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TMI Blog2013 (12) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown in profit and loss account. In the balance sheet, the assessee has shown to have incurred an expenditure of Rs.7,69,22,617/-, which has been reflected as "Project Development Expenditure" in the books of account. However, in the computation of income, this expenditure has been claimed as Revenue expenditure. It is relevant to state that the AO stated that assessee itself has disallowed an amount of Rs.4,80,50,176/- u/s 40A(7) /43B of the Act. Thus, out of the said amount, the assessee has claimed an amount of Rs.2,88,72,441/- in the assessment year under consideration u/s 37(1) of the Act. The AO has stated that the assessee vide its letter dated 29.11.2010 submitted that these expenditures are mainly salary, travelling and conveyance, telephone expenses, professional fees, audit fees and those are appearing in books of accounts under the head 'Project Development expenditure' since they are of revenue nature are eligible for deduction u/s 37(1) of the Act. The AO has reproduced the submissions of the assessee in the assessment order at pages 2 to 6 of the assessment order. The assessee has stated in its submissions : a) During the year the assessee has already started its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure notwithstanding that the business plan is implemented in phased manner. Before the AO, the assessee placed reliance on the following case laws: i) Kedarnath Jute Manufacturing Co.Ltd. (1971) 82 ITR 363 (SC); ii) Jay Engineering Works Ltd. V/s CIT (2008) 166 Taxmann 115 (Delhi); iii) CIT V/s Priya Village Roadshows Ltd (2009) 185 Taxmann 44 (Delhi) iv) Bansidhar (Pvt) Ltd. V/s CIT (127 ITR 65)(Guj) v) CIT V/s Rajendra Prasad Moody (115 ITR 519) However, the AO has stated that the submissions of the assessee is not tenable as the assessee has not incurred such expenses for the routine operations. That the assessee itself in the books of account has considered such expenses as capital and hence claiming the same while computing total income as revenue is not acceptable. Therefore, AO has stated that assessee itself has disallowed Rs.4,80,50,176/- u/s 40A(7) /43B of the Act while claiming "Project Development Expenditure" in the computation of income and therefore restricted the disallowance to Rs.2,88,72,441/-. Being aggrieved, the assessee filed appeal before the First Appellate Authority. 4. On behalf of the assessee, the submissions as made before the AO were reite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant is engaged in the business of supply chain management including supply, distribution and logistics. Since this is the first year after the business of the appellant was set up, it was incumbent upon the appellant to expand its existing infrastructure and for this purpose such expenditure has been incurred. These expenses have been essentially incurred for expansion of the existing line of business or for maintenance and operation of the already established stores and have been transferred to the "Project development expenditure". The amount has been spent towards various sub-heads like Salary, Wages, General and administrative charges etc. which are all in the nature of revenue expenditure. In these circumstances, the predominant legal opinion is that such expenditure is allowable revenue expenditure under section 37 of the Act and the same cannot be treated as capital expenditure. 3.10 The appellant has vide letter dated 24.02.2012, further elaborated upon the nature of expenses incurred in this regard. Since the appellant started its business of supply chain solutions and logistics in the current year, it was required to operate its business from various locations as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is evident, is not incurred on capital assets) or for maintenance and operation of the already established stores is an allowable deduction under section 37 of the Act. In view of this therefore, I am of the opinion that the disallowance by the AO of the Project Development Expenditure is not justified. Same is therefore deleted." Hence, Department is in appeal before the Tribunal. 5. At the time of hearing, ld. DR relied on the order of AO. 6. On the other hand, ld. AR submitted that similar issue on identical facts had been considered by ITAT in sister concern of the assessee M/s Reliance Footprint Ltd V/s ACIT in ITA No.5997/Mum/2011 (AY-2008-09) order dated 23.10.2013 and filed a copy of the said order to substantiate his above submissions. Ld. DR has not objected above contention of the assessee that the facts of the present case are identical to the facts of the case of M/s Reliance Footprint Ltd (supra). 7. We have carefully considered the submissions of ld. Representatives of the parties and the orders of authorities below as also the order of Tribunal dated 23.10.2013 in M/s Reliance Footprint Ltd (supra). We agree that the facts in the case before us are identical t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee at Bangalore were allowable despite the fact that unit of the assessee at Bangalore did not start production as the new unit at Bangalore was nothing but expansion of the existing business and there was complete inter-connection, inter-lacing and inter-dependence of both units. 8. On perusal of the details of expenditure placed at pages 26 and 27 of the paper book, we observe that the said expenditure were incurred towards salary to the employees, travelling and conveyance, telephone expenses, professional fees paid, audit fee and other miscellaneous expenses towards registration as stamp duty charges, license application fees, repair and maintenance etc. Therefore, we agree that the such expenses cannot be said to have generated any capital advantage to the assessee and the same is in the nature of revenue expenditure irrespective of the fact that the assessee has given dual status of such expenditure in its books of account vis-à-vis computation of income filed along with return claiming it as revenue expenditure. 8.1 Considering the reasoning given by ld. CIT(A) and the earlier decision of the Tribunal dated 23.10.2013 (supra), we uphold the order of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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