Cosmic Kitchen Pvt. Ltd. Vs ACIT (ITAT Delhi)- The only ground taken in this appeal, filed by the assessee, is that the learned CIT(A) erred in disallowing depreciation of Rs. 2,70,744/- in respect of pre-operative expenses allocated to fixed assets. It is also mentioned that he erred in holding that the expenses were revenue in nature and not linked with installation of various assets.
The question is covered by the decision of Supreme Court in the case of Challapalli Sugars Limited Vs. CIT (supra) and CIT Vs. Hindustan Petroleum Corporation, (1975) 98 ITR 167, in which it has been held that accepted accountancy rule for determining cost of fixed assets is to include of expenditure necessary to bring such assets into existence and to put them in working condition. Therefore, the question was decided in favour of the assessee and against the revenue. Having considered the facts of the case, we are of the view that they are similar and, therefore, the ratio of this case is applicable.
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ‘B’ NEW DELHI)
Cosmic Kitchen Pvt Ltd Vs ACIT
ITA No. 5549/Del/2010
Assessment Year: 2006- 2007
Decided on: 13 May 2011
ORDER
PER K.G. BANSAL: AM:
The only ground taken in this appeal, filed by the assessee, is that the learned CIT(A) erred in disallowing depreciation of Rs.2,70,744/- in respect of pre-operative expenses allocated to fixed assets. It is also mentioned that he erred in holding that the expenses were 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 “Chokola”.
2.1 On perusal of the accounts and notes thereto, it was found that .the assessee company commenced commercial operations from 13.10.2005. In view thereof, the assessee was requested to file the details of pre-operative expenses. According to the details submitted, expenditure of ‘16,93,153/- was incurred before 13.10.2005, the details of which are as under:-
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