The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) recently held that expenditure incurred on sheleed projects are revenue expenditure and deleted the disallowance made by the assessing officer.
The Assessee Tata Power Co. Ltd. is engaged in generation, transmission and distribution of electricity. the assessee had entered into international transaction of provision of loan to its Associated Enterprise( AE ), Tata Power Mauritius and provision of corporate guarantee to its other A.E. In assessment proceedings the Assessing Officer referred international transactions to the Transfer Pricing Officer ( TPO ).
During the proceedings the TPO observed that the assessee claimed expenditure on shelved projects as revenue expenditure. The Department has been consistently disallowing the same stating it to be on capital account. The assessee filed objections before the Dispute Resolution Panel ( DRP ). Who confirmed the disallowance.
Aggrieved by the order assesee filed an appeal before the tribunal.
During the adjudication Nitesh Joshi , the counsel for assessee argued that this issue has been considered by the Tribunal in assessee’s own case in appeal by the Revenue in the preceding Assessment Years.
Manoj Kumar, representatives supported the orders of the AO and the CIT(A).
Considering this fact the tribunal observed that the preceding Assessment Years the Tribunal has been consistently holding that such expenditure is on revenue account and has decided the issue in favour of the assessee.
Therefore, the two member tribunal bench of Vikas Awasthy, ( Judicial Member ) and Padmavathy.S, ( Accountant Member ) held that expenditure incurred on sheleed projects are revenue expenditure.
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