Project Expenses are “Revenue” in Nature, Deductible u/s 37: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that project expenses are revenue in nature therefore it has deductible under Section 37 of the Income Tax Act 1961.

Section 37 of the Income Tax Act,  provides that any expenditure spent solely for the purpose of the company or profession shall be considered for calculating income under the heads of profits and gains of business or profession.

Amol Sinha, Advocate appeared for the revenue. Atiq Ahmad appeared for revenue

Assessee Indian Farm Forestry Development Cooperative Ltd. being a Cooperative Society is engaged in the trading/marketing of various types of fertilizer, manufactured by IFFCO at various places in India.

Assessing Officer from the Profit & Loss account submitted by the Assessee noted that the Assessee has claimed expenses to the tune of Rs. 6, 28, 66,118/- under the head expenses on “Social and Rural Development Programme”, which the Assessee was claiming under the head Project Development in earlier years.

Assessee was asked to explain social & Rural Development Programmers (Project Development) and to file the necessary evidence in support of these expenses being claimed as Revenue Expenses in nature in the return. Assessee's reply was not accepted by the assessing officer hence AO   said that he cannot be treated project expenses as revenue expenditures. The Aggrieved assessee filed an appeal before Commissioner. The commissioner after considering the fact and material records allowed the claim of the assessee. Against the order, revenue filed an appeal before the tribunal.

The division bench of the tribunal after observing the issues raised by the revenue found that the tribunal has already allowed the assessee's claim in the assessment years 2008-09 & 2009-10 by treating the same expenditure as the “revenue in nature” instead of “capital in nature” as held by the AO.

Moreover, the two-member bench of Anil Chaturvedi, (Accountant Member) and Narender Kumar Choudhry, (Judicial Member) while dismissing the appeal of the revenue observed that the identical issues are already considered in the assessee's own case in the assessment year 2010-11, 2011-12 & 2012-13 at the time the tribunal dismissed the appeal of the revenue.

To Read the full text of the Order CLICK HERE

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