9911796707
TMI Blog2016 (7) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... mounting to Rs. 56,62,56,096/-- (ii) The learned CIT(AT failed to appreciate that the expenditure being incurred for carrying on the business and being of revenue nature is eligible for deduction u/s 37(1). (iii) The appellant prays that the deduction of Rs. 49,06,00,257/- [Rs. 56,62,56,096/- minus Rs. 7,56.55.639/- being disallowance u/s 40A(7)/40A(9) as claimed by it be allowed." 3. During the course of hearing, it was contended by the assessee that only ground 1(i) is relevant and, therefore, ground 1(ii) & 1(iii) were not pressed and hence, these are dismissed. 4. In Ground 1(i), the issue raised by the assessee is with regard to the treatment of revenue expenditure claimed by the assessee in the return of income amounting to Rs. 56.62 crores as capital expenditure by the AO in the assessment order. During the course of hearing, it was submitted by the Ld. Counsel that impugned expenses were capitalised in the books of account by the assessee, but in fact, there expenses are purely revenue in nature, and therefore, in the computation sheet, these expenses were claimed as revenue expenses. The claim of the assessee was denied and these expenses were treated as capital e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account and, therefore, assessee cannot be granted benefit of double deduction. 6. We have gone through the orders of lower authorities and considered the submissions made by both the sides before us. We have also gone through copies of decisions of the Tribunal in other group companies of the assessee. 7. The brief facts, as brought out before us, are that during the year, the assessee company was engaged in the business of organized retail. The main business of the assessee company was sourcing and selling fruits, vegetables, food articles, groceries, fast moving goods and other goods of daily use and provisions of various related services as a neighborhood convenience store. It was noted by the Assessing Officer that as per Schedule K of annual report of the assessee for A.Y.|2007-08 following expenses were capitalized under the head 'project development expenditure: " PROJECT DEVELOPMENT EXPENDITURE The Company has launched new project for carrying on retail business. The project is in the process of under implementation. The expenditure incurred during the implementation period for bringing the project in the condition of its intended use, is treated as "Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s retail business, the admitted fact would be that the business of the assessee is already 'set up' as per facts and well settled legal position. It is well settled position of law that all the expenses incurred subsequent to the setting up of the business shall be allowable to the assessee. 9.1. It is further noted that all these expenses are otherwise purely revenue in nature. None of these expenses pertain to acquisition of any capital asset. It is also well settled law that 'normally', the manner of accounting shall not determine the taxability of income or allowability of any expenditure. The taxability of income and allowability of an expense shall be determined on the basis of provisions of income-tax law as contained in Income Tax Act, 1961 and as explained by various courts from time to time. It is further noticed by us that nothing has been brought out by the lower authorities to show that if any of these expenses were capital in nature except the fact that the assessee has debited the same under the head 'Project Development Expenditure'. The assessment of the return has to be made on the basis of return filed by the assessee supported with the accounts of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence we reproduce relevant portion of the observations given by the co-ordinate bench in the case of Reliance Footprint Ltd vs ACIT in ITA No.5997/Mum/2011 for A.Y. 2008-09 order dt 23-10-2013:- "We have heard both parties and their contentions have carefully been considered. There is no dispute to the fact that the assessee has shown a turnover of Rs. 4.75 crores in relation to its stores which were made operational during the year at Bangalore and Hyderabad. Before the AO it was the case of the assessee that it is in the process of expansion of its business and thus this expenditure has been incurred in relation to expansion of business. It was also submitted that the expenditure which are in the nature of salary, electricity, audit fee etc. are essentially incurred for expansion of existing line of business that is setting up of more number of stores/ specialty stores under planned format or for maintenance of already established stores. These submissions were made before the AO and have not been controverted by the AO and disallowance is made mainly on the ground that the assessee cannot give dual status to these expenditures i.e. as "capital" in books of account and as "reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of revenue (being mostly paid to employees). These are allowable in the year itself as per ratio of aforementioned decision of the Hon'ble Bombay High Court in the case of CIT vs. Kothari Auto Parts Manufacturers Pvt. Ltd.(supra) and Hon'ble High Court of Gujrat in the case of CIT vs. Alembic Glass Industries Ltd. (supra). These expenditures did not create any asset and also did not provide enduring benefit to the business of the assessee so as to say that the expenditure was capital in nature. Therefore, we hold that expenditure are allowable in the year under consideration irrespective of the fact that assessee has given dual status to such expenditure in its books of account vis-à-vis computation of income filed along with return." 9.5. It is further noted by us that in another case also similar decision has been taken by the Tribunal which are not being reproduced here to avoid duplication. We also find it appropriate to refer at this stage, for the sake of completeness, the judgement of Hon'ble Supreme Court in the case of Taparia Tools Ltd vs JCIT 372 ITR 605 (SC) wherein it has been observed by Hon'ble Supreme Court that the fact that a differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
