INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Expenses (including depreciation) - Relating to closed unit

Assessee was engaged in the business of manufacturing of paints and varnishes. AO observed from the earlier years orders that assessee had not continued its pigment operations at Kavesar (Thane) from 1-4-1999. The AO observed that the assessee had however, continued claiming expenses incurred with respect to said unit which were incurred under various heads which stood debited to profit and loss account. The AO disallowed the expenses to the tune of Rs. 10,11,504 incurred with respect to Kavesar Unit (including depreciation) by following assessment Order, dt. 28-2-2003 passed by the AO under section 143(3) for assessment year 2000-01. CIT(A) allowed these expenses partly as business expenses.Held: The Tribunal in the preceding year assessment year 2004-05 had held that expenses incurred by the assessee (including deprecation) with respect to Kavesar Unit situated at Thane which was lying closed since 1-4-1999 is to be allowed as revenue expenses. The facts being identical in this year and there was no reason to take divergent view than what was taken by tribunal in preceding assessment year 2004-05 and also with a view to maintain consistency(Ref: Supreme Court decision in the case of Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC), these expenses be allowable as business expenses. Thus, these expenses including depreciation of Rs. 10,11,504 with respect to Kavesar Unit located at Thane was to be allowed as Revenue Expenses.

Followed:For assessment year 2004-05 in ITA No. 212/Mum/2008 vide appellate Order, dt. 19-3-2018 wherein tribunal followed the decision of the tribunal in assessee's own case for assessment year 2003-04 in ITA No. 1525/Mum/2007. Applied:Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC).