ADITYA BIRLA POWER CO.LTD, MUMBAI V. ASST CIT 8(1), MUMBAI

ITA 1115/MUM/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1748 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: HARDIK NIRMAL LD ARS
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 37(1); 28

Judgement Text

ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.1115/MUM/2012 ( ASSESSMENT YEAR:2007-08) ADITYA BIRLA POWER COMPANY LIMITED C-1, ADITYA BIRLA CENTRE S.K. AHIRE MARG, WORLI MUMBAI-400 030 VS. ASSISTANT COMMISSIONER OF INCOME TAX -8(1) ROOM NO.204, 2 ND FLOOR AAYKAR BHAVAN MUMBAI-400 020 !' # PAN/GIR NO.AABCB-7067-N ( '$ APPELLANT ) : ( %'$ RESPONDENT ) REVENUE BY : RAJESH KUMAR YADAV,LD.DR ASSESSEE BY : YOGESH THAR & HARDIK NIRMAL, LD.ARS &' DATE OF HEARING : 02/07/2018 ()*' / DATE OF PRONOUNCEMENT : 07/09/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [A Y] 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 APPE AL:- 2 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-16 MUMBAI [CI T (A)] ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX -8(1), MUMBAI (THE AO) IN DISALLOWING CLAIM FOR DEDUCTION U/S 37(1)/28 OF THE INCOME-TAX ACT,1961 ADVANCES WRITTEN OFF AMOUNTING TO RS.3,24,63,783/- AND INVES TMENTS WRITTEN OFF AMOUNTING TO RS.36,040/-. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX-8(1), MUMBAI [AO] U/S 14 3(3) OF THE INCOME TAX ACT, 1961 ON 10/11/2009 WHEREIN THE INCOME OF THE ASSESSEE W AS ASSESSED AT RS. NIL AFTER SET-OFF OF BROUGHT FORWARD LOSSES OF RS.10.11 CRORES AS AGAINST NIL RETURN E -FILED BY THE ASSESSEE ON 31/10/2007. THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROJECT DEVELOPMENT ACTIVITIES DURING THE IMPUGNED AY. THE ASSESSEE HAS SUFFERED DISALLOWANCE OF RS.324.99 LACS ON ACCO UNT OF ADVANCES/INVESTMENT WRITTEN OFF , WHICH ARE THE SOLE SUBJECT MATTER OF THIS APPEAL. THE MATERIAL ON RECORD SUGGESTS THAT THE NA ME OF THE ASSESSEE HAS BEEN CHANGED FROM BIRLA PROJECT DEVELOPMENT CO. LTD. TO ADITYA BIRLA POWER CO. LTD. 2. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.324.63 LACS ON ACCOUNT OF ADVANCES WRITTEN-OFF AND RS.0.36 LACS AS INVESTMENTS WRITTEN-OFF IN THE PROFIT & LOSS ACCOUNT . THE ASSESSEE DEFENDED THE SAME VIDE LETTER DATED 30 /10/2009 AND SUBMITTED THAT IT WAS PURSUING LNG POWER PROJECT IN CONSORTIUM WITH CERTAIN OTHER ENTITIES AS SELECTED BY TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION LTD [TIDCO] . THE JOINT VENTURE WAS BEING CARRIED IN THE NAME O F 3 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 TN LNG POWER COMPANY PRIVATE LIMITED [TNLNG] IN CONSORTIUM WITH FOLLOWING PARTICIPANTS:- (I) DAKSHIN BHARAT ENERGY CONSORTIUM (II) GRASIM INDUSTRIES LIMITED (III) CMS ENERGY OF USA (IV) UNOCAL OF USA (V) WOODSIDE ENERGY LTD. OF AUSTRALIA (VI) SIEMENS PROJECT VENTURE GMBH OF GERMANY THE ASSESSEE ACQUIRED THE RIGHT, TITLE, INTEREST AN D OBLIGATIONS IN THE SAID PROJECT FROM ONE OF THE CONSORTIUM PARTNER NAMELY GRASIM INDUSTRIES LTD. VIDE MEMORANDUM OF UNDERSTANDING [MOU] DATED 10/04/2002. THE PROJECT ENVISAGED SETTING UP OF 2.4 MT/ANNUM LNG RECEIVING AND R-GAS TERMINAL AND AN 1850 MW GAS TURBINE POWER PLANT PROJECT AT ENNOR IN TAMIL NADU AND THE STATE OF TAMIL NADU WAS TO BE THE SOLE POWE R OFF-TAKER. SINCE NO PROGRESS COULD TAKE PLACE IN THE PROJECT, IT WAS DE CIDED TO ABANDON THE PROJECT DURING THE IMPUGNED AY. THEREFORE, THE ASSE SSEE DECIDED TO WRITE- OFF THE PROJECT EXPENDITURE DURING IMPUGNED AY, WHI CH 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 THA T THE AFORESAID CLAIM WAS NOT ALLOWABLE EVEN U/S 28 OR U/ S 37(1), SINCE THE SAID EXPENDITURE WAS NOTHING BUT ASSESSEES SHARE OF EXP ENSES IN THE JOINT VENTURE, THE INCOME WHERE-FROM WOULD NOT FORM PART OF TAXABLE INCOME. 