Case Law Details
Where the so called new unit set up by the assessee was merely an expansion of its existing business and was not setting up of a new business, the expenses incurred in that regard were allowable as revenue expenses.
CASE LAWS DETAILS
DECIDED BY: HIGH COURT OF GUJARAT, IN THE CASE OF: CIT Vs. Ghanashyam Steel Work Ltd., APPEAL NO: Tax Appeal Nos. 553 to 555 of 2009, DECIDED ON May 4, 2010
FACTS OF THE CASE
The assessee is engaged in the business of manufacture of chemical processing equipment. During the years under consideration, the assessee started construction of a new unit in a separate plot, adjacent to its existing unit. For this new unit, the assessee borrowed funds and also collected funds through public issue of equity shares. The assessee incurred expenses of Rs.27,90,138/-, Rs. 19,81,792/- and Rs. 1,05,73,889/- respectively in Financial Years 1995-96, 1996-97 and 1997-98, in relation to the said unit. All these expenses were capitalized in the books of account and shown as pre-operative expenses. However, while filing the returns of income, the said expenses were claimed as revenue expenditure. Since these expenses had been incurred for the new unit which was a separate unit from the existing unit and the new unit had not started production, the Assessing Officer made addition of Rs.17,87,595/-, Rs.19,81,792/- and Rs.1,05,73,889/- for Assessment Years 1996-97, 1997-98 and 1998-99 respectively, treating the same as capital expenditure.
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