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M/s Binani Cement Ltd. Versus Commissioner of Income Tax

2015 (3) TMI 849 - CALCUTTA HIGH COURT

Expenditure incurred for preparation of the feasibility study report and capital-work-in-progress disallowed - disallowing the expenditure by ITAT in the earlier years, but written off during the previous year corresponding to the assessment year 2002-03 since the proposed project was abandoned - Held that:- The expenditure made for construction/acquisition of new facility subsequently abandoned at the work-inprogress stage was allowable as incurred wholly or exclusively for the purpose of asses .....

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ondent in incurring the expenditure had acted in the interest of and for the purpose of its business. The expenditure was not laid out for any purpose other than that of carrying on the business. The deduction was properly admissible under section 10 (2)(xv) of the Act. Section 10 (2) (xv) of the old Act corresponds to section 37 (1) of the present Act. For the aforesaid reasons the question is answered in the affirmative - decided in favour of the assessee. - ITA No. 265 of 2009 - Dated:- 23-3- .....

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that when construction/acquisition of new facility is abandoned at the work-in-progress stage, the expenditure does not result in an enduring advantage and such expenditure, when the same is written off, has to be allowed under section 37 of the Income Tax Act, 1961. The learned Tribunal reversing the order of CIT (A) held that the expenditure incurred in the earlier years could not be deducted in the year under consideration. Aggrieved by the order of the learned Tribunal, the assessee has come .....

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ed that the question is partly covered by the decision in CIT Vs. Graphite India Ltd. reported in (1996) 221 ITR 420 (Cal). The relevant question referred by the Tribunal to this court in that case was whether in the facts and circumstances of that case, the Tribunal was justified in holding that the expenditure incurred for the assessee s proposed petro-chemical project was revenue expenditure and to be allowed as a deduction? This court in answering the question, held as follows:- So far as qu .....

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tting continuous supply of raw material even during periods of acute shortage. In fact, the project did not materialise. The Income-tax Officer as well as the Commissioner of Income-tax (Appeals), therefore, held that the expenditure was capital in nature. However, the Tribunal found that the expenditure did not result in bringing into existence any capital asset of enduring in nature. The Tribunal further found that the decision of the Calcutta High Court in the case of Hindusthan Aluminium Cor .....

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673 (Cal). According to us, question no.4 in this reference stands concluded by the aforementioned two decisions. We, accordingly, answer question no.4 in the affirmative and in favour of the assessee and against the Revenue. Mr. Bajoria further relied on two decisions of the Supreme Court being respectively the decision in CIT Madras Vs. Gajapathy Naidu reported in (1964) 53 ITR 114 (SC) and CIT Madhya Pradesh Nagpur and Bhandara Vs. Swadeshi Cotton and Flour Mills Pvt. Ltd. reported in (1964) .....

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lusion that such a right accrued or arose to the assessee in a particular accounting year, he should include the said income in the assessment of the succeeding assessment year. No power is conferred on the Income-tax Officer under the Act to relate back an income that accrued or arose in a subsequent year to another earlier year, on the ground that that income arose out of an earlier transaction. Nor is the question of reopening of accounts relevant in the matter of ascertaining when a particul .....

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ITR (Delhi) submitted that the expenditure was rightly disallowed by the learned Tribunal as it was made and related to earlier years. We accept Mr. Bajoria s submission regarding the expenditure made for construction/acquisition of new facility subsequently abandoned at the work-inprogress stage was allowable as incurred wholly or exclusively for the purpose of assessee s business as covered by the decision in Graphite India Ltd. (supra). The issue whether such expenditure could be allowed in t .....

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t having come into existence - the capital-work-in-progress had to be written off as such. There was no challenge to such finding on facts before the learned Tribunal or even before us. The decision in Delhi Tourism and T.D.C. Ltd. is distinguishable on facts in as much as in that case the Delhi High Court had held that the electricity charges for power consumed was a known expenditure and the assessee, on the basis of average, could make a provision for that expenditure in every year of assessm .....

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