Case Law Details
Mangalam Arts Vs DCIT (ITAT Jaipur)
Held that assessee has no interest in the ownership of the asset but he is in possession of the asset for conducting its business, the litigation expenditure incurred is only to protect his business and, therefore, the same is revenue expenditure.
Facts-
During the course of assessment proceedings, AO held that assessee is in possession of the said property and utilizing the same from the beginning and, therefore, the litigation expenses incurred for continued possession of the immovable property where assesee’s office and factory are located is expenditure in relation to immovable property and hence, a capital expenditure which would provide benefit for several years. The AO thus disallowed the litigation expenses of Rs. 2,37,00,000/- being a capital expenditure and added back to assessee’s returned total income.
Being aggrieved, assessee preferred an appeal before the ld. CIT (A). The ld. CIT (A) observed that the expenditure has substantially increased as compared to the last year. The details of expenses have not been furnished during the appellate proceedings. The outcome of the litigation and its present status is not known. Hence, nature of expenditure cannot be considered as recurring and of revenue in nature. Accordingly, the ld. CIT (A) upheld the order of the AO treating the expenditure as capital expenditure.
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