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2020 (8) TMI 766 - HC - Income TaxNature of expenditure - manufacturing and administrative expenses incurred by the appellant for development of a product in the course of its manufacturing activity which was already carried on - Revenue expenditure u/s 37(1) or capital expenditure - HELD THAT:- Assessee had started a new Unit at Hosur in financial year 2004-05 by taking over machineries and properties of M/s V.B.Medicare Pvt. Ltd., Hyderabad on lease. The work of development of 'SUCRALOSE' viz., a new product was started in financial year 2005-06 in Hosur Unit. The product was developed in the financial year 2006-07. Thus, the assessee had produced a new product from which enduring benefit was derived. Therefore, the same has to be treated as capital expenditure. An asset was brought into existence for enduring benefit of the business and therefore, the same has to be treated as capital expenditure. The expenditure has not been made for bringing into existence an asset for running of the business or working with it with a view to produce profits. Same cannot be treated as revenue expenditure. It is pertinent to mention here that the assessee himself in the Books of account had shown it as capital expenditure. Therefore, the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Tribunal have rightly treated the expenditure incurred by the assessee for development of a new asset as capital expenditure. - Decided against assessee.
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