- (1.) This order shall dispose of I.T.A. Nos. 163 of 2009 and 147 of 2011 as the facts and the issue involved are similar. However, the facts are being extracted from I.T.A. No. 163 of 2009. I.T.A. No. 163 of 2009 has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (in short, "the Act"), against the order dated September 30, 2008, annexure A. 3 passed by the Income-tax Appellate Tribunal, Chandigarh Bench "B" (in short, "the Tribunal") in I.T.A. No. 614/Chandi/2008 for the assessment years 2005-06, claiming the following substantial question of law: "Whether, on the facts and in the circumstances of the case and in law, the hon'ble Income-tax Appellate Tribunal was correct in holding that the mere fact that the benefit from recurring expenditure shall be available to the appellant in succeeding assessment years cannot be a ground to hold such expenditure as capital expenditure?"
(2.) On July 21, 2009, the appeal was admitted to consider the question formulated in the order dated April 28, 2009, which reads thus: "Learned counsel for the appellant states that only such expenditure incurred on agriculture that results in raising a current crop, can be treated as revenue expenditure, whereas the expenses incurred to reclaim the land must be treated as capital expenditure."
(3.) A few facts relevant for the decision of the controversy involved as narrated in I.T.A. No. 163 of 2009 may be noticed. The assessee is a Punjab Government undertaking engaged in the business of contract farming, procurement of food grains, marketing and export, etc. A return declaring income of Rs. 1,50,75,000 was filed by the assessee on October 31, 2005, which was processed under section 143(1) of the Act on March 18, 2006. The case was selected for scrutiny. Notice under section 143(2) of the Act was issued to the assessee on October 26, 2006. Later on, on March 6, 2007, the assessee filed revised return declaring total income of Rs. 5,16,50,282. The assessment was completed under section 143(3) of the Act, vide order dated December 24, 2007, annexure A. 1. The Assessing Officer held that the major expenditure incurred by the assessee-company for the development of the land was capital expenditure. In all, the expenditure of Rs. 4.43 lakhs had been allowed as revenue expenditure and the balance expenses of Rs. 33.74 lakhs were disallowed being in the nature of capital expenses for developing the land. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) ("the CIT(A)"). Vide order dated April 25, 2008, annexure A. 2, the Commissioner of Income-tax (Appeals) dismissed the appeal holding that the expenditure incurred to make a barren land into fertile land was capital in nature. The assessee filed further appeal before the Tribunal. Vide order dated September 30, 2008, annexure A. 3, the Tribunal allowed the appeal holding that the land was fallow and not barren and the mere fact that the benefit from the expenditure shall be available to the assessee in succeeding assessment years could not be a ground to hold such expenditure as capital expenditure. Hence, the instant appeal by the Revenue.;