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TMI Blog2014 (12) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... extension of business were allowable revenue expenditure under section 37(1)/36(1 )(iii) of the Income Tax Act 1961. 2. That on the facts, circumstances and legal position of the case the learned CIT(A) has erred in confirming the disallowance of Rs. 8,35,000/- being advances given during the course of business in earlier years, written off during the year." 2. Briefly stated the facts giving rise to this appeal are that the assessee is a printer publisher of newspapers and magazines. The main income is from advertisements published in newspapers and periodicals as well as revenue from sale of publications. During the assessment proceedings, the AO made certain additions including impugned two additions pertaining to disallowance of expenses of Rs. 27,079,740/- incurred by the assessee in connection with extension of existing business at Greater Noida which was treated by the authorities below as capital expenditure. The main contention of the assessee was that the alleged expenditure was incurred in connection with extension of existing business of the assessee and the same was allowable as revenue expenditure u/s 37(1)/36(1)(iii) of the Income Tax Act, 1961. The AO also made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself capitalised borrowing cost in the preceding year upto 12.12.2001, then the subsequent borrowing cost cannot be held as allowable as revenue expenditure. Ld. DR parted his argument with a final submission that the department has no serious objection if it is found just and proper to remit the issue to the file of the AO on the similar line which was adopted by the ITAT in the order for AY 2002-03 (supra) on the same ground. 5. On careful consideration of above submissions and contentions of both the sides, from para 12 and 13 of the impugned order, we observe that the CIT(A) has decided the issue on similar line of adjudication for AY 2002-03 by reiterating its conclusion for AY 2002-03 against the assessee. We further note that on the appeal filed by the assessee, the ITAT, Delhi 'C" Bench remitted the issue to the file of AO with following observations, findings and conclusion:- "2.7 We have carefully considered the submissions. As per the facts of the case the assessee is engaged in newspaper printing and publication business. It is an owner of printing press at Kasturba Gandhi Marg, New Delhi. It has engaged into acquisition of land and construction of building at Noid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded period during which high water levels delay construction of a bridge, if such high water levels are common during the construction period in the geographic region involved." 2.9 Now the assessee's claim is that after 12.12.2001 the assessee has suspended the work on the new project and as it is mandate of AS-6 during the period in which the project is suspended, the borrowing cost should not be capitalized. Hence the inference is that it should be recognized as an expense in the period they are incurred. Now to consider as to whether AS-16 is applicable or not, it is relevant to find out as to whether the present case falls under the suspension of capitalization. It has been submitted that before us that this project was not revived by the assessee and the same was ultimately sold to HT Media Ltd. in July, 2003. However Ld. counsel of the assessee claimed that the project was revived by the purchasing company. Now we deal with the case laws submitted by the ld. counsel of the assessee: - 60 ITR 52 (SC) India Cement Ltd. vs. CIT. The issue was allowability of Rs. 84633/- incurred on stamps, registration fee, legal fee etc. in obtaining the loan. In this case it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give a finding regarding the nature of the said project whether the same was a new business altogether or the expansion of the existing project. Moreover this line of argument was never made by the assessee before the lower authorities. Assessee had itself capitalized the borrowing cost in the preceding as well as current year and only after 12.12.2001 when the project was deferred/suspended, that the assessee has claimed the borrowing cost to be allowable as revenue expenses as per the AS-16 of the Institute of Chartered Accountants of India. The reliance upon A.S. 16 by the assessee is on the premise that the case comes under 'Suspension of Capitalization". This aspect also needs examination of facts. These facts have not been examined by the authorities below. The relevant material is also not on record before us. It is paradoxical that this new claim of the assessee that the entire expenditure of interest cost should be allowed as it is expansion of the new line of business is not fully in consonance to the AS-16 which mandates capitalization of borrowing cost till the asset is put to use. In fact assessee had capitalized these expenditures upto the date of deferral of the proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HOTELS LTD. vs. ADDITIONAL COMMISSIONER OF INCOME TAX 114 ITD 202(Del), those advances given for purchase of capital assets are not allowable as bad debts/business loss. 9. On careful consideration of above rival submissions, we note that the CIT(A) decided the issue against the assessee with following conclusion:- "29. Admittedly the amounts were advanced for purchase of capital assets. In the case of Tulip Star Hotels Ltd. vs. Addl. CIT 114 ITD 202(Del), it was held those advances given for purchase of capital assets not allowable as business loss. The Hon'ble ITAT observed as under at page 224. "35. Now, we will take up the remaining issue in regard to bad debts of Rs. 27.89 lakhs raised through ground no. 2. 36. The Assessing Officer disallowed the claim of the assessee by holding that the advances were for acquiring capital assets. The CIT(A) also confirmed the action of the Assessing Officer. 37. The Id. Authorised Representative who appeared before the Tribunal could not controvert the findings of the Id. Assessing Officer and ld. CIT(A) that the amount so advanced was for acquiring capital assets. The CIT(A) has taken into consideration the decision of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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