TaxTMI 
TaxTMI 
TaxTMI 
2022 (11) TMI 617
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....ssue in question did not fructify and therefore the entire amount of Rs.3 .10 crores spent thereon could par take the character of revenue loss only and therefore to be allowed only as a revenue expenditure on business exigencies. 4.0 The learned CIT(A)bought to have appreciated the relevance of the judicial precedents cited before him by the Appellant in regard to the Appellant's case in Appeal and in particular the decision of the jurisdictional Madras High Court in Tamilnadu Magnesite Ltd. V. ACIT (Appeal no. 907 and 908 of 2007). 4.1 The CIT(A) ought to have appreciated that when there is no new business which has been created and there is no creation of any new asset nor there being any enduring benefit accrued to the assesse, the expenditure should be treated as revenue and not as capital. 4.2 The CIT(A) ought to have noted the decision of Bangalore ITAT in Adadyn Technologies P. Ltd's case wherein it was held the expenditure incurred on development of a software platform, which was abandoned before being fully developed and put to use should be allowed as a revenue expenditure and not be treated as a capital expenditure. 5.0 The Appellant craves indulgenc....
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....ssue expenses, cannot be treated as capital in nature. 4. The Ld.CIT(A) after considering relevant submissions of the assessee and also taken note of relevant provisions of the Act, opined that after amendment of sec.143(1)(a) of the Act, w.e.f. 01.04.2008, the scope of adjustment u/s.143(1)(a) of the Act, is enlarged in as much as the AO can adjust an incorrect claim, if such incorrect claim is apparent from any information in the return. Since, claim of the assessee towards share issue expenses is Revenue in nature, is an incorrect claim and thus, the AO has rightly disallowed such expenses while processing return of income u/s.143(1)(a) of the Act. The Ld.CIT(A) had also rejected the arguments of the assessee on deduction towards share issue expenses and held that the expenditure incurred by the assessee towards share issue expenses is capital in nature, which gives enduring benefit, because, the assessee has incurred said expenses for raising additional capital which goes to increase capital base of the assessee. Therefore, he opined that there is no error in the reasons given by the AO to disallow share issue expenses, because said decision is squarely covered in favour of th....
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....ke Bond India Ltd. v. CIT (supra) and also in the case of General Insurance Corporation v. CIT (supra) and held that if there is no fresh inflow of funds and there is no increase in capital employed, the expenditure incurred towards share issue expenses should be allowable as Revenue expenditure. The Ld.CIT(A) without appreciating the above facts simply sustained the additions made by the AO. 6. The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A), submitted that after amendment to sec. u/s.143(1) of the Act, the AO can made adjustment in case of any incorrect claim, if such claim is ascertainable from return of income filed by the assessee. Therefore, there is no merit in the arguments of the assessee that adjustment cannot be made towards disallowance of share issue expenses. As regards deduction towards share issue expenses u/s.37(1) of the Act, the Ld.CIT(A) has brought out clear facts to the effect that the case of the assessee is squarely covered by the decision of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. v. CIT (supra) and therefore, the AO has rightly disallowed share issue expenses and their orders should be upheld. 7. We have heard ....
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....he Hon'ble Supreme Court, because, once expenditure incurred by the assessee creates a new asset which gives enduring benefit to the assessee, then the same partakes the nature of capital in nature. But, the Hon'ble Supreme Court in the subsequent judgment in the case of General Insurance Corporation v. CIT (supra) has taken a different view and held that if expenditure incurred by the assessee towards share issue expenses does not increase the capital base of the assessee, then said expenditure cannot be treated as capital in nature. The ITAT Hyderabad Bench in the case of M/s.Spandana Sphoorty Financial Ltd. (supra) has considered both the judgments and held that if expenditure incurred by the assessee goes to increase the capital base of the assessee, then said expenditure needs to be classified as capital in nature and if expenditure incurred by the assessee does not goes to increase the capital base of the assessee, then the said expenditure needs to be treated as Revenue in nature. 9. In this case, there is no dispute with regard to the fact that the expenditure incurred by the assessee is Revenue in nature. If you go by nature and type of expenditure, said expenditure is in....