COMMISSIONER OF INCOME TAX Vs. EICHER LIMITED

JUDGEMENT

(1.) The respondent-assessee has filed the return of its income in respect of the Assessment Year 1999-2000 declaring income at 9.49 Crores under Section 115JA of the Income Tax Act (hereinafter referred to as 'the Act'). This return was processed under Section 143(1) of the Act and the assessment was completed under Section 143(3) at an income of Rs. 44,13,247/- under normal provisions of the Act and at Rs. 10.17 Crores under Section 115JA of the Act. This assessment order was passed on 28.03.2002.

(2.) Within two years, however, the Assessing Officer (AO) sought to reopen the assessment by issuing a notice under Section 148 of the Act on 18.03.2004. Based thereupon, afresh assessment order was passed on 22.02.2005. The AO added an income of Rs. 15,662,632/- on the ground that when the first assessment order was passed while computing the business income, a deduction of Rs. 5,67,48,804/- was claimed and the same was allowed under Section 37(1) of the Income Tax Act as part of the company's plan to expand its product range into higher horse power tractor segment, higher horse power tractors and its components and motorcycles, in the course of its existing business of manufacture and sale of tractors and its components and motor cycles. The addition of Rs. 15,662,632/- to the aforesaid expenditure on its expansion of business was treated as 'capital expenditure' on the premise that it was made with a view to bringing into existence an asset or an advantage for the enduring benefit of the business.

(3.) The assessee challenged this order by an filing an appeal before the CIT (Appeals). Main contention of the assessee was that all the relevant facts in this behalf were placed before the AO when the assessment was carried out in the first instance and the AO had taken a categorical view that the entire expenditure was in the nature of revenue expenditure and therefore, liable for deduction. Relevant discussion contained in the order of the CIT(A) runs as follows: