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TMI Blog2022 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... has been shown as "DCIT, Circle 4(2), New Delhi" and the respondent has been shown as "Bharat Light and Power Pvt. Ltd., New Delhi (Assessee)". Even in the cause list, the appeal has been shown being filed by the Revenue Department. Whereas, in fact, herein the Assessee is an appellant and the Revenue Department through DCIT, Circle 4(2), New Delhi, is the respondent, therefore we deem it appropriate to clarify that the Assessee be read as 'Appellant' and the Revenue Department as 'Respondent' herein. 3. It appears from the Record that though various notices of hearing were issued to the Assessee and the case was fixed for hearing on many occasions, but the Assessee did not appear, therefore we are constrained to decide this appeal as ex-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us the same have been claimed as expenses during the year. The Assessing Officer, though considered the claim of the Assessee but not found acceptable on the ground that the said expenses were clearly 'capital' in nature, as the Assessee company has itself admitted the fact that "due to certain unavoidable reasons, it was not able to successfully develop those clients and thus eventually it had to write such amount as an expense during the year under the relevant provisions of the Income Tax Act, 1961". The Assessing Officer further observed that the expenditure was not for regular business activities. Thus, the expenses claimed by the Assessee cannot be allowed. 6. The Assessee being aggrieved, challenged the said addition before the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of legal and professional charges of Rs.1,20,01,931/- under the head "other expenses" in its profit and loss account. The Assessing Officer sought the reply of the Assessee, against which the Assessee has claimed that "since the company is in the nascent stage of its operations and accordingly, it has taken services of various legal and technical professions to augment its scale of operations significantly. Accordingly, the proportion of such expenses has increased significantly as compared to the previous year". The Assessee again submitted that the said expenses have been incurred during the routine course of business activities of the company which have been utilized for identification and generation of source of income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act with respect to Capital and Revenue Expenditure Considering the provision of section 37(1) as well as the judgments passed by the Hon'ble Supreme Court of India, and various High Courts, the Ld. Income Tax Appellate Tribunal Kolkata (Special Bench) in case of Pearless Securities Ltd. Vs Joint CIT (2005) 94 ITD 89 (KOL) (SB) outlined certain general principles for making the distinction between the "Capital Expenditure" and "Revenue Expenditure" which are briefly explained here below:- i. When an expenditure is made with a view to bring into existence an asset or an advantage for the enduring benefit of a trade, there is good reason (in the absence of special circumstances leading to the opposite conclusion) for treating suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of business or manufacture, it would be Revenue expenditure. viii. It is the true nature of the expenditure that is relevant and not the name or description or treatment given to it by the Assessee in his books of account or other documents. 4.5.4. Further, one of the conditions for allowing deductions u/s 37 or losses u/s 28 is that such expenditure should not be of capital expenditure or such loss should not be of capital expenditure or capital loss in nature. However, the Act neither defines the term nor prescribes as to when an expenditure or loss would be characterized as capital in nature. Ordinarily, 'capital' means an asset which has an element of permanency about it and which is capable of being a source for g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expert opinion for long term goals of revenue generation and expansion of markets. By its own admission, the appellant has stated that the expenditure has been for "services of various legal and technical professionals to augment its scale of operations significantly". Thus the expenditure of Rs. 1,20,01,931/- is adjudged as capital expenses. Considering thus the totality of circumstances facts of case and the legal provisions as discussed in the preceding paras, I uphold the finding of AO in this regard. Ground no. 4 is dismissed. {Highlighted by us } 10. We observe that the ld. Commissioner while affirming the disallowance under challenge categorically observed that the appellant company as per various submissions, is in its nascent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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