4 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 FINALLY, THE AFORESAID AMOUNT WAS DISALLOWED AND AD DED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 02/12/2 011 WHEREIN THE MATTER WAS CONCLUDED IN THE FOLLOWING MANNER :- 3.3. DECISION 3.3.1. I HAVE CAREFULLY CONSIDERED THE CONTENTION O F THE APPELLANT COMPANY AS WELL AS CAREFULLY GONE THROUGH THE AVAILABLE DOCUME NTS ON RECORD. THE APPELLANT WAS A PART OF CONSORTIUM WHICH WAS PURSUING LNG POW ER PROJECT AT ENNOR AND WERE SELECTED BY TAMIL NADU INDUSTRIAL CORPORATION, A GOVERNMENT OF TAMIL NADU UNDERTAKING. DUE TO VARIOUS REASONS AS STATED SUPRA, THE PROJECT DID NOT SEE THE LIGHT OF THE DAY. THE APPELLANT WHILE PURSU ING THE IMPLEMENTATION OF THE PROJECT HAD GIVEN A PAYMENT OF RS.3,24,00,000/- APP ROXIMATELY. THE NATURE OF THE PAYMENT MADE ARE AS UNDER: - SR.NO. YEAR AMOUNT PURPOSE 1 UPTO 2002 3,07,09,371 TIDCO BIDDING C OST, DOCUMENT FEES, PROCESSING FEES, LEGAL/PROFESSIONAL FEES FOR COMPANY SET UP/BIDDING EXPENSES, OFFICE SET UP EXPENSES. 2 2002 - 03 6,60,000 SUCCESS FEES 3 2003 - 04 9,92,610 ADVANCE PAYMENT MADE FOR OFFICE MAINTENANCE 4 2004 - 05 5,06,460 ADVANCE PAYMENT MADE FOR OFFICE MAINTENANCE 5 2005 - 06 4,43,000 ADVANCE PAYMENT MADE FOR OFFICE MAINTENANCE 6 2006 - 07 (8,47,658) RECOVERY OF AMOUNT FROM TNLNG TOTAL 3,24,63,783 3.3.2. A PERUSAL OF THE SAME REVEALED THAT THE APPE LLANT HAD INCURRED CAPITAL EXPENDITURE. THE DETAIL OF THESE PAYMENTS AND THE P ERSONS TO WHOM THE PAYMENT HAS BEEN MADE WAS NOT GIVEN. MOREOVER, THE WRITE OF F U/S.36(VII) R.W.S. 36(2) IS NOT PERMISSIBLE FOR THE REASON THAT THE CONDITIONS OF BOTH THE SECTIONS ARE NOT FULFILLED. IT IS A SETTLED POSITION OF THE LAW THAT ALL EXPENDITURE AND LOSSES INCIDENTAL TO BUSINESS AND ALLOWABLE AS PER COMMERCIAL ACCOUNT ING PRINCIPLES HAVE TO BE DEDUCTED TO ARRIVE AT PROFITS CHARGEABLE TO TAX. HO WEVER, IF SPECIFIC PROHIBITIONS TO ALLOWANCE OF EXPENDITURE HAVE BEEN IMPOSED UNDER TH E ACT, THEN SUCH EXPENSES 5 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 CANNOT BE ALLOWED AS DEDUCTION. LORD HERSCHELL HAS OBSERVED IN GRESHAM LIFE ASSCE SOCIETY VS. STYLE 3 TC 185 (HL), HOWEVER, TH E ACT HAS LAID DOWN CERTAIN RULES TO BE APPLIED IN DETERMINING HOW THE TAX IS T O BE ASSESSED, AND EVEN IF THE RESULT SHOULD BE TO TAX AS PROFITS AND GAINS WHAT C ANNOT PROPERLY BE SO CALLED, THE REQUIREMENTS OF THE ACT MUST NEVERTHELESS BE COMPLI ED WITH. 3.3.3. IT IS A MATTER OF COMMON PRACTICE THAT AN EX PENDITURE OR CLAIM FOR ALLOWANCE OF LOSS MAY FALL UNDER MORE THAN ONE OF T HE CATEGORY I.E. IT MAY BE COVERED BY A SPECIFIC PROVISION OF A MORE GENERAL O R 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 SPECI FIC PROVISION WOULD PREVAIL AND CONDITIONS PRESCRIBED UNDER THE SPECIFIC PROVIS IONS WOULD HAVE TO BE SATISFIED. OTHERWISE IF THE EXPENDITURE OR ALLOWANC E, THOUGH SIMILAR IN NATURE BUT DOES NOT FALL WITHIN THE SCOPE OF THE SPECIFIC ALLO WANCE 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 PR OVISIONS AND CONDITIONS PRESCRIBED UNDER THE SAID PROVISIONS ARE NOT SATISF IED, THEN THE SAME CANNOT BE CLAIMED UNDER THE GENERAL RULE OR THE OMNIBUS PROVI SION OF SECTION 37(1). 