TMI Blog2014 (9) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... re has been incurred for the project which could not be accomplished and it was intended to facilitate the assessee's business activity to be carried out more conveniently and profitably, the expenditure is an allowable revenue expenditure – Decided in favour of assesssee. Claim u/s 35ABB disallowed – Amortization of license fee - Held that:- The assessee has claimed the amortization of license fee relating to the TATA Cellular Ltd only for post amalgamation period of three months w.e.f 1.1.2000 to 31st March 2001, however during the course of assessment proceedings the assessee made a claim for the entire year u/s 35ABB for the license fee paid in respect of the TATA Cellular Ltd amalgamated with the assessee - The restriction on the jurisdiction for entertaining a fresh claim otherwise than a revised return is applicable only of the AO and not of the appellate authorities – relying upon National Thermal Power Corporation Ltd. Vs. CIT [1996 (12) TMI 7 - SUPREME Court] - there is no bar in entertaining the present claim in question by the CIT(A) even without filing the revised return - the provisions of section 35ABB(6) permits such claim only in the hands of the amalgamated com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directed against the order dated 14.03.2008 of CIT(A) for the assessment year 2001-02. The assessee has raised following grounds in this appeal. Ground No.1: Disallowance of Expenses of ₹ 3,94,75,619/- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the Additional Commissioner of Income Tax, Range 3(2), Mumbai ( the AO ) in disallowing amount of ₹ 3,94,75,619/- being amount written off by the Appellant in respect of expenses on abandoned projects on the ground that the entire expenditure has been incurred for the purpose of bringing into existence a new source of income and hence such expenditure is capital in nature. Ground No. 2.: Disallowance of Additional claim u/s 35ABB of the Act. 1. On the fact and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO of disallowing ₹ 11,24,92,260/- being the amount of license fees paid by TATA Cellular Ltd to Department of telecommunication upto December 31, 2000, on the ground that the claim was made by a letter without filing a revised return of income. Ground no. 3: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d High Court in the case of CIT Vs. Tata Robins Fraser Ltd. (211 Taxman 257). The Ld. Senior Counsel has submitted that the Hon'ble High Court has held that the pre-operational expenses on an abandoned project can be treated as revenue expenditure and not capital expenditure. He has stressed the point that in the case of the assessee the project of construction of tower were abondoned due to the reasons that the sites were not found suitable, therefore, the decision in the case of Tata Robins Fraser Ltd. is squarely applicable in the facts of the assessee's case. 2.4 On the other hand, the Ld. DR has submitted that the expenditure has been incurred not only on survey of the sites but also for the development of the sites as well as feasibility report, therefore, the expenditure of such nature is in the capital field and loss due to the abandonment of the project would certainly be a capital loss and not revenue loss. He has relied upon the orders of authorities below and reiterated that the entire expenditure has been incurred for the purpose of brining into existence new asset and new source of income. Therefore, the expenditure of such nature is not allowable as revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred only in respect of the existing business and not for setting up of a new business or line of business. An identical issue has been considered by the Hon'ble High Court of Jharkhand in the case of CIT Vs.Tata Robins Fraser Ltd Vs. (supra), and held in para 12 to 16 as under:- 12. So far as issue relating to the lease of the articles are concerned, that has been answered in Tax Appeal Nos. 3 of 2000, 4 of 2000, 5 of 2000, 6 of 2000 and 8 of 2000. In Tax Appeal No. 7 of 2000, one more issue is involved and that is relating to the claim of the assessee of spending an expenditure to the tune of ₹ 3,16,490. It has been on the ground that the assessee though had one project in contemplation, but that was not completed and the project was abandoned, therefore, it is an abortive expenditure. The expenditure incurred by the assessee is as under:- 1. Architectural fee in respect of abandoned project ₹ 2,57,335/- 2. Old capital work in progress abandoned ₹ 46,379/- 3. Cost of damaged cabinets ₹ 12,776/- 13. The company' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including all three of the heads is ₹ 3,16,490/-. It is not in dispute that the project could not be accomplished because of the reason that the place where it was to be undertaken had a poor quality of soil and all the construction already damaged. The other articles bought by the assessee also got damaged and, therefore, in that fact situation, the Tribunal was fully justified in holding that such expenditure which may be pre-operational expenditure for a project can be treated to be a revenue expenditure actually and not a capital expenditure. 2.6 Since the expenditure has been incurred for the project which could not be accomplished and it was intended to facilitate the assessee's business activity to be carried out more conveniently and profitably, therefore, the said expenditure is an allowable revenue expenditure. Hence by following the decision of Hon'ble High Court of Jharkhand in the case of CIT Vs. Tata Robins Fraser Ltd. (supra), we set aside the order of authorities below qua this issue and allow the claim of the assessee. 