The New Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ), held that training expenses that does not result in new income is not capital expenditure.
During the relevant Assessment Year, training expenditure has been incurred by the assessee company, Petnet Radio Pharmaceutial Solutions Pvt Ltd on account of training services obtained from Siemen Petnet Korea (SPK) in order to enable the Company to operate and run the “Cyclotron Machine” in a more efficient and effective manner and to repair/maintain the same in-house without outside help.
The Counsel for the assessee argued that the subject training expenses, can by no stretch of imagination, be treated as a capital expenditure, as such expenses do not result in any economic benefit of enduring nature to the company, neither there is an increase in the production capacity the cyclotron machine nor is there an increase in the useful life of the cyclotron machine.
The Counsel also argued that the aforesaid trainings expense is a revenue expenditure as the same has been incurred for efficient and more profitable working of the business and not for addition or augmentation of profit-making apparatus.
The Tribunal relied on the judgment in Empire Jute Co. Ltd vs. CIT, wherein it was held that the expenditure incurred would be capital in nature if it has resulted into any kind of advantage in the capital field but if the advantage consists merely in facilitating the assessee’s business or enable the management to conduct the assessee’s business more efficiently or profitably, the expenditure would be revenue in nature.
A Bench consisting of Yogesh Kumar US, Judicial Member and Dr. B. R. R. Kumar, Accountant Member observed that “Since the subject training expenses do not bring into existence any capital asset nor results in any new source of income but merely enable the Company to manage and conduct the production operations in a more efficient effective manner, thus, the said expenses are on account of revenue and cannot be treated as capital expenditure.
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