3.3.4. THE APPELLANT HAS CLAIMED THE ADVANCES WRITT EN OFF UNDER THE SAME SECTION AS BAD DEBTS I.E U/S 36(1)(VII) READ WITH S ECTION 36(2) OF THE ACT. HAVING CONSIDERED THE CLAIM OF THE APPELLANT LD. AO ALLOWE D THE CLAIM OF THE APPELLANT OF THE BAD DEBTS AS ACCORDING TO HIM ALL CONDITIONS RE QUIRED TO CLAIM THE BAD DEBTS HAS BEEN FULFILLED AND THUS CLAIM IS ADMISSIBLE. TH ERE IS NO DISPUTE TO THAT EFFECT. HOWEVER, WITH REGARD TO THE ADVANCES WRITTEN OFF TH E APPELLANT CLAIM WAS REJECTED BY THE LD. AO AS HE FOUND THAT IT IS NOT ON THE SAM E FOOTING AS BAD DEBTS, THEREFORE, THE APPELLANT CLAIM OF 61.53 LAKHS WAS N OT ACCEPTED BY THE LD. AO. THE APPELLANT SUBMITTED THAT IN MANY CASES THE AMOU NTS OF ADVANCES MADE ARE VERY SMALL AS COMPARED TO THEIR COST OF RECOVERY AN D THUS WRITTEN OFF. IT WAS FURTHER SUBMITTED THAT THE AFORESAID ADVANCES WERE GIVEN FOR THE PURPOSE OF BUSINESS AND ARE OF THE REVENUE IN NATURE. THERE IS NO ELEMENT OF CAPITAL INVESTMENT AND HENCE WRITTEN OFF OF SUCH ADVANCES O UGHT TO BE ALLOWED AS A BUSINESS EXPENDITURE UNDER SECTION 28 OR UNDER SECT ION 37(1). IT THEREFORE APPEARS THAT THE APPELLANT HAVING FAILED IN ITS CLA IM UNDER A SPECIFIC SECTION IS NOW TRYING TO SEEK ITS CLAIM UNDER OTHER OMNIBUS SE CTIONS WHICH IN MY OPINION IS NOT PERMISSIBLE AS STATED SUPRA. 3.3.5. WITHOUT PREJUDICE TO THE FORGOING IT IS OBSE RVED THAT DEBT DENOTES NOT ONLY THE OBLIGATION OF THE DEBTOR TO PAY BUT ALSO THE RI GHT OF CREDITORS TO RECEIVE AND ENFORCE PAYMENT AS OBSERVED BY THE HIGH COURT OF PU NJAB IN CIT VS. BASUMAL JAGAT NARAIN (38 ITR 447). BUT ON THE BAD DEBTS, TH E CALCUTTA HIGH COURT IN HONGKONG & SHANGHAI BANKING CORPORATION VS. CIT (28 ITR 199) HAS OBSERVED THAT THE BAD DEBTS WILL ALWAYS MEAN DEBT OF WHICH T HE CHANCE OF RECOVERY IS NIL OR SLENDER. THE BASIC CONDITIONS WHICH NEED TO BE SATI SFIED FOR CLAIMING DEDUCTION FOR BAD DEBTS ARE AS UNDER: 6 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 1. THERE HAS TO BE A DEBT WHICH HAS BECOME BAD IN R ESPECT OF THE BUSINESS CARRIED ON BY ASSESSEE OR THE LOAN IS GRAN TED BY THE ASSESSEE IN THE COURSE OF THE BUSINESS OF BANKING OR MONEY LEND ING. 2. I HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE I NCOME OF THE ASSESSEE IN THE YEAR IN WHICH SUCH DEBT IS WRITTEN OFF OR IN THE EARLIER YEARS. 3. IT IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSE E IN THE YEAR IN WHICH DEDUCTION IS CLAIMED. 3.3.6. THEREFORE, THE CLAIM OF THE APPELLANT FOR WR ITE OFF OF ADVANCE IS NOT MAINTAINABLE UNDER THE FACTS AND CIRCUMSTANCES OF T HE APPELLANTS CASE. EVEN THE CLAIM OF THE APPELLANT WITH RESPECT TO THE LOSSES I NCIDENTAL TO THE BUSINESS ARE NOT MAINTAINABLE FOR THE REASON THAT THIS WAS A JOINT V ENTURE PROJECT AND THE APPELLANT HAD PAID ITS PART OF SHARE TO THE JOINT VENTURE. TH E INCOME OF THE JOINT VENTURE HAS NOT COME INTO BEING AS PROJECT GOT TERMINATED IN TH E MIDDLE. IT IS NOT THE BUSINESS OF THE APPELLANT TO ENTER INTO THE JOINT VENTURE AN D THEREFORE THE CLAIM AS SUCH IS NOT MAINTAINABLE AS IT IS NOT FOR THE PURPOSE OF TH E 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 PA RTLY 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 TH E PAPER-BOOK CONTESTED THE ADDITIONS AND SUBMITTED THAT THE CLAI M WAS ALLOWABLE U/S 28 / 37(1). RELIANCE HAS BEEN PLACED ON SEVERAL JUDICIAL PRONOUNCEMENTS, IN THIS REGARD. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], RAJES H KUMAR YADAV SUPPORTED THE STAND TAKEN BY THE LOCAL AUTHORITIES. