Case Law Details
Mahindra & Mahindra Limited Vs DCIT (ITAT Mumbai)
The issue under consideration is whether the expenditure incurred by the assessee for the expansion will be considered as Capital Expenditure and allowability of the depreciation on the same?
In the present case, assessee is engaged in the business of manufacturing and sale of on-road automobiles, agricultural tractor implements, engine parts and accessories of motor vehicle rendering services, property development activity, financing, investment and transport solutions. The assessee submitted in the course of expanding operation bars / manufacturing activities, it had incurred expenditure on acquiring entities which are engaged in similar business in India as well as overseas. For this purpose, it had incurred expenditure such as professional fees to legal charges, due diligence fees etc., and claimed the same as revenue in nature. AO treated the said incurrence of such expenditure as capital in nature.
ITAT states that the expeniture incurred in connection with acquisitions have to be treated as capital expenditure and shall form part of cost of investment which the assessee could claim as cost at the time of sale of investment. But other related expenditure like Legal fees for Project Strike & Project Bamford, Professional Fees, Legal/Professional fees for Project Bamford will be considered as revenue in nature. Further ITAT states that the depreciation will be allowed on the expenditure which will be considered as Capital in Nature.
FULL TEXT OF THE ITAT JUDGEMENT
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