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TMI Blog2023 (1) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as relating to same business and assessee wants this expenditure to be allowed as revenue expenditure. We find that assessee is taking contradictory stand. As per assessee s own admission, similar expenses incurred in earlier year are written off as abandoned project. Similar expenditure in the current year assessee wants to be treated as revenue expenditure. It is settled law that any party cannot be allowed to approbate and reprobate i.e. accept and reject part of the same nature. In the same year, assessee wants to adopt two system of accounting In the present case, AO has allowed those expenditure which as per AO is necessary for the purpose of managing the status of the company. While the assessee on the other hand c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Lacs Seventeen Thousand Five Hundred Seventeen only) as revenue expenditure under section 37 of the Income Tax Act, 1961 ('the Act'). 2. The Ld. CIT(A) failed to appreciate that these are revenue business expenditure such as employee costs and finance charges etc. incurred for the continuous running of the business and thus cannot be said to be of capital in nature so as to warrant their disallowance under Section 37 of the Act. 3. Without prejudice to Ground 0.1, the Ld. CIT(A) has erred in facts and in law in not passing a speaking order directing the Ld. AO to allow depreciation at the specified rate of 25% as per the provisions of Section 32 of the Act. That the grounds of the appeal as herein are without prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exus between earning of the income and expenditure. Further AO held that assessee needs to incur certain expenditure to retain its status as a company, hence expenditure relating to audit fees, insurance and other administrative office expenses totaling Rs.4,68,907/- was allowed by the AO and rest of the expenditure of Rs.2,61,76,161/- was disallowed. 5. Against this order, assessee appeal before the ld. CIT (A). Ld. CIT(A) was of the opinion that the project abandoned by the assessee has provided intellectual property right as know-how and he held that the earlier expenditure written off should be allowed as capital expenditure and depreciation should be allowed. Further he held that the action of AO not disallowing the same as revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prudent that the project rendered a solid learning and created a strong basis for the appellant to re-launch the project in any time in future. The appellant has created a set of intellectual knowhow in this arena of e learning which is futuristic and is bound to be the norm in the times to come. Thus, the expenses so incurred have generated substantial IPRs for the appellant entity. These would not fall in the category of Revenue Item in view of the discussion supra. The AO is directed to allow the expenses as Capital item and allow depreciation as per law. The action of the AO in disallowing the same as revenue items is upheld. The jurisprudence cited by the appellant is on entirely different facts where no business was carried out or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that there is no finding of the AO that any particular expenditure was not related to assessee s business. Thereafter, ld. Counsel for the assessee referred to plethora of case laws in this regard as under:- l. CIT vs E-funds International India (2007) 162 Taxmann 1 Delhi High Court 2. ITO vs Mokul Finance (P) Ltd. (2009) 29 SOT 11 Delhi Tribunal 3. CIT vs Ganga Properties Ltd. (1992) 62 Taxmann 286 Calcutta High Court 4. L.Ve. Vairavan Chettiar vs CIT (1969) 72 ITR 114 Madras High Court 5. ITO vs Patel Corp. P Ltd. [2017] 86 taxmann.com 82 Mumbai Tribunal 6. Akarsh Printers Ltd., Kolkata vs Department Of Income Tax I.T.A.No.2279 (Kol) of 2007 Kolkata Tribunal 7. Pr. Commissioner of Income Tax-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee wants to adopt two system of accounting In the present case, AO has allowed those expenditure which as per AO is necessary for the purpose of managing the status of the company. While the assessee on the other hand claimed that the entire expenditure was meant to preserve the status of the company and was statutory necessity and commercial expediency. In our considered opinion, those part of the expenditure incurred during the year which are identical to the earlier year, which have been written off by the assessee as abandoned cannot be allowed as revenue expenditure during the year. Hence, we deem it appropriate to remit the issue to the file of AO. AO shall examine the nature of expenditure during the year and those of the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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