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Commissioner of Income Tax Versus Kayal Syntex Ltd.

[2016] 389 ITR 84 - Nature of expenditure - revenue or capital - main ground for disallowance of the expenses by the Assessing Officer was that the said expenses were capitalized in the books of accounts of the assessee - Held that:- As decided in Ghanshyam Steel Work Ltd [2010 (5)831 - GUJARAT HIGH COURT] the so called new unit was merely an expansion of the existing business of the assessee and was not setting up of a new business and as such the expenses incurred in this regard were allowable .....

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the books of account, the same cannot be a final wording in the tax proceedings unless these entries of books of account are in consonance with the IT provisions. - Decided in favour of the assessee and against the revenue - Tax Appeal No. 232, 233 of 2006 - Dated:- 14-6-2016 - KS Jhaveri And G. R. Udhwani, JJ. Mrs Mauna M Bhatt, Advocate for the Appellant Mr. Hardik V Vora, Advocate for the Opponent JUDGMENT ( Per : Honourable Mr. Justice KS Jhaveri ) 1. By way of these appeals, the appellant- .....

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assessee had claimed expenditure of ₹ 37,04,458/- as revenue expenditure. During the course of assessment proceedings, the A.O observed that the said expenditure was towards acquisition of a capital expenditure and therefore not entitled to deducted as revenue expenditure. On appeal the CIT (Appeals) deleted the addition to the extent of the said amount and sustained the remaining addition. On further appeal, the Tribunal upheld the decision of CIT(A) with regard to interest payment to th .....

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e submitted that the assessee itself had debited the same as capital expenditure in its books of accounts and therefore it cannot change its stand later on. Relying upon a decision of the Apex Court in the case of Commissioner of Income Tax, Central, Bombay vs. Jalan Trading Co. P. Ltd reported in (1985) 155 ITR 536 (SC) wherein it is held that since the assessee was a new company and it had no other business and it acquired under the assignment the right to carry on the business of sole selling .....

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y this Court. He has submitted that in the assessment years 1996-97 and 1997-98 the assessee had claimed expenses to the tune of ₹ 99,18,607/- and ₹ 97,62,536/- respectively as revenue expenditure and that the assessee had initially capitalized these expenses in the books of account which was duly audited by the Chartered Accountant. He submitted that while filing return of income the assessee claimed the amounts as allowable expenditure. He has relied upon the decision of this Court .....

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hat the said expenses were capitalized in the books of accounts of the assessee. The Tribunal has relied upon a decision of the Tribunal in the case of United Phosphorus Ltd. and observed that merely because the expenses have been capitalized in the books of account, the same cannot be a final wording in the tax proceedings unless these entries of books of account are in consonance with the IT provisions. 8. The facts in the case of Ghanshyam Steel Work Ltd (supra) are quite similar. This Court .....

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