TMI Blog2018 (9) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... . As a logical consequence, it also become imperative to find out that the aforesaid claim has not been claimed /allowed to the assessee in any of the other years. Secondly, Ld. CIT(A) has noted that complete details of expenditure could not be filed by the assessee. Keeping in view the aforesaid factors, while agreeing with the claim of the assessee in principle, the matter stand remitted back to the file of Ld. AO for verification of aforesaid facts. - Decided in favour of assessee for statistical purposes. - I.T.A. No.1115/Mum/2012 - - - Dated:- 7-9-2018 - SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Revenue : Rajesh Kumar Yadav,Ld.DR For The Assessee : Yogesh Thar Hardik Nirmal, Ld.AR s ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2007-08 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-16 [CIT(A)], Mumbai, Appeal No.CIT(A)-16/AC-8(1)/IT-266/2009-10 dated 02/12/2011 by raising following sole ground of appeal:- On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-16 Mumbai [ CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce no progress could take place in the project, it was decided to abandon the project during the impugned AY. Therefore, the assessee decided to writeoff the project expenditure during impugned AY, which was hitherto been reflected as amount recoverable in the books of accounts. However, not convinced, Ld. AO opined that the assessee incurred its share of expenses towards LNG power project and the assessee was not in the business of advancing loan. Therefore the claim of the assessee u/s 36(i)(vii) read with Section 36(2) was not maintainable. The Ld. AO further opined that the aforesaid claim was not allowable even u/s 28 or u/s 37(1), since the said expenditure was nothing but assessee s share of expenses in the joint venture, the income where-from would not form part of taxable income. Finally, the aforesaid amount was disallowed and added to the income of the assessee. 3. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 02/12/2011 wherein the matter was concluded in the following manner :- 3.3 . Decision 3.3.1. I have carefully considered the contention of the appellant company as well as carefu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 185 (HL), However, the Act has laid down certain rules to be applied in determining how the tax is to be assessed, and even if the result should be to tax as profits and gains what cannot properly be so called, the requirements of the Act must nevertheless be complied with. 3.3.3. It is a matter of common practice that an expenditure or claim for allowance of loss may fall under more than one of the category i.e. it may be covered by a specific provision of a more general or omnibus provision. The settled position of the law in this regard is that if an expense or allowance can be considered under more than one category, than specific provision would prevail and conditions prescribed under the specific provisions would have to be satisfied. Otherwise if the expenditure or allowance, though similar in nature but does not fall within the scope of the specific allowance then the same can be considered under general rule. It is also a settled positions of law that if nature of expense is the same as prescribed under specific provisions and conditions prescribed under the said provisions are not satisfied, then the same cannot be claimed under the general rule or the omnibus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant for write off of advance is not maintainable under the facts and circumstances of the appellant s case. Even the claim of the appellant with respect to the losses incidental to the business are not maintainable for the reason that this was a joint venture project and the appellant had paid its part of share to the joint venture. The income of the joint venture has not come into being as project got terminated in the middle. It is not the business of the appellant to enter into the joint venture and therefore the claim as such is not maintainable as it is not for the purpose of the business of the appellant though apparently appellant its own doing the same business. Therefore, this ground of appeal is dismissed. 4. In the result, the appeal of the appellant is partly allowed. Aggrieved as aforesaid, the assessee is in further appeal before us. 4. The Ld. Authorized Representative for assessee [AR], Shri Yogesh Thar, drawing our attention to the documents placed in the paper-book contested the additions and submitted that the claim was allowable u/s 28 / 37(1). Reliance has been placed on several judicial pronouncements, in this regard. Per Contra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Limited (TN LNG) decided not to pursue the power project and liquidate the TN LNG voluntarily. Consequent to this decision, the development expenses aggregating to ₹ 32,463,783 incurred on this project till the date of abandonment has been written off and charged to profit and loss account. The fact that the project was finally been abandoned is corroborated by the letter of TNLNG dated 03/03/2007 written to The Director (Projects), Tamil Nadu Industrial Development Corporation Limited communicating its decision to disband the project. Consequently, the entity TNLNG has been dissolved vide Company Application No. 401 of 2009, order of Hon ble Bombay High Court dated 01/04/2009. The above facts are further fortified by the financial statements of the entity TNLNG for AY 2006-07 as placed on record. 5.3 The undisputed position that emerges out of the above discussion is that the assessee undertook a project and incurred certain expenditure which was reimbursable to him along with development fees upon financial closure of the project. However, the project was ultimately aborted by the assessee and the management decided to write-off the stated expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed were in the nature of capital field even though the incurring of expenses did not result in creation of any asset of enduring in nature? 