Deferred Revenue expenditure incurred on account of leased Aircraft Engine Improvement: ITAT directs re adjudication [Read Order]

The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) directed readjudication with respect to deferred revenue expenditure incurred on account of leased aircraft engine improvement.

The Assessee, India Flysafe Aviation Ltd is engaged in the business of providing aircrafts on charter basis to the VVIPs, State governments, corporate houses, travel agents, etc.

During the assessment proceedings the AO observed that the assessee has claimed deferred revenue expenditure written off amounting to Rs.31,21,556/- which the assessee explained that the assessee company had taken on lease a helicopter in the earlier years and incurred expenditure amounting to Rs.2.6 crores on account of engine improvement, repair & overall check and compliance of DGCA guidelines during F.Y. 2009-10.

Since the asset was taken on lease, the expenditure was amortized over the remaining lease period of the helicopter. Rs.31,21,556/- being the remaining amount has been amortized during the relevant financial year.

Accordingly AO was not satisfied with the same and concluded that in the assessment year 2012- 13 also, the disallowance was made by the then AO and considered this expenditure to be incurred in earlier years. 

Aggrieved, the assessee filed an appeal before the CIT(A) who upheld the disallowance  made by the AO. Therefore the assessee filed another appeal before the tribunal.

During the proceedings the Salil Kapoor, counsel for assessee relied upon the decision in case Madras Industrial Investment Corporation Ltd. vs. CIT submitted that “where the revenue expenditure incurred is of a considerable magnitude and its benefit can be spread over a number of years, the same has to be allowed on a deferred basis over the period of benefit thereof”.

Meenakshi Dohare, Counsel for Revenue, supported the order of lower authorities.

After reviewing the submissions of both parties the two-member bench Of M. Balaganesh ( Accountant Member ) and Anubhav Sharma, ( Judicial Member ) restored the file to AO after considering the decision of coordinate Bench in the case of the assessee for AY 2012-13.

Thus directed readjudication with respect to deferred revenue expenditure incurred on account of leased aircraft engine improvement.

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