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2016 (8) TMI 202 - HC - Income TaxTrial run expenditure incurred in the process of expansion of its existing manufacturing facilities - revenue or capital expenditure - Held that:- The mere fact that there was no common place of business because the Bangalore unit was situate many miles away from Baroda was not a matter of any consequence because the head office of the assessee was at Baroda and it was the head office which controlled the affairs of both the businesses. It was pointed out that the closure of any of the two units would surely affect the working and the business of the remaining unit for the simple reason that a larger liability of the whole business would obviously have to be borne by the other unit on the closure of one unit. Having regard to all these circumstances, it was held that the factory at Bangalore did not constitute a new business but was only an establishment of a new unit of the existing business and that the amounts in question were allowable as revenue expenditure. Taking into consideration the fact that the expense was incurred by the assessee for trial run with regard to expansion of present unit, to increase its installed capacity of the tile manufacturing plant from 35000 MT to 42000 MT, we find merit in the submissions of Mr.Soparkar. We are of the opinion that the question posed for our consideration is required to be answered in favour of the assessee and against the revenue. Accordingly, it is held that the Tribunal has committed an error in treating the trial run expenditure incurred by the appellant in the process of expansion of its existing manufacturing facilities as capital expenditure.
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