ACIT 6(1), MUMBAI V. RELIANCE SUPPLY CHAIN SOLUTIONS LTD, MUMBAI

ITA 5759/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71780 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37(1); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , _ ./I.T.A. NO.5759/MUM/2012 ( / ASSESSMENT YEAR : 2008-09) DY. COMMISSIONER OF INCOME TAX CIRCLE 6(1), ROOM NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S RELIANCE SUPPLY CHAIN SOLUTIONS LTD., GROUND FLOOR, BUILDING NO.4, C-WING, THANE BELAPUR ROAD, GHANSOLI, NAVI MUMBAI-400701 ( ( / APPELLANT) .. ( ) ( / RESPONDENT) _ ./ ./PAN/GIR NO. : AAACA3872F ( /: APPELLANT BY SHRI SANJEEV JAIN ) ( , / RESPONDENT BY SHRI FARROKH V IRANI , / / DATE OF HEARING : 19.11.2013 , / /DATE OF PRONOUNCEMENT : 27.11.2013 / O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2008-09 AGAINST ORDER OF LD. CIT(A) DATED 21.6.2012. 2. THOUGH THE GROUNDS OF APPEAL TAKEN BY ASSESSEE IS NOT CORRECTLY WORDED, THE ONLY ISSUE INVOLVES IN THIS APPEAL IS AS TO WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DEL ETING THE DISALLOWANCE OF CLAIM FOR DEDUCTION OF RS.2,88,72,441/- CONSIDERING IT AS RE VENUE EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE INCOME TAX ACT, 1961(THE ACT) AS AGAINST THE AO CONSIDERED IT AS CAPITAL EXPENDITURE. 3. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL A RE THAT THE ASSESSEE IS IN THE BUSINESS OF DISTRIBUTION AND LOGISTIC BUSINESS. THIS IS THE FIRST YEAR OF OPERATION AND THE COMPANY HAD A TURNOVER OF RS.26,22,30,201/- ON WHI CH NET LOSS OF RS.4,42,981/- IS SHOWN IN PROFIT AND LOSS ACCOUNT. IN THE BALANCE S HEET, THE ASSESSEE HAS SHOWN TO HAVE INCURRED AN EXPENDITURE OF RS.7,69,22,617/-, WHICH HAS BEEN REFLECTED AS PROJECT I.T.A. NO.5759/MUM/2012 2 DEVELOPMENT EXPENDITURE IN THE BOOKS OF ACCOUNT. HOWEVER, IN THE COMPUTATION OF INCOME, THIS EXPENDITURE HAS BEEN CLAIMED AS REVEN UE EXPENDITURE. IT IS RELEVANT TO STATE THAT THE AO STATED THAT ASSESSEE ITSELF HAS DISALLOWED AN AMOUNT OF RS.4,80,50,176/- U/S 40A(7) /43B OF THE ACT. THUS, OUT OF THE SAID AMOUNT, THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.2,88,72,441/- IN THE ASSESSMENT YEAR UNDER CONSIDERATION U/S 37(1) OF THE ACT. THE AO HAS ST ATED THAT THE ASSESSEE VIDE ITS LETTER DATED 29.11.2010 SUBMITTED THAT THESE EXPENDITURES ARE MAINLY SALARY, TRAVELLING AND CONVEYANCE, TELEPHONE EXPENSES, PROFESSIONAL FEES, AUDIT FEES AND THOSE ARE APPEARING IN BOOKS OF ACCOUNTS UNDER THE HEAD PROJECT DEVEL OPMENT EXPENDITURE SINCE THEY ARE OF REVENUE NATURE