Amortization of Expenses u/s 35 D to be Allowed Only on Satisfying the Prescribed Conditions: ITAT [Read Order]

The Income Tax Appellate Tribunal, Bench “A”, Mumbai, has, recently while allowing an appeal filed by the Revenue, held that amortization of expenses under section 35 D can be allowed only on satisfying the conditions as prescribed for the same.

The aforesaid observation was made by the tribunal when an appeal was preferred before it by the Revenue, as against the order of the CIT(A), who partly allowed the assessee company’s appeal, with regard to the sum of Rs.13.30 crores debited by it to the P&L account towards professional fee, as against the order of the Assessing Officer (A0) who disallowed the same, having found the explanation filed by the assessee nontenable.

The assessee having succeeded in putting forth it’s claim before the CIT(A) that the expenditure of Rs.13.30 crores was for the purpose of setting up its business and that such expenditure qualifies for amortization under section 35D of the Act, the court expressed its surprise as to how the  CIT(A) could  agree upon and allow the said amount of Rs.13.30 crores to be amortized under section 35D of the Act when assessee itself has come up with a specific plea before the AO that the deductions claimed by it are allowable under section 37 .

Thus,allowing the appeal filed by the Revenue and thereby concluding the case, the bench commented:

“The Ld. CIT(A) has not decided the issue in entirety as to how the expenditures are not allowable under section 37 of the Act and where the detail is on the basis of which expenditures are held to be allowable for amortization under section 35D of the Act.

In these circumstances, we are of the considered view that the issue is required to be remitted back to the AO to decide afresh keeping in view both the pleas raised by the assessee one before the AO and another before the Ld. CIT(A) as to allowability of expenditure under section 37 of the Act or allowability of amortization of the expenses under section 35D of the Act and consequently, the appeal filed by the Revenue is hereby allowed for statistical purposes.”

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