2010 (2) TMI 1178

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....nce of Rs. 48,66,712/- on account  of  pre-operative/capital expenditure. 3.1. During the assessment proceedings, the assessee was required to file the details of pre-operative expenditure and was asked that why these expenses should not be treated as capital expenditure. It was explained that the pre-operative expenditure claimed as revenue expenditure pertains to capital project of the company undertaken at Chakan, Pune where the then existing manufacturing facilities of the company at Umbergaon, Gujarat have been shifted and in addition, the expansion of manufacturing facilities of the same business has been undertaken.  It was also explained that this is an expansion of business already been carried on by the assessee ....

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....nd in the immediately preceding year there was a sale of 769 millions. Copy of the P&L account showing sale of the year under consideration and in the immediately preceding year is placed at page 63 of the paper book. At page 69 Schedule forming part of profit and loss account showing pre-operative expenditure and at page 74 details showing pre-operative expenditure are placed. It is further seen that whatever the expenses were incurred by the assessee on plant and machinery they were capitalized by the assessee itself; however, the expenses which are to be revenue in nature are claimed on account of legal and professional charges, personnel expenses, repairs and maintenance & others. Travel rates and taxes, insurance, power, fuel and elect....

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....nditure incurred in connection with the new unit at Pondicherry even though it was independent, because of the inter-connection of management, financial, administrative and production aspects, has to be construed as revenue in nature and was deductible." 5.3 The expenses claimed in this case were on account of interest on  Exim  bank loan, various raw material consumed, stores consumed, tools consumed, salary and wages etc., 5.4 Similar view has been expressed by the Hon'ble MP  High Court in the case of Eicher Motors Ltd 293 ITR 464 and  the Hon'ble Delhi High Court in the case of  Jay Engineering Works Ltd in 212 CTR 562(Del). It is held in this case that;  "the new project undertaken by the assessee....