TMI Blog2020 (1) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... items listed would also have to be absorbed as revenue expenditure as one time cost in respect of abondoned project which requires to be charged off as revenue. Hence, we hold that the finding of the ld. CIT that the entire expenditure would be treated as capital loss is incorrect. We hold that some part of these expenses would be capital in nature and part would be revenue in nature. Since the ld. AO has been directed to frame the assessment afresh pursuant to the directions of the 263 order by the ld. CIT, the assessee would be at liberty to make out its case before the ld. AO in the light of the aforesaid directions. Provision for Doubtful Debts - HELD THAT:- We find from the schedule-14 of the financial statements as on 31/03/2007 of the assessee company, which is enclosed in page 8 of the paper book, the assessee has debited a sum of ₹ 16,07,000/- towards provision for doubtful debts (net) and sum of ₹ 4,70,000/- towards bad debts and advances written off. This clearly goes to prove that a sum of ₹ 16,07,149/- purely represents only provision for doubtful debts and not write-off of bad debts in the books of accounts of the assessee by corresponding credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in invoking revisionary jurisdiction u/s.263 of the Act as well as the issue adjudicated therein on merits. 3. We have heard rival submissions. We find that the brief facts of this appeal are that the return of income for the A.Y.2007-08 was filed by the assessee on 30/10/2007 declaring total income of Rs.Nil under the normal provisions of the Act and book profit of ₹ 25,02,24,129/- computing u/s. 115JB of the Act. The taxes payable u/s. 115JB of the Act were duly paid by the assessee. The assessment was completed u/s.143(3) of the Act on 30/12/2010 determining the total income at Rs.Nil under normal provisions of the Act and book profit of ₹ 25,02,24,129/- u/s.115JB of the Act. In the income determined under normal provisions of the Act, the ld. AO made transfer pricing adjustment of ₹ 5,72,99,914/- and disallowance u/s.145A of the Act to the tune of ₹ 1,28,74,878/- and consequently adjusted the brought forward business loss to that extent. This assessment was sought to be revised by the ld. CIT by issuing show-cause notice u/s.263 of the Act on the following grounds:- A. The ld. AO while computing income under normal provisions of the Act failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions made by the assessee on merits in respect of each of the issues. Write-Off of capital work in progress of ₹ 31,25,000/- claimed as deduction by the assessee while computing income under normal provisions of the Act:- 4. We find that assessee is engaged in the business of manufacturing and trading of cosmetic / Fast Moving Consumer Goods (FMCG) such as hair colours, shampoos, creams etc. The ld. AR stated before us that in view of the cut throat competition in the FMCG Sector, it would be imperative for the assessee to come out with new and better advertisement ideas on continuous basis to attract / retain customers. Accordingly, we find that assessee had proposed to set up an advertisement counter for display and sale of Lancome beauty products range skin care, fragrance and make-up in beauty saloons / shopping malls etc. It was submitted that this advertisement counter was specially designed and was to be set up as per uniform global standards to attract customers and create awareness of the new and different range of Lancome products. It was submitted that since the company does not engage in any direct retail, this counter would be placed under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.10.2006 Custom duty 375,556 27.10.2006 Freight charges 86,432 29.11,2006 M/UBar 187,987 29.11.2006 Hanging Mirror 97,698 29.11.2006 S/C Bar 112,515 29.11.2006 Furniture and fixture packing cost 112,120 04.12.2006 Bar Maquillage Grand Modele Asia 141,928 04.12.2006 Bar Soin Grand model for the boutique 133,610 Total 3,125,442 4.1. From the aforesaid list, it could be seen that the majority of the items comprises of cost of furniture and fixtures, its customs duty, its freight charges, drawing and design of the counter etc., among others. From the list of expenses incurred above, it could be seen that some items would certainly carry enduring benefit to the assessee in the capital field in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n off. This clearly goes to prove that a sum of ₹ 16,07,149/- purely represents only provision for doubtful debts and not write-off of bad debts in the books of accounts of the assessee by corresponding credit to concerned debtor s account. We also find that the very same sum (i.e provision for doubtful debts) has already been added back by the assessee voluntarily in the return of income while computing income under normal provisions of the Act which goes to strengthen our finding that this sum represents only provision for doubtful debts and not bad debts actually written off in the books. Hence, the applicability of provision of Clause (i) of Explanation 1 to Section 115JB(2) of the Act would directly come into operation wherein this amount requires to be added back while computing book profits u/s.115JB of the Act. Hence, we do not find any infirmity in the action of the ld. CIT invoking revisionary jurisdiction in respect of this issue. Provision for obsolescence / Slow Moving Stock ₹ 3,42,82,000/- 6. We find that the assessee as per Accounting Standard 2(AS-2) issued by the Institute of Chartered Accountants of India (ICAI) on Valuation of Invento ..... X X X X Extracts X X X X X X X X Extracts X X X X
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