TMI Blog2017 (6) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... official duty and such taxi was hired in inspecting the railway siding in the absence of the material. We are of the considered view that Ld. CIT(A) has rightly confirmed the disallowance of 10% of the expenditure. This ground of assessee appeal is partly allowed. Addition invoking the provision of section 14A - Held that:- In the present case the Ld. CIT(A) has recomputed the disallowance by applying rule 8D. He has disallowed interest expenditure of ₹ 2,38,454/- and administrative expenses of ₹ 6,89,497/-. The grievance of the assessee is that the no interest expenditure is related to the exempt income. As it is claimed that the entire investment in mutual funds have been made from own fund. The Ld. CIT(A) has not given any reason as to why the contention of the assessee is not acceptable. Revenue has not placed any material rebutting the claim of the asessee. Therefore, out of disallowance of ₹ 9,27,956/- a sum of ₹ 2,38,454/- is deleted and ₹ 6,89,497/- is sustained. This ground is partly allowed. Expenditure in 20 annual installments of compensation paid to the farmers - Held that:- There is no dispute with regard to the fact that the AO him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this appeal of the revenue is rejected. Disallowance on account of payment of demurrage - Held that:- We find that the Ld. CIT(A) has given a finding on fact that there is no clause by which the demurrages was required to be paid by the C & F Agent not by the assessee. It is also not brought on record by the revenue that the assessee had claimed such expenditure from C & F agent. Under these facts, we are of the view that the Ld. CIT(A) has rightly followed the decision of the Hon’ble Delhi High court in the case of Mahalaxmi Sugar Mills Co. Ltd. Vs. CIT [1984 (5) TMI 6 - DELHI High Court] and Nanhoomal Jyoti Prasad Vs. CIT (1979 (8) TMI 38 - ALLAHABAD High Court). We do not see any merit into the ground of revenue’s appeal, same is hereby affirmed. This ground is dismissed Disallowance on account of railway siding expenses - Held that:- In the present case, it is not the case of replacement of old machinery by new machinery and repair of rented buildings. In the present case the expenditure is incurred on the day to day maintenance of the railway tracks at the railway siding. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue : Varinder Mehta (CIT(DR)) ORDER Kul Bharat (Judicial Member) This Bunch of six cross appeals pertaining to the different AY 2010-11, 2011-12, 2012-13, by the Assessee and Revenue against the different orders of Ld. CIT(A) Kota, dated 27/03/2014, 18/03/2016 and 17/05/2016 respectively. Since the common ground are involved in all these appeals. All these appeals were taken up together for hearing and being disposed off by consolidated order for the sake of brevity. At the time of hearing, Ld. Counsel for the assessee submitted that cross appeals of AY 2010-11 i.e. 354/JP/2014 and 425/JP/2014 may be taken as lead case. Therefore, first we take up the assessee appeal in ITA No. 354/JP/2014 pertaining to the AY 2010-11. ITA No. 354/JP/2014 The assessee has raised the following grounds of appeal:- 1. The Ld. CIT (A) has erred on facts and in law in confirming the disallowance of expenditure of ₹ 45 lacs incurred by the assessee by way of contribution made towards construction of hospital to Medicare Relief Society. Community Health Centre, Ramaganjmandi by holding that the payment is in the nature of charity/donation and the same can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee craves to amend, add, alter, or modify any of the ground of appeals. 7. Necessary cost be allowed to the assessee. 2. Briefly stated the facts are that, the case of the assessee was picked up for scrutiny assessment and the assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 31/12/2012. While framing the assessment the AO disallowed the claim of compensation paid to farmers of ₹ 49,01,986/-, contribution made to construction to hospital of ₹ 45,00,000/-, contribution on account of construction of road of ₹ 1,00,00,000/-, disallowance of expenses made on account of fly ash handling system of ₹ 1840565/- Expenses out of staff welfare expenses of ₹ 46,20,468/-, disallowance out of charges general expenses of ₹ 4,57,819/-, disallowance of claim of expenditure of ₹ 1,75,000/- out of ₹ 9,10,425/- made by the AO towards social welfare, gift expenses of ₹ 11,77,771/- out of sale promotion expenses of ₹ 30,37,316/-, gardening expenses of ₹ 34,36,131/-, outstanding liabilities of ₹ 2,22,17,547/-, payment of demurrage 3,71,46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailway expenses deleted the disallowance and in respect of mining utilization expenses the Ld. CIT(A) deleted both the additions. In respect of the disallowance made u/s 14A partly sustained the disallowance, against this order, both revenue and assessee has filed the appeals. 