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2018 (8) TMI 675 - ITAT MUMBAITreatment of expenditure and revenue during Construction period - Nature of sale of machines - revenue receipt or capital receipt - determination cost of Capital Work in Progress (Product Development Expenditure (RCS)) - Indirect Expenditure - Overhead expenditure - sale was made of trial/demo machines and the rent was received when the project was in the development stage - assessee is engaged in the development of Machine 2 Machine (M2M) and Register Control System (RCS) and whatever expenses incurred were debited to Capital Work-in-progress including the Project Development Expenses. Held that:- Revenue has not doubted the development of products by the assessee and allowed capitalization of expenses but at the same time the Revenue has chosen to treat the sale of demo machines to the tune of ₹ 59, 20, 849/- and recovery of rent amounting to ₹ 64, 200 as revenue receipt and added the same to the income of the assessee after allowing the expenses of ₹ 14, 75, 553/-. The case of the assessee also finds support from the Guidance Notes issued by the Institute of Chartered Accountants of India on treatment of expenditure during construction period, which provides that if any revenue is realized during the trial run or product development stage, the same should be set off against the expenditure incurred in connection with the said project/products. - No addition - Decided in favor of assessee. Disallowance of certain sum paid treating the expenses as relatable to Capital Work-in-progress - Held that:- the assessee has explained with reasons the apportionment of expenses into revenue and capital account in which no defects or deficiencies were pointed out. After perusing the said reply we certainly feel that the apportionment of expenses were made correctly. Moreover there is no materials brought before us by the revenue to take a view supporting the order of CIT(A). The Assessing Officer has also treated the expenditure as capital in nature without giving any reasons which is highly subjective and whimsical. The assessee has rightly apportioned the expenses depending upon the nature and purpose of expenses with adequate reasoning. - Decided in favor of assessee.
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