ARE ELIGIBLE FOR DEDUCTION U/S 37(1) OF THE ACT. THE AO HAS REPRODUCED THE SUBMISSIONS OF THE ASSESSEE IN THE ASSESSMENT ORDER AT PAGES 2 TO 6 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS STATED IN I TS SUBMISSIONS : A) DURING THE YEAR THE ASSESSEE HAS ALREADY STARTED I TS ACTIVITY OF SUPPLY CHAIN MANAGEMENT. THAT THE ASSESSEE-COMPANY IS EXPANDING ITS ALREADY STARTED LINE OF BUSINESS BY EXPANDING ITS SCALE OF OPERATIO N THROUGHOUT THE COUNTRY; B) THAT ALL THE ACTIVITIES OF THE ASSESSEE-COMPANY AR E APPROPRIATELY REFLECTED IN THE BALANCE-SHEET OF THE ASSESSEE COMPANY AND AL L THE OPERATIONS ARE ACCOUNTED THROUGH ONE SINGLE PROFIT AND LOSS ACCOUN T OF THE ASSESSEE COMPANY; C) THAT ALL SOURCING OF FUNDS IS DONE AT THE COMPANY LEVEL. DURING THE YEAR, THE ASSESSEE-COMPANY HAS SOURCED FUNDS BY WAY OF UN SECURED LOANS AND OTHER SHORT TERM LIABILITIES ALONG WITH ITS SHAREH OLDERS FUNDS. ALL THE ACTIVITIES ARE OPERATED AND EXPENDED OUT OF THIS CO MMON POOL OF FUND; D) THAT THE BUSINESS CARRIED ON BY ASSESSEE CONSTITUTE S ONE INDIVIDUAL BUSINESS AS ALL THE ACTIVITIES OF THE COMPANY ARE DIRECTLY OPERATED AND MANAGED BY ITS BOARD OF DIRECTORS OR ITS EMPLOY EES. THE ADMINISTRATION OF THE ASSESSEE IS CENTRALIZED AND THE MAJOR POLIC IES ARE FRAMED AT THE CENTRAL LEVEL. HENCE, THERE EXISTS INTER-CONNECTIO N, INTER-LACKING, INTER- DEPENDENCE, COMMON MANAGEMENT, COMMON BUSINESS ORGA NIZATION, COMMON FUND, COMMON ADMINISTRATION AND COMMON CENTR AL PLACE OF BUSINESS; E) THAT THE ASSESSEE HAS INCURRED OPERATIONAL AND MAIN TENANCE EXPENSES TOWARDS SALARY, ELECTRICITY, AUDIT FEES AND LIKES. FOR EXPANSION OF THE EXISTING LINE OF BUSINESS OR FOR MAINTENANCE AND OP ERATION OF THE ALREADY ESTABLISHED OPERATIONS. I.T.A. NO.5759/MUM/2012 3 F) THAT WHERE THE EXPENSES ARE DIRECTLY IDENTIFIABLE WITH THE OPERATION AND MAINTENANCE OF THE EXISTING OPERATIONS, THE SAME HA VE BEEN EXPENSED OUT DURING THE YEAR AND WHERE THE EXPENSES ARE NOT DI RECTLY IDENTIFIABLE WITH THE OPERATIONS AND MAINTENANCE OF THE EXISTING STO RES, THE SAME HAS BEEN TRANSFERRED TO THE PROJECT DEVELOPMENT EXPENDITUR E PENDING CAPITALIZATION. THAT WHAT IS BEING REFLECTED BY A SSESSEE, IN THE BOOKS OF ACCOUNT, PROJECT DEVELOPMENT EXPENDITURE AND N OT CAPITALIZATION OF ANY INDIVIDUAL CAPITAL ASSET. G) THAT ACCORDING TO THE PROVISIONS OF INCOME TAX ACT , THE EXPENSES INCURRED BY ASSESSEE DURING THE YEAR IS ALLOWABLE IN ENTIRE TY AND DEFERMENT OF SUCH EXPENDITURE IN THE COMING YEARS IS NOT PERMISSIBL E.; H) THAT THESE EXPENSES ARE CLAIMED