Capital Expenditure Incurred on transfer of asset

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Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2009 If a Company shifts its head office in the same state only then the expenditure incurred on transfer of Capital Assets will be a Capital or a Revenue Expenditure as per Companies Act,1956 and As per Income Tax Act,1961?

CA Balram Sharma

CA Balram Sharma (Expert)
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09 December 2009 In my opinion expenditure should be capitalised in both cases

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2009 If u could provide me with the section or any reference of any case law or judgement for the same as per Income Tax Act and for Companies At too any judgement for the same. And by the expenses i meant expenses such as transport charges,charges paid to labour,fixation charges,installation charges,etc.
Thank You

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
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10 December 2009 It is capital expenditure because the office must have been shifted to make the business more profitable. So all expenditure on dismantling, transporting and reerecting capital assets must be considered capital expenditure. Case reference is given below:
[1963] 49 ITR 160 (SC)

SUPREME COURT OF INDIA

Sitalpur Sugar Works Ltd.

v.

Commissioner of Income-tax

S.K. DAS, A.K. SARKAR AND M. HIDAYATULLAH, JJ.

CIVIL APPEAL NO. 350 OF 1962

APRIL 10, 1963

Querist : Anonymous

Querist : Anonymous (Querist)

11 December 2009 Sir the case law provided by u is pretty useful. But in my case the transfer has been made within the same state of Maharashtra and also within the same city (Mumbai) and not Inter state as per the case law provided by u. In the case law provided by u the judgement of the SC is on inter state (transfer from Uttar pradesh to Bihar) transfer and not intra state.

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
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14 December 2009 I think in this matter the place of transfer is really not relevant. The underlying principle is whether the shifting has been done so as to conduct business in a better way or not. It is obvious thatanyone will do shifting only for betterment of business. I think this is a relevant case.

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
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