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TMI Blog2018 (11) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... r. AR did not provide details with regard to the dates of training given by the Reliance Industries to dealers and the staff. Similarly no break up of the expenses incurred for the training and construction related activities were submitted. The signing fee was one time payment which was related to the setting up of construction of Reliance petrol pump unit and the expenditure was incurred prior to the commencement of the business, therefore, we are unable to accept the contention of the assessee that the expenditure be treated as revenue expenditure for the year under consideration. Since the expenditure was incurred before the commencement of business, the expenditure required to be capitalized in respect of relevant asset and allow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame as licence fee in the Profit and loss account for the impugned assessment year. The amount was paid in the financial year 2004-05 but not during the current financial year of 2005-06. Therefore, the AO held that the expenditure is neither incurred nor accrued in the impugned assessment year, hence the same was not allowable as revenue expenditure in the year under consideration. The Ld.AO also observed that the expenditure was incurred for the purpose of setting up of Retail outlet, therefore, the expenditure was capital in nature, thus treated the sum of ₹ 3,00,000/- as capital expenditure and allowed the depreciation @5% and disallowed the balance amount. 3. Aggrieved by the order of the AO, the assessee went on appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be computed and assessed each year independently. In this case, the assessee is following the mercantile system of accounting.Since the expenditure claimed to be paid for signing fee, was not relatable to the year under consideration, the expenditure is not allowable as per the system of accounting followed by the assessee. Secondly, the Ld.DR submitted that the payment of ₹ 3,00,000/- was paid towards signing fee and as per the agreement, the payment was made towards training of the dealer and its staff and supervision and coordination of the construction of the retail outlet of petrol bunk. Therefore, the expenditure was incurred in connection with the setting up of the retail outlet during the period of construction and befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case law relied upon by the assessee has no application in the case of the assessee. 6. We have heard both the parties, perused the material placed on record. In this case, the assessee is following the mercantile system of accounting and the assessee has paid the sum of ₹ 3 lakhs on 13.08.2004 as a signing fee for the training of the dealers and its staff and supervision and coordination of the construction of the retail outlet. The payment was made to the Reliance Industries on 07.08.2004 relevant to the A.Y.2005-06 and the expenditure is related to the setting up of the retail outlet incurred before commencement of the business. For a query from the Bench, the Ld.AR submitted that the retail outlet of the Reliance unit was commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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