TMI Blog2010 (2) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. 3.1. During the assessment proceedings, the assessee was required to file the details of pre-operative expenditure and was asked that why these expenses should not be treated as capital expenditure. It was explained that the pre-operative expenditure claimed as revenue expenditure pertains to capital project of the company undertaken at Chakan, Pune where the then existing manufacturing facilities of the company at Umbergaon, Gujarat have been shifted and in addition, the expansion of manufacturing facilities of the same business has been undertaken. It was also explained that this is an expansion of business already been carried on by the assessee and accordingly, expenses in connection with such shifting expansion or ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt showing sale of the year under consideration and in the immediately preceding year is placed at page 63 of the paper book. At page 69 Schedule forming part of profit and loss account showing pre-operative expenditure and at page 74 details showing pre-operative expenditure are placed. It is further seen that whatever the expenses were incurred by the assessee on plant and machinery they were capitalized by the assessee itself; however, the expenses which are to be revenue in nature are claimed on account of legal and professional charges, personnel expenses, repairs and maintenance others. Travel rates and taxes, insurance, power, fuel and electricity etc., were claimed on revenue account. It is seen that similar expenses were allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter-connection of management, financial, administrative and production aspects, has to be construed as revenue in nature and was deductible. 5.3 The expenses claimed in this case were on account of interest on Exim bank loan, various raw material consumed, stores consumed, tools consumed, salary and wages etc., 5.4 Similar view has been expressed by the Hon ble MP High Court in the case of Eicher Motors Ltd 293 ITR 464 and the Hon ble Delhi High Court in the case of Jay Engineering Works Ltd in 212 CTR 562(Del). It is held in this case that; the new project undertaken by the assessee company being under the control of the same management and administration and managed from common funds, was only an extension of the existi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity of control; same funds are used for expansion of business; therefore, it cannot be said that expenses incurred by the assessee were capital in nature. More importantly, it is seen that the unit is already in existence as in the immediately preceding year as well as in the year under consideration there are huge sales of the products manufactured by the assessee. 7 In view of these facts and circumstances, we hold that both the lower authorities were not justified in rejecting the claim of the assessee; accordingly, we allow this ground and direct the AO to accept the expenses claimed as revenue in nature. We order accordingly. 8 In the result, the appeal filed by the assessee is allowed in part. Order pronounced on 11th Feb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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