AS DEDUCTION U/S 37 (1) DURING THE YEAR AS ONCE BUSINESS IS COMMENCED, EXPENDITURE WHICH ARE OTHERWISE ALLOWABLE UNDER THE ACT AND WHICH ARE NOT CAPITAL IN NATURE, SHOULD BE ALLOWABLE AS BUSINESS EXPENDITURE NOTWITHSTANDING THAT THE BUSIN ESS PLAN IS IMPLEMENTED IN PHASED MANNER. BEFORE THE AO, THE ASSESSEE PLA CED RELIANCE ON THE FOLLOWING CASE LAWS: I) KEDARNATH JUTE MANUFACTURING CO.LTD. (1971) 82 ITR 363 (SC); II) JAY ENGINEERING WORKS LTD. V/S CIT (2008) 166 TAXMANN 115 (DELHI); III) CIT V/S PRIYA VILLAGE ROADSHOWS LTD (2009) 185 TAXMANN 44 (DELHI) IV) BANSIDHAR (PVT) LTD. V/S CIT (127 ITR 65)(GUJ) V) CIT V/S RAJENDRA PRASAD MOODY (115 ITR 519) HOWEVER, THE AO HAS STATED THAT THE SUBMISSIONS O F THE ASSESSEE IS NOT TENABLE AS THE ASSESSEE HAS NOT INCURRED SUCH EXPENSES FOR THE ROU TINE OPERATIONS. THAT THE ASSESSEE ITSELF IN THE BOOKS OF ACCOUNT HAS CONSIDERED SUCH EXPENSES AS CAPITAL AND HENCE CLAIMING THE SAME WHILE COMPUTING TOTAL INCOME AS REVENUE IS NOT ACCEPTABLE. THEREFORE, AO HAS STATED THAT ASSESSEE ITSELF HAS DISALLOWED RS.4,80,50,176/- U/S 40A(7) /43B OF THE ACT WHILE CLAIMING PROJECT DE VELOPMENT EXPENDITURE IN THE COMPUTATION OF INCOME AND THEREFORE RESTRICTED THE DISALLOWANCE TO RS.2,88,72,441/-. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY. 4. ON BEHALF OF THE ASSESSEE, THE SUBMISSIONS AS MA DE BEFORE THE AO WERE REITERATED. IT WAS FURTHER SUBMITTED THAT ALLOWANC E OF ANY ITEM OF EXPENDITURE FOR THE PURPOSE OF COMPUTING THE TAXABLE BUSINESS INCOME IS GUIDED BY PROVISIONS OF INCOME TAX ACT AS CONTAINED IN SECTIONS 30 TO 43D OF THE ACT AND TREATMENT OF ANY ITEM OF EXPENDITURE IN A PARTICULAR MANNER IN THE BOOKS OF ACCOUNT IS NOT MATERIAL FOR ALLOWING DEDUCTION THEREOF WHILE COMPUTING TAXABLE INCOME. IT WAS REITERATED BEFORE THE LD. CIT(A) THAT THE BUSINESS CARRIED ON BY THE ASSESSEE CONSTITUTES ONE INDIVIDUAL BUSINESS I.T.A. NO.5759/MUM/2012 4 AS ALL THE ACTIVITIES OF THE ASSESSEE ARE DIRECTL Y OPERATED AND MANAGED BY ITS BOARD OF DIRECTORS OF THE ASSESSEE-COMPANY OR ITS EMPLO YEES. THE EXPENDITURES INCURRED DURING THE YEAR IS OF REVENUE NATURE IS ALLOWABLE U /S 37 OF THE ACT. IT WAS STATED THAT ONCE THE ASSESSEE HAS STARTED ITS BUSINESS, EXPEN DITURE INCURRED ON EMPLOYEES AND EXPENDITURES FOR PLANNING AND EXECUTION OF VARIOU S LOGISTIC SOLUTION ARE IN RESPECT OF EXPANSION OF THE EXISTING LINE OF BUSINESS AND THER EFORE, THE SAME IS THE EXPENDITURE INCURRED IN CONNECTION THEREWITH. HENCE, THE SAME IS REVENUE EXPENDITURE. IT WAS ALSO CONTENDED THAT