TaxTMI 
TaxTMI 
2021 (1) TMI 1030
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....ed Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in sustaining the disallowance of expenses on the analysis of the book treatment and the treatment given for such expenses in the income tax computation without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the disallowance of expenses on the presumption of such expenses incurred at the pre-operative stage was wholly unjustified and ought to have appreciated that the sequence of events after selling up of the business in focusing different products and incurring expenses in relation thereto was completely overlooked and brushed aside, thereby vitiating the findings in para 4.3 of the impugned order. 4. The CIT (Appeals) failed to appreciate that the expenses incurred were wrongly considered as capital in nature which formed part of the another facet of the findings to sustaining the disallowance of such expenses and ought to have appreciated that the details furnished in this regard were not examined properly, thereby vitiating the findings in para 4.3 of the impugned order. 5 The CIT (Appeals) tailed to appreciate that ....
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.... incurred for development of a new product including knowhow is in the nature of intangible asset, which gives enduring benefit to the assessee and hence, expenses incurred towards development of new product shall be regarded as capital work-in-progress and accordingly, disallowed deduction claimed towards pre-operative/preliminary expenses of Rs. 1,91,45,213/- and added back to the total income of the assessee. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has reiterated its arguments taken before the Assessing Officer.The assessee further submitted that expenditure incurred under the head technical consultancy charges, purchase of raw materials and advertisement expenses etc. are in the nature of revenue expenditure, which is incurred for the purpose of existing business and hence, the same cannot be considered as capital in nature, merely because the assessee has treated expenditure under the head deferred revenue expenditure pending amortization over the years. 5. The learned CIT(A) after considering the relevant submissions of the assessee observed that on the basis of the detai....
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....xpenditure in question was allowable as revenue expenditure. 7. The learned DR, on the other hand, supporting the order of the learned CIT(A) submitted that as claimed by the assessee expenditure has been treated as deferred revenue expenditure in the books of account, which itself is sufficient to come to the conclusion that expenditure gives enduring benefit to the assessee and hence, the Assessing Officer as well as learned CIT(A) have recorded correct finding to disallow expenditure claimed in the statement of total income and hence, their orders should be upheld. 8. We have heard both parties, perused the materials available on record and gone through the orders of the authorities below along with the case laws cited by the learned counsel for the assessee. The assessee is engaged in the business of manufacturing LED lights was purchasing raw materials being LED drives till assessment year 2010-11. The assessee started manufacturing these LED drives in substitute of purchase from the assessment year 2012-13 on the basis of Government policy for encouragement of manufacturing solar based lights in relation to the manufacture of the above mentioned LED drives and solar based ....
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....le High Court while allowing the claim has laid down certain parameters and according to the observations of the Hon'ble High Court it is nature of expenditure that is relevant , but not treatment of the expenditure in the books of account / financial statements for determining whether or not the expenditure is of capital or revenue. The relevant findings of the Hon'ble High Court are as under:- "3. Before the Commissioner of Income-tax (Appeals) the assessee company contended that despite the treatment given in the backs of account by the assessee-company as deferred revenue expenditure, the fact remains that the said expenditure was of revenue nature- The Commissioner of Income- tax (Appeals) accepted the stand of the assessee-company. inter aIia, for the following reasons "(I) Prima facie. the expenditure was of revenue nature. (ii) No capital asset was acquired or brought into existence by incurring the expenditure. (iii) Expenditure incurred for the purpose of running a business efficiently cannot for that reason be labelled as capital expenditure. (iv) The treatment of the expenditure in the books account/financial statements is not relevant for determining whethe....
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....on Ferro Metal Corporation Ltd 296 ITR 140 (Del) to contend that the expenditure is of revenue nature only- The counsel for the respondent has further contended that the concurrent findings of facts of the Commissioner (Appeals) and the Income-tax Appellate Tribunal should not be disturbed by the court as no substantial question or law arises. 7. A reference to the judgments cited by the respondents show that expenses such as salaries. etc., incurred by the assessee in this case is clearly revenue in nature. The judgments cited by the counsel do not applies none of them dealt with facts as found in the present case. i.e., of expenditure for salaries, wages. Travelling expenses. etc. Merely because the benefit of the type of expenditure involved in this case is such the benefit can also be available later is not a good enough reason to treat the expenditure, which is otherwise of revenue nature, as a capital expenditure. There are concurrent findings of both the authorities below with which we agree and which are not perverse, No substantial question of law arises. Dismissed." 9. In this case, the facts are identical to the facts considered by the Hon'ble Delhi High Court in the ....