Capital versus revenue expenditure split upheld where Revenue failed to identify any specific wrongly classified item.

Expenditure incurred in connection with the construction and operation of cinema houses was bifurcated by the assessee into capital and revenue components. The first appellate authority test-checked part of the claim and accepted that only the portion attributable to construction-related items required capitalisation, while the balance was revenue in nature. As the Revenue did not identify any specific item from the stated heads to show that the assessee's classification was incorrect, the bifurcation was accepted and the disputed expenditure was not shown to have been wrongly treated.

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Issues: Whether the expenditure of Rs. 66,975.11 out of the total claim of Rs. 1,68,887.64 was liable to be capitalised or was allowable as revenue expenditure.

Analysis: The assessee had split the common expenditure into capital and revenue components in relation to the construction and operation of cinema houses. The first appellate authority examined and test-checked part of the claim and accepted the bifurcation, finding that only the portion attributable to construction-related items required capitalisation. The Revenue did not point to any specific item of expenditure from the identified heads to show that the classification accepted by the assessee was incorrect.

Conclusion: The disputed expenditure was not shown to be wrongly classified, and the order accepting the assessee's bifurcation was upheld.

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