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2016 (1) TMI 216 - AT - Income TaxPayment of advance made for acquisition of existing windmill power project - expenditure in the nature of capital expenditure or to be regarded as revenue expenditure - Held that:- The assessee had generated revenue from the said windmills pending completion of the payment terms and also incurred expenses which resulted in a net income of ₹ 2.54 lakhs. Further, it is also evident that the assessee had sought to foray into a new business line by proposing to acquire the impugned windmill project. We find on these facts that the payment of impugned advance of ₹ 90 lakhs is in the nature of capital advance or capital investment and not a revenue expenditure as claimed. The test is to consider for what purpose the amount is laid for. If the amount is laid for purchase of goods in which the assessee dealt with and which were ultimately to be sold as profit then the expenditure would ordinarily be revenue expenditure. On the other hand, in the present case, the capital was provided by the assessee to the seller for acquisition of capital asset. The MOU clearly shows that the assessee was venturing on a new business and the amount was put as the capital expenditure to acquire capital asset. It is therefore clear that the loss arose from the investment and not given in the course of business being carried on by the assessee. Thus, it is capital loss and not a loss incidental to the business. Deprivation from benefit as a result of such capital expenditure is of no consequence and cannot impact the character of expenditure. The decisions cited by the assessee are distinguishable on facts. In all the decision relied upon, the advance were given in the course of carrying on of the regular business like purchase of raw material or other business expenses, etc. where the loss incurred due to termination of contract. The expenses were incurred in the revenue field. In the present case, the amount was paid with a view to bringing into existence an asset and therefore clearly is in a capital field. Our aforesaid view is supported by the decision of the Hon’ble Delhi High Court in the case of Narang Industries Ltd. vs. CIT (1967 (8) TMI 1 - DELHI High Court ) - Decided against the assessee.
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