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
This appeal in ITA No.1449/Mum/2016 for A.Y.2011-12 preferred by the assessee against the final assessment order passed by the Assessing Officer dated 29/01/2016 u/s.143(3) r.w.s.144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s. 144C(5) of the Act dated 18/12/2015 for the A.Y.2011-12.
SA No.462/Mum/2019 (Assessment Year : 2011- 12)
This stay application is arising out of ITA No.1449/Mum/2016 for A.Y.2011-12.
ITA No. 7382/ Mum/2017 (Assessment Year : 2013-14)
This appeal in ITA No.7382/Mum/2017 for A.Y.2013-14 preferred by the assessee against the final assessment order passed by the Assessing Officer dated 30/11/2017 u/s.143(3) r.w.s.144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 22/09/2017 for the A.Y.2013-14.
SA No.461/Mum/2019 (Assessment Year 2013-14)
This stay application is arising out of ITA No.7382/Mum/2017 for A.Y.2013-14.
ITA No. 1797/ Mum/2016 (Assessment Year : 2011-12)
This appeal in ITA No.1797/Mum/2016 for A.Y.2011-12 preferred by the revenue against the final assessment order passed by the Assessing Officer dated 29/01/2016 u/s.143(3) r.w.s.144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 18/12/2015 for the A.Y.2011-12.
ITA No. 719/Mum/2017 (Assessment Year : 2012-13)
This appeal in ITA No.719/Mum/2017 for A.Y.2012-13 preferred by the assessee against the final assessment order passed by the Assessing Officer dated 05/12/2016 u/s.143(3) r.w.s.144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 29/09/2016 for the A.Y.2012-13.
With the mutual consent of both the parties, the appeal of the assessee in ITA No.7382/Mum/2017 for A.Y.2013-14 is taken up as the lead case and the decision rendered thereon would apply with equal force for other assessment years also in respect of identical issues except with variance in figures.
2. The concise ground No.1 raised by the assessee is with regard to treatment of expenditure in the sum of Rs.17,45,55,863/- incurred by the assessee as capital expenditure. The alternative prayer made by the assessee on without prejudice basis is that in case if said expenditure is construed as capital expenditure, then depreciation should be allowed to the assessee.
2.1 We have heard the rival submissions and perused the materials available on record. We find that 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. We find that during the year under consideration, the assessee incurred expenses amounting to Rs.17,45,55,863/- in connection with various acquisitions made/explored by it as under:-
