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COMMISSIONER OF INCOME TAX-IV Versus VADILAL ENTERPRISES LTD

2016 (2) TMI 631 - GUJARAT HIGH COURT

Expenses allowable as revenue expenditure u/s 37 - assessee has treated the same as deferred revenue expenditure - Held that:- The issue is squarely covered by the decision of Supreme Court in case of Taparia Tools Ltd. v. Joint Commissioner of Income tax reported in (2015 (3) TMI 853 - SUPREME COURT ) wherein held the assessee had issued non convertible debentures in which option was given to the subscribers to receive interest periodically over a period of debenture or one time lumpsum payment .....

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same was paid on the capital borrowed by the assessee and the borrowing was for the purpose of business or profession. While examining the allowability of such deduction, the Assessing Officer is to consider the genuineness of the business borrowing and that the borrowing was for the purpose of business and not an illusionary and colourable transaction. It was further held that the amount would be said to have been paid even if same is not actually paid but incurred on the basis of method of acc .....

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2-2016 - MR. AKIL KURESHI AND MR. Z.K.SAIYED, JJ. FOR THE APPELLANT : MR.VARUN K.PATEL, ADVOCATE FOR THE OPPONENT : MRS SWATI SOPARKAR, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue's appeal was admitted on the following substantial question of law : Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) and thereby holding that the expenses of ₹ 32,29,377/is allowable as revenue expenditure u/s37 though the ass .....

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1,35,86,571/in respect of deferred revenue expenditure, though not debited to the profit and loss account ? 2. Briefly stated, the facts are as under. The respondent assessee is a company registered under the Companies Act and is engaged in the business of manufacturing Air conditioner. For the assessment year 19961997, the assessee's return was taken in scrutiny by the Assessing Officer. One of the issues which came up during such scrutiny assessment was with respect to various expenditure .....

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. In the return, however, the assessee had claimed entire expenditure of ₹ 1.67 crores by way of deduction under section 37 of the Income Tax Act, 1961 ( the Act for short). The Assessing Officer disputed such claim. The assessee contended that the expenditure was incurred during the year under consideration. The same was in the nature of revenue expenditure and, therefore, allowable under section 37 of the Act. The Assessing Officer however, rejected such a claim barring ₹ 32.10 lac .....

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sing Officer on the issue upon which the Revenue filed appeal before the Tribunal. The Tribunal noted that the prime reason for the Assessing Officer to disallow the claim was the accounting treatment that the assessee had given to such expenditure. The same being in consonance with the accounting principles and the method of accounting rightly employed by the assessee, the claim of expenditure contrary to such accounting entires was not valid. The Tribunal in this respect recorded that it was n .....

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ould give an enduring benefit to the assessee. Reference was made to the decision of the Supreme Court in case of Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Incometax (central) Calcutta reported in (1971) 82 ITR 363(SC) to hold that mere accounting entries would not be conclusive of the nature of expenditure. 4. It is against this judgement of the Tribunal that the Revenue has filed this appeal. 5. We notice, as correctly pointed out by the parties, that the issue is squarely covered by the .....

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