2019 (2) TMI 531 - HC - Income Tax

Disallowance of Project Development Expenses - AO considering it as Capital Expenditure against the Assessee s claim to be considered it as Revenue Expenditure u/s 37(1) - Held that - AO deleting a sum of 39.79 lacs being part of the project development expenses considering as a capital expenditure against the assessee s claim of the expenditure being revenue in nature. We notice that identical question had come up for consideration before the Tribunal in case of this very assessee for earlier assessment year 2008-09. Tribunal had held the issue in favour of the assessee. In the present impugned judgment also the Tribunal has relied on the same order. In CIT-4 Vs. M/s. Reliance Supply Chain Solutions Ltd 2017 (7) TMI 611 - BOMBAY HIGH COURT which was dismissed on 5.7.2017. No question of law therefore arises. Disallowance towards the assessee s expenditure for gratuity and leave encasement - Held that - Expenditure was actually incurred and that there was no question of disallowance in terms of Section 43B of the Act.

Summary

Issues:
1. Disallowance of Project Development Expenses
2. Disallowance of Gratuity and Leave Encashment Expenditure

Analysis:

Issue 1: Disallowance of Project Development Expenses
The Revenue appealed against the Tribunal's judgment deleting a sum of &8377; 39,79,354 as part of project development expenses, treating it as capital expenditure instead of revenue expenditure under Section 37(1) of the Income Tax Act. The Tribunal's decision was based on a previous ruling in favor of the assessee for the assessment year 2008-09. The High Court had already dismissed a similar appeal by the Revenue in a previous case involving the same assessee. Consequently, the High Court found no legal question to consider, leading to the dismissal of the appeal.

Issue 2: Disallowance of Gratuity and Leave Encashment Expenditure
The second question raised in the appeal concerned the disallowance of &8377; 2,97,42,700 by the Assessing Officer for the assessee's gratuity and leave encashment expenditure. The CIT(A) had already determined that the expenditure was legitimately incurred, and there was no basis for disallowance under Section 43B of the Act. Therefore, the High Court concluded that no legal issue arose in this regard and dismissed the Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decisions in both issues, resulting in the dismissal of the Revenue's appeal.