TaxTMI 
TaxTMI 
2015 (3) TMI 838
X X X X Extracts X X X X
X X X X Extracts X X X X
....e has declared Rs. 86109000/- (as income) under the head 'extraordinary items'. As per schedule 18, in this regard, the break up is as under- Amount Rs. Receipts from consumers 234000 Fuel related Gains 28365000 Subsidy against Loss due to Floods 92900000 121499000 Less: Expenses Loss due to flood, cyclone, fire 35390000 (86109000) During the course of assessment proceedings, the assessee was requested to justify its claim of extra ordinary items and was specifically asked to show cause why the expenditure booked under the head Extraordinary Items may not be disallowed: In response, the assessee submitted its reply as under vide letter dated 8-8-2008: "During the year the Company has booked extra ordinary income amounting to Rs. 861.09 lacs, the break-up of which is as under: Particulars Account Code Total Fuel related gains for prior period 65.1 192.38 Prior period adjustment of Head Office 91.27 Receipts from consumers relating to prior period 65.2 2.34 Subsidies against loss due to flood 929.00 INCOME ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urred for revival and repair of assets damaged and the sundry debits was on account of written off of deferred revenue expenditure. However, assessee has not submitted any details such as nature of loss, how the amount of loss quantified, date when the asset was purchased, depreciation claimed/allowed, WDV, etc. In the absence of such details, assessee's claim could not be examined and verified properly and assessee could not be allowed the claim without such details. Moreover, loss on account of obsolescence could not be allowed after introduction of concept of depreciation on block of assets. As regards loss due to cyclone, fire and flood and sundry debits, no details have been furnished by the assessee despite requirements of this office. Without details assessee's claims cannot be allowed. In view of the above, the assessee's claim of Rs. 2,95,13,000/- under the head extra ordinary items is disallowed and added back to the total income." 6. On appeal, the CIT(A) deleted the addition for Asstt.Year 2006-07 by observing as under: "4.2 I have considered the submissions of the Id. AR and the facts of the case. The disallowance has been made only on the ground th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation. Being an undertaking wholly owned by the Government of Gujarat, the accounts are to be audited by the auditors appointed by C & AG. As per the accounts furnished to C & AG, the expenses incurred on repair of "flood damaged" assets amounted to Rs. 186.99 lacs. The C & AG has certified the expenditure. No further evidence in this regard would ordinarily be necessary. If, however, it was felt that the expenses were over-stated, an independent enquiry could have been made to ascertain the correct expenses. However, this has not been done. Looking to the circumstances and also the fact that the excess subsidy received has been included in the taxable income, it is held that the AO was not justified in making the addition of Rs. 1,86,99,000/-, which is directed to be deleted. So far as the miscellaneous write off of Rs. 82.93 lacs is concerned, it was submitted as under: "The Company has carried out physical verification of material by a specified team as per the standard practices. After completion of physical verification, shortage/excesses of materials were listed out. The detailed reasons of shortage of material were received from respective stores in-charge. Excess materia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imed deduction of Rs. 353.90 lakhs on account of expenses incurred on repairs of flood damaged assets and the balance amount was shown as income in the year under consideration. The CIT(A) has also observed that the accounts of the assessee are audited by C&AG, as the assessee is a Government company, and therefore, the disallowance was not justified. We find that the undisputed facts are that the assesseecompany received grant of Rs. 929.00 lakhs from Govt. of Gujarat on account of loss suffered in flood and the said amount was declared as income by the assessee and was also accepted by the Department. 9. Further, the assessee claimed Rs. 353.90 lakhs as actual expenditure incurred on account of damages by flood in the Asstt.Year 2006-07 and Rs. 186.99 in Asstt.Year 2007-08. The assessee also claimed Rs. 82.93 lakhs as Misc. write off in Asstt.Year 2007-08. The AO disallowed the entire amount of loss claimed by the assessee on account of loss due to flood and Misc. write off on the ground that the details of expenditure incurred were not available before him. In our considered view, the fact that the assessee suffered loss has not been disputed by the AO, and therefore, the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ernment for repayment of loan. In view of the facts, the assessee was asked to show cause as to why the premium for restructuring debts and the guarantee fees should not be disallowed as capital