FROM THE DETAILS OF THE EXPENSES CL AIMED AS REVENUE EXPENSES, IT CAN BE OBSERVED THAT THE AMOUNT HAD BEEN SPENT TOWARDS VA RIOUS SUB-HEADS LIKE SALARY, WAGES, GENERAL AND ADMINISTRATIVE CHARGES ETC. ALL SUCH EXPENSES ARE IN THE NATURE OF GENERAL OVERHEADS AND INCAPABLE OF GIVING RISE TO ANY CAPITAL ASSETS IN THE CAPITAL FIELD. BY INCURRING THOSE EXPENSES, THE ASSESSEE HAS NOT ACQUIRED OWNERSHIP OF ANY ASSETS OR BENEFIT OF ENDURING NATURE WHICH CREATES A NEW S OURCE OF INCOME. THE EXPENSES MERELY FACILITATED MANAGEMENT IN CONDUCT OF ASSESSE ES BUSINESS AND ALLOWED IT TO RUN ITS BUSINESS MORE EFFICIENTLY. LD. CIT(A) AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE VIDE PARAS 3.9 TO 3.12 HAS HELD THAT DIS ALLOWANCE OF CLAIM OF EXPENDITURE BY THE AO OF THE PROJECT DEVELOPMENT EXPENDITURE IS NOT JUSTIFIED AND ACCORDINGLY DELETED THE SAME. THE SAID PARAS 3.9 TO 3.12 READ AS UNDER : 3.9 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT, THE CASE LAWS CITED IN THIS REGARD AS WELL AS THE ASSESSMENT ORDE R PASSED BY THE AO. I AGREE WITH THE APPELLANT THAT THE SO-CALLED PROJECT DEVE LOPMENT EXPENDITURE WHICH HAS BEEN HELD BY THE AO TO BE IN THE NATURE OF CAPITAL EXPENDITURE IS BASICALLY NOT SO AND THE SAME IS AN ALLOWABLE EXPENDITURE BEING REVE NUE IN NATURE. THE APPELLANT IS ENGAGED IN THE BUSINESS OF SUPPLY CHAIN MANAGEME NT INCLUDING SUPPLY, DISTRIBUTION AND LOGISTICS. SINCE THIS IS THE FIRST YEAR AFTER THE BUSINESS OF THE APPELLANT WAS SET UP, IT WAS INCUMBENT UPON THE APP ELLANT TO EXPAND ITS EXISTING INFRASTRUCTURE AND FOR THIS PURPOSE SUCH EXPENDITUR E HAS BEEN INCURRED. THESE EXPENSES HAVE BEEN ESSENTIALLY INCURRED FOR EXPANSI ON OF THE EXISTING LINE OF BUSINESS OR FOR MAINTENANCE AND OPERATION OF THE AL READY ESTABLISHED STORES AND HAVE BEEN TRANSFERRED TO THE PROJECT DEVELOPMENT E XPENDITURE. THE AMOUNT HAS BEEN SPENT TOWARDS VARIOUS SUB-HEADS LIKE SALAR Y, WAGES, GENERAL AND ADMINISTRATIVE CHARGES ETC. WHICH ARE ALL IN THE NA TURE OF REVENUE EXPENDITURE. IN THESE CIRCUMSTANCES, THE PREDOMINANT LEGAL OPINION IS THAT SUCH EXPENDITURE IS ALLOWABLE REVENUE EXPENDITURE UNDER SECTION 37 OF T HE ACT AND THE SAME CANNOT BE TREATED AS CAPITAL EXPENDITURE. 