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2015 (8) TMI 1306 - ITAT Mumbai

2015 (8) TMI 1306 - ITAT Mumbai - TMI - Project development expenditure - Disallowance of claim for deduction u/s 37(1) in respect of revenue expenditure - Held that:- Identical issue in assessee’s own case was decided in favour of the assessee in the two earlier AY.s., that similar issue had arisen in the matter of one of the sister concerns namely Reliance Footprint Ltd. [2013 (12) TMI 161 - ITAT MUMBAI], that the Tribunal had allowed the claim made by the assessee. Looking to the nature of ex .....

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9; of the case and in law, the Ld. CIT(A) erred in directing the AO to delete the disallowances of ₹ 39,79,354/- of reject Development Expenditure made by the AO considering it as Capital Expenditure but wrongly claimed by the assessee as a revenue 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 ₹ 2,97,42,700/- consisting of leave encashment .....

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income on 25.09.2010,declaring income of ₹ 19,70,64,951/-.The AO completed the assessment u/s. 143(3) of the Act, on 23.02.2013 determining the income of the assesse at ₹ 16,44,96, 510/-. 2.Effective ground of appeal is about deleting the disallowance of ₹ 3.73 Crores (Rs.39.79 lakhs + ₹ 2.97 Crores), made by the AO, with regard to Project Development Expenditure. During the assessment proceedings, the AO found that the assessee had claimed revenue expenditure amounting .....

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Finally, he held that following a consistent approach similar to the earlier assessment years the claim of project development expenditure was being treated as capital in nature. As a result, he added an amount of ₹ 39.79 lacs to the total income of the assessee. 3.The AO further found that the assessee had claimed certain expenses u/s. 43B and 40A (7) in the computation of income out of the disallowances made under the head project development expenses. He found that the expenses claimed .....

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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 order of the Tribunal for AY.2008-09 wherein the issue of treating capital account in the books of account and later on claiming the same as revenue expenditure was decided in favour of the assessee. Following .....

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Representative(AR)stated that the identical issue in assessee s own case was decided in favour of the assessee in the two earlier AY.s., that similar issue had arisen in the matter of one of the sister concerns namely Reliance Footprint Ltd., that the Tribunal had allowed the claim made by the assessee. We find that while adjudicating the appeal, filed by the AO, for AY.2008-09(ITA/5759/Mum/2012 dated 27.11. 2013), the Tribunal has deliberated upon and decided the issue as under: 3. The relevant .....

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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 ₹ 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 ₹ 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 .....

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the assessee-company is expanding its already started line of business by expanding its scale of operation throughout the country. b) That all the activities of the assessee-company are appropriately reflected in the balancesheet of the assessee company and all the operations are accounted through one single profit and loss account of the assessee company. c) That all sourcing of funds is done at the company level. During the year, the assesseecompany has sourced funds by way of unsecured loans .....

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inter dependence, common management, common business organization, 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, th .....

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ng the year is allowable in entirety and deferment of such expenditure in the coming years is not permissible.; h) That these expenses are claimed as deduction u/s 37(1) during the year as once business is commenced, expenditure which are otherwise allowable under the Act and which are not capital in nature, should be allowable as business expenditure notwithstanding that the business plan is implemented in phased manner. Before the AO, the assessee placed reliance on the following case laws: i) .....

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count 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 ₹ 4,80,50,176/- u/s 40A (7) /43B of the Act while claiming Project Development Expenditure in thecomputation of income and therefore restricted the disallowance to ₹ 2,88,72,441/-. Being aggrieved, the assessee filed appeal before the First Appellate Authority. 5. At the time of hearing, ld. D .....

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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 I.T.A. No.5759/Mum/2012 6 before us are identical to the case of M/s Reliance Footprint Ltd (supra). In that case also the assessee incurred the expenses for the purpose of expansion of its business in relation to its stores which were made operati .....

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ther the Assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the Assessee might take of his own rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter. The Tribunal held that when the expenditure is incurred for the purpose of expansion of business which is already in existence and which is in the nature of revenue then the same is allowable as revenue ex .....

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