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2014 (12) TMI 1156 - AT - Income TaxReopening of assessment - expenses incurred for development of certain products will give an enduring benefit to the assessee and same is in the capital field - CIT(A) deleted addition - Held that - The assessee has incurred expenditure of ₹ 31.20 lacs on salaries, wages, stores & sapares, travelleing etc. No expenditure has been incurred on any asset of the nature fixed assets or capital in nature or which has resulted into any benefit of enduring nature. The expenditure had been incurred for improvement and enhancement of its existing business in the line of chemical manufacturing under the unity and control of same management with common funds etc. See Rama Synthetics India Ltd. Vs. CIT reported in (2009 (9) TMI 635 - Delhi High Court ) & CIT Vs. Priya Village Roadshows Ltd. reported in (2008 (5) TMI 142 - PUNJAB AND HARYANA HIGH COURT). CIT(A) is justified in deleting the disallowance of ₹ 31.2 lakhs - Decided in favour of assessee.
Issues Involved:
1. Validity of deletion of a sum of Rs. 31,20,439 by CIT(A). 2. Validity of reopening of assessment under section 147 of the Income Tax Act. Issue 1: Validity of deletion of a sum of Rs. 31,20,439 by CIT(A): The appeal by the Revenue and cross objection by the assessee pertained to the CIT(A)'s order dated 04.07.2012 for the assessment year 2004-05. The Revenue's appeal questioned the deletion of Rs. 31,20,439 by the CIT(A). The Revenue contended that the expenditure claimed by the assessee as Revenue expenditure was capital in nature as it involved development of new products. However, the CIT(A) ruled in favor of the assessee, stating that the expenditure was revenue in nature and not capital. The CIT(A) relied on the judgment of the Hon'ble jurisdictional High Court in the case of Indo Rama Synthetics (I) Ltd. Vs. CIT. The Revenue appealed this decision, but after hearing both parties and examining the details of the expenditure, the Tribunal upheld the CIT(A)'s decision. The Tribunal found that the expenditure was revenue in nature and affirmed the CIT(A)'s order, rejecting the Revenue's appeal. Issue 2: Validity of reopening of assessment under section 147 of the Income Tax Act: The assessee raised cross objections regarding the validity of the reopening of assessment under section 147 of the Income Tax Act. The CIT(A) did not adjudicate on this issue but focused on the merits of the disallowance of expenditure. The Tribunal did not delve into this issue as the CIT(A)'s decision in favor of the assessee regarding the expenditure rendered this issue moot. Therefore, the Tribunal did not provide a separate analysis on the validity of the reopening of assessment under section 147. In summary, the Tribunal upheld the CIT(A)'s decision to delete the sum of Rs. 31,20,439 as revenue expenditure, rejecting the Revenue's appeal. The Tribunal did not specifically address the validity of the reopening of assessment under section 147 as the decision on the expenditure issue made this point irrelevant. The judgment was pronounced on 12th December, 2014.
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