3.10 THE APPELLANT HAS VIDE LETTER DATED 24.02.2012 , FURTHER ELABORATED UPON THE NATURE OF EXPENSES INCURRED IN THIS REGARD. SINCE T HE APPELLANT STARTED ITS BUSINESS OF SUPPLY CHAIN SOLUTIONS AND LOGISTICS IN THE CURRENT YEAR, IT WAS REQUIRED TO OPERATE ITS BUSINESS FROM VARIOUS LOCAT IONS AS PER NEEDS OF ITS CUSTOMERS AND SEARCH AND ALIGN VARIOUS VENDORS AND SUPPLIERS FOR PROVIDING SERVICES AT THAT PLACE. IT HAD TO ESTABLISH WARE-HO USING CONTRACTS AND ORGANISE TRANSPORTATION AT VARIOUS LOCATIONS TO COLLECT THE MATERIAL, MAKE TRANSPORT ARRANGEMENTS AND DELIVER THE MATERIAL AT PLACES AS SPECIFIED BY ITS CUSTOMERS. I.T.A. NO.5759/MUM/2012 5 FOR THIS PURPOSE, LARGE NUMBER OF EMPLOYEES AND STA FF MEMBERS WERE RECRUITED AND EMPLOYED AT VARIOUS LOCATIONS TO FAMILIARISE AN D MAKE TIE UP ARRANGEMENTS WITH THE TRANSPORTERS AND SUPPLIERS. THEY WERE ALSO ENTRUSTED THE TASK OF FINDING NEW LOCATIONS WHERE-FROM THE RESPECTIVE ACTIVITY CA N BE CARRIED ON. IT IS SEEN THAT THE MAJOR EXPENSE HAS BEEN INCURRED IN REGARD TO SALARIES AND WAGES OF THESE EMPLOYEES. THE APPELLANT HAS IN THIS REGARD, FURNISHED THE BREAKUP OF THE PROJECT DEVELOPMENT EXPENDITURE AS WELL AS A LIST OF ALL THE EMPLOYEES ALONG- WITH THEIR DESIGNATION AND JOB SPECIFICATION GIVING DETAILS OF SALARIES AND WAGES PAID TO THEM. FROM THESE DETAILS IT IS EVIDENT THAT THE EXPENSES INCURRED ARE PURELY OF REVENUE NATURE. 3.11 IN THE CASE OF ASAHI INDIA SAFETY GLASS LIMITE D (SUPRA), HONBLE DELHI HIGH COURT HAS HELD THAT WHAT IS REQUIRED TO BE SEEN IS NOT WHETHER THE ADVANTAGE OBTAINED LASTS FOREVER BUT WHETHER THE EXPENSE INCU RRED DOES AWAY WITH A RECURRING EXPENSE (S) DEFRAYED TOWARDS RUNNING A B USINESS AS AGAINST AN EXPENSE UNDERTAKEN FOR THE BENEFIT OF THE BUSINESS AS A WHOLE. IN OTHER WORDS, THE EXPENDITURE WHICH IS INCURRED, WHICH ENABLES TH E PROFIT MAKING STRUCTURE TO WORK MORE EFFICIENTLY LEAVING THE SOURCE OF THE PRO FIT MAKING STRUCTURE UNTOUCHED, WOULD IN OUR VIEW BE AN EXPENSE IN THE N ATURE OF REVENUE EXPENDITURE. FINE TUNING BUSINESS OPERATIONS TO ENA BLE THE MANAGEMENT TO RUN ITS BUSINESS EFFECTIVELY, EFFICIENTLY AND PROFITABL Y; LEAVING THE FIXED ASSETS UNTOUCHED WOULD BE AN EXPENDITURE IN THE NATURE OF REVENUE EXPENDITURE EVEN THOUGH THE ADVANTAGE MAY LAST FOR AN INDEFINITE PER IOD. TEST OF ENDURING BENEFIT OR ADVANTAGE WOULD THUS COLLAPSE IN SUCH LIKE CASES . 3.12 IT IS THUS SEEN THAT THE ABOVE JUDGEMENT SUPPO RTS THE CLAIM OF THE APPELLANT REGARDING ALLOWABILITY OF THE PROJECT DEV ELOPMENT EXPENDITURE AS PER THE PROVISIONS OF SECTION 37 OF THE ACT. SIMILARLY , OTHER DECISIONS CITED ABOVE ALSO INDICATE THAT THE EXPENDITURE UNDER CONSIDERAT ION INCURRED BY THE APPELLANT FOR EXPANSION OF THE EXISTING LINE OF BUSINESS (WHI CH AS IS EVIDENT, IS NOT INCURRED ON CAPITAL ASSETS) OR FOR MAINTENANCE AND OPERATION OF THE ALREADY ESTABLISHED STORES IS AN ALLOWABLE DEDUCTION UNDER SECTION 37 O F THE ACT. IN VIEW OF THIS THEREFORE, I AM OF THE OPINION THAT THE DISALLOWANC E BY THE AO OF THE PROJECT DEVELOPMENT EXPENDITURE IS NOT JUSTIFIED. SAME IS T HEREFORE DELETED. