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Expenditure treated as capital in books cannot be claimed as revenue in computation of income
Case Law Details
- Case Name
- Sabare International Ltd Vs DCIT (Madras High Court)
- Appeal Number
- Only available for paid members
- Date of Judgement/Order
- Only available for paid members
- Related Assessment Year
- 2007-08
- Courts
- All High Courts, Madras High Court
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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 Asses...
Author Info
In such cases, it would be useful if the department, having disallowed this as ‘capital expenditure charged to revenue’, subsequently allows appropriate portion of the expense in following years in its own calculation (though the same will be contested by the assessee). The benefit would be that, if the case is finally disposed of (against the assessee) and the same accepted by the assessee, the latest assessment position (based on such expense being treated as revenue expenses), will be readily available from the latest year assessment and the assessee wont have to ‘re-calculate’ its earlier years’ total income’ going back to the past years, which sometimes becomes cumbersome and difficult, particularly if the Company is under MAT.