expenditure. In reply the assessee vide letter dated 8.8.2008 stated as under:- "The company raised loans from banks and financial institution and offered guarantee for, repayment of loan and interest thereon as security. Moreover, during the year under review, the assets and liability; of erstwhile Gujarat Electricity Board was transferred to the company, which also contained loans raised from banks and financial institutions. The guarantee fees are payable to the state government every year on the outstanding balance of guarantee given to banks / financial institutions on the first day of the year. Therefore, it is submitted that it is not a single one time payment but recurring expenditure till repayment of loans." The company has repaid higher interest bearing loans. For the same the bank charges premium on restructuring of loans. As the same reduces the cost of interest expenditure, it is requested to allow the same as revenue expenditure.'' I have gone through the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts, the assessee was asked to show cause as to why the guarantee fees should not be disallowed as capital expenditure. In reply dated 12.06.09 the assessee has submitted only details without any justification specifically called for. I have gone through the submission of the assessee. It is clear from the details in this respect that the assessee is going to derive all the benefits in the form of restructuring of the debt, rescheduling of repayment schedule, reduction in interest etc. over a long period of time which are in the range of more than 5 years. It means that the assessee will derive advantage of enduring nature as a result of restructuring of loans, therefore, the expenses pertaining to the same in the form of premium for restructuring debts have resulted into advantage or benefit of enduring nature to the assessee. It is pertinent here to mention "enduring benefits" has been discussed as under - The Honorable Supreme Court has in case of CIT vs. Coal Shipments Pvt Ltd reported in 82ITR 902 has defined "Enduring benefit" in the following terms - Although and enduring benefit need not be of an everlasting character, it should not at the same time be transitory or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd from financial institutions. The Government of Gujarat guaranteed to the public and the financial institutions that in case of failure on the part of GEB to redeem the bonds and other financial instruments, the same would be made good by the Government of Gujarat. In lieu of this, commission @ 1% of the outstanding value of unsecured loans was charged. Hence the addition of Rs. 20,57,03,000/- may be deleted. 5.2 I have considered the submissions of the Id. AR and the facts of the case. The issue relating to whether an item of expenditure lies in the capital or the revenue field has exercised the courts in numerous cases. From an analysis of such cases a few guiding principles/tests can be identified. One of the important tests for categorizing any expenditure as capital in nature is whether the laying out of the impugned expenditure results in the acquisition or creation of any new asset. Where no such asset is created, it would be indicative of an expenditure which was not capital in nature. Another test relates to the principle of "enduring benefit". "Enduring benefit" may be in the form of long lasting use of an asset or the acquisition of a right to exploit certain commer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of capital vs revenue expenditure. The concurrence of judicial opinion now is that there are a number of tests for determining the nature of an expenditure, viz., test of bringing into existence an asset, test of enduring benefit, test of fixed and circulating capital, etc. However, the general view is that the test of enduring benefit is not a certain or conclusive test and it cannot be applied without regard to the particular facts and circumstances of each case. It has been generally agreed that where the laying out of such expenditure confers an advantage to the assessee which constitutes of merely facilitating the assessee's trading operations or enabling the management or conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be in the revenue account even though the advantage may endure for the indefinite future. As observed by the Supreme Court in the case of Alembic Chemical Works Co. Ltd. v CIT, 111 ITR 377, "the idea of "once for all" payment and "enduring benefit" are not to be treated as something akin to statutory conditions; nor are the notions of "capital" or "....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITR 686 (Guj) wherein it was held that guarantee commission paid was allowable as revenue expenditure. 19. We find that it is not in dispute that the amount was paid by the assessee as guarantee commission for unsecured loans. Therefore, respectfully following the decision of the Hon'ble Gujarat High Court in the case of Mihir Textile Ltd. (supra), we confirm the order of the CIT(A) and dismiss this ground of the Revenue for both the years under consideration. 