4. Ground no. 1 , is against confirmation of disallowance of expenditure of ₹ 45 lacs incurred by the assessee by way of contribution made towards construction of hospitals by the Medicare Relief Society, Community Health Centre. 4.1 Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. At the outset, the Ld. Counsel for the assessee submitted that the similar contribution was allowed by this Tribunal in ITA No. 361 419/JP/2012 for AY 09-10. 4.2 On the contrary, Ld. Departmental Representatives opposed the submissions and submitted that the contribution is in nature of donation cannot be treated as an expenditure incurred for the purpose of the business of the assessee. 4.3 We have heard the rival contentions, perused the material available on record. It is stated by the assessee that where the contribution is made by the assessee, the hospitals keeps ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67/- on roads boundary wall. The expenditure was capitalized by assessee in its books of accounts. However, in the computation of total income, the same was claimed as revenue expenditure u/s 37(1) of the Act. The AO disallowed the entire expenditure of ₹ 18,40,565/- by treating the same as capital in nature. However, the Ld. CIT(A) by relying the finding pertaining to the AY 2009-10 directed the AO to allow 1/5 th of the expenditure. The Ld. Counsel submitted that the Tribunal in the earlier year 2009-10 deleted the disallowance even otherwise also the observations of the lower authorities is incorrect. It is to be noted that accounting entry is not decisive for considering the assessee s claim. 6.2 On the contrary, Ld. Departmental Representatives supported the order of the authorities below. 6.3 We have heard the rival contentions, perused the material available on record. The AO disallowed the claim by treating the same as expenditure is capital in nature. It is undisputed fact that in the books of accounts, the assessee has treated this expenditure as capital expenditure. The Tribunal in the earlier year deleted the disallowance by holding as under:- 4.6 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on by the Revenue, has clearly laid down that test of enduring benefit is one of the criteria to be considered when deciding the nature of expenses, as to whether it was capital or revenue. To say that this is the sole criteria which is to be adopted is not correct. In our opinion, the CIT (A) had correctly relied on the decision of the apex Court in the case of Madras Auto Services (P) Ltd. (supra) where their lordship held that when an asset was created but it belonged to somebody else, even if it resulted in any enduring benefit, it should be still looked upon as a revenue expenditure. Explanation 1 to s. 32 was considered by the jurisdictional High Court in the case of TVS Lean Logistics Ltd (Supra) wherein their Lordships held that when an assessee had constructed a building on a leasehold land, it could not be considered that there was any acquisition of capital asset. We find that the CIT (A) was justified in holding that the expenditure would be revenue in nature. No interference is called for. 4.7 Considering the above decision and also the various other decisions relied by the Ld. AR, we do not agree with the finding of the Ld. CIT (A) that the issue is to be appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can be made. We note that assessee has filed the complete details of expenditure as required by the AO. The AO has not specified any particulars expenditure which is for personal use or for non-business purpose. It is a case of a corporate entity where the contribution made to Gram Panchayat for various welfare measures at a place where the factory of assessee is located as a part of its social obligation is an allowable business expenditure as held in various cases referred in Ground no.3 above. Further, we agree with the contention of the assessee that once FBT is paid the expenditure cannot be subject matter of disallowance as held by this bench in case of M/s Natural State Sandstone Exports (P) Ltd. in ITA No. 1090/JP/10 dated 04.02.2011. The finding of Ld. CIT (A) that to the extent the expenditure is disallowed, FBT should not be charged is therefore not correct. We, therefore, delete the various adhoc disallowances made by the AO and confirmed by the Ld. CIT (A). Thus, Ground no. 4 and 5 of assessee's appeal are allowed and the solitary ground raised by the Revenue in its appeal is dismissed. 