10. Mr. A.S. Sriraman, learned counsel for the appellant submitted that the Tribunal has not assigned any reason to reverse the well considered order of the CIT (A), as it failed to appreciate that the expenses incurred in the implementation of the abandoned project under consideration have not brought any asset into existence, inasmuch as the expenses incurred on the said abandoned project would constitute deductible loss. 11. Further, it is submitted that the ITAT failed to appreciate that the venture undertaken was not a new one, but, in fact one in the same line of business already being carried on by the assessee company. The assessee had claimed that the expenses incurred for the implementation of the project was claimed as revenue expenses/business loss in the computation of total taxable income on the strength of the Government Order in G.O.No.140, directing closure of the project and cancellation of the allotment of the land. This aspect of the matter was not considered by the Tribunal and without reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order, which referred to the Government Order and the decision taken by the Government to abandon the project and submitted that merely because the project was abandoned, that will not be a reason to treat the expenditure as revenue. 17. In support of his contentions, the learned Standing Counsel placed reliance on the following decisions:- ( i) Empire Jute Co. Ltd. v. CIT [1980] 3 Taxman 69 (SC) ( ii) E.I.D. Parry (India) Ltd. v. CIT [2002] 257 ITR 253 (Mad.) ( iii) Mascon Technical Services Ltd. v. CIT [2013] 358 ITR 545/218 Taxman 108/37 taxmann.com 253 (Mad.) ( iv) Malabar Pioneer Hosiery (P.) Ltd. v. CIT [2008] 302 ITR 72/[2009] 178 Taxman 120 (Ker.), and ( v) CIT v. Idea Cellular Ltd. [2016] 76 taxmann.com 77 (Bom.), against which the revenue has preferred appeal before the Hon'ble Supreme Court and the Special Leave Petition has been admitted as CIT v. Idea Cellular Ltd. [2017] 81 taxmann.com 112/247 Taxman 313. 18. We have heard the learned counsels for the parties and carefully perused the materials placed on record. 19. The common issue involved in both the appeals is whether the Tribunal was just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. 23. Further, it was held that another test, which is often applied is the one based on distinction between fixed and circulating capital. This test was applied by Lord Haldane in the case of John Smith Son v. Moore 12 TC 266, where the learned Law Lord drew the distinction between fixed capital and circulating capital by holding that fixed capital is what the owner turns to profit by keeping it in his own possession; circulating capital is what he makes profit of by parting with it and letting it change. 24. Bearing the above legal principles in mind, we proceed to examine the facts of the instant case. It is not in dispute that the Chemical Beneficiation Plant was already established by TIDCO and on account of their not being able to achieve the desired result, the assessee was invited to take over the project, as the assessee possessed expertise in the field. This is how the assessee stepped into the project and by turn of events, the Government granted approval during the year 1998. 25. As could be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the same business, which is already carried on by the assessee, even if it is for the expansion of the business, viz., to start a new unit, which is same as earlier business and there is unity of control and a common fund, then such an expense is to be treated as business expenditure and in such a case whether it is a new business/asset would become a relevant factor. 28. It is further held that if there is no creation of new asset, then the expenditure incurred would be revenue in nature. However, if the new asset comes into existence, which is of enduring benefit, then such expenditure would be capital in nature. 29. The Hon'ble Delhi High Court took note of the decision of the Gauhati High Court in Dy. CIT v. Assam Asbestos Ltd. [2003] 263 ITR 357/132 Taxman 808. The High Court of Calcutta in the case of Binani Cement Ltd. (supra), considered a case where the Tribunal disallowed the expenditure allegedly incurred by the assessee for preparing feasibility study report and capital work-in-progress in the earlier years but written off during the previous year, since the proposed project was abandoned. The Court affirmed the view taken by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was justified in seeking for bifurcation of the expenses incurred into capital and revenue. The Division Bench referred to the decision in the case of Brooke Bond India Ltd. v. CIT [1997] 225 ITR 798/91 Taxman 26 (SC). In the case of Brooke Bond India Ltd. (supra), it was held that expenditure, in connection with the additional issue of shares, paid to the Registrar of Companies by way of filing fee and hence, has no application. The Division Bench held that the decision in the case of Brooke Bond India Ltd. (supra) would have no application to the facts of the case, as the expenditure incurred by the assessee were shown in the books of accounts as towards issue expenses incurred during the year and they found there was no justifiable ground to dissect one part of the expenditure as revenue expenditure and another part as capital expenditure. As pointed out by the Hon'ble Supreme Court in Empire Jute Co. Ltd. (supra), we cannot take a decision sans facts and the factual position as set out in the preceding paragraph would clearly show that the abandoned project was not a new one and it was a decision taken by the Government after about 12 years after the petitioner was invited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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