20. The ground no.2 of the appeal of the Revenue for the Asstt.Year 2006-07 is also directed against the order of the CIT(A) in deleting the disallowance of premium claim on restructuring of loan of Rs. 172.71 lakhs. The AO disallowed the claim of premium claim on restructuring of loans by holding as under: "4. Guarantee fees and Premium on debt restructuring: During the financial year under consideration the assessee has paid guarantee fees of Rs. 20,57,03,000/- to the Government of Gujarat in consideration of it issuing guarantee for repayment of unsecured loans. Further the assessee has also paid Rs. 1,72,71,000/- as premium on restructuring of loans. The said premium has been paid to the Financial Institution....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the same time be transitory or ephemeral, so that it can be terminated at any time at the volition of either of the parties. What is the extent durability, or permanence should depend on the facts of each case. The expression "Enduring Advantage" is a relative term, not enduring in the sense of its being permanent, but is sufficiently durable depending upon the nature of terms upon which it can be acquired. . The above views were again expressed by the Honorable Supreme Court in the case of Devidas Vitthaldas & Co. Vs. ClT (1972) reported in 84 ITR 277. Therefore, having regard to that discussion and facts of the case as discussed above, the entire expenditure pertaining to CDR is held as capital expenditure. Accordingly, the total amount of Rs. 22,29,74,000/- as claimed by the assessee on this account and discussed above, is held as capital expenditure and the same is disallowed and added to its total income. 21. The CIT(A) has decided the issue by observing as under: "6.2 I have considered the submissions of the Id. AR and the facts of the case. The courts have been repeatedly called upon to pronounce on the issue of capital vs revenue expenditure. The concurrence of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... lakhs paid in the Asstt.Year 2006-07 for restructuring of loan. According to the AO, the restructuring of loan was to reduce the interest burden and the assessee will benefit from the same for a long period of time of more than 5 years, therefore, he disallowed the same by treating it as capital expenditure. 23. On appeal, the CIT(A) deleted the disallowance on the ground that it does not confer any enduring benefit and merely facilitate the assessee's business in more efficient manner. 24. DR relied on the order of the AO. 25. On the other hand, AR of the assessee relied of the decision of the Hon'ble Gujarat High Court in the case of DCIT Vs. Gujarat Narmada Valley Fertilizers Ltd., 356 ITR 460 (Guj) wherein it was held that the expenditure incurred by the assessee on restructuring of loan was revenue expenditure. No contrary decision was cited by the learned DR. Therefore, respectfully following the decision of the Hon'ble Gujarat High Court in the case of Gujarat Narmada Valley Fertilizers Ltd. (supra), we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. 26. The ground no.3 of the appeal for the Asstt.Year 2006-07 and the ground no.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 of 2006), it was pleaded that the deduction may be allowed since the payment was made before the due date for filing of return of income. 4.2 I have considered the submission of the A.O. and facts of the case. The delay in this case is of only one day. The General Clauses Act provides that if payment is made on the date following a holiday, the payment would be deemed to have been made within time. Moreover, in AIMIL's case, the Delhi High Court has clearly stated that even in the case of employees' contribution to PF, the delayed payment would qualify for deduction, provided it was deposited before the due date for filing of return. In the instant case, the payment has been made before the prescribed due date for filing the return of income. Accordingly, the disallowance of Rs. 5,23,892/- is directed to be deleted." 29. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the AO disallowed deduction for employees' contribution to PF of Rs. 37,31,520/- in Asstt.Year 2006-07 and Rs. 5,23,892/.- in the Asstt.Year 2007-08, as the assessee failed to deposit the contribution with PF authori....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... computation of book profit under section 115JB of Rs. 3,68,000/- in the Asstt.Year 2006-07 and Rs. 401.16 lakhs in the Asstt.Year 2007-08. 35. The CIT(A) in the Asstt.Year 2006-07 has decided the issue as under: "8.1 Ground No. 5.1 pertains to the treatment by the AO of the provision for gratuity amounting to Rs. 3,68,000/- as unascertained liability and in enhancing the book profit by this amount. 8.1.1 The Id. AR submitted in appeal that, as held by various judicial authorities, if the provision for gratuity was made on acturial valuation, the same should not be considered as unascertained liability but was to be treated as an ascertained one. The assessee computed the quantum of provision for gratuity based on acturial valuation done by LIC of India, a Government owned company. 