Expenditure incurred as a measure of value addition is to be treated as revenue expenditure

Last updated: 30 December 2011

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The assessee is converting scrap iron into MS steel. In the previous year relevant to the impugned assessment year, the assessee proceeded further to improve the value addition by converting MS steel again into TMT steel. In that process, the assessee had incurred an expenditure of ` 88,75,000/-. This amount was claimed as a deduction under the head ‘product development expenditure’. The assessing authority had disallowed this claim on the ground that this amount of expenditure was capital in nature. In first appeal, the Commissioner of Income Tax(Appeals) accepted the contention of the assessee and directed the assessing authority to treat the expenditure as revenue and allowed the same as deduction. The Revenue is aggrieved and therefore the second appeal is before us.

Citation :
Assistant Commissioner of of Income Tax, Company Circle-I(2), Coimbatore. Appellant)Vs.M/s. Kannappan Iron and Steel Co. Pvt. Ltd.,9/110, Kalidas Road,Ramnagar,Coimbatore-641 009.PAN:AABCK2974P (Respondent)