7.4 The Revenue has not brought any contrary, material on records su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stockiest for securing its debts/stocks. Against this investment debtors and stocks and others is utilized for working capital requirement of the business. There is no relationship of these deposits with investment in mutual funds. It is submitted that there is no relationship of these deposits with investment in mutual fund. It is further contended that investment in mutual fund is made out of surplus fund which is evident from the balance sheet as the assessee is having reserve and surplus of ₹ 360133.32 lacs whereas investment in share mutual funds is only ₹ 1950.11 lacs. Therefore, it is submitted that no disallowance in respect of interest expenditure can be made. To buttress these contention Ld. Counsel for the assessee placed reliance on various case laws. In support of proposition that for attracting the provisions of Section 14A of the Act, there has to be a proximate cause for disallowance which is its relationship with the tax exempt income, Ld. Counsel relied judgment of Hon be Supreme Court rendered in the case of CIT vs. Walfart Share Stock Brokers Pvt. Ltd. 326 ITR 001 (SC). Further reliance is placed on the judgments of Hon ble Delhi High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 5 years, consequent giving relief of 1/5 th of the expenses during the year: 4. Reducing the disallowance from 50% to 5% out of staff welfare expenses. 5. Restricting he disallowance of 10% as against 20% made by the AO out of General Charges expenses. 6. Reducing the disallowance out of social welfare expenses from ₹ 9,10,425/- to ₹ 1,75,000/-, without any valid reason. 7. Reducing the disallowance from 20% to 10% out of sales promotion expenses. 8. Deleting the disallowance of gardening expenses of ₹ 34,36,131/- without any valid reason. 9. Deleting the addition u/s 41(1) on account of unexplained outstanding liabilities of ₹ 2,22,17,547/- 10. Deleting the disallowance of ₹ 3,71,46,968/- made by the AO on account of payment of demurrage. 11. Deleting disallowance of ₹ 27,51,314/- made by the AO on account of railway siding expenses. 12. Reducing the disallowance from 20% to 10% made out of taxi hiring charges. 13. Deleting the disallowance of ₹ 79,39,737/- on account of mining rights without any valid reasons. 14. Deleting the disallowance of ₹ 3,38,996/- on account of mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason for changing the stand. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. This ground is dismissed. 11. Ground no. 2 , is against deleting the disallowance of ₹ 1 crore on account of construction of road. 11.1 The Ld. Departmental Representatives supported the order of the AO and submitted that the Ld. CIT(A) was not justified in deleting the addition. He submitted that the expenditure incurred for the enduring benefit. Therefore, the AO rightly disallowed the claim of the assessee. 11.2 On the contrary, Ld. Counsel for the assessee submitted that the issue is covered against the Revenue by the judgment of the Hon ble Supreme Court rendered in the case of Empire Jute Co. Ltd. Vs. CIT 124 ITR 0001. 11.3 We have heard the rival contentions, perused the material available on record. The facts remains that the assessee had contributed to the Rajasthan Government for construction of new railway over bridge. This facilitated the transportation of raw materials to the factory and flow of finished goods to the market. It is also stated that by this the distance is also reduced. The contribution is purely for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed. He submitted that under these facts, Ld. CIT(A) ought not to have deleted the disallowance. 14.2 On the contrary, the Ld. Counsel for the assessee opposed the submissions and reiterated the submissions as made in the written synopsis. Ld. Counsel submitted that the outstanding liabilities of ₹ 2,22,17,547/- as mentioned in the Assessment Order included an amount of ₹ 1,28,60,330/- towards land tax which was already disallowed by the assessee u/s 43B of the Act in the Assessment Year 2007-08. In respect of the remaining amount of ₹ 93,57,217, the unpaid liability of retention money of contractor is ₹ 2,90,504/- and not ₹ 24,39,981/- as mentioned by the AO. Thus, the correct amount of such unpaid liability remain at ₹ 72,07,741/-. Out of this amount, ₹ 34,82,022/- is written back or paid in AY 2011-12 and 2012-13, leaving a balance of ₹ 37,25,719/-. The individual explanation regarding its write back/payment in the subsequent years/reasons for non-payment is at PB Page No. 385-387. Before the Ld. CIT(A), the position of the outstanding liability as on 11.05.2013 was given according to which the unpaid amount of ₹ 31,99,75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... measure part of the liabilities has been written back and offered for tax in other years. Under these fact, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed, this appeal of the revenue is rejected. 15. Ground no. 10 , is against deleting the disallowance of ₹ 3,71,46,968/- made by the Assessing Officer on account of payment of demurrage. 15.1 Ld. Departmental Representatives supported the order of the Assessing Officer and submitted that Ld. CIT(A) was not justified in deleting the disallowance. Ld. D/R submitted that the AO made disallowance on the basis that the expenditure was in the nature of fine and also on the ground that there was a clause into the agreement which indemnify/mandated C F agent to indemnify the assessee. 