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TMI Blog2012 (11) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act, does not ipso facto make that expenditure a capital expenditure for the purpose of the Income-tax Act.” Application of section 143(3) - held that:- sub-section (3) in this case has no manner of application as it is not a case here that the appellant has frequently shifting its accounting process and method. In this case the accounting system is uniform however, while filing returns the depreciation of those assets have been claimed under the provisions of the law in its return. It is not a case that the said assets and properties do not belong to the appellant, therefore depreciation in any assets and properties is a regular phenomenon and deduction on this account is allowable under Section 32 automatically. Tribunal while reading Section 32 of the Act has accepted the legal principle but unfortunately while granting relief as rightly pointed out by Mr. Khaitan has not allowed the setting off of the interest income as regard the aforesaid amount of depreciation. - A.O.is directed to work out again allowing the deduction and setting off of the amount of interest income and to allow carry forward - Decided in favor of assessee. - I.T.A. No. 447 of 2007 - - - Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the completion of the same and commencement of the commercial operation. On appeal being preferred Commissioner of Income Tax did not interfere with the disallowance of depreciation. The learned Tribunal then was approached unsuccessfully as the desired relief was not granted. It appears from the recordings of all authorities below that basis of disallowance of the above depreciation was that the assessee itself in its own account has capitalized all the expenditure under the head National Highway Development Expenditure and it has mentioned in the audited balance sheet that National Highway Development Expenditure amortized over the concession period from the date of commercial operation. In the audited P/L Account no expenditure or depreciation has been claimed by the assessee. On the other hand, only interest on fixed deposit has been shown. In the computation of income the assessee has claimed deduction for depreciation against interest income, being income from other sources. The user of the assets was not for earning interest income. The assets were used for construction of National Highway. All the expenditure in respect of construction of National Highway has been ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. reported in (2006) 283 ITR 194 (Mad). He further submits that depreciation under Section 32 is an item of allowance in computing business income. After business income is computed, the provisions of Section 71(1) of the Act comes into play which permit set off of loss under any head of income (other than capital gains). Therefore, the said disallowance of depreciation further setting off of interest income should have been allowed after treating the same as income from other sources. He further contends that once income under different heads is computed, the provisions of the Act relating to the set off and carry forward have to be necessarily given. There is no provision in the Act permitting capitalization of income computed under any head. Learned counsel for the Revenue submits without disputing the fact as follows:- As the assessee during the accounting year for the relevant assessment year under consideration was not entitled to any annuity it capitalized the expenditure incurred by it on the construction of National Highway under the head National Highway Development Account as per accounting policy followed by it regularly and the said expenditure was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the purpose of income-tax. The name given to an expenditure or a nomenclature given to an expenditure in the books of account of the assessee is not the litmus test to decide the exact nature of expenditure for the purpose of income-tax. The purpose of the Companies Act is different from the purpose of the Income-tax Act. Therefore, the classification of those expenses as capital in nature for the purpose of the Companies Act, does not ipso facto make that expenditure a capital expenditure for the purpose of the Income-tax Act. In the case before Madras High Court the aforesaid decision was rendered on the factual aspect that assessee therein filed a return of income admitting a total loss of Rs.8,58,41,145/-. The Assessing Officer disallowed the claim of expenditure to the extent of Rs.20,36,157/- towards crop development expenses on the ground that the same was not considered as a revenue expenditure by the assessee in its accounts. However, the assessee claimed it as revenue in the statement of computation of total income. The Assessing Officer however disallowed the expenses incurred amounting to Rs.16,41,125/- towards advertisement in respect of the Soya products and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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