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TMI Blog2015 (8) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure u/s.37(1) of the Income Tax Act,1961. 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to delete the disallowances of Rs. 2,97,42,700/- consisting of leave encashment paid, leave encashment reversed, gratuity paid and gratuity reversed out of Project Development Expenses which was disallowed by the AO considering it as a Capital Expenditure but wrongly claimed by the assessee as a revenue expenditure to be allowed u/s.43B and 40A (7) of the Income Tax Act,1961." 3. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." Assessee-company, engaged in the distribution and logistics business, filed return of income on 25.09.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt pay during the year under appeal (Rs.1.40 crores), leave enchashment reversed during the year (Rs.1.29 crores), gratuity paid during the year under appeal (Rs.7.96 lacs) and gratuity reversed during the year (Rs.19.24 lacs). The AO held that claim made by the assessee for Rs. 2.97 crores(Rs.1.40 crores+1.29 crores+7.96 lacs+19.24lacs)for the above mentioned heads of expenses was not allowable u/s. 37(1)of the Act. In short, the AO rejected the claim made by the assessee for treating the expenses in question as revenue expenditure. 4.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). After considering the submission of the assessee and the assessment order, the FAA referred to or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rganization, common fund, common administration and common central place of business; e) That the assessee has incurred operational and maintenance expenses towards salary, electricity, audit fees and likes. For expansion of the existing line of business or for maintenance and operation of the already established operations. f) That where the expenses are directly identifiable with the operation and maintenance of the existing operations, the same have been expensed out during the year and where the expenses are not directly identifiable with the operations and maintenance of the existing stores, the same has been transferred to the "Project development expenditure" pending capitalization. That what is being reflected by assessee, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Expenditure"in thecomputation of income and therefore restricted the disallowance to Rs. 2,88,72,441/-. Being aggrieved, the assessee filed appeal before the First Appellate Authority." "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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the treatment given by the assessee to such expenditure in its books of accounts. The Tribunal also placed reliance on the decision of the Hon'ble High Court of Bombay in the case of CIT vs. Kothari Auto Parts Manufacturers Pvt. Ltd. (109 ITR 333) and the decision of decision of Hon'ble Gujarat High Court in the case of CIT vs. Alembic Glass Industries Ltd. (103 ITR 715). In the case of Kothari Auto Parts Manufacturers Pvt. Ltd.(supra), the jurisdictional High Court has held that assessee company had started selling auto parts and incurred certain expenditure in relation to activity of manufacturing of auto parts. Noting from the Memorandum of Association it was observed that the activity of manufacturing related to same business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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