Mobilization expenses to move assets to client’s premises allowable as revenue expenditure

Brief of the case:

The ITAT bench of Mumbai in the above cited case held that when the assessee company in its continuing and existing business of chartered hiring of rigs imported new rigs to be moved to and installed at the site of the clients desirous of taking the same on hire for oil drilling, all the mobilization expenses which is in connection with these new rigs till these new rigs mobilization is completed and these rigs are installed at clients site and start commencing drilling of oil for the client is a revenue expenditure and not a capital expenditure.

Facts of the case:

• The assessee company is engaged in the business of giving Rigs (a type of machinery) on chartered hiring to Government and Private parties l who places order on the assessee company. The assessee company has claimed the expenses with respect to the mobilization of rigs to the extent of Rs. 3,43,28,180/- which was not debited to the profit and loss account but was treated as capital expenditure in the books of accounts prepared under the Companies Act ,but treated the same as revenue expenditure and claimed deduction from business profits to match the mobilization income of Rs. 20.46 crores.
• The A.O. observed that the assessee company has not debited the amount of Rs. 3,43,28,180/- to the profit and loss account although the expenditure was incurred , but the same was capitalized in the books of accounts as per the Companies Act and hence the amount which has not been debited to Profit and Loss Account cannot be allowed as deduction while computing income chargeable to tax under the Act.AO thus added back the expenditure to income after allowing depreciation on capitalized mobilization expenses.
• The CIT(A) on appeal also upheld the order of AO by holding that nothing has been submitted to actually establish the mobilization of rigs and commencement of work from it, the claim of the assessee company that expenditure incurred is to be treated as revenue expenses was not acceptable to the CIT(A). Aggrieved assessee is in appeal before tribunal.
  

Contention of the Assessee: