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2019 (8) TMI 1198 - AT - Income TaxExpenditure u/s 37 (1) - power project expenditure - HELD THAT:- Merely because assessee has capitalized all the expenditure, relating to the power project there is no reason to capitalize all the expenditure, which are not even related to the power project, should also be capitalized. Further it is not the case of the revenue that assessee has not incurred these expenditure. Further, no evidence has been brought on record by the revenue to show that this expenditure is related to the power project only. The revenue also could not controvert that field study report and feasibility report expenditure incurred by the assessee under the head legal and professional expenditure is any way connected to the power project. With respect to the salary of employees the assessee has given the designation of those employees who salary has been reimbursed to the holding company, the nature of the services rendered by them as shown in the designation. We reverse the finding of the lower authorities and allow ground number 1 and 2 of the appeal of the assessee holding that employs remuneration on legal and professional fees has been correctly debited in the profit and loss account and is allowable to the assessee as a deductible expenditure u/s 37 (1) of the income tax act. Interest income assessment - capital receipt OR revenue reciept - HELD THAT:- NTPC SAIL POWER COMPANY PVT. LTD. VERSUS CIT [2012 (10) TMI 524 - DELHI HIGH COURT] held that if the receipt is inextricably linked to the setting up of the project then it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. In the present case, the assessee has given advances to fellow subsidiaries. Further, assessee also could not establish that how the above advance given to the subsidiary companies from womb the interest income has been earned are inextricably linked to the setting up of the project. Further assessee has also treated it as a regular income and offered to tax in the computation of income by crediting it as other income in the profit and loss account. In view of this ground number 3 of the appeal of the assessee is dismissed. Nature of expenses - expenses of abundant project - revenue or capital expenditure - HELD THAT:- As relying on CHEMPLAST SANMAR LIMITED [2018 (9) TMI 75 - MADRAS HIGH COURT] and JAY ENGINEERING WORKS LTD. [2007 (10) TMI 286 - DELHI HIGH COURT] wherein held that where assessee company set up a new project which was subsequently abandoned, since new project was managed from common funds, control over all business units was in hands of assessee and there was unity of control, it could not be said that pre-operative expenditure incurred by assessee was on a new line of business, thus, same was to be allowed as revenue expenditure. In the present case also, there is no allegation that the expenditure incurred by the assessee is capital in nature. It is not also the case of the revenue that the assessee has not incurred the expenditure at all. It is not also the case of the revenue that these expenditure are not pertaining to this year. Therefore, respectfully following the decision of the honourable Madras High Court and Delhi High Court, we do not find any infirmity in the order of the learned CIT – A in allowing the expenditure incurred by the assessee for the abandoned project as allowable during the year.
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