Law:

Section:

I. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1994-95 - Whether telex rent, telephone rent, postal franking machine rent and amount paid towards rates and taxes are allowable as a deduction - Held, yes - Whether pre-paid expenditure is allowable as a deduction - Held, yes II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1994-95 - Whether where assessee-company had incurred certain expenditure towards upgradation of its existing computers by changing their certain parts for improving efficiency, without making any structural alteration, it could be said that assessee had not achieved any enduring benefit - Held, yes - Whether, therefore, expenditure incurred by assessee towards upgradation of existing computers would be allowable as a deduction as a revenue expenditure - Held, yes FACTS-I The assessee-company, which was engaged in the business of goods transport, claimed deduction in respect of telex rent, telephone rent, postal franking machine rent, and rates and taxes and in respect of pre-paid expenditure. The Assessing Officer disallowed said claim. On appeal, the Tribunal allowed the claim of the assessee. On revenue's appeal : HELD-I In view of the decision of the Division Bench of the High Court in the case of CIT v. Southern Roadways Ltd. [2004] 265 ITR 404 /[2003] 133 Taxman 350 (Mad.), the Tribunal was justified in holding that pre-paid expenditure and expenses incurred by the assessee in respect of telex rent, telephone rent, postal franking machine rent and amount paid towards rates and taxes were allowable as a deduction. [Para 5.2] FACTS-II The assessee-company, which was engaged in the business of goods transport claimed deduction in respect of the expenditure incurred towards upgradation of its existing computers. The Assessing Officer disallowed said claim by treating computer software and hardware upgradation expenses as capital expenditure. On appeal, the Tribunal allowed the claim of the assessee by holding that there was no complete structural alteration and, on the other hand, there were only changes in certain areas for…

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