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS, PERUSED RELEVANT MATERIAL ON RECORD INCLUDING CITED JUDICIAL PRONOUN CEMENTS. IT IS NOTED THAT THE ASSESSEE, DURING IMPUGNED AY WAS ENGAGED IN PROJECT DEVELOPMENT ACTIVITIES. IT ACQUIRED THE RIGHT IN THE STATED PRO JECT BY WAY OF MEMORANDUM OF UNDERSTANDING [MOU] DATED 10/04/2002 FROM GRASIM INDUSTRIES LTD, A COPY OF WHICH HAS BEEN PLACED ON RECORD. IN TERMS O F THE MOU, THE 7 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 ASSESSEE AGREED TO DEVELOP THE PROJECT TILL ITS FIN ANCIAL CLOSURE AND WAS RESPONSIBLE TO BEAR PROJECT, ADMINISTRATIVE AND OTH ER COSTS AND EXPENSES. IN TERMS OF CLAUSE (5), THE EXPENSES CONTRIBUTED BY OT HER GROUP CONCERNS AFTER 01/04/2001 WERE TO BE REIMBURSED BY THE ASSESSEE TO THOSE CONCERNS. FOR THIRD PARTY EXPENSES INCURRED BY THE GROUP CONCERNS PRIOR TO 31/03/2001, EACH OF THE GROUP COMPANIES, AT THE FINANCIAL CLOSU RE, WAS EITHER TO SUBSCRIBE THE EQUITY SHARES OF TNLNG OR OBTAIN REIMBURSEMENT OF THE SAME FROM TNLNG . THE ASSESSEE ALSO ENTERED INTO ANOTHER MOU DATED 10/04/2002 WITH GROUP CONCERNS TO OBTAIN FINANCIAL ASSISTANCE TO CARRY OUT THE PROJECTS BEING PERUSED BY THE RESPECTIVE PROJEC T COMPANIES. IN TERMS OF CLAUSE (3) OF THE SAID MOU , THE ASSESSEE WAS ENTITLED FOR REIMBURSEMENT OF THIRD PARTY EXPENSES INCURRED BY HIM UPON FINANCIAL CLOSURE OF THE PROJECT. BESIDES THIS, THE ASSESSEE WAS ALSO ENTITLED FOR CE RTAIN DEVELOPMENT FEES UPON FINANCIAL CLOSURE OF THE PROJECT. 5.2 THE LD. AR, ON THE STRENGTH OF DOCUMENTS PLACED IN THE PAPER-BOOK, SUBMITTED THAT THE SAID PROJECT COULD NOT BE SUCCES SFUL AND THEREFORE, THE MANAGEMENT DECIDED TO ABORT THE SAME AND ACCORDINGL Y THE PROJECT EXPENDITURE, WHICH WAS HITHERTO, BEING REFLECTED AS ADVANCES RECOVERABLE IN THE BALANCE SHEET WAS WRITTEN-OFF IN THE BOOKS OF ACCOUNTS DURING IMPUGNED AY AND THEREFORE, THE SAME WAS ALLOWABLE T O THE ASSESSEE. UPON PERUSAL OF THE FINANCIAL STATEMENTS FOR IMPUGN ED AY, WE FIND THAT THE ASSESSEE HAS WRITTEN-OFF AN AMOUNT OF RS.324.63 LAC S AS ADVANCES WRITTEN- OFF & AN AMOUNT OF RS.0.36 LACS AS INVESTMENTS WRITTEN-OFF UNDER THE HEAD 8 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 ADMINISTRATIVE AND OTHER EXPENSE, THE EXPLANATION OF WHICH HAS BEEN FURNISHED IN SCHEDULE-9, NOTE NO. 3B WHICH READ AS UNDER:- DURING THE YEAR, THE PROMOTERS OF TN LNG POWER COMP ANY LIMITED (TN LNG) DECIDED NOT TO PURSUE THE POWER PROJECT AND LIQUIDATE THE T N LNG VOLUNTARILY. CONSEQUENT TO THIS DECISION, THE DEVELOPMENT EXPENSES AGGREGATING TO RS.32,463,783 INCURRED ON THIS PROJECT TILL THE DATE OF ABANDONMENT HAS BEEN WRITT EN OFF AND CHARGED TO PROFIT AND LOSS ACCOUNT. THE FACT THAT THE PROJECT WAS FINALLY BEEN ABANDONE D 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 HONBLE 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 DEVELOPMEN T FEES UPON FINANCIAL CLOSURE OF THE PROJECT. HOWEVER, THE PROJECT WAS UL TIMATELY ABORTED BY THE ASSESSEE AND THE MANAGEMENT DECIDED TO WRITE-OFF TH E STATED EXPENDITURE IN THE BOOKS OF ACCOUNT DURING THE IMPUGNED AY. THE SAID CLAIM, IN OUR OPINION, IS CLEARLY NOT AVAILABLE TO ASSESSEE IN TE RMS OF SECTION 36(I)(VII) READ WITH SECTION 36(2) SINCE THE AMOUNT WRITTEN-OFF IS IN NOT IN THE NATUR E OF BAD DEBTS FOR THE ASSESSEE, THE INCOME OF WHICH HAS BEEN TAK EN INTO 9 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 ACCOUNT BY THE ASSESSEE. THE STAND OF LOWER AUTHORI TY, TO THAT EXTENT, IN OUR OPINION, WAS CORRECT. 