8.1.2 I have considered the submissions of the Id. AR and the facts of the case. The issue relating to treatment of provision as unascertained liability was considered by the Supreme Court in Bharat Earth Movers, 245 ITR 428. In that case, the issue was of provision for leave encashment. The principle laid down by the Court was that where the liability could be computed along scientific lines an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO whereas the AR of the assessee submitted that the issue is covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of DCI Vs. Inox Leisure, 351 ITR 314 (Guj) wherein it was held that the provision of gratuity on the basis of acturial calculation was not to be added back under clause (c) to Explanation-1 below section 115JB of the I.T.Act, 1961. 40. DR could cite any contrary decision. He could not controvert the findings of the CIT(A) that the provision for gratuity in the instant case was made by the assessee on actuarial valuation. Therefore, following the decision o the Hon'ble Gujarat High Court in the case of DCIT Vs. Inox Leisure (supra), we dismiss this ground of the Revenue. 41. The ground no.5 in the Asstt.Year 2006-07 is directed against the order of the CIT(A) directing the AO to exclude the amount withdrawn from reserve of Rs. 8990.87 lakhs in the computation of book profit u/s.115B. 42. The CIT(A) has held as under: Ground No. 5.2 relates to disallowance of Rs. 88,90,87,000/-. The AO noted that the assessee had reduced its book profits by the aforesaid amount for the purposes of section 115JB in terms of clause (i) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act while working out the book profits under section 115JB of the IT Act. The learned Assessing Officer has, however, disallowed the said deduction taking the view that the profit & loss account of the year under consideration has not been increased by the amount withdrawn from the reserve and has misinterpreted the proviso to clause (i) to Explanation 1 to section 115JB(2) of the IT Act. The appellant invites your honour's reference to the provisions of clause (i) to Explanation -1 to sub-section (2) to section 115JB of the I T Act which provide that the amount withdrawn from reserves and credited to profit & loss account shall not be reduced unless the book profits of such year, in which such reserves were created, were increased by the amount transferred to such reserves or provisions (out of which the said amount was withdrawn). From the above, it is clear that only such transfers (from the reserves of earlier years) shall be reduced from the book profits which have already been taxed in earlier years. Thus as explained in preceeding paras, the company has already offered the income for tax in the respective years in which the same was transferred to the Reserves. Out of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... noteworthy that the profits carried to balance sheet were those profits which were arrived at after deducting tax. It is not necessary under the proviso that the amount withdrawn from reserves should be credited to the profit and loss account of the same year. It is sufficient that the amount had been included in the book profit "of such year", i.e. the year in which the reserve was created. In the instant case, the amounts withdrawn from reserves had already been included in the profit and loss account, and hence the reduction under clause (i) of Explanation 1, proviso would be available to the assessee. Accordingly, the AO is directed to recompute the book profits u/s 115JB by allowing the same to be reduced by the impugned amount of Rs. 88,90,87,000/- 43. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the assessee has reduced Rs. 8890.87 lakhs from the book profit under the clause (i) of Explanation to section 115JB of the Act, as the amount withdrawn from the reserve/provisions. The AO added the same to the book profit of the assessee on the ground that from the audited balance sheet sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e effect that the profits were under-stated by Rs. 1.75 crores, due to higher claim of depreciation of this amount. The assessee was asked to show cause why the quantum of reduction under clause (ii)(a) in respect of depreciation should not be correspondingly reduced while computing the book profit. In reply, the assessee submitted that the rate of depreciation was claimed as per Central Electricity Regulatory Commission (CERC) guidelines. However, this explanation was not accepted by the AO and the book profits were enhanced by Rs. 1.75 crores. 