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TMI Blog2012 (11) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 of the CIT(Appeals)-III, Bangalore. 2. Following grounds have been raised in this appeal:- 1. The order of the Ld. CIT(A) is opposed to law and facts of the case. 2. The learned CIT (A) erred in law in holding that the expenditure incurred by the assessee amounting to Rs. 1,00,25,500/- for construction of structures on railway property for smooth handling of containers is revenue in nature without appreciating the fact that the expenditure incurred by the assessee resulted in enduring benefit to the assessee, and therefore, the CIT(A) ought to have held the said expenditure as capital in nature and considered allowing depreciation on the capitalized expenditure as per law. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 4. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. 3. From the above grounds, it is clear that the only grievance of the department relates to the deletion of the addition made by the AO on account of construction of struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties have to be arranged by the assessee for the proper placement of the container on deportation from the wagons. To enable smooth handling of the above activities the assessee has to construct temporary structures like rams for smooth unload of the containers and also for loading it into the transport careers. Thereafter again it requires to provide rams and other facilities in the yard to load and unload from the transport careers to enable it in the appropriate place. These structures like rams which have been constructed were on temporary basis and on account of heavy wear and tear, frequent replacement are required to be done. The assessee approximately load and unload an average of 1 lakh and above Containers in a year. Accordingly, the expenditure on the maintenance of rams and other structures were for smooth transport of the containers. These expenses do not result in any permanent structures to suggest their capital in nature and replacement of rams from now and then is inevitable. The expenses incurred also for the maintenance of the rams and the expenditure claimed were totally on the revenue in nature and no part of the expenditure could be held to be capital. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly submitted that the provisions of section 35D has no application. The expenses referred to in Section 35D are the expenses incurred the commencement of the business or after the commencement of the business in connection with the extension of industrial undertaking or in connection with setting up a new industrial unit. The expenditure claimed by the appellant do not fall in any of the categories referred to hereinabove. They are all normal expenditure incurred in the course of business and for the purpose of business. As long as the expenditure is not capital expenditure, the same cannot be brought in u/s.35D of the Act. Reference may be made to CIT Vs. East India Hotel (252 ITR 860) and CIT Vs. Mahindra Ugine (250 ITR 84). Undisputedly the expenditure claimed by the appellant were revenue expenditure for the reasons stated hereinabove. Consequently the provision of section 35D can not be invoked. Accordingly it is prayed that the expenditure as claimed being the incidental to the business and for the purpose business and was not in the nature of capital expenditure is required to be allowed u/s. 37(1) of the Act in full. 7. The AO was not satisfied with the above said repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein viz., (a) expenditure in connection with (i) preparation of feasibility report (ii) preparation of project report (iii) conducting market survey or any other survey necessary for the business of the assessee (b) for drafting any agreement relating to the setting up or conduct of the business of the assessee (c) Where the assessee is a company, expenditure relating to (i) legal charges for drafting the Memorandum and Articles of Association of the company (ii) printing of Memorandum and Articles of Association (iii) registration charges of the company under the provisions of the Companies Act, 1956 (iv) expenditure in connection with the issue of shares in or debenture etc (v) other items of expenditure as may be prescribed. 9. It was contended before the ld. CIT(A) that the expenditure incurred by the assessee was never doubted and was a genuine expenditure towards smooth handling of goods in transportation. It was also stated that the assessee was not at all an industrial undertaking and the expenditure incurred was part of its business to earn income therefrom and incidental towards the maintenance. 10. The ld. CIT(A) after considering the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for registering the company under the provisions of the Companies Act, 1956 (1 of 1956); (iv) in connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus; (d) such other items of expenditure (not being expenditure eligible for any allowance or deduction under any other provision of this Act) as may be prescribed. 13. In the present case, the expenses incurred by the assessee are not specified in any one or more of clauses mentioned in sub-section (2) of section 35D of the Act. The assessee is also not an industrial undertaking and those expenses were incurred in the regular course of business for smooth running of the existing business, therefore the expenditure in question cannot be termed as preliminary expenses. By incurring the expenses, the assessee did not acquire any new asset having enduring benefit. The expenses were incurred for smooth running of existing business by constructing rams for loading unloading and no permanent structure came into existence, rather the expenses were incurred for replacement and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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