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2022 (6) TMI 347 - ITAT CHENNAIReopening of assessment u/s 147 - Whether no fresh tangible materials in the possession of the Assessing Officer? - disallowance of proportionate interest expenses u/s.36(1)(iii) - HELD THAT:- We do not subscribe to the arguments of assessee for simple reason that once there is element of escapement of income, then the AO can very well look into other issues which come to his knowledge during the course of assessment proceedings. In this case, the assessee himself has conceded fact that there is escapement of income on the issue of deduction towards exceptional items. Therefore, once it is proved that there is escapement of income, then additions made by the Assessing Officer towards other issues being disallowance of interest expenses also in accordance with law. Therefore, we are of the considered view that reopening of assessment u/s.147 of the Act, is valid in the given facts & circumstances of the case and thus, arguments of the assessee are rejected. Disallowance of interest expenses u/s.36(1)(iii) - We find that the assessee has substantiated its claim with necessary evidences, including Board resolution and argued that project developed by the assessee is abandoned. Once project is abandoned, it seizes to become eligible asset to capitalize borrowing cost to the work in progress account, till such asset is put to use in business of the assessee. In this case, since, project of the assessee was abandoned, expenditure incurred on said project, including interest, if any, on borrowed capital would be in the nature of revenue expenditure, which needs to be allowed as deduction. This legal principle is supported by the decision in the case of CIT Vs. Priya Village Roadshows Ltd [2009 (8) TMI 765 - DELHI HIGH COURT] wherein it has been held that when the project is abandoned without creation of new asset, expenditure related thereto is only that of revenue expenditure. It was further noted that the assessee has incurred amount towards creation of new asset for expansion of existing project. It is well settled principles of law by various judicial precedents that when there is only expansion of existing business, incidental expenditure for bringing capital asset will be revenue in nature. We are of the considered view that the Assessing Officer has erred in disallowing proportionate interest expenses and added back to capital work in progress. CIT(A), without appreciating facts has simply sustained additions made by the Assessing Officer. Hence, we reverse findings of the learned CIT(A) and direct the Assessing Officer to delete additions made towards disallowance of proportionate interest expenses u/s.36(1)(iii) - Decided partly in favour of assessee.
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