Case Law Details
Brief of the Case
ITAT Mumbai held in the case of Reliance Wellness Ltd. vs. DCIT that treatment given in the books of account is not relevant to examine the claim put forth by the assessee. In this case Assessee was in the process of expansion of its business operations by opening various new shops and booked revenue nature expenditures for the purposes of expansion of its business, which cannot be identified with any Particulars shop under the head ‘Project Development Expenditure’ even though the assessee had shown the same in the Balance Sheet as “Capital work in progress”.
These expenditures did not create any asset and also did not provide enduring benefit to the business of the assessee so as to say that the expenditure was capital in nature. Hence expenditure are allowable in the year under consideration irrespective of the treatment given by the Assessee to such expenses in its books of account.
Facts of the Case
The assessee is engaged in the business of trading and merchandising of goods and services. In the financial year relevant to the assessment year 2008-09, the assessee had already started its operation from nine of its stores located in various states. The AO noticed that the assessee had claimed expenses booked by it under the head “Project Development Expenditure” as deduction in the computation of total income in both the years under consideration, even though the assessee had shown it in the Balance Sheet as “Capital work in progress”. When questioned, the assessee submitted that it is in the process of expansion of its business operations by opening various new shops and the revenue expenses, which could not be identified with a particular shop was shown under the head “Project Development Expenses” and taken to Balance sheet.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