5.4 REGARDING ASSESSEES CLAIM U/S 37(1) / 28, THE ASSESSEE HAS PLACED RELIANCE ON CERTAIN JUDICIAL PRONOUNCEMENTS TO SUBM IT THAT THE SAME WAS ALLOWABLE AS BUSINESS LOSS. OUR ATTENTION HAS ALSO BEEN DRAWN TO THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003 -04 WHEREIN THE AFORESAID EXPENDITURE AS CLAIMED BY THE ASSESSEE IN THAT YEAR HAS BEEN DISALLOWED FOR WANT OF MATCHING PRINCIPLE AND ON THE PREMISE THAT THE SAME COULD BE ALLOWED ONLY UPON FINANCIAL CLOSURE OF THE PROJECT. WE FIND OUT THAT THE ASSESSEE WAS ENGAGED IN DEVELOPING VARIOUS PROJ ECTS AND THE PROJECT ACTIVITIES WAS THE BUSINESS OF THE ASSESSEE. THEREF ORE, ANY LOSS INCURRED BY THE ASSESSEE ON THIS COUNT, BEING BUSINESS LOSS FOR THE ASSESSEE AND PART AND PARCEL OF THE BUSINESS ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE, WAS ALLOWABLE TO HIM IN TERMS OF SECTION 37(1) READ WITH SECTION 28(1) PROVIDED THE SAME WAS ASCERTAINED LIABILITY . OUR VIEW IS DULY FORTIFIED BY THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN ASIA POWER PROJECTS PRIVATE LTD. VS DCIT [49 TAXMANN.COM 428] . THIS DECISION OF THE HONBLE COURT ALONG WITH CATENA OF OTHER DECISION HAS DULY BEEN C ONSIDERED BY HONBLE MADRAS HIGH COURT IN RECENT JUDGMENT TITLED AS TAMILNADU MAGNESITE LTD. VS. ACIT [95 TAXMANN.COM 239 DATED 05/06/2018] WHEREIN THE MATTER HAS BEEN CONCLUDED IN THE FOLLOWING MANNER:- 9. THE ABOVE TAX CASE APPEALS HAVE BEEN ADMITTED ON T HE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW. '(A) WHETHER THE TRIBUNAL IS CORRECT IN REJECTING THE CL AIM OF DEDUCTION/LOSS RELATING TO THE 'PROJECT EXPENSES' IN THE COMPUTATI ON OF TAXABLE TOTAL INCOME 10 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 RELATING TO THE ASSESSMENT YEAR(S) UNDER CONSIDERAT ION? (B) WHETHER THE TRIBUNAL IS CORRECT IN CONCLUD ING THAT THE EXPENSES WERE CAPITAL IN NATURE EVEN THOUGH SUCH EXPENSES WERE INCURRED F OR 'POSSIBLE EXPANSION' OF THE EXISTING BUSINESS? (C) WHETHER THE TRIBUNAL IS CORRECT IN LAW IN CONCLUDIN G THAT THE EXPENSES CLAIMED WERE IN THE NATURE OF CAPITAL FIEL D 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 APPELLA NT SUBMITTED THAT THE TRIBUNAL HAS NOT ASSIGNED ANY REASON TO REVERSE THE WELL CONSIDE RED ORDER OF THE CIT (A), AS IT FAILED TO APPRECIATE THAT THE EXPENSES INCURRED IN THE IMP LEMENTATION OF THE ABANDONED PROJECT UNDER CONSIDERATION HAVE NOT BROUGHT ANY ASSET INTO EXISTENCE, INASMUCH AS THE EXPENSES INCURRED ON THE SAID ABANDONED PROJECT WOU LD CONSTITUTE DEDUCTIBLE LOSS. 11. FURTHER, IT IS SUBMITTED THAT THE ITAT FAILED TO A PPRECIATE THAT THE VENTURE UNDERTAKEN WAS NOT A NEW ONE, BUT, IN FACT ONE IN THE SAME LIN E OF BUSINESS ALREADY BEING CARRIED ON BY THE ASSESSEE COMPANY. THE ASSESSEE HAD CLAIME D THAT THE EXPENSES INCURRED FOR THE IMPLEMENTATION OF THE PROJECT WAS CLAIMED AS RE VENUE EXPENSES/BUSINESS LOSS IN THE COMPUTATION OF TOTAL TAXABLE INCOME ON THE STRE NGTH OF THE GOVERNMENT ORDER IN G.O.NO.140, DIRECTING CLOSURE OF THE PROJECT AND CA NCELLATION OF THE ALLOTMENT OF THE LAND. THIS ASPECT OF THE MATTER WAS NOT CONSIDERED BY THE TRIBUNAL AND WITHOUT REFERENCE TO THE FACTUAL POSITION, THE IMPUGNED ORD ER HAS BEEN PASSED. 