Sabare International Ltd Vs DCIT (Madras High Court)
Madras High Court held that expenditure claimed as capital expenditure cannot be claimed as revenue expenditure in the computation of income. Accordingly, appeal filed by the assessee dismissed.
Facts- The assessee has claimed a sum of Rs.2,38,89,114/-as deduction by way of revenue expenditure incurred in the context of the capacity expansion of the manufacturing unit of the assessee. In the books of account, the assessee has capitalized the expenditure. The claim was made only in the computation of income under the Income Tax Act. The Assessing Officer treated the amount as preliminary expenses and applied Section 35D of the Act. Accordingly, one-fifth of the expenses has been allowed in the impugned assessment year. The claim of the assessee is that the entire amount should be treated as revenue expenditure entitled for deduction.
Conclusion- Held that since the appellant assessee itself has booked it as a capital expenditure, where, at least to the extent of Rs.56,96,988/- have been culled out by the Tribunal because of the nature of the expenses as revenue expenditure, to that extent the relief granted by the Tribunal has to be accepted. Insofar as the remaining expenditure is concerned, the assessee / appellant cannot claim it as a revenue expenditure because the assessee itself has booked it as a capital expenditure. When that being so, we do not find any error in the order passed by the Tribunal. Therefore, the questions of law raised in this appeal is answered in favour of the Revenue and against the appellant / assessee. Resultantly, the appeal fails and it is dismissed.
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