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TaxTMI 
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2018 (5) TMI 1628
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....d 04.04.2013 u/s 143(3) of the Income Tax Act, 1961 (in short 'the Act'). In this appeal, Revenue has raised the following Grounds of appeal :- "(i) The Ld CIT (A) has erred on facts and in law in deleting the disallowance of expenses made U/s. 37(1) of Rs. 60,79,24,773/- holding that these expenses are in the nature of revenue expenses without properly appreciating the fact that these expenses are pre-operative in nature and also without appreciating the factual and legal matrix as clearly brought out by the Assessing Officer in the assessment order that these expenses were in the nature of capital expenses. (ii) The Learned CIT(A) has erred on facts and in law, in treating the expenses incurred on Capital Work in Progress of Rs. 60,79,24,773/-, as revenue expenditure instead of capital expenditure without properly appreciating the fact that such expenditure is providing enduring benefit to the business of the assessee. (iii) The Ld CIT (A) has erred on facts and in law in deleting the disallowance of expenses made U/s. 37(1) of Rs. 60,79,24,773/- holding that these expenses are in the nature of revenue expenses without properly appreciating the fact that the assessee has it....
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....iture under this head reflected expenditure incurred by the assessee in acquiring, adding and maintaining the new stores during the year under consideration. While filing its return of income, assessee claimed that a part of such expenditure amounting to Rs. 60,79,24,773/- debited under the head 'Project Development Expenditure' was revenue in nature, and since it has been incurred during the year under consideration for the purposes of a business already in existence, the same was an allowable expenditure within the meaning of Sec. 37(1) of the Act. On being asked to explain by the Assessing Officer, assessee reiterated that its business of retailing through stores was in existence since earlier years and such business was an indivisible business; that the revenue expenditure incurred in carrying out expansion of the existing line of business or for maintenance and operation of already established stores is liable to be treated as a revenue expenditure. Assessee also referred to the nature of such expenditure being on account of salaries, travelling, professional fee, repairs, etc. and explained that the same was revenue in nature. Assessee also explained that all its activities a....
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....at the outset, pointed out that the decision of the Tribunal in the case of Reliance Footprint Ltd. (supra) relied upon by the CIT(A) has since been affirmed by the Hon'ble Bombay High Court in ITA No. 948 of 2014 dated 05.07.2017. Thus, according to him, the order of CIT(A) deserves to be affirmed. 7. The ld. DR, on the other hand, did not dispute the factual matrix asserted by the learned representative, but relied on the order of the Assessing Officer in support of the case of the Revenue. 8. We have carefully considered the rival submissions. Insofar as the factual situation is concerned, it is not in dispute that the business of retailing being carried out by the assessee commenced in the earlier period. So far as the expenditure in question is concerned, the same is stated to have been incurred in the process of setting-up new retail outlets. It is also not in dispute that in the new outlets, assessee is continuing with its existing business of retailing. Therefore, factually speaking, the adding of new stores/outlets is nothing but an expansion of the existing line of business, i.e. retailing. So far as the nature of expenditure of Rs. 60,79,24,773/- is concerned, when....
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....at it provides enduring benefit to the business of the assessee is concerned, the same, in our view, does not ipso facto justify the treatment of such expenditure as capital in nature having regard to the facts of the case. Notably, in the instant case, as we have inferred earlier, the business of retail is already set-up and the impugned expenditure, which is otherwise revenue in nature, relates to expansion of the existing line of business and not for a new line of business. Thus, even if such expenditure was to provide an enduring benefit to the business, the same is in revenue field and thus is liable to be treated as revenue expenditure. In this context, a gainful reference can be made to the judgment of the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC). Furthermore, it is nobody's case that the expenditure in question, which we have already enumerated above, results in creation of any fixed or an enduring asset so as to be capitalised. Thus, the objections raised by the Assessing Officer, in our view, have been rightly negated by the CIT(A). 11. Moreover, the CIT(A) has followed the decision of the Tribunal in the case of Reliance Footprint Lt....