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL . 5. AT THE TIME OF HEARING, LD. DR RELIED ON THE ORD ER OF AO. 6. ON THE OTHER HAND, LD. AR SUBMITTED THAT SIMIL AR ISSUE ON IDENTICAL FACTS HAD BEEN CONSIDERED BY ITAT IN SISTER CONCERN OF THE A SSESSEE M/S RELIANCE FOOTPRINT LTD V/S ACIT IN ITA NO.5997/MUM/2011 (AY-2008-09) ORDER DATED 23.10.2013 AND FILED A COPY OF THE SAID ORDER TO SUBSTANTIATE HIS ABOVE SU BMISSIONS. LD. DR HAS NOT OBJECTED ABOVE CONTENTION OF THE ASSESSEE THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF M/S RELIANCE FOOTPRINT LTD (S UPRA). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW AS ALSO THE ORDER OF TRIBUNAL DATED 23.10.2013 IN M/S RELIANCE FOOTPRINT LTD (SUPRA). WE AGREE THAT THE FACTS IN THE CASE I.T.A. NO.5759/MUM/2012 6 BEFORE US ARE IDENTICAL TO THE CASE OF M/S RELIANCE FOOTPRINT LTD (SUPRA). IN THAT CASE ALSO THE ASSESSEE INCURRED THE EXPENSES FOR THE PU RPOSE OF EXPANSION OF ITS BUSINESS IN RELATION TO ITS STORES WHICH WERE MADE OPERATI ONAL DURING THE YEAR AT BANGALORE AND HYDERABAD. IN THE SAID CASE, THE AO MADE DISALLOWA NCE OF CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT GIVE DUAL STA TUS TO THE EXPENDITURES I.E. AS CAPITAL IN BOOKS OF ACCOUNT AND AS REVENUE FOR INC OME TAX PURPOSES. THE TRIBUNAL HAS HELD THAT SUCH VIEW OF AO COULD NOT BE UPHEL D IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF KEDARNATH JUTE MANUFACTUR ING COMPANY LIMITED (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE QUESTION THAT WHE THER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROV ISIONS OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS O WN RIGHTS; NOR CAN THE EXISTENCE OR ABSENCE OF ENTRIES IN HIS BOOKS OF ACCOUNT BE DECIS IVE OR CONCLUSIVE IN THE MATTER. THE TRIBUNAL HELD THAT WHEN THE EXPENDITURE IS INCURRE D FOR THE PURPOSE OF EXPANSION OF BUSINESS WHICH IS ALREADY IN EXISTENCE AND WHICH I S IN THE NATURE OF REVENUE THEN THE SAME IS ALLOWABLE AS REVENUE EXPENSES IN RESPECT OF THE TREATMENT GIVEN BY THE ASSESSEE TO SUCH EXPENDITURE IN ITS BOOKS OF ACCOUN TS. THE TRIBUNAL ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. KOTHARI AUTO PARTS MANUFACTURERS PVT. LTD. (109 ITR 333) AND THE DECISION OF DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. A LEMBIC GLASS INDUSTRIES LTD. (103 ITR 715). IN THE CASE OF KOTHARI AUTO PARTS MANUFACTURE RS PVT. LTD.