Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2011 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (9) TMI 588 - AT - Income TaxDeduction under 35E - Business of Prospecting Exploring and mining of Diamonds and also Consultancy - Total Expense 23,64,44,196 Suo motu disallowed 1,20,06,438 and expenditure of 5,39,57,120 deductible under 37(1) - Show cause why entire expenditure not to be capitalized under 35E - Consultancy income Rs. 98,42,810 - a reasonable ratio of 30% of the income can be allowed as deduction for earning the income of Rs. 98,42,810" - Held That:- Survey Exploration expenses have been rightly capitalized. Assessee inter alia engaged in mining activities all expenses are to be treated as Eligible under 35E is an incorrect approach. The application of 'matching principle', based on the quantum of earnings, is wholly devoid of any merits. One cannot invoke the matching principle to restrict the deductibility of a part of expenses as a result of the expenses being too high in proportion to quantum of expenditure; it can at best be invoked to spread over the costs over entire period in which revenues as a result of those costs are generated. We are of the considered view that the Assessing Officer was indeed in error in capitalizing the expenses which were not directly attributable to the prospecting of diamonds as also in restricting the deductibility of expenses to 30% of the consultancy revenues received by the assessee. Decided in favour of assesee.
|