Law:

Section:

Section 37(1) of Income-tax Act, 1961 – Business expenditure – Allowability of – Assessment years 1969-70 and 1970-71 – Assessee paid installation charges in respect of a data processing machine taken on lease from IBM, with stipulation that supplier could take back machine at any time after a specified period – Assessee also spent certain amount on repairs of generator which included replacement of some spare parts – ITO disallowed assessee's claim for deduction of both items, treating same as capital expenditure – Tribunal, however, allowed assessee's claim – Whether since expenditure for installation charges was incurred on an asset which did not belong to assessee, it could not be said that benefit or advantage derived by assessee in installing processing machine conferred any enduring benefit or advantage to it - Held, yes - Whether, merely for reason that installation charges came to a big sum, it did not become capital expenditure - Held, yes - Whether, therefore, amount spent on installation of data proceeding machine was admissible as revenue expenditure - Held, yes - Whether, further expenditure incurred for replacement of certain parts of generator could not be said to be an expenditure for creation of a new asset and that too of enduring nature so as to disentitle assessee from claiming deduction - Held, yes - Whether, therefore, said expenditure was also allowable as revenue expenditure – Held, yes FACTS The assessee incurred considerable expenditure on the installation of a data processing machine, taken on lease from IBM, with the stipulation that the supplier could take the machine at any time after a specified period. The assessee also incurred considerable expenditure for reconditioning of generator by replacing, certain parts. The ITO disallowed both the items for deduction treating the same as capital expenditure. On second appeal, the Tribunal allowed the assessee's claim. On reference : HELD On facts, it could not be said that the benefit or advantage derived by the assessee in installing the processing machine conferred any enduring benefit or advantage to it. Merely for the reason that the installation charges came to a big sum, it did…

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