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2016 (11) TMI 391 - AT - Income TaxAddition of Project expenses written off - decision to abandon the project - whether the assessee is eligible to claim the said expenditure in respect of a resort being developed which is being abandoned at the stage of work in progress due to the change in the govt. policy regulating the developments of such resort? - Held that:- The decision of Hon’ble Delhi High Court in case of Jay Engineering Works Ltd. (2007 (10) TMI 286 - DELHI HIGH COURT ) directly supports the case of the assessee wherein it was held that “the nature of the new business is not a decisive test for determining whether or not there is an expansion of an existing business. The nature of the business could be distinct. What is of importance is that the control of both the ventures, the existing venture as well as the new venture, must be in the hands of one establishment or management or administration. The place of business of the existing business and the new business may not be in close proximity. However, the funds utilized for the management of both the concerns must be common as reflected in the balance sheet of the company. The control over the two units is in the hands of the same management and administration.” Also see Maharaja Shri Umaid Mills (1987 (9) TMI 6 - RAJASTHAN High Court ) which also supports the case of the assessee. In light of above and given the facts that the decision to abandon the project was taken during the year due to the change in govt. Policy, the expenses relating to the resort which have been written off in the books of accounts have been rightly been claimed by the assessee as revenue expenditure. - Decided in favour of assessee Addition u/s 40A(3) - Held that:- The genuineness of the transaction as well as the identity of the payee are not disputed. Further, the appellant has explained the business expediency of making the cash payments to both the parties which has not been controverted by the Revenue. Following the decision of Gujarat High Court in case of Anupam Tele Services (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and Harshila Chordia (2006 (11) TMI 117 - RAJASTHAN HIGH COURT ), the addition under section 40A(3) is deleted.- Decided in favour of assessee
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