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2014 (9) TMI 361 - HC - Income TaxExpenses disallowed – Project work in progress should be capitalized or not – Held that:- Method of accounting is one aspect and regardless of the treatment given in the books of accounts, the expenditure, if it is revenue in nature, can be claimed u/s 37 of the Act – relying upon Kedarnath Jute Mfg. Co. V/s Commissioner of Income-Tax 1971 (8) TMI 10 - SUPREME Court] - The core and important aspect which should have been determined by the AO was; whether or not, the expenditure was revenue or capital in nature - This was not the appropriate manner to deal with the contention and issue whether or not the expenditure was wholly or exclusively for purpose of earning of income – AO has not dealt with and examined the aspect but made the addition - even if addition is made in the year, the expenditure will have to be allowed as a deduction in the subsequent years - The income declared in the revised return filed on 30.11.2006 was income and in the revised return loss was declared - The tax effect and the tax involvement would be minimum, and in case we take a holistic view by taking future years in question, there possibly would not be any tax collection shortfall – Decided against revenue.
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