12. FURTHER, IT IS SUBMITTED THAT THE DECISIONS, WHICH WERE REFERRED TO BY THE ASSESSEE WERE NOT PROPERLY CONSIDERED BY THE TRIBUNAL AND TH E FACTUAL POSITION IN THOSE DECISIONS WERE NOT APPRECIATED. THUS, IT IS SUBMITTED THAT WH EN THERE IS NO NEW BUSINESS, WHICH HAS BEEN CREATED AND THERE IS NO CREATION OF ANY NE W ASSET, NOR THERE BEING ANY ENDURING BENEFIT ACCRUED TO THE ASSESSEE, THE EXPEN DITURE SHOULD BE TREATED AS REVENUE AND NOT AS CAPITAL. 13. FURTHER, IT IS POINTED OUT THAT, THOUGH IT MAY BE TRUE THAT THE EXPENDITURE WAS INCURRED FROM THE CAPITAL ACCOUNT, THAT WOULD NOT B E THE PROPER TEST TO DETERMINE THE NATURE OF EXPENDITURE FOR THE REASONS NOT ATTRIBUTA BLE TO THE ASSESSEE, WHEN THE EXISTING UNIT OUGHT TO BE CLOSED. 14. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL PLACED RELIANCE ON THE FOLLOWING DECISIONS: (I) INDO RAMA SYNTHETICS (I) LTD. V. CIT [2011] 333 ITR 18/[2009] 185 TAXMAN 277 (DELHI) (II) BINANI CEMENT LTD. V. CIT [2016] 380 ITR 116/ [2015] 233 TAXMAN 340/60 TAXMANN.COM 384 (CAL.) (III) CIT V. TATA ROBINS FRASER LTD. [2012] 211 TAXMAN 257/26 TAXMANN.COM 15 (JHARKHAND) (IV) ASIA POWER PROJECTS (P.) LTD. V. DY. CIT [2015] 370 ITR 257/[2014] 49 TAXMANN.COM 428/226 TAXMAN 136 (MAG.) (KAR.), AND (V) THIRUVENGADAM INVESTMENTS (P.) LTD. V. ASSTT. CIT [T.C.(A) NO. 583 OF 2007, 11 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 DATED 5-1-2016], WHICH WAS FOLLOWED BY A DIVISION B ENCH OF THIS COURT IN CIT V. PRASAD PRODUCTIONS [T.C. (A) NO. 905 OF 2008, DA TED 4-4-2018]. 15. MR. S. RAJESH, LEARNED STANDING COUNSEL FOR THE RE VENUE SOUGHT TO SUSTAIN THE ORDER PASSED BY THE ITAT BY REFERRING TO THE FACTUA L POSITION AS STATED IN THE ASSESSMENT ORDER DATED 15.09.2000. IT IS SUBMITTED THAT THE EXPENDITURE IS CAPITAL IN NATURE, AS THE MONEY WAS DRAWN FROM THE CAPITAL ACC OUNT AND IT IS AN AID EXTENDED BY THE GOVERNMENT OF TAMIL NADU TERMED AS 'CAPITAL WOR K-IN-PROGRESS' AND MERELY BECAUSE THE PROJECT WAS ABANDONED ON ACCOUNT OF CAN CELLATION OF THE APPROVALS GRANTED BY THE GOVERNMENT OF TAMIL NADU, THAT WILL NOT CHAN GE THE CHARACTER OF THE EXPENDITURE TO THAT OF THE REVENUE, AS THE EXPENDITURE WAS INCU RRED FOR ACQUISITION OF TANGIBLE ASSETS. 16. FURTHER, THE LEARNED STANDING COUNSEL REFERRED TO THE ORDER PASSED BY THE CIT (A) MORE PARTICULARLY PARAGRAPH 5 OF THE ORDER, WHICH R EFERRED 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 STANDIN G COUNSEL PLACED RELIANCE ON THE FOLLOWING DECISIONS: (I) EMPIRE JUTE CO. LTD. V. CIT [1980] 3 TAXMAN 69 (S C) (II) E.I.D. PARRY (INDIA) LTD. V. CIT [2002] 257 ITR 2 53 (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 7 7 (BOM.) , AGAINST WHICH THE REVENUE HAS PREFERRED APPEAL BEFORE THE HON'BLE SUP REME 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 W HETHER THE TRIBUNAL WAS JUSTIFIED IN REVERSING THE DECISION OF THE CIT (A) DELETING T HE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS REVENUE IN NATURE AND NOT CAPITAL. 20. TO DECIDE THE SUBSTANTIAL QUESTIONS OF LAW FRAMED FOR CONSIDERATION, WE WOULD HAVE TO APPLY THE PROPER TEST, WHICH WOULD DISTINGUISH C APITAL AND REVENUE EXPENDITURE. THIS QUESTION CAME UP FOR CONSIDERATION BEFORE THE HON'B LE SUPREME COURT IN EMPIRE JUTE CO. LTD. (REFERRED SUPRA). IT WAS POINTED OUT THAT FROM TIME TO TIME CASES HAVE EVOLVED VARIOUS TESTS FOR DISTINGUISHING BETWEEN CAPITAL AN D REVENUE EXPENDITURE, BUT, NO TEST IS PARAMOUNT OR CONCLUSIVE. FURTHER, THERE IS NO ALL-E MBRACING FORMULA, WHICH CAN PROVIDE A READY SOLUTION TO THE PROBLEM; NO TOUCHSTONE HAS BEEN DEVISED. IT WAS POINTED OUT THAT EVERY CASE