Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1990-91 - Certain amount was capitalized by assessee treating same to be in form of capital expenditure spent in construction of plant/machinery, prior to commencement of business - As regards part of expenditure, Assessing Officer found that no adequate material was tendered by assessee and therefore, he exercised his discretion by means of best and held that 25 per cent of said expenditure was not allowable towards capitalization - Whether in absence of any adequate material to prove actual expenditure and its nature, Assessing Officer had discretion to grant benefit to extent of 75 per cent only of claimed amount and decline it to extent of 25 per cent - Held, yes - Whether, therefore, Tribunal was justified in affirming order passed by Assessing Officer and no question of law arose from said order of Tribunal - Held, yes FACTS For the assessment year 1990-91, the Assessing Officer noticed that a sum of Rs. 5,93,128 was capitalized by the assessee treating the same to be in the form of capital expenditure spent in construction of plant/machinery, prior to commencement of business. On details being sought, the Assessing Officer found that a sum of Rs. 1 lakh was spent in acquiring know how and, therefore, he allowed deduction of said amount in six equal instalments under section 35AB. In respect of the balance amount of Rs. 4,93,128, the Assessing Officer, on finding that no adequate material was tendered by the assessee to prove the actual expenditure and its nature, exercised his discretion by means of best and held that 25 per cent of said expenditure was not allowable towards capitalization. The Assessing Officer further granted benefit to the extent of Rs. 40,000 towards deferred revenue expenditure as against the assessee's claim for Rs. 58,875 on the ground that the said amount was part of the main entry of Rs. 5,93,128. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the order of the Assessing Officer. On appeal : HELD It is a settled position of law that when the Act provides a specific section for determination of one kind of…

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