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2012 (12) TMI 732 - AT - Income TaxCapitalization of product improvement expenses - CIT(A) deleted the disallowance - Held that:- CIT (A) has rightly observed that the expenditure in question was incurred as a matter of routine, for the business and commercial expediency of the assessee’s business, i.e., consultancy business. The CIT (A) has also declared that the capitalization of such expenses in preceding years was for the period prior to the commencement of the assessee’s business. Right from the commencement of the business of the assessee, the expenses started being claimed as revenue, every year. The allowance of similar expenditure in the earlier as well as subsequent years, it is pertienent to note, was made in scrutiny assessments - CIT(A) placed reliance on the case laws CIT vs. Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] & Assam Bengal Cement Company Limited Versus Commissioner Of Income-Tax, West Bengal [1954 (11) TMI 2 - SUPREME COURT] - no error in the order of the CIT (A) in this regard - against revenue. Treatment of leased property improvement expenses as capital expenditure - CIT(A) deleted the addition - Held that:- The detail of expenditure filed shows that as shown before the taxing authorities, the expenditure was incurred on networking, fire fighting, electricity cabling, flooring, tiling, sanitary partitions, etc. The premises on which the office of the assessee was situated was a rented premises taken by the assessee and the assessee was not an owner thereof. The expenditure, no doubt, was incurred in the ordinary course of business of the assessee. No addition whatsoever, was made to the structure on the rented premises. The assessee never got to acquire any new asset or advantage by expending the amount - thus CIT (A) rightly deleted the addition wrongly made by the Assessing Officer - against revenue. Foreign Exchange loss - disallowance of claim by CIT(A) - Held that:- As decided in CIT, Delhi-II, New Delhi versus M/s L.G. Electronics India Pvt. Ltd. [2008 (8) TMI 10 - HIGH COURT DELHI] oss on account of foreign exchange rate fluctuation is an allowable business expenditure u/s 37 - rightly been contended on behalf of the assessee that current assets and liabilities in foreign exchange in accordance with the AS 11, are required to be revalued as per the rate applicable at the end of the year. Undoubtedly, forex revaluation has to be done every time. Therefore, CIT (A) clearly erred in upholding the disallowance wrongly made by the AO - in favour of assessee.
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