15.2 On the contrary, Ld. Counsel for the assessee reiterated the submissions as made in the written submissions and also relied upon the decision of the CIT(A) and submitted that the issue is not more res integra if the allowability of demurrages has been decided by various judgments including the judgment of the Hon ble Delhi High Court in the case of Mahalaxmi Sugar Mills Co. Ltd. Vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is that the judgment of the Hon ble Madras High Court is not applicable as the fact is that the cases were with regard to replacement of old machinery and renovation of the buildings. We find that in the case of CIT vs. Madura Coats (supra) the AO disallowed the claim in respect of replacement of Auto Corner etc by holding that replacement of old machinery cannot be treated as the revenue expenditure. This view of the AO was upheld by the Hon ble High Court. In the present case, it is not the case of replacement of old machinery by new machinery and repair of rented buildings. In the present case the expenditure is incurred on the day to day maintenance of the railway tracks at the railway siding. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue s appeal is dismissed. 17. Ground no. 12 , is against restricting the disallowance out of taxi hiring charges from 20% to 10%. 17.1 Ld. Departmental Representatives supported the order of the AO and submitted that Ld. CIT(A) was not justified in deleting the disallowance. 17.2 On the contrary, Ld. Counsel for the assessee reiterated the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be allowed in 20 years. In my opinion, finding of one AO cannot be disturbed by his successor. The proper course could be to invoke provisions of section 263. The same was not done by the AO, therefore, he should not have disturbed the finding of his predecessor. Secondly, while deciding Ground no. 1, I have held that similar expenditure was allowable in 20 equal installments. Considering the above, the AO is directed to delete addition of ₹ 79,39,737/- ₹ 3,38,996/-. 18.4 The revenue has not disputed that in the AY 2008-09, 2009-10 the AO had allowed the claim of the assessee in 6 yearly installments and 20 yearly instalments respectively. The Revenue has not pointed out any change into facts and circumstances for taking a different stands. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed, this ground of revenue s appeal is dismissed. 19. Ground no. 15 is against reducing the claim of ₹ 9,27,956/- from ₹ 84,05,723/- made by invoking the provision of u/s 14A. 19.1 The Ld. Departmental Representatives supported the order of the AO. 19.2 On the contrary, Ld. Counsel for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for earning dividend income, which is exempt from tax. Under these facts, the AO had disallowed the interest of ₹ 30,17,564/- u/s 36(1)(iii) of the Act. 20.2 On the contrary, Ld. Counsel for the assessee supported the order of the Ld. CIT(A) and reiterated the submissions as made in the written submissions. He submitted that has stated in the Ground no. 5 of the assessee s appeal and Ground no. 15 of the Revenue s appeal, the entire interest expenditure was incurred for commercial expediency essentially for the purpose of business of assessee. He submitted that there is no nexus on borrowed funds, with the investment in mutual funds. 20.3 We have given our thoughtful consideration to the rival contentions, we find merit into the observation of the Ld. CIT(A), that the AO has not justified in making disallowance for the same item by invoking the provision of section 14A and also the provision of section 36(1)(iii). Moreover, the assessee has demonstrated that the entire investment into mutual funds was made out of interest free funds. Under these facts, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee as discussed in detail vide para 7.2 7.3 of this order above. This ground of the assessee is partly allowed. 24. Ground No. 2 of the assessee relates to confirming the disallowance of ₹ 6,66,297/- by invoking the provisions of section 14A of the IT Act. 24.1 The respective representatives have been heard and similar arguments have been advanced as made in ITA No. 354/JP/2014. We have already dealt with this issue in the assessee s appeal in ITA No. 354/JP/2014 for the A.Y. 2010-11 in para 8.2 to 8.3 whereby we have partly allowed the ground of the assessee by giving relief of ₹ 2,38,454/-. Since the facts involved in this ground is exactly similar, therefore, on the same reasoning, we partly allow the appeal of the assessee by allowing relief of ₹ 1,51,263/- out of disallowance of ₹ 6,66,297/- sustained by the ld. CIT (A). The ground of the assessee is partly allowed. ITA NO. 616/JP/2016: 25. Now, we take up Revenue s appeal in ITA No. 616/JP/2016 pertaining to the AY 2011-12. The Revenue has raised the following grounds of appeal:- On the facts and in the circumstances of the case, of the case, the Ld. CIT(A) has erred in:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department relates to ld. CIT (A) has erred in holding that contribution of ₹ 15 lacs for construction of hospital building as relating to the business of the assessee. 