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TMI Blog2015 (10) TMI 2177X X X X Extracts X X X X X X X X Extracts X X X X ..... be in the nature of revenue expenditure and has to be debited to the Profit And Loss account. Consequently the semi finished goods will also be reflect in the credit side of the Profit And Loss account as "Semi-Finished goods" and as well as in the balance sheet under the head "Current Assets. In such circumstances if this expenditure is not allowed as deduction, then to that extent profit of the assessee will be superficially inflated. Therefore, the Revenue has erred in treating the semi finished stock of the assessee as capital expenditure. Moreover from the order of the Ld. Assessing Officer it appears that he was under impression that the expenditure is incurred towards "Solvent Extraction Plant" when the fact remains that these ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 2005- 06 on 28.10.2005 admitting an income of ₹ 3,59,99,511/-. Initially the return was processed U/s.143(1) of the Act on 31.07.2006. Subsequently the case was reopened by issuance of notice U/s.148 of the Act on 29.03.2010 and finally, the assessment was completed on 24.12.2010 wherein the Ld. Assessing Officer disallowed the above stated expenditure. During the course of assessment proceedings, it was observed by the Ld. A.O that the assessee had incurred expenditure on its Oil Solvent Extraction Plant amounting to ₹ 18,84,633/-. The Ld. Assessing Officer further observed from the annual report of the company that the company has started its oil division and produced 11,660 Kgs of low purity crude sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. D.R argued in support of the orders of the Revenue. 5. We have heard both the parties and carefully perused the materials available on record. As pointed out by the Revenue, it is evident from the balance sheet of the assessee that the assessee had produced semi finished crude solanesol oil of 11,660 Kgs of low purity. Therefore, on completion of the balance process these semi finished goods will be converted into finished goods and available as stock in trade to the assessee for sale. Hence any expenditure incurred for producing the semi finished goods will be in the nature of revenue expenditure and has to be debited to the Profit And Loss account. Consequently the semi finished goods will also be reflect in the credit side of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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