(SUPRA), THE JURISDICTIONAL HIGH COURT HAS HELD THAT ASSESSEE COMPANY HAD STA RTED SELLING AUTO PARTS AND INCURRED CERTAIN EXPENDITURE IN RELATION TO ACTIVITY OF MANU FACTURING OF AUTO PARTS. NOTING FROM THE MEMORANDUM OF ASSOCIATION IT WAS OBSERVED THAT THE ACTIVITY OF MANUFACTURING RELATED TO SAME BUSINESS AND MEMORANDUM OF ASSOCIAT ION OF THE COMPANY EMPOWERED THE COMPANY TO MANUFACTURE THE ITEMS IN WHICH IT WA S PERMITTED TO DEAL IN AND THUS THESE TWO ACTIVITIES WERE TWO SEPARATE STAGES OF TH E SAME BUSINESS AND THE TRIBUNAL WAS JUSTIFIED IN ALLOWING THE TOTAL EXPENDITURE AS BUSINESS EXPENDITURE. FURTHER THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ALEMBIC GLASS INDUSTRIES LTD (SUPRA) HAS HELD THAT THAT THE EXPENDITURE RELATING TO THE UNIT OF THE ASSESSEE AT BANGALORE WERE ALLOWABLE DESPITE THE FACT THAT UNIT OF THE ASSESSE E AT BANGALORE DID NOT START PRODUCTION AS THE NEW UNIT AT BANGALORE WAS NOTHING BUT EXPANS ION OF THE EXISTING BUSINESS AND THERE WAS COMPLETE INTER-CONNECTION, INTER-LACING A ND INTER-DEPENDENCE OF BOTH UNITS. 8. ON PERUSAL OF THE DETAILS OF EXPENDITURE PLACED AT PAGES 26 AND 27 OF THE PAPER BOOK, WE OBSERVE THAT THE SAID EXPENDITURE WERE IN CURRED TOWARDS SALARY TO THE EMPLOYEES, TRAVELLING AND CONVEYANCE, TELEPHONE EXP ENSES, PROFESSIONAL FEES PAID, AUDIT I.T.A. NO.5759/MUM/2012 7 FEE AND OTHER MISCELLANEOUS EXPENSES TOWARDS REGIS TRATION AS STAMP DUTY CHARGES, LICENSE APPLICATION FEES, REPAIR AND MAINTENANCE E TC. THEREFORE, WE AGREE THAT THE SUCH EXPENSES CANNOT BE SAID TO HAVE GENERATED ANY CAPITAL ADVANTAGE TO THE ASSESSEE AND THE SAME IS IN THE NATURE OF REVENUE E XPENDITURE IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS GIVEN DUAL STATUS OF SUCH EXPENDITURE IN ITS BOOKS OF ACCOUNT VIS--VIS COMPUTATION OF INCOME FILED ALONG WITH R ETURN CLAIMING IT AS REVENUE EXPENDITURE. 8.1 CONSIDERING THE REASONING GIVEN BY LD. CIT(A) A ND THE EARLIER DECISION OF THE TRIBUNAL DATED 23.10.2013 (SUPRA), WE UPHOLD THE OR DER OF LD. CIT(A) AND REJECT GROUNDS OF APPEAL TAKEN BY DEPARTMENT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON T HE 27 TH NOVEMBER, 2013 , 2 3 27TH NOVEMBER, 2013 , SD/: SD/: ( / SANJAY ARORA) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ( / THE APPELLANT 2. ) ( / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. = )? , / ? , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER TRUE COPY (ASSTT. REGISTRAR) / ? , /ITAT, MUMBAI