8.3.1 In appeal it was submitted by the Id. AR as under:- "The learned Assessing Officer has made adjustments under this head on the basis of comments of CAG. During the year the Company adopted the ongoing rates of depreciation as per CERC norms in respect of most of its assets. CERC had revised rates of depreciation of certain assets which the Company could not adopt for the year 2005- 06. The same were applied in the subsequent years. Further the alleged understatement of profit is only due to the accounting entries made in the books of account on account of excess and/or short provision of depreciation. Thus there is no question o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompanies Act are permissible and the Assessing Officer in such cases does not jurisdiction to recast the profit & loss account for the purpose of determining Book Profits under section 115JB. In the appellant's case the company has applied the rates prescribed bv the Companies Act and not any other higher rates. The appellant invites your honour's kind attention to case of Apollo Tyres Ltd. (255 ITR 273) -wherein -while determining its book profits for the relevant year, the arrears of depreciation of prior periods were charged against the profits of the current year which according to the Revenue was not in accordance with Part II and Part III of Schedule VI of the Companies Act, 1956. The AO recomputed the book profits and excluded the provisions made in respect of arrears of depreciation. The AO's order was confirmed by the Kerala High Court, and the issue was taken up further before the Ron 'ble Supreme Court. The Supreme Court adjudicated the issue and held as under : "The AO, while computing the book profits of a company under section 115Jofthe IT Act, 1961, has only the power of examining whether the books of account are certified by the authorities und....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CLB lays down minimum rate of depreciation for the purpose of distribution of dividend and the company may decide to claim higher depreciation on the basis of a bona fide technological evaluation and proper disclosure is to be made by way of a note forming part of the annual accounts. The Tribunal further held that, in the instant case, the proper disclosure was made by way of a note to the annual statement of accounts and the rates claimed on the basis of income-tax records were based on the bonafide information of the Board of Directors as contained in the meeting of the Board of Directors held on 29-6-1988. The Tribunal held that the depreciation worked out by the assessee on the basis of income-tax records and debited to the profit and loss account would not be violative of the provisions of the Companies Act and cancelled the order passed by the Commissioner under section 263. On appeal, the Gujarat High Court affirmed the order passed by the Tribunal. The gist of the decision is as under : "Section 115J, read with section 263, of the Income-tax Act, 1961 and Schedule IV, Parts II and III, of the Companies Act, 1956 - Zero-tax companies - Assessee calculated depreciatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gher rates of depreciation than those laid down in Schedule XIV to the Companies Act and, therefore, the Assessing Officer was unjustified in applying the lower rates and working out the book profit for purpose of section 115J in this manner -Held, yes ". The appellant invites reference to the decision of IT AT, Delhi 'F' Bench in case of Bhushan Steels & Strips Ltd. Vs. Dy. CIT, reported at 91 TTJ 108 wherein the AO added back the arrears of deprecation of earlier years provided during the year while computing the Book Profits under section 115JA of the Act on the ground that the arrears of depreciation for the earlier years cannot be charged against the current year's profit. The assessee was of the view that all the entries related to prior period are required to be made below the line and hence such entries cannot be counted for the purpose of arriving at the book profit. The AO had disallowed the said claim following the decision of Kerala High Court decision in case of CIT vs. Apollo Tyres Ltd. reported at 149 CTR 538. On appeal, the IT AT, Delhi Bench allowed the claim of the assessee holding that while working out the book profit under section 115JA, the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt-II of Schedule-VI lays down the requirement as to profit and loss account. At item No. 3(iv), it has been laid down that the profit and loss account shall disclose information relating to the amount provided for depreciation, renewals or diminution in the value of fixed assets. Schedule-XIV lays down the rates of depreciation in respect of various assets, both in terms of written down value (WDV) and straight line method (SLM). At the same time, the Department of Company Affairs has issued Circular dt. 7.3.2009 which allows depreciation to be claimed at higher rates on the basis of bonaflde technological evaluation. It has been clearly stated therein that the rates prescribed in Schedule - XIV could be viewed as minimum rates. From Part A to the notes (wherein accounting policies have been disclosed) it is seen from item-xi relating to depreciation, that up to FY 2003-04 the company was providing depreciation as per Rules framed under the Electricity (Supply Act), 1948. Subsequently, CERC brought out a Notification No. 23.2/2005 R&R dt. 6.1.2006 issued by the Ministry of Power, Government of India. As per the notification, higher rates of depreciation have been prescribed as com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion's guidelines. However, this explanation was not accepted by the AO and book profit was enhanced by Rs. 1.75 crores. 