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2013 (12) TMI 195 - HC - Income TaxValuation of stock of spares - Held that - Following assessee s own case for the assessment year 1994-95 - Decided in favour of Revenue. Pre-operative expenses - Revenue or capital - Held that - Following The Commissioner of Income Tax, Patiala Vs. Vardhman Spinning & General Mills, Ludhiana 2008 (8) TMI 202 - PUNJAB AND HARYANA HIGH COURT - The expenses incurred by the assessee for exploring the possibility of setting up of a project is a revenue expenditure as no asset of permanent nature with enduring benefit is acquired by the assessee - Decided against Revenue.
Issues:
1. Valuation of closing stock of stores, spares, tools, etc. 2. Treatment of pre-operative expenses incurred by the assessee. Analysis: Issue 1: Valuation of closing stock of stores, spares, tools, etc. The appeal under Section 260-A of the Income Tax Act, 1961 arose from an order passed by the Income Tax Appellate Tribunal for the assessment year 1995-96. The Assessing Officer added Rs.3,20,600/- to the closing stock value based on one month's purchases, which the assessee contested. The Commissioner of Income Tax (Appeal) reduced the period of closing stock considered but upheld the pre-operative expenses as capital expenditure. The Tribunal referred to a previous order in a similar case and set aside the closing stock addition but allowed pre-operative expenses as revenue expenditure. However, a separate order in the same case for the assessment year 1994-95 found the Tribunal was wrong in deleting the closing stock addition. Consequently, the first question of law was answered in favor of the revenue, setting aside the deletion of the addition made by the Tribunal. Issue 2: Treatment of pre-operative expenses Regarding the expenses incurred by the assessee for exploring the possibility of setting up a project, the Division Bench of the Court found such expenses to be revenue expenditure as no permanent asset with enduring benefit was acquired. The Tribunal's view allowing the expenses to be revenue in nature was upheld, emphasizing that no lasting asset was obtained due to the project not materializing. Consequently, the second question of law was answered against the revenue and in favor of the assessee. The Court disposed of the appeal accordingly, with no order as to costs.
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