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2018 (11) TMI 1484 - ITAT DELHIExpenditure incurred during construction/trial period - Revenue or capital expenditure - expenses before the commencement of the business are added to the cost of assets and allowed to be capitalised - matching concept - Held that:- It is an undisputed fact that assessee has shown income of ₹ 3,16,68,000/- pertaining to income from sale of power during trial run period has been adjusted from the expenditure incurred during construction/trial period from 17.7.2010 to 28.7.2010 amounting to ₹ 4,90,42,000/- pending capitalisation. AO on one hand has added the income and on the other hand treated the corresponding expenditure as capital. We are unable to appreciate the action of the AO in adding the receipts of ₹ 3,16,68,000/- as income, because if the expenses before the commencement of the business are added to the cost of assets and allowed to be capitalised then how the corresponding income from the commercial production is treated as revenue. It is also capital in nature which has to be reduced accordingly. This principle has been reiterated by the Supreme Court in the case of CIT vs. Bokaro Steel Limited [1998 (12) TMI 4 - SUPREME COURT] wherein held that if the assessee receives any amount which are inextricably linked with the process of setting up its plant and machinery, then such receipts will go to reduce the cost of its assets and would be receipts of a capital nature and cannot be taxed. We are of the view that, if income of ₹ 3.16 crore earned during the trial period is treated as income then corresponding expenses of ₹ 4.90 crore incurred during the trial period should also be allowed as revenue expenditure by applying the matching concept, which as discussed above will result in net loss of ₹ 1.74 crores. Thus, the addition made by the AO is unsustainable in law and on facts and hence, we do not find any infirmity in the order of the Ld. CIT (A) in deleting the addition and the same is affirmed - Decided against revenue
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