HAS TO BE DECIDED ON ITS OWN FACTS KEEPING IN MIND THE BROAD PICTURE OF THE WHOLE OPERATION IN RESPECT OF WHICH THE EXPENDI TURE HAS BEEN INCURRED. AFTER 12 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 REFERRING TO THE DECISION OF LORD RADCLIFFE IN CIT V. NCHANGA CONSOLIDATED COPPER MINES LTD. [1965] 58 ITR 241 (PC), IT WAS HELD THAT IT WO ULD BE MISLEADING TO SUPPOSE THAT, IN ALL CASES, SECURING A BENEFIT FOR THE BUSINESS WOUL D BE PRIMA FACIE CAPITAL EXPENDITURE 'SO LONG AS THE BENEFIT IS NOT SO TRANSITORY AS TO HAVE NO ENDURANCE AT ALL'. 21. FURTHER, IT WAS HELD THAT THERE MAY BE CASES WHERE EXPENDITURE EVEN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFIT, MAY, NONET HELESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT WAS POINTED OUT THAT IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSE E THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTA GE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. 22. FURTHER, IT WAS POINTED OUT THAT IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAG EMENT AND CONDUCT OF THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENT LY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THUS, IT WAS HELD THAT THE TEST OF ENDURING BENEFIT IS NOT A CERTAIN OR CONCLUSIVE TES T 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 O FTEN 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 CIRCULATI NG 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 LETT ING IT CHANGE. 24. BEARING THE ABOVE LEGAL PRINCIPLES IN MIND, WE PRO CEED TO EXAMINE THE FACTS OF THE INSTANT CASE. IT IS NOT IN DISPUTE THAT THE CHEMICA L BENEFICIATION PLANT WAS ALREADY ESTABLISHED BY TIDCO AND ON ACCOUNT OF THEIR NOT BE ING ABLE TO ACHIEVE THE DESIRED RESULT, THE ASSESSEE WAS INVITED TO TAKE OVER THE P ROJECT, AS THE ASSESSEE POSSESSED EXPERTISE IN THE FIELD. THIS IS HOW THE ASSESSEE ST EPPED INTO THE PROJECT AND BY TURN OF EVENTS, THE GOVERNMENT GRANTED APPROVAL DURING THE YEAR 1998. 25. AS COULD BE SEEN FROM THE ORDER PASSED BY THE CIT (A), THE ASSESSEE HAD ENTERED INTO AN ARRANGEMENT WITH TIDCO AS WELL AS WITH IDBI AND FIXED THE PROJECT COST WITH A DEBT EQUITY RATIO, WHICH WAS APPROVED BY THE GOVERN MENT OF TAMIL NADU AND THEREAFTER, STEPS WERE TAKEN TO ACQUIRE LAND, IMPORT MACHINERY ETC. IN THE MEANTIME, 12 YEARS HAD PASSED BY AND THE PROJECT HAD NOT TAKEN OFF. THE ID BI HAD WITHDRAWN FROM THE PROJECT, AS IT WAS FOUND TO BE UNVIABLE AND ANOTHER CO-PROMO TER VIZ., M/S. KHALTAN SUPERMAG LIMITED WAS BROUGHT IN AND A JOINT SECTOR COMPANY W AS FORMED WITH THE ASSESSEE SUBJECT TO CERTAIN CONDITIONS. HOWEVER, THE SAID CO -PROMOTER, M/S. KHALTAN SUPERMAG LIMITED EXPRESSED INABILITY TO BE A PART OF THE PRO JECT AND AFTER 12 YEARS, THE GOVERNMENT TOOK A DECISION TO SELL THE PROJECT AND CONSEQUENTLY, CANCELLED THE ALLOTMENT OF 47 ACRES OF LAND IN FAVOUR OF THE ASSE SSEE. THE ABOVE FACTS CLEARLY DEMONSTRATE THAT THE ASSESSEE THOUGH HAD ENTERED IN TO ARRANGEMENT WITH THE BANKS AND CO-PROMOTERS AND TOOK ACTION FOR ACQUISITION OF LAND, IMPORT OF MACHINERIES, ETC., NO 13 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 NEW VENTURE WAS ESTABLISHED BY THE ASSESSEE. THE VE NTURE, WHICH WAS TO BE TAKEN OVER BY THE ASSESSEE AND OPERATED DID NOT FRUCTIFY, NOT ON ACCOUNT OF THE CONDUCT OF THE ASSESSEE, BUT ON ACCOUNT OF THE DECISION OF THE GOV ERNMENT OF TAMIL NADU. IN OUR CONSIDERED VIEW, THE DECISION OF THE GOVERNMENT OF TAMIL NADU TO SELL THE PROJECT IS A VERY IMPORTANT FACT, WHICH HAS TO BE BORNE IN MIND TO DECIDE AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE WAS CAPITAL OR REVENUE IN NATURE. 