With respect to expenditure incurred in connection with increase in authorised capital. The assessee claimed that such expenditure was incurred prior to commencement of commercial production and was transferred to the asset account along with the financial charges. The AO disallowed the same on the ground that once expenditure was capitalised, the depreciation would be indefinitely claimed by the assessee and the assessee was required to charge such expenditure as revenue expenditure which he disallowed. The ITAT upheld the CIT(A) order wherein he has partly allowed the assessee’s appeal holding that the AO cannot compel the assessee to compute  such expenditure as revenue expenditure and thereby make disallowance, when the assessee had capitalised the expenditure in its books of account. However, since the assessee had admitted that such expenditure was treated as part of fixed assets and depreciation had been claimed in respect thereof, since expenditure was not allowed as revenue expenditure on increase in authorized capital, the assessee could not claim such expenditure by capitalising it and claiming depreciation thereon.  Mercantile system of  accounting-Interest to be taxed on  accrual basis.(AY.2014-15)