TaxTMI 
TaxTMI 
2010 (1) TMI 148
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..... No. 77 of 2009, the following two substantive questions of law have been raised for determination of this court: "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in upholding the order of the Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 72,60,300 on account of new project expenses holding the same to be of revenue nature as against the admission of capital nature by assessee in its notes to accounts even though the assessee had identified Rs. 72,60,300 for diversification and expansion of new product range including acquisition of machinery to aid such expansion and the amount had been shown pending technical quantification under capital work-in-progress? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in restoring the issue on account of bad debts written off of Rs. 10,72,917 to the file of the Assessing Officer with a direction to adjudicate the same afresh, as per the relevant provisions of the Act even when the assessee failed to prove its claim that the debts have actually became bad debts and also failed to furnish d....
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...."capital assets" have been created out of the expenditure. After referring to the judgment in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC), the Commissioner of Income-tax (Appeals) has held as under: "On overall examination of the facts of the case that emerge is that the assessee had bifurcated the sum of Rs. 72, 60,300 out of the total expenditure on salary and wages, telephone, travelling expenses and other administrative expenses, and allocated to the modification of existing products/development of new products, with the assets under the same management, with the same work force and expertise, with the same existing machinery including the buildings. The Assessing Officer has not doubted that the expenditure incurred was not exclusively and wholly for the purposes of business. The dispute arose only because of the fact that the assessee himself first treated this as capital expenditure, and later on claimed as revenue expenditure in the revised return. To decide the issue, it will first have to be ascertained whether the expenditure incurred is on capital account or on revenue account. Obviously, in this case no new machinery has been purchased or now (no?)....
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....nder section 10(1) or under section 10(2)(xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter." (emphasis added) 6. Feeling aggrieved, the Revenue filed an appeal before the Tribunal. The Tribunal under ground No. 1 reiterated the findings given by the Com missioner of Income-tax (Appeals) by observing that the assessee had bifurcated the sum of Rs. 72, 60,300, out of total expenditure on salary and wages, telephone, travelling expenses and other administrative expenses and allocated to the modification of existing products/developments of new products with the asset under the same management, ....
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....tter back on the aforesaid issue on the file of the Assessing Officer, as is evident from the perusal of paragraphs 6, 7 and 8 of its order, which reads thus: "6. In ground No. 2: The assessee-company claimed deduction of Rs. 10, 72,917, on account of provisions for doubtful debts written off during the year. The Assessing Officer gave a finding that the basis for the provision created was not given nor the details of the write off for bad debts were supplied. However, the Commissioner of Income- tax (Appeals) deleted the addition without reference to and appreciation of the provisions of section 36(1) (vii) read with sub-section (2) thereof. A perusal of section 36(1) (vii) indicates that the section opens with 'subject to the provision of sub-section (2)' meaning thereby that strict compliance with the provision of sub-section (2) is a statutory condition. However, the Commissioner of Income-tax (Appeals) had not discussed whether the said statutory condition had been satisfied by the assessee. 7. In the course of appellate proceedings both the learned authorised representative and Departmental representative expressed the view that the matter should be restored back to the....