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2022 (11) TMI 617 - ITAT CHENNAIBusiness expenditure u/s.37(1) - share issue expenses - assessee has abandoned the proposal to issue shares at later stage - AO rightly disallowed such expenses while processing return of income u/s.143(1)(a) - HELD THAT:- As the assessee has not created any asset which gives enduring benefit and also it does not help in the business of the company and in profit making, because, there is no increase in capital employed in the business of the assessee. Therefore, under these facts and circumstances, it is very difficult to accept the arguments of the CIT(A) that expenditure incurred by the assessee is capital in nature which gives enduring benefit to the assessee. This legal principle is supported by the decision in the case of M/s.Adadyn Technologies Pvt. Ltd.,[2020 (8) TMI 669 - ITAT BANGALORE] where the Tribunal held that if expenditure incurred by the assessee for development new project is Revenue in nature, then if said project is abandoned and not put to use, the expenditure incurred by the assessee should be allowed as Revenue in nature. In this case, the assessee has incurred certain expenditure which are Revenue in nature. However, the proposal of share issue has been abandoned for the reasons best known to the assessee. Therefore, in our considered view when the nature of expenditure incurred by the assessee are Revenue in nature and further, said expenses has been incurred wholly and exclusively for the purpose of business, then said expenditure needs to be allowed as Revenue expenditure and deductible u/s.37(1) - CIT(A) without appreciating the above facts simply sustained the additions made by the AO - we set aside the order of the Ld.CIT(A) and direct the AO to delete the additions made towards disallowance of share issue expenses u/s.37(1) - Appeal filed by the assessee is allowed.
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