2009 (9) TMI 635 - DELHI HIGH COURT

Disallowance - Revenue or capital expenditure - Regarding expansion of its existing business by setting up a weaving and spinning unit for manufacture of fabric and textiles - Since the setting up of the said proposed unit was abandoned during the previous year relevant to the assessment year 2000 -01, related project expenses amounting to Rs. 64,47,855 were written off and claimed deduction in computation of income for the assessment year 2000-01 under section 37(1) of the Act - The mere fact that the unit was proposed to be set up in the State of Karnataka, which was geographically distant from the existing unit of the appellant, could not be a ground to hold that what was proposed to be set up was a different unit altogether - The proposed business was not an individual business but vertical expansion of the present business - Since the project was abandoned, no new asset also came to be created

In the previous year relevant to the assessment year 2000-01, the payment made to Mc. kinsey was claimed deduction by the appellant - Tribunal has accepted the fact that even when there was no formal written agreement with M/s. McKinsey and Co., the report was submitted by the said company for the task assigned - Once it is accepted as a fact that the assignment given to the said consultants was for the purpose of improving operational efficiencies and was not to incur any enduring benefit in capital field but to carry on the existing business more efficiently and profitably, the irresistible conclusion which follows is that such expenditure was allowable as business expenditure - All the appeals are dicided in the favour of the assessee