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2023 (6) TMI 204 - AT - Income TaxBusiness expenditure u/s 37(1) - effect of treatment of expenditure by the assessee in its books of accounts - HELD THAT:- AO has nowhere denied that expenditure in question has been incurred for the purpose of the business. He has also not denied that those expenses are routine in nature and same would generally be classified as revenue Expenditure as per the provisions of the Act. The business of the assessee has already been set up and assessee has commenced providing digital services to its customers. The revenue from the same as also been recognised in books of accounts and offered for the tax. In such circumstances, the expenses which are incurred for running the business are revenue expenditure for the purpose of income tax irrespective of the treatment of the same by the assessee in its books of accounts. DR could not substantiate as how the expenses incurred for day-to-day business are for upgradation of the asset and of enduring benefit. Though the assessee has treated those expenses in its books of accounts as capital expenditure following the Indian accounting standard, but these expenses, list of which has been reproduced above have been incurred in relation to services provided to existing customers, and therefore same being incurred wholly and exclusively for the purpose of the business, deserve to be allowed in terms of section 37(1) - Decided against revenue.
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