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2022 (11) TMI 1291 - AT - Income TaxDisallowance of Expenses written off - M/s. Fortune Construction Pvt. Ltd. has refunded an amount from the security deposit paid by the assessee company under the project development agreement - HELD THAT:- The assessee abandoned the project due to commercial expediency and in terms surrendered the same in favour of the land owner M/s. Fortune Construction Pvt. Ltd. Further, the amount of Rs. 13 crores refunded to the assessee towards security deposits is out of the security deposit of Rs. 80 crores as on 31.03.2009 which reduce to Rs. 67 crores as on 31.03.2010. Nothing was produced by the revenue to controvert the submissions filed by the assessee before the ld. CIT(A) and the finding of the ld. CIT(A) on this issue. Hon'ble Madras High Court in the case of Chemplast Sanmar Ltd. [2018 (9) TMI 75 - MADRAS HIGH COURT] has 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. Hon'ble Calcutta High Court in the case of Binani Cement Ltd [2015 (3) TMI 849 - CALCUTTA HIGH COURT] has held that expenditure incurred for construction/acquisition of new facility which was subsequently abandoned at work-in-progress stage was allowable in year of write off as incurred wholly and exclusively for purpose of assessee's business. We do not find any infirmity in the order of the ld. CIT(A) on this issue. Accordingly, the same is upheld and the grounds raised by the revenue are dismissed. Disallowance of Customers Settlement Claims - said amount did not crystallize in the year under consideration and therefore a contingent liability - direct and intimate connection between the claim and the business - HELD THAT:- It is an admitted fact that the direct and intimate connection between the claim and business is not in dispute before the lower authorities. The settlement of the claim by the assessee pursuant to the legal process arising out of the contractual liability is in the course of carrying on of its business and the same is also not in dispute - claim being revenue in nature is also not disputed by the AO. It is also relevant to mention here that the accounts were duly audited and signed by the auditor on 29.09.2013 before which the order of the State Consumers Disputes Redressal Commission was available and therefore, in view of the guidelines issued by the ICAI for events occurring after the balance sheet date and considering the fact that the tax rate of both the assessment years are same, we do not find any infirmity in the order of the ld. CIT(A) in deleting the addition. Accordingly, ground of appeal no. 1 by the revenue is dismissed. Addition on account of deposits written off on surrender of land development rights - HELD THAT:- As find from the details so furnished that CASA I, project was implemented and carried. The development rights of project CASA II, were surrendered in terms of registered document dt. 31-10-2012, duly registered as Doc. No. 4758/2012 in the office of Sub-Registrar, Medchal. Pursuant to the cancellation of the development rights, as against the deposit amount of Rs. 17,80,61,366/- the developer returned only an amount of Rs. 14,17,10,000/-. The submission of ld. counsel for the assessee that the balance amount of deposit has not been returned by the developer has not been controverted by the revenue. The deed of cancellation of surrender of rights is categorical in the preamble mentioned to the effect that the deposit amount refunded was only Rs. 13,67,10,000/-. Once the developer was sure that it is not possible to receive back any further amount of the deposit, as a commercial expediency the balance amount of Rs. 3,63,51,366/- has been written off, since it is arising out of the business exigency and commercial expediency. We uphold the order of the ld. CIT(A) in deleting the addition. The ground raised by the revenue is dismissed.
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