27.1 Facts are identical for the year under consideration. We have already dealt with the similar issue in Ground No. 1 in assessee s appeal in ITA No. 354/JP/2014 for the assessment year 2010-11 whereby we have allowed the ground of the assessee. For the similar reasons mentioned in para 4.2 above in the order in ITA No. 354/JP/2014, we dismiss this ground of the department. 28. Ground No. 3 of the department relates to deleting the disallowance of ₹ 12,00,436/- out of social welfare expenses. 28.1 Facts are identical for the year under consideration. We have already dealt with the similar issue in Ground No. 2 in assessee s appeal in ITA No. 354/JP/2014 for the assessment year 2010-11 whereby we have allowed the ground of the assessee. For the reasons mentioned in para 5.2 of this order above in ITA No. 354/JP/2014, we dismiss this ground of the department. 29. Ground Nos. 4 to 8 of the department relate to reducing the disallowances of various expenses on account of Staff Welfare e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reasons mentioned therein, we dismiss these grounds of the department. 34. Ground No. 14 of the department relates to reducing the disallowance from ₹ 52,45,149/- to ₹ 6,66,297/- made u/s 14A. 34.1 This ground of the department is decided by us in the Revenue s appeal in ITA No. 425/JP/2014 for the A.Y. 2010-11 in favour of the assessee in para 19.3 and 19.4 by dismissing the ground of the department. Therefore, for the similar reasons mentioned therein, we reject this ground of the department. 35. Ground No. 15 of the department relates to deleting the disallowance of ₹ 10,00,000/- made u/s 36(1)(iii). 35.1 Facts are identical for the year under consideration. We have dealt with this ground in the revenue s appeal in ITA No. 425/JP/2014 for the assessment year 2010-11 and decided the issue in favour of the assessee in para 20.3 above by rejecting the ground of the Revenue. Similarly, for the reasons mentioned therein, we dismiss this ground of the department. 36. In the result, appeal of the assessee is partly allowed whereas appeal of the Department is dismissed. 37. Now we take up the appeals of the assessee and revenue in ITA Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation on such expenditure. 38.1 The brief facts giving rise to the ground of appeal are that the assessee is engaged in the manufacturing of cement. Clinker is basic ingredient for manufacturing cement. The board in its meeting dt. 13.03.2011 approved for setting up a clinker grinding unit at Hardwaganj, District Aligarh, UP for a total project cost of ₹ 125 crores. Accordingly, necessary application was made to UPSIDC Ltd. for allotment of land and to UP State Pollution Control Board for environment clearance. The possession of the land measuring 1,23,110 sq. mtr. at K-1, Industrial Area, Aligarh was given on 20.08.2011. 38.2 However, because of non issue of environmental clearance from Ministry of Environment and Forests (MOEF) , no construction activity could be started. Therefore, the assessee in its board meeting dt. 07.2.2012 (PB 1) discussed the possibility of setting up the grinding unit at the existing site at Morak and also its economic viability considering the incentive scheme of the Government of Rajasthan. Thereafter, the Board in its meeting held on 05.05.2012 (PB 2) decided to set up clinker grinding unit at Morak. 38.3 The company in the meanwhile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h expenditure. If not, the same is to be allowed as a deduction when a decision to abandon such project is taken. For this reliance is placed on the following cases:- Ajmer Food Products Pvt. Ltd. Vs. JCIT (2017) 145 DTR 57 (Jaipur) (Trib.) Expenditure incurred by the assessee on the development of a resort which was eventually abandoned at the stage of work-in-progress due to change in the Government policy did not result in creation of any new asset or an advantage of enduring nature and therefore, the said expenses which have been written off in the books of account are allowable as revenue expenditure. Indo Rama Synthetics (I) Ltd. Vs. CIT (2011) 333 ITR 18 (Del.) (HC) In this case, the assessee was engaged in the business of manufacturing of yarn and polyster. On account of generation of cash surplus, assessee commenced setting up of a spinning and weaving unit for manufacture of fabric and textile in State of Karnataka. In relation to setting up of the said unit, the assessee from time to time incurred revenue expenditure in the nature of salary, wages, repairs, maintenance, design and