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TMI Blog2021 (8) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order passed u/s 143(3) of the Income Tax Act, 1961 [for short 'the Act']. 2. Brief facts of the case are that the assessee company engaged in the business of real estate development and financing, filed its return of income for the assessment year under consideration declaring loss of Rs. 2,38,22,599/-Later on return was revised declaring loss of Rs. 5,89,66,211/- Since the case was selected for scrutiny, AO issued notices to the assessee company u/s 143(2) and 142(1) of the Act. In response thereof, the authorized representative of the assessee appeared before the AO and produced the books of account and submitted various details as asked by the AO. It was noticed that the assessee had earned interest income of Rs. 4.46 Cr., aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in existence during the year under consideration though the assesses was having no business income and the income declared by the assessee was interest income and income from other sources. (ii) On the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that professional expenses of Rs. 3,47,72,000/-incurred by the assessee are allowable as revenue expenditure, though the same were to be capitalized being incurred at preoperative stage. (iii) It is prayed that the order of the Ld. CIT(A) be set aside and that of the AO be restored. (iv) That the appellant craves to delete, withdraw and amend or add any other ground of appeal which may arise at the time of hearing. 5. Before us the Ld. departmental re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is under consideration and expenses for the same have been incurred. There is no change in management and there is common and interlacing of funds and the genuineness of the expenses is not in doubt. The appellant is in the business of real estate development and financing of real estate and the expenses incurred are into the same line of business. ......" 8. The Ld. CIT(A) has based his findings on the ratio laid down by the Hon'ble Delhi High Court in the case of CIT vs. SRF Ltd. [2015] 59 taxmann.com 180(Delhi) in which the Hon'ble Court has held that where the assessee company expands its existing business and claims expenses as pre-capitalization cost, the same is to be treated as revenue expenditure. The Ld. CIT(A) has furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples are well-settled. It cannot be disputed that if the expenses are incurred in connection with the setting up of a new business, such expenses will be on capital account. But where the setting up does not amount to starting of a new business but expansion or extension of the business already being carried on by the assessee, expenses in connection with such expansion or extension of the business must be held to be deductible as revenue expenses. One has to consider the purposes of the expenditure and its object and effect. The finding of the Tribunal in this case is that there was an expansion or extension of the existing business of the assessee. The assessee is a manufacturer of cement. In addition to its factory in Andhra Pradesh, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uential." 9. As observed by the Ld. CIT(A), AO has assessed the interest income as business income. Therefore, the only issue in dispute before the Ld. CIT was regarding the allowability of expenses claimed by the assessee amounting to Rs. 3,47,72,000/- as revenue expenditure instead of capital expenditure treated by the AO. The Ld. CIT(A) has decided the said issue in favour of the assessee by following the ratio laid down by the Hon'ble Delhi High Court in the case of CIT vs. SRF Ltd.(supra) and the decision of the Mumbai Tribunal in the case of Reliance Footprint Ltd. vs. ACIT and the coordinate Bench in the case of DSM Sinochem Pharmaceuticals India (P) Ltd. vs. DCIT. Since, the Ld. CIT(A) has decided the issue in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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