Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allow ability of - Vrs Payment Amount paid by assessee under approved Voluntary Retirement Scheme (VRS), which scheme was approved under section 10(10C), was allowable in full under section 37(1) [In favour of assessee] CIT v. P.I. Industries Ltd. [2009] 221 CTR (Raj.) 259 The assessee implemented a Voluntary Retirement Scheme floated by it, which was duly approved by the Commissioner under section 10(10C) and claimed deduction of the entire expenses to the tune of Rs. 1,06,57,907 paid by way of terminal benefits, in the relevant assessment year. The Assessing Officer disallowed the claim and held that it was not an expenditure of the nature described in sections 30 to 36 but it was in the nature of capital expenditure. Held that even a reading of sections 30 to 36 made it clear, that the expenditure claimed did not fall under any of those sections. It was not in dispute that the amount was laid out or expended wholly and exclusively for the purpose of business. Therefore, the only question that survives was, as to whether the expenditure could be said to be of capital nature. It was consistently established legal position that the expenditure of the nature as was involved in the present case, was clearly allowable as revenue expenditure under section 37(1). Therefore, the Tribunal was not in error in allowing the entire claim of deduction under section 37(1) of the amount paid by the assessee towards the dues of its employees whose services were brought to an end under the Voluntary Retirement Scheme. K.K. Bissa for the Appellant. Arun Bhansali for the Respondent. JUDGMENT N. P. Gupta, J. : This appeal has been filed by the Revenue against the order of the Tribunal dated 28th July, 2006, allowing the appeal of the assessee, and setting aside the order of the assessing authority, and the CIT and thereby allowing deduction for the full amount of Rs. 1,06,57,907 in the relevant year being the expenditure claimed under section 37(1) of the IT Act, being the amount paid by the assessee, under the approved Voluntary Retirement Scheme (VRS), which scheme was approved under section 10(10C) vide order…

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