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Issues involved: The judgment involves the disallowance of purchase and consumption of tools and instruments as revenue expenditure versus capital expenditure u/s 250 read with section 143(3) of the IT Act.
ITA No.2457/Ahd/2010 (Revenue's appeal for AY 2007-08): The revenue appealed against the deletion of addition made on account of disallowance of capital expenditure debited to P & L Account under the head 'purchases of tools and instruments'. The AO treated the purchase of tools and instruments as capital expenditure, disallowing it and adding it back to the income of the assessee. The CIT(A) directed the AO to delete the addition, considering the items as revenue expenditure. The Tribunal confirmed the CIT(A)'s decision based on previous decisions and dismissed the revenue's appeal. ITA No.959/Ahd/2012 (Assessee's appeal in AY 2008-09): The assessee challenged the addition made by the AO for disallowing revenue expenses claimed in Profit & Loss a/c on account of consumption of tools and instruments. The CIT(A) confirmed the AO's action. However, following the decision in the revenue's appeal for AY 2007-08, the Tribunal held that the expenditure incurred on tools and instruments was revenue expenditure and deleted the additions made by the AO. ITA No.1751/Ahd/2012 (Assessee's appeal for AY 2009-10): The assessee contested the disallowance of expenditure on purchase/consumption of tools and instruments, arguing that the expenses were written off and should be treated as revenue expenditure. The Tribunal, following the decision in the revenue's appeal for AY 2007-08, deleted the additions made by the AO for AY 2008-09 and 2009-10, considering the expenditure on tools and instruments as revenue expenditure. In all three appeals, the Tribunal consistently held that the expenditure on purchase and consumption of tools and instruments should be treated as revenue expenditure, in line with previous decisions and the nature of the items involved.
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