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2018 (6) TMI 1236 - HC - Income TaxClaim of deduction / loss relating to the 'project expenses' in the computation of taxable total income - expenditure incurred by the assessee was revenue in nature and not capital - Whether the Tribunal is correct in concluding that the expenses were capital in nature even though such expenses were incurred for 'possible expansion' of the existing business? - Whether the Tribunal is correct in concluding that the expenses were capital in nature even though such expenses were incurred for 'possible expansion' of the existing business? - Held that:- The assessee though had entered into arrangement with the banks and co-promoters and took action for acquisition of land, import of machineries, etc., no new venture was established by the assessee. The venture, which was to be taken over by the assessee and operated did not fructify, not on account of the conduct of the assessee, but on account of the decision of the Government of Tamil Nadu. In our considered view, the decision of the Government of Tamil Nadu to sell the project is a very important fact, which has to be borne in mind to decide as to whether the expenditure incurred by the assessee was capital or revenue in nature. The Assessing Officer fell in error in going by the fact that the expenditure was incurred from the capital account forgetting that the test to be applied to ascertain as to whether the expenditure is revenue or capital is not based on where the funds were drawn from. The broad parameters and tests, which have been laid down by various decisions are that there should be an enduring benefit, which should accrue to the assessee and there should be a creation of a new asset. In the instant case, both these parameters remain unfulfilled. - Decided in favour of assessee
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