Whether the expenditure is capital or revenue in nature cannot form the subject matter of block assessment

CIT Vs. East India Syntex Limited (Delhi High Court)- It is not in dispute that the entries were made contemporaneously when the expenditure was incurred between September, 1997 and December 1997. Therefore, though the search was in September, 1998, it  cannot be denied that the entries had been made in the books of accounts by that time. This is what the CIT (A) has noted in para 27 of his order by saying that the case of the AO is not that these were not made in the regular books of account. Further, as rightly pointed out by the CIT (A), a debatable question whether the expenditure is capital or revenue in nature cannot form the subject matter of block assessment, though it may be disallowed as capital expenditure in the regular u/s 143(3) if the facts warrant the same. Quite appear from these expenditure of Rs. 14.79 lacs on invertors has not been claimed at all as revenue expenditure, but has been capitalised and the entries in the balance sheet support the same. For these reasons, we are of the view that the CIT(A) committed no error in deleting the addition of Rs. 51.52 lacs.

THE HIGH COURT OF DELHI AT NEW DELHI

Judgement delivered on: 30.11.2011

 ITA No. 25/2007

COMMISSIONER OF INCOME TAX

 versus

EAST INDIA SYNTEX LIMITED