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| The Tax Publishers2019 TaxPub(DT) 3775 (Mum-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where expenditure incurred on projects were connected with the existing business of the assessee, i.e., generation, transmission and distribution of electricity though the projects were shelved or not taken off, expenditure would be revenue in nature and allowable as per past practice.
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Capital or revenue expenditure - Expenditure incurred on shelved project, on preliminary studies, feasibility reports, etc. - Projects not taken off -
Expenditure were incurred on shelved project and on preliminary studies, feasibility reports, etc., on the projects which have not taken off. Assessee had claimed these expenses as revenue Expenses while the AO held the same to be capital expenditure. The AO observed that this issue being recurring in nature and in preceding years also these expenses were disallowed, the AO disallowed these expenses in this year also and added the same to the income of the assessee. CIT(A) allowed assessee's claim. Held: Since these expenses were incurred for the projects which were closely connected with the business activities of the assessee company and these projects had either not taken off or were shelved, these expense were to be held as business expenses as rightly held by CIT(A).
Followed: Tribunal in assessee's own case in ITA No. 3035/Mum/2009 for assessment year 2002-03 vide Order dated 20-4-2012.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2003-04
INCOME TAX ACT, 1961
Section 4 Section 5
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