2009 (2) TMI 482 - HC - Income Tax

Business expenditure Initial expenditure for commencement of Business and for opening Branches amortized closure of one Branch Unabsorbed expenditure of closed branch to be apportioned equally amongst Head office and other Branches

Summary

The High Court of Kerala, in the case of 2009 (2) TMI 482 - Kerala High Court, delivered a judgment with C. N. Ramachandran Nair and Surendra Mohan K. as judges. The appellant, a jeweler, had started a business with branches in Mettupalayam, Pollachi, and Areacode. The appellant had spread the initial expenditure for setting up these branches over ten years. The Assessing Officer allowed deductions for the expenditure during the 2003-04 year, but when the appellant closed one branch, they claimed the entire unabsorbed expenditure for that branch in that year. The Tribunal ruled that the unabsorbed expenditure for the closed branch should be spread out over the remaining years along with the expenditure for the other branches. The appellant appealed this decision, arguing that the unabsorbed expenditure for a closed branch should be allowed in the year of closure. The High Court rejected this claim, stating that there is no provision in the Act for claiming the entire expenditure in the year of closure. The High Court upheld the Tribunal's decision to spread the unabsorbed expenditure over the remaining years, in line with the accounting practice followed by the appellant. The appeal was dismissed accordingly.