TMI Blog2019 (8) TMI 1767X X X X Extracts X X X X X X X X Extracts X X X X ..... blished cannot be disallowed as expenditure not relatable and incurred for 'business' purposes. On the question of capital expenditure, the assessing officer did not refer to or examine whether the capital assets created were for third party villagers - assessee was not the owner of the assets created and developed. The assets created were not capital assets in the hands of the respondent-assessee. The respondent-assessee had contributed, developed, financed aid created assets which belonged to third persons. The expenditure incurred therefore would not be capital in nature in the hands of the respondent assessee - Decided against revenue. - ITA No. 573/DEL/2016 - - - Dated:- 8-8-2019 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER For the Revenue : Smt. Naina Soin Kapil For the Assessee : Shri Ashwini Kumar Shri Amol Sinha ORDER PER T. S. KAPOOR, ACCOUNTANT MEMBER: This is an appeal filed by the Revenue against the order of Ld. CIT(A)-10, dated 30/11/2015. The grounds of appeal taken by the Revenue are reproduced below:- 1. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-09 and 2009-10 which had dismissed the appeals of the Revenue by holding as under:- 2. We have heard the arguments advanced by the parties in view of the orders of the authorities below and materials available on record. In the captioned appeal, there is only one issue regarding admissibility of project expenses whether capital or revenue in nature. The ld. Assessing Officer disallowed the expenditure observing as under : The case of assessee can be examined on these lines. There is no business expediency in the expenditure. The assessee has incurred the project expenses in implementing various schemes for social upliftment of farmers and weaker section of society. The expenditure is intact in the nature of donation but not covered U/s 80G of the Incometax Act, 1961. Accordingly, it is an item to be considered below the line and is not an admissible deduction since not laid out wholly and exclusively for the purpose of business. In the earlier years i.e. A.Y. 2008-09 2009-10, this issue was examined in details and after detailed discussion in both A.Y.s, the claim of assessee in respect of project expenses was not treated as revenue expenditure and same was disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rural community, upliftment of backward/poor people in tribal/rural areas at different locations in various States. These activities were implemented in consultation with community and community is using these for further use and upscaling. The IFFDC has been receiving grants/reimbursement of expenses from various institutions including Government Organizations to implement their programs. The assessee society (IFFDC) is also finished. The beneficiaries in large numbers enjoy the fruits of projects/programmes of the funding agency. The assessee society (IFFDC) is neither the project funding agency nor the beneficiary of project's benefits 'executed by them. To Project Expenses represents the amount spent by the assessee society against the grant received from various institutions or reimbursement of expenses made on behalf of the funding agencies. The grant received by IFFDC against the project expenses is also credited as income. Thus, the assessee society (IFFDC) has no basis to capitalize the project expenses of Revenue nature in their hooks. 7.1 Considering the above submissions, the Learned CIT(Appeals) has given following findings in the assessment year 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lages managed through village community and the assessee society only provided expertise and funding to them. Considering material aspects of the case, we are of the view that the Ld. CIT(Appeals) has rightly hold that the Assessing Officer was not correct in holding that expenditure were not incurred wholly and exclusively for the purpose of the business and that alternatively it was capital in nature. We thus do not find infirmity in the first appellate order on the issue also because in earlier assessment years 2004-05 to 2007-08 when assessments were framed under sec. 143(3) of the Act similar expenditure have been accepted. Similar are the facts of the case in the assessment year 2009-10. The finding of the Ld. CIT( Appeals) is thus upheld. The ground No. 1 of the appeals is accordingly rejected. 3. In view of the above, we find that the issue under consideration is squarely covered in favour of the assessee by the aforesaid decision of ITAT as reproduced above. Therefore, respectfully following the decision of coordinate bench, we find no merits in the appeal of the Revenue and accordingly, the same is liable to be dismissed. 4. In the result, the appeal of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re would be non-deductible expenditure or expenditure without business expediency. Under section 37 of the Act it does not matter whether or not the expenditure was in the nature of donation or Section 80G of the Act was not attracted. The conditions stated in Section 37 of the Act matter and constitute the test. Expenditure incurred in furtherance of and connected with the business and commercial activities for which the respondent- assessee was established cannot be disallowed as expenditure not relatable and incurred for 'business' purposes. 15. On the question of capital expenditure, the assessing officer did not refer to or examine whether the capital assets created were for third party villagers. The respondentassessee was not the owner of the assets created and developed. The assets created were not capital assets in the hands of the respondent-assessee. The respondent-assessee had contributed, developed, financed aid created assets which belonged to third persons. The expenditure incurred therefore would not be capital in nature in the hands of the respondent assessee. 16. Accordingly, the appeal filed by the Revenue has no merit and is dismissed, without an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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