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2018 (1) TMI 1380 - AT - Income Tax


Issues:
Assessment Year 2012-13 - Classification of Expenses - Advertisement Expenditure, Legal & Professional Fees, Site Administrative Expenditure - Applicability of Accounting Standard (AS) 2 on Inventory and Section 145A of Income Tax Act.

Analysis:
The appeal pertains to the Assessment Year 2012-13 and concerns the classification of three types of expenses incurred by the assessee: Advertisement Expenditure amounting to ?15.65 lacs, Legal & Professional Fees of ?14.80 lacs, and Site Administrative Expenditure of ?11,84,600. The CIT (A) determined that all these expenses should be capitalized to Inventory as per AS-2 on Inventory in conjunction with section 145A of the Income Tax Act.

The assessee raised arguments before the CIT (A) regarding the nature of these expenses, emphasizing that certain expenses should be excluded based on the provisions of Para 13 of AS-2. However, the CIT (A) made a decision without thoroughly examining the applicability of clauses (c) and (d) of Para 13 of AS-2. The ITAT Judge, Shri A.K. Garodia, upon considering the submissions of both the assessee's representative and the Revenue's representative, set aside the CIT (A)'s order on this issue. The matter was remanded back to the CIT (A) for a fresh decision with a detailed and reasoned order specifically addressing the applicability of clauses (c) and (d) of Para 13 of AS-2 after providing both parties with a fair opportunity to present their case.

In conclusion, the ITAT Bangalore allowed the appeal of the assessee for statistical purposes, emphasizing the need for a comprehensive review of the applicability of accounting standards and provisions of the Income Tax Act to determine the treatment of the expenses in question. The decision highlights the importance of a thorough analysis and reasoned order in tax matters to ensure proper application of relevant laws and standards.

 

 

 

 

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