9911796707
TMI Blog2005 (11) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with installation of various assets. 2. The facts of the case are that the assessee-company filed its return on 29.11.2006 declaring loss of ₹ 30,94,980/-. The return was processed u/s 143(1) of the Income-tax Act, 1961, on 13.10.2007. A notice u/s 143(2) dated 10.10.2007 was served on the assessee for making scrutiny assessment. It was found that .the assessee is engaged in the business of manufacturing and trading in cakes, pastries, biscuits, bread, other bakery products, chocolate products, confectioneries and allied foods products. These products are directly supplied to institutional customers. It is also operating a restro named "Choko la". 2.1 On perusal of the accounts and notes thereto, it was found that .the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition of any fixed asset. U/s 32 of the Act, the deduction for depreciation can be granted only in respect of specified assets subject to the condition that the expenditure is incurred for its cost. 3. Before us, the learned counsel drew our attention towards the findings of the Assessing Officer and the learned CIT(A). Our attention has also been drawn towards major expenses, being administrative and general expenses of ₹ 73,069/-. Net consumption of material of ₹ 1,98,082/-, rent of ₹ 9,09,194/- and personnel's salary of ₹ 4,25,169/-. It is submitted that electricity, gas and water charges, consumption of material charges, and kitchenware expenses of ₹ 12,131/- were incurred in the course of trial produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will amount to the cost of fixed asset. It was also submitted that AS-10 regarding "accounting for fixed assets" issued by the ICAI specifies the components of cost of a fixed asset. Thus, the purchase price of an asset includes import duties, levies, non-refundable taxes and any other cost directly attributable to the asset for bringing it to the working condition. The examples given in AS-10 are site preparation, initially delivery and handling cost, installation cost, such as laying foundations, and professional fees for architects and engineers. The preliminary project expenditure, indirect expenditure relating to construction and other indirect expenditure not related to construction have been included in the cost of the asset. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be capitalized. The assessee has capitalized the expenses in the ratio of the cost of the asset to the total cost, which is a reasonable basis. On the other hand, the of the learned DR is that in absence of any corelation of any expenditure with any fixed assets, the expenses which are of revenue in nature, cannot be capitalized. 4.1 Section 43(1) defines "actual cost" to mean actual cost of the asset to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. 4.2 In the case of CIT Vs. Food Specialties Limited, (1982) 136 ITR 203 (Delhi), it has been mentioned that it seems that the Tribunal was not wrong in holding that the expenditure of test runs was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance the case of the assessee. 4.4 In the case of CIT Vs. Lucas-TVS Limited ( No.2), (1977) 110 ITR 346, one of the questions before the court was - whether, on the facts and in the circumstances of the case, it has been rightly held that the sum of ₹ 1,30,768/- representing indirect expenditure on salaries, rent, lighting, etc. and allocated to various assets formed part of the capital asset for the eligibility of depreciation allowance and in relation to the cost of the machinery was eligible for development rebate also? The facts of the case are that the assessee-company acquired land near Madras and erected buildings, plant and machinery etc. It also took on lease adjoining land for its use from integral coach factory. After c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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