TaxTMI 
TaxTMI 
2005 (11) TMI 530
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....e revenue in nature and not linked with installation of various assets. 2. The facts of the case are that the assessee-company filed its return on 29.11.2006 declaring loss of Rs. 30,94,980/-. The return was processed u/s 143(1) of the Income-tax Act, 1961, on 13.10.2007. A notice u/s 143(2) dated 10.10.2007 was served on the assessee for making scrutiny assessment. It was found that .the assessee is engaged in the business of manufacturing and trading in cakes, pastries, biscuits, bread, other bakery products, chocolate products, confectioneries and allied foods products. These products are directly supplied to institutional customers. It is also operating a restro named "Choko la". 2.1 On perusal of the accounts and notes thereto, i....
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....ing that the assessee has not been able to substantiate that the expenses were incurred for acquisition of any fixed asset. U/s 32 of the Act, the deduction for depreciation can be granted only in respect of specified assets subject to the condition that the expenditure is incurred for its cost. 3. Before us, the learned counsel drew our attention towards the findings of the Assessing Officer and the learned CIT(A). Our attention has also been drawn towards major expenses, being administrative and general expenses of Rs. 73,069/-. Net consumption of material of Rs. 1,98,082/-, rent of Rs. 9,09,194/- and personnel's salary of Rs. 4,25,169/-. It is submitted that electricity, gas and water charges, consumption of material charges, and kitc....
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....the above, it would transpire that any expenditure on putting up fixed asset will amount to the cost of fixed asset. It was also submitted that AS-10 regarding "accounting for fixed assets" issued by the ICAI specifies the components of cost of a fixed asset. Thus, the purchase price of an asset includes import duties, levies, non-refundable taxes and any other cost directly attributable to the asset for bringing it to the working condition. The examples given in AS-10 are site preparation, initially delivery and handling cost, installation cost, such as laying foundations, and professional fees for architects and engineers. The preliminary project expenditure, indirect expenditure relating to construction and other indirect expenditure not....
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....land. Since the expenses were incurred for setting up fixed asset, they had to be capitalized. The assessee has capitalized the expenses in the ratio of the cost of the asset to the total cost, which is a reasonable basis. On the other hand, the of the learned DR is that in absence of any corelation of any expenditure with any fixed assets, the expenses which are of revenue in nature, cannot be capitalized. 4.1 Section 43(1) defines "actual cost" to mean actual cost of the asset to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. 4.2 In the case of CIT Vs. Food Specialties Limited, (1982) 136 ITR 203 (Delhi), it has been mentioned that it seems ....
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...., which is missing in this case. Therefore, the ratio of this decision does not advance the case of the assessee. 4.4 In the case of CIT Vs. Lucas-TVS Limited ( No.2), (1977) 110 ITR 346, one of the questions before the court was - whether, on the facts and in the circumstances of the case, it has been rightly held that the sum of Rs. 1,30,768/- representing indirect expenditure on salaries, rent, lighting, etc. and allocated to various assets formed part of the capital asset for the eligibility of depreciation allowance and in relation to the cost of the machinery was eligible for development rebate also? The facts of the case are that the assessee-company acquired land near Madras and erected buildings, plant and machinery etc. It also....