TMI Blog2011 (2) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... may become obsolete - It helps in the smooth and efficient running of the day-to-day business - The expenditure would have been allowable as revenue expenditure; as a corollary, when the website did not materialize, the amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable, can be written off and claimed as loss incidental to the business. The loss is thus allowable as business loss in terms of section 28 of the Act - The appeal of the department is dismissed. - I T A No: 3971/Mum/2009 - - - Dated:- 15-2-2011 - SHRI R V EASWAR, SHRI B RAMAKOTAIAH, JJ. Appellant by: Shri P N Devdasan Respondent by: Shri Rajan R Vora and Shri Manoj Purohit O R D E R R V EASWAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / 29 of the Income Tax Act, 1961. This submission is seen noted in para 6(ii) of the order of the CIT(A). The assessee also cited the following judgments in support of its plea that the write off should be allowed as business loss: - (1) CIT vs. S C Kothari (1971) 82 ITR 794 (SC) (2) Cit VS. Anjani Kumar Co. Ltd. (2003) 259 ITR 114 (Raj) (3) Minda (HUF) Ltd. vs. JCIT (2006) 101 ITD 191 (Del) These authorities are seen noted at page 6 of the impugned order. The CIT(A) thereafter discussed each and every debt aggregating to ₹ 27,97,170/- and held that in view of the judgment of the Hon ble Bombay High Court in the case of Director of Income Tax (International Taxation) vs. Oman International Bank (2009) 313 ITR 128 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount as bad debt on the ground that the assessee has written off the amount in the Profit and Loss Account. 6. The argument of the learned representative for the assessee, however, is that the amount was allowable as business loss under section 28 of the Act and, therefore, the ultimate decision of the CIT(A) should be sustained on the basis of Rule 27 of the ITAT Rules, 1963. Though the assessee is entitled to rely on this Rule, there is no decision of the CIT(A) with respect to the assessee s alternative submission before him that the write off should be allowed as business loss, though such an alternative plea appears to have been taken before him vide para 6(ii) of his order. The question is whether in the absence of any decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Bombay High Court it was held that the Tribunal has the discretion to allow any party to an appeal, whether appellant or respondent, to raise a new point or new contention provided two conditions are satisfied, namely, (i) no new facts are required to be brought on record for disposing of such new point; and (ii) an opportunity is given to the other side to meet the point. In Hukumchand Mills Ltd. vs. CIT (1967) 63 ITR 232 (SC) the Supreme Court held that Rule 27 of the ITAT Rules is not exhaustive of the powers of the Tribunal and is merely procedural in character and does not in any way circumscribe or control the powers of the Tribunal which are couched in widest possible terms under section 254(1) of the Act. It was held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure would have been clearly capital expenditure. It is submitted that the fact that the websites did not materialize and the idea was abandoned by the assessee cannot convert what would have been capital expenditure into business loss. The facts brought out at page 7 of the impugned order show that an amount of ₹ 50,00,000/- was paid during the period from October 2000 to July 2001 to M/s Icleo.Com Limited for the development of the website. Subsequently also several amounts were advanced and from the ledger account the total advance came to ₹ 22,21,800/-. The development of website did not materialize and ultimately the assessee abandoned the idea. The amount was written off in the accounts in January 2005 as bad debt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the assessee respondent to put forth this plea before us since no further facts are required to be found and the department was also given the opportunity of arguing the question of business loss. 8. On merits, the judgment of the Rajasthan High Court in the case of CIT vs. Anjani Kumar Co. Ltd. (supra) supports the assessee s plea. In this case the assessee intended to acquire agricultural land to set up a boiler factory and made advances to the agriculturists for purchase of the land. The project did not materialize. The agriculturists however refused to refund the advances. The assessee filed the suit but lost it. The amounts were written off in its books of account and were claimed as revenue loss. The Rajasthan High Court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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