2020 (1) TMI 827 - HC - Income Tax

Nature of expenditure - expenses incurred in the preoperative period towards the project development cost - revenue or capital expenditure - HELD THAT - Question of law as considered in M/S. RELIANCE FOOT PRINT LIMITED 2017 (7) TMI 611 - BOMBAY HIGH COURT expenditure to be revenue expenditure - the same has been held against the Appellant-Revenue. Expenditure u/s. 37(1) - whether expenses were preoperative in nature and hence not admissible as expenditure u/s. 37(1) ? - whether Tribunal was justified in allowing the expenses incurred u/s. 37(1)? - HELD THAT - Issue considered and held against the Appellant-Revenue in M/S RELIANCE HOME STORE LTD 2019 (6) TMI 1427 - BOMBAY HIGH COURT

Summary

Issues:
1. Treatment of project development cost as capital expenditure or revenue for Assessment Year 2010-2011.
2. Allowance of expenses incurred in the preoperative period under section 37(1) of the Act.

Issue 1: Treatment of project development cost

The Appellant-Revenue raised a question regarding the treatment of project development cost as capital expenditure or revenue for the Assessment Year 2010-2011. The High Court referred to previous cases, specifically Income Tax Appeal No.892 of 2014 and Income Tax Appeal No.948 of 2014, where a similar issue was addressed. In those cases, it was held against the Appellant-Revenue. Therefore, the High Court concluded that no substantial question of law arises in the present Appeal related to this issue.

Issue 2: Allowance of expenses under section 37(1) of the Act

The second question raised in the Appeal was about allowing expenses incurred in the preoperative period under section 37(1) of the Act. The High Court mentioned that this issue was considered in Income Tax Appeal No.197 of 2017 and was held against the Appellant-Revenue. Consequently, the High Court found that no substantial question of law arises in this Appeal concerning the allowance of expenses under section 37(1) of the Act. As a result, the Appeal was dismissed based on the decisions from previous cases where similar issues were addressed and decided against the Appellant-Revenue.

In conclusion, the High Court dismissed the Appeal as it found no substantial question of law arising from the issues raised by the Appellant-Revenue regarding the treatment of project development cost and the allowance of expenses under section 37(1) of the Act for the Assessment Year 2010-2011. The decisions from previous cases where similar issues were considered and decided against the Appellant-Revenue were pivotal in the High Court's judgment.