3. Ground No. 2 is regarding disallowance of claim u/s 35ABB of the Income Tax Act. 3.1 On 01st January 2001, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same time not accepting the claim of the assessee. On the point of admission of claim without revised return of income, he has relied upon the decision of hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (229 ITR 383) as well as the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Pruthvi Brokers Shareholders Pvt. Ltd. (346 ITR 336) and submitted that the power and jurisdiction of CIT(A) is not restricted only to entertain the claim made in the return of income. 3.4 On the other hand, the Ld. DR has heavily relied upon the orders of authorities below. 3.5 We have considered the rival submissions as well as relevant material on record. Initially the assessee has claimed the amortization of license fee relating to the TATA Cellular Ltd only for post amalgamation period of three months w.e.f 1.1.2000 to 31st March 2001, however during the course of assessment proceedings the assessee made a claim for the entire year u/s 35ABB for the license fee paid in respect of the TATA Cellular Ltd amalgamated with the assessee. The CIT(A) has allowed the claim of three months and disallowed for nine months only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the amalgamated company (being an Indian Company),- (i) The provisions of sub-section (2), (3) and (4) shall not apply to the amalgamated company and; (ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not transferred the license.] 3.7 Sub-section (6) makes it clear that in a scheme of amalgamation if the amalgamating company sales or transfer the license to the amalgamated company then license fee paid for the entire year is eligible for amortization u/s 35ABB only in the hands of amalgamated company. Accordingly in view of the above discussion, we allow the claim of amortization of license fee relating to Tata Cellular Ltd merged with assessee for entire year u/s 35ABB. 4. Ground No. 4 is regarding claim for revenue sharing license fee to be allowed u/s 37(1). 4.1 In the return of income the assessee has not claimed the deduction in respect of amount paid towards revenue sharing expenses to the Govt. of India as it was capitalized in the books of accounts. Only before the CIT(A) the assessee has raised an additional ground towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered the rival submissions as well as relevant material on record. So far as the admissibility of the fresh claim first time before the appellate authority is concerned, we find that an identical issue was before the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra). The issue in the said case emerged from the fact that the assessee offered an amount to tax in the return of income which was not taxable as income. The inclusion of the said amount was not objected by the assessee even before the CIT(A) and only after filing appeal before the Tribunal the assessee raised a ground by way of forwarding a letter. In those facts, Hon'ble Supreme Court has held that when it is found that non taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal first time so long as relevant facts are on record in respect of that item. We have already reproduced the relevant finding of the Hon'ble Supreme Court in the foregoing paras while discussing the ground no. 2. It is clear from the decision of Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be treated as revenue expenditure. (ii) Capital expenditure will qualify for deduction as per Section 35ABB of the Act. 4.6 We further note that this Tribunal in the case of Mahanagar Telephone Nigam Ltd. Vs. ACIT (supra) as well as in the case of ACIT Vs. Vodafone Essar Gujarat Ltd. (supra) along with other no. of decision has taken a similar view. Following the decisions of Hon'ble Delhi High Court in the case of CIT Vs. Bharati Hexacom ltd. Others as well as other decisions relied upon by the assessee, we allow the claim of the assessee. 4.7 Before parting with the appeal of the assessee we note that the assessee has filed additional grounds, however, the same are only repetition of ground no. 2 and 3 raised along with form No. 36, therefore, the additional ground raised by the assessee becomes infructuous. 5. The revenue has raised only ground as under:- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of foreign exchange loss of ₹ 22,38,39,000/- by holding that the principle amount was not utilized by the assessee for acquisition of capital assets 5.1 The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Industrial Development Corporation (225 ITR 703)(SC) (ii) Bharath Heavy Electricals (239 ITR 756) (Del) (iii) ONGC v. CIT (83 ITD 151) (Del) (SB) (iv) DCIT V Idea Cellular Limited (ITA No. 2242/M/2008) (v) Samtex Fashions Ltd. [2008] (24 SOT 116) (Del) (vi) Sutlej Cotton Mills Limited (116 ITR 1) (SC). 5.5 We have considered the rival submissions as well as relevant material on record. There is no dispute that for the A.Y. 1998-99, an identical issue came before this Tribunal and the Tribunal has held that the loss due to foreign exchange fluctuation is an allowable expenditure in para 8 as under:- 8 We have considered the rival submissions. We have considered the statement by the learned counsel of the assessee and also taking note of the findings of the CIT(A). We are of the view that the order of the CIT(A) does not call for any interference. The details of the utilization of the loans are at page 27 of the assessee's paper book. The details of the loans utilized for revenue purposes as given in page No. 23 of the assessee's paper book have also been perused by us. The loan-wise bifurcation of foreign exchange loans as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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