50. On appeal, the CIT(A) allowed the appeal of the assessee on the ground that as per the notification of CERC No.23.2/2005 R&R dt.6.1.2006 issued by the Ministry of Power, Govt. of India, higher rate of depreciation has been prescribed as compared to the rates prescribed under Schedule-XIV of Companies Act as well as the rates under Electricity Act. The assessee has claimed the higher rate on the basis of a bona fide technological evaluation by the Ministry of Power, Govt. of India to the effect that depreciation in respect of plant & machinery utilized for generating power needed to be provided at higher rate. Further, The CIT(A) has also held that the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT, 255 ITR 273 has held that power to make enhancement and reduction u/s.115J is limited only to the specific items provided under clauses (a) to (i) and (i) to (viii). The AO has to satisfy himself that the provisions of Companies Act have been complied with while preparing the accounts. The CIT(A) also held that on similar facts, the Hon'ble Gujara....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be Rs. 5,195.12 lacs. This is due to the fact that interest on term loans amounting to Rs. 21,600 lacs has also been included in the above figure, although such interest was not attributable to the investment which produced the tax free income. 5.2 I have considered the submission and facts of the case. I find that the similar issue came in appeal in the case of Gujarat Urja Vikas Nigam Limited (GUVNL) (Appeal No CAB-I/348/08-09) in the A Y 2006-07. In that appeal, vide order dtd. 24-2-2010, it has been held that, following the decision in Daga Capital Management Pvt. Ltd, it was mandatory for the A.O. to apply rule 8D while computing the disallowance under 14A, The facts are exactly identical to the appellant's case. Accordingly, following the ratio of my order in the case of GUVNL, the disallowance made by the A.O. is confirmed. However, the A.O. is directed to verify the correct figure of interest and recalculate the disallowance, if necessary." 54. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the AO found that the assessee has shown exempt income of Rs. 41.32 lakhs. The assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....items of Rs. 25.21 lakhs. The AO has made disallowance in observing as under: "As per the P&L account the assessee has debited Rs. 2,95,13,000/- under the head 'extraordinary items' as under: Loss due to cyclone, fire and flood Rs.1,86,99,000/- Misc. Write off Rs. 82,93,000/- Sundry debits Rs. 25,21,000/- Total Rs.2,95,13,000/- Vide this office letter dated 20.05.09, the assessee was requested to justify its claim of extra ordinary items and was specifically asked to show cause why the expenditure booked under the head Extraordinary Items should not be disallowed. The assessee vide its reply dated 12.06.09 simply submitted that miscellaneous write off represents loss on obsolescence of fixed assets of the company. Further, the assessee vide its reply dated 09.07.09 submitted that the loss due to flood was incurred for revival and repair of assets damaged and the sundry debits was on account of written off of deferred revenue expenditure. However, assessee has not submitted any details such as nature of loss, how the amount of loss quantified, date when the asset was purchased, depreciation claimed/allowed, WDV, etc. In the absence ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowable as revenue expenditure. We find that the details of expenditure in question are not brought on record. No material could be brought before us by the AR to show that the expenses in question was the revenue expenditure of the assessee of the year under consideration. We find that the system of accounting followed by the assessee is mercantile. Therefore, the revenue expenditure is deductible in its entirety in the year in which the same has been incurred, even though the assessee for keeping its books of accounts treated the same as deferred revenue expenditure in its books of accounts and write off the same over a period of five years. We, therefore, do not find any good reason to interfere with the order of the CIT(A), and thus the ground of the assessee is dismissed. 63. The ground no.3 of the appeal of the assessee for the Asstt.Year 2007-08 reads as under: "3. The ld.CIT(A) has erred in law and facts in not adjudicating the ground relating to reduction of amount of capital grants amounting to Rs. 31,37,78,000/- from the total cost of the fixed assets and allowing depreciation after such reduction by invoking the provisions of section 43(1) of the I.T.Act." 64. ....