engineering fee, travelling and other expenses of administrative na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT Anr. (2015) 118 DTR 61/233 Taxman 340 (Cal.) (HC) Expenditure made for construction/acquisition of new facility subsequently abandoned at the work-in-progress stage was allowable in the year of write off as incurred wholly and exclusively for the purpose of assessee s business. There would have been no occasion to claim the deduction if the work-in-progress had completed its course. Because the project was abandoned, the work-in-progress did not proceed any further. The decision to abandon the project was the cause for claiming the deduction. The decision was taken in the relevant year. It can therefore be safely concluded that the expenditure arose in the relevant year. Excel Industries Ltd. Vs. DCIT 86 TTJ 840 (Mum.) (Trib.) The company is manufacturing phosphorous and in the process of manufacturing this, slag is produced as co-product at the time of furnace tapping in the ratio of 1:8. In order to add substantial value to this co-product i.e., phosphorous slag, the company has developed a technology for the manufacturing of high aluminium refractory cement which was the extension of the technology used for the development of ceramic tiles project. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts on manufacturing insecticide formulation, an item to be used for improving the quality of cane produced in the area by individual agriculturists and societies. He also spent certain amount for survey report on extra melkral alcohol. The assessee wanted these reports to put to a better use its byproducts, namely, molasses. On these facts, Tribunal held that all the three items of expenditure were incurred with a view to manufacturing new products and utilising byproducts of the sugar units and thus, the question of allowance of these expenses as business expenses did not arise as they were definitely of capital nature being expenses preliminary to manufacturing the various products. The High Court held that the amount spent on the project reports was not for the purpose of facilitating the assessee s existing trading operations or enabling management and conduct of the assessee s business to be carried on more efficiently or more profitably while leaving the fixed capital untouched. The expenditure was attributable to capital having been incurred with a view to bringing an asset or advantage into existence and having enduring benefit. Merely because the project did not materali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance made by AO and confirmed by CIT(A) is uncalled for and the same be deleted. 38.8 The ld. D/R opposed the submissions and supported the orders of the authorities below. 38.9 We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the ld. CIT (A) has given a finding of fact that a new Unit has been established and the expenses incurred in establishing a new Unit are capital in nature and accordingly disallowed the claim of the assessee. The ld. Counsel for the assessee insisted that it is an extension to the earlier unit. We do not see any merit into the contention of the assessee as admittedly even if the assessee s new projects are in the same line of business, expenses relating to new projects are capital in nature and not allowable as revenue as held by the Hon ble Bombay High Court in case of J.K. Chemical Ltd. 80 Taxman 19 (Bom.). We, therefore, find no infirmity in the order of ld. CIT (A), the same is affirmed. The ground of the assessee is dismissed. 39. Ground No. 2 of the assessee in this appeal relates to disallowances out of staff welfare expenses, charges genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93/- paid to the farmers is to be allowed over a period of 20 years, consequently giving relief of ₹ 6,81,485/- for the current year. 41.1 We have already dealt with the similar issue in revenue s appeal in ITA No. 425/JP/2014 for the A.Y. 2010-11 in para 10.3 above, wherein we have confirmed the order of the ld. CIT (A) by dismissing the ground of the department. We, therefore, dismiss this ground of the department for the year 2011-12. 42. Ground No. 2 of the department relates to deleting the disallowances of ₹ 2,45,909/-, ₹ 79,39,737/- and ₹ 3,38,996/- claimed as mining rights. 42.1 Facts are identical to A.Y. 2010-11. We have dealt with this ground in the revenue s appeal in ITA No. 425/JP/2014 for the assessment year 2010-11 and decided the issue in favour of the assessee in para 18.3 and 18.4 above by rejecting the grounds of the Revenue. Similarly, for the reasons mentioned therein, we dismiss this ground of the department. 43. Ground No. 3 of the department relates to deleting the disallowance of ₹ 3,02,13,331/- made under section 37(1) on account of payment of demurrage. 43.1 We have already decided this ground in Revenue s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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