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2019 (7) TMI 795 - ITAT CHANDIGARHAddition of pre-operative expenditure - nature of expenditure - revenue or capital expenditure - expenses are only to enhance the existing portfolio of the assessee and to increase its existing production capacity - HELD THAT:- The decision of the Hon'ble Delhi High Court in the case of ‘Jay Engineering Works Ltd.’ [2007 (10) TMI 286 - DELHI HIGH COURT] is found applicable wherein it has held that where a new unit set up is only an expansion of the business of the assessee, the pre-operative revenue expenditure incurred by the assessee on the said project will be allowable expenditure. The facts of the case are squarely covered by the aforesaid decision of the Hon'ble Delhi High Court. DR could not bring any contrary decision to the above proposition of law laid down by the Hon'ble Delhi High Court. Even there is no denial of the fact that the expenditure claimed by the assessee is otherwise revenue in nature and not relating to the set up of the plant. In view of this, this ground of appeal is hereby allowed and disallowance made by the A.O. on this issue is ordered to be deleted. Disallowance of interest on adhoc basis - HELD THAT:- Assessee already capitalized the interest expenditure as per actual utilization, there was no justification for adhoc disallowance made by the A.O., which even exceeds the actual interest expenditure incurred by the assessee. In view of this, the disallowance on this issue is restricted to the extent of suo moto capitalized by the assessee and the addition made by the A.O. is ordered to be deleted. Addition of provision for warranty - HELD THAT:- The CIT(A) has given a categorical finding that the method adopted by the assessee was a scientific method. Moreover, the provision for warranty created by the assessee has been accepted by the Department till assessment year 2007-08. Hence, based on the principle of consistency as well as considering that the provision was calculated by adopting a consistent method, we do not find any infirmity in the order of the CIT(A) in deleting the disallowance made by the A.O. on this issue. Addition of bad debts written off - Government dues - HELD THAT:- Some times due to certain difficulties/impediments, it is not possible to complete the requisite formalities and even sometimes it is beyond the control of the assessee to get the necessary approval and further that sometimes the value of the required time and efforts applied for the recovery of dues is more than the actual amount recoverable and hence, in the overall business interests, it is deemed prudent to write off such debts. The assessee in this case has written off bad debts as there was no likelihood of recovery of the aforesaid outstanding amount. No justification on the part of the A.O. to make the impugned disallowance merely because the recovery was outstanding against the Government. This ground of appeal of the Revenue is, therefore, dismissed. Addition u/s 145 by including excise duty in closing stock of WIP - HELD THAT:- In the case in hand, the assessee has not paid any excise duty on the closing work in progress and hence there was no question of loading any excise duty on estimation basis. Even otherwise, if the value of excise duty has to be included in the closing stock then the value of excise duty has also to be included in the opening stock and in that event there would be no difference in the result of the value of the opening stock and closing stock.
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