TaxTMI 
TaxTMI 
2012 (11) TMI 52
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.... and considered allowing depreciation on the capitalized expenditure as per law. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 4. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above." 3. From the above grounds, it is clear that the only grievance of the department relates to the deletion of the addition made by the AO on account of construction of structures on railway property for smooth handling of containers. 4. The facts of the case in brief are that the assessee was engaged in the business of handling and transportation of containers from wagons and filed return of income on 01.11.2004 declaring total income of Q 1,34,74,449 which was processed u/s. 143(1) of the Income-tax Act, 1961 [hereinafter referred to as "the Act" in short"] on 26.03.2005, later on the case was selected for scrutiny. 5. During the course of assessment proceedings, the AO noticed that the assessee had claimed expenditure of Q 1,00,25,500 as deferred revenue expenditure....
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....rage of 1 lakh and above Containers in a year. Accordingly, the expenditure on the maintenance of rams and other structures were for smooth transport of the containers. These expenses do not result in any permanent structures to suggest their capital in nature and replacement of rams from now and then is inevitable. The expenses incurred also for the maintenance of the rams and the expenditure claimed were totally on the revenue in nature and no part of the expenditure could be held to be capital. In fact the assessee is also employs sub-contractors namely M/s. C Viswanatha Iyer Co (Railway Contractors) for this purpose for whom the payments have been made after deducting appropriate tax which were accounted in the accounts of the revenue. Further, the amount spent and nature of expenses was duly mentioned in the notes forming part of the accounts in Schedule M clause No.9 of the financial accounts for the year. Further, we state that the Company has incurred expenditure of Rs. 1,00,25,500 during the relevant assessment year and it was towards the business of the company on which it did not result in acquisition of any capital assets. Undisputedly the expenditure incurred is also i....
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.... 860) and CIT Vs. Mahindra Ugine (250 ITR 84). Undisputedly the expenditure claimed by the appellant were revenue expenditure for the reasons stated hereinabove. Consequently the provision of section 35D can not be invoked. Accordingly it is prayed that the expenditure as claimed being the incidental to the business and for the purpose business and was not in the nature of capital expenditure is required to be allowed u/s. 37(1) of the Act in full." 7. The AO was not satisfied with the above said reply of the assessee and observed that the expenditure incurred of Q 1,00.25.500 as revenue expenditure was not merely expenditure incurred for carrying on the existing business, but for extension of its business. He further observed that the assessee in the note attached to the computation of income has clearly mentioned the purpose i.e., towards extension of business and shown deferred revenue expenditure in the fixed asset schedule. The AO was of the view that the provisions of section 35D of the Act were applicable to the assessee being an Indian company which incurred the expenditure after the commencement of its business in connection with extension of its industrial undertaki....
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....e issue of shares in or debenture etc (v) other items of expenditure as may be prescribed. 9. It was contended before the ld. CIT(A) that the expenditure incurred by the assessee was never doubted and was a genuine expenditure towards smooth handling of goods in transportation. It was also stated that the assessee was not at all an industrial undertaking and the expenditure incurred was part of its business to earn income therefrom and incidental towards the maintenance. 10. The ld. CIT(A) after considering the submissions of the assessee observed that the provisions of section 35D of the Act was not applicable to the assessee company as the assessee was not an industrial undertaking and the provisions were applicable only if the assessee was an industrial undertaking. He further observed that the expenditure incurred by the assessee was also not listed as expenditure covered by section 35D of the Act. He accordingly deleted the addition made by the AO. Now the department is in appeal. 11. The ld. DR strongly supported the order of the Assessing Officer, while in his rival submissions the ld. counsel for the assessee reiterated the submissions made before the authoritie....