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TMI Blog2015 (8) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... operation of the business. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... d considered the expenses as capital in its books of account, that claiming the same as revenue expenditure was not acceptable. Finally, he held that following a consistent approach similar to the earlier assessment years the claim of project development expenditure was being treated as capital in nature. As a result, he added an amount of ₹ 39.79 lacs to the total income of the assessee. 3.The AO further found that the assessee had claimed certain expenses u/s. 43B and 40A (7) in the computation of income out of the disallowances made under the head project development expenses. He found that the expenses claimed by the assessee included leave encashment pay during the year under appeal (Rs.1.40 crores), leave enchashment reversed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o earlier AY.s., that similar issue had arisen in the matter of one of the sister concerns namely Reliance Footprint Ltd., that the Tribunal had allowed the claim made by the assessee. We find that while adjudicating the appeal, filed by the AO, for AY.2008-09(ITA/5759/Mum/2012 dated 27.11. 2013), the Tribunal has deliberated upon and decided the issue as under: "3. The relevant facts giving rise to this appeal are that the assessee is in the business of distribution and logistic business. This is the first year of operation and the company had a turnover of ₹ 26,22,30,201/- on which net loss of ₹ 4,42,981/- is shown in profit and loss account. In the balance sheet, the assessee has shown to have incurred an expenditure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) That all sourcing of funds is done at the company level. During the year, the assesseecompany has sourced funds by way of unsecured loans and other short term liabilities along with its shareholders funds. All the activities are operated and expended out of this common pool of fund. d) That the business carried on by assessee constitutes one individual business as all the activities of the company are directly operated and managed by its Board of Directors or its employees. The administration of the assessee is centralized and the major policies are framed at the central level. Hence, there exists inter-connection, inter-lacking, inter dependence, common management, common business organization, common fund, common administration an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks Ltd. V/s CIT (2008) 166 Taxmann 115 (Delhi); iii) CIT V/s Priya Village Roadshows Ltd (2009) 185 Taxmann 44 (Delhi) iv) Bansidhar (Pvt) Ltd. V/s CIT (127 ITR 65) (Guj) v) CIT V/s Rajendra Prasad Moody (115 ITR 519) However, the AO has stated that the submissions of the assessee is not tenable as the assessee has not incurred such expenses for the routine operations. That the assessee itself in the books of account has considered such expenses as capital and hence claiming the same while computing total income as revenue is not acceptable. Therefore, AO has stated that assessee itself has disallowed ₹ 4,80,50,176/- u/s 40A (7) /43B of the Act while claiming "Project Development Expenditure"in thecomputation of income an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO could not be upheld in view of the decision of Hon'ble Apex Court in the case of Kedarnath Jute Manufacturing Company Limited (supra) wherein it has been held that the question that whether the Assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the Assessee might take of his own rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter. The Tribunal held that when the expenditure is incurred for the purpose of expansion of business which is already in existence and which is in the nature of revenue then the same is allowable as revenue expenses in respect of the treatment given by the assessee to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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