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TMI Blog2016 (6) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... upholding the action of the Assessing officer in not allowing deduction of Rs. 48,56,088/- holding the same as of capital in nature. 2. That on the facts and in the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs. 3,11,705/- made by the Assessing Officer by invoking the provisions of Rule 8D(2)(iii) of the Income Tax Rules read with Section 14A of the Income tax Act. 3. That the appellant crave leave to vary, alter, add or amend to the aforesaid grounds of appeal either at or before the time of hearing." 2. The relevant facts of the case are that the assessee company which is engaged in the business of manufacturing of sugar, organic/fine chemicals, indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon by the assessee namely (i) Indo Rama Synthetics India Ltd. v CIT [2011] 333 ITR 18 (Del.) and (ii) CIT vs Priya Village Roadshows Ltd. [2011] 332 ITR 594 (Del.) were cited, the CIT(A) while coming to a conclusion has failed to consider these. Carrying us through the decision relied upon it was his submission that the grounds deserve to be allowed. In the alternate it was his prayer that the issue may be remanded. The Ld. Sr. DR on the other hand relied upon the impugned order. 6. We have heard the rival submissions and perused the material available on record. On a consideration of the same, it is seen that the claim of the assessee was rejected by the AO holding as under:- "The assessee company, vide letter dated 11.07.2012 has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the facts stated by the assessee in his submission and the grounds raised in appeal. The Assessing Officer has not allowed the deduction of Rs. 48,56,088/- claimed for expenditure incurred in putting up structure for installation of machinery holding the same as capital in nature. It is seen from the assessment order that Assessing Officer has observed that the assessee company has itself in the earlier years debited the said expenditure which has been written off during the-year to capital working progress. Since the expenditure was of capital nature its write off during the year does not change the character of the expenditure. The said expenditure is not a deductible expenditure in computing the income from profit and ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e later abandonment. The expenditure was incurred in different assessment years and on abandonment of the project, the expenditure was claimed as revenue in nature. The claim of the assessee was disallowed. However, the Delhi High Court following its earlier judgement in the case of Modi Industries Ltd. 200 ITR 341 has held the expenditure as revenue in nature. It has been held that since the expenditure was incurred on salaries, wages, repair, maintenance, travelling / other other administrative expenditure, which are undoubtedly revenue in nature and as such, no asset of enduring nature can be said to come into existence on incurring this expense. We may also mention that the Hon'ble Supreme Court on facts has also dismissed Special L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries Ltd wherein expenditure incurred on a new project was earlier charged to CWIP and on abandonment of the project the assessee claimed the expense deductible as revenue expense. The same has been allowed in appeals by the CIT(A) / ITAT and the said order has been accepted by the department. Relevant extract from the order is attached for your honour's ready reference. It is thus prayed that the assessee company be allowed deduction for amount of Rs. 48,56,088/- representing the cost of various revenue expenses incurred and written off to Profit & Loss A/c during the previous year." While completing the assessment the Assessing Officer has not accepted the contention of the appellant holding that since the appellant company had i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith law after giving the assessee a reasonable opportunity of being heard. 7. Addressing the next issue the Ld. AR submitted that in the facts of the present case, the assessee has made investment of share out of its fund in Mid 1990 and no dividend has been earned in the year. In these circumstances relying upon CIT vs HOLCIM India Pvt. Ltd. [2014] 272 CTR 282 (Del.) and Joint Investments Pvt.Ltd. vs CIT [2015] 372 ITR 394 (Del.). It was his submission that no addition should have been made. 8. The Ld. Sr.DR on considering the material available on record submitted that the fact that no dividend in the year under consideration was earned is not coming out either from the impugned order or from the record. Accordingly, it was his prayer t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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