26. THE ASSESSING OFFICER FELL IN ERROR IN GOING BY TH E FACT THAT THE EXPENDITURE WAS INCURRED FROM THE CAPITAL ACCOUNT FORGETTING THAT T HE TEST TO BE APPLIED TO ASCERTAIN AS TO WHETHER THE EXPENDITURE IS REVENUE OR CAPITAL IS NO T BASED ON WHERE THE FUNDS WERE DRAWN FROM. THE BROAD PARAMETERS AND TESTS, WHICH H AVE BEEN LAID DOWN BY VARIOUS DECISIONS ARE THAT THERE SHOULD BE AN ENDURING BENE FIT, WHICH SHOULD ACCRUE TO THE ASSESSEE AND THERE SHOULD BE A CREATION OF A NEW AS SET. IN THE INSTANT CASE, BOTH THESE PARAMETERS REMAIN UNFULFILLED. 27. THE HIGH COURT OF DELHI IN INDO RAMA SYNTHETICS LT D. (SUPRA) HELD THAT IF THE EXPENDITURE IS INCURRED FOR STARTING A NEW BUSINESS , WHICH WAS NOT CARRIED OUT BY THE ASSESSEE EARLIER, THEN SUCH EXPENDITURE WAS HELD TO BE CAPITAL IN NATURE. HOWEVER, IF THE EXPENDITURE INCURRED IS IN RESPECT OF THE SAME BUSI NESS, WHICH IS ALREADY CARRIED ON BY THE ASSESSEE, EVEN IF IT IS FOR THE EXPANSION OF TH E BUSINESS, VIZ., TO START A NEW UNIT, WHICH IS SAME AS EARLIER BUSINESS AND THERE IS UNIT Y OF CONTROL AND A COMMON FUND, THEN SUCH AN EXPENSE IS TO BE TREATED AS BUSINESS EXPEND ITURE AND IN SUCH A CASE WHETHER IT IS A NEW BUSINESS/ASSET WOULD BECOME A RELEVANT FAC TOR. 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 TH E 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 DECI SION OF THE GAUHATI HIGH COURT IN DY. CIT V. ASSAM ASBESTOS LTD. [2003] 263 ITR 357/1 32 TAXMAN 808. THE HIGH COURT OF CALCUTTA IN THE CASE OF BINANI CEMENT LTD. (SUPR A), CONSIDERED A CASE WHERE THE TRIBUNAL DISALLOWED THE EXPENDITURE ALLEGEDLY INCUR RED BY THE ASSESSEE FOR PREPARING FEASIBILITY STUDY REPORT AND CAPITAL WORK-IN-PROGRE SS IN THE EARLIER YEARS BUT WRITTEN OFF DURING THE PREVIOUS YEAR, SINCE THE PROPOSED PROJEC T WAS ABANDONED. THE COURT AFFIRMED THE VIEW TAKEN BY THE CIT (A), WHERE IT WA S HELD THAT THE COMPANY CLAIMED AS ALLOWABLE THE EXPENDITURE ON THIS ABANDONED PROJECT . WHILE IT WAS FOUND TO BE UNVIABLE, THE EXPENDITURE ON IT WAS FOR THE PURPOSE OF BUSINE SS AND IT WAS NOT CLAIMED OR ALLOWED EARLIER AS BUSINESS EXPENDITURE BECAUSE IT WAS OF C APITAL NATURE ENTITLED TO DEPRECIATION AFTER COMPLETION AND ON COMMENCEMENT OF ITS USE FOR BUSINESS AND THAT STAGE HAVING NOT REACHED AND NO ASSET HAVING COME INTO EXISTENCE , THE CAPITAL WORK-IN-PROGRESS HAD TO BE WRITTEN OFF AS SUCH. 30. IN THE CASE OF ASIA POWER PROJECTS (P.) LTD. (SUPR A), THE HIGH COURT OF KARNATAKA HELD THAT, IF THE ASSESSEE INCURS A LIABILITY AND W HEN THE CONTRACT UNDER WHICH THAT LIABILITY WAS INCURRED WAS TERMINATED AND WHEN NO A MOUNTS UNDER THE OR IN PURSUANCE OF A CLAIM IS RECEIVABLE, HE IS ENTITLED TO CLAIM THE SAID AMOUNT INCURRED AS EXPENDITURE IN IMPLEMENTING THE CONTRACT AS A SET OFF UNDER SECTIO N 37(1) READ WITH 28 OF THE INCOME TAX ACT, 1961. 14 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 31. INSOFAR AS THE ABANDONED FEATURE FILMS ARE CONSIDE RED, A DIVISION BENCH OF THIS COURT IN THE CASE OF TIRUVENGADAM INVESTMENTS (P.) LTD. V. ASSTT. CIT [2016] 95 CCH 0024, REFERRING TO A CIRCULAR ISSUED BY THE CBDT IN CIRCULAR NO.16/2015 DATED 06.10.2015, HELD THAT FILM PRODUCTION EXPENSES OF A BANDONED FILMS SHOULD BE TREATED AS REVENUE EXPENDITURE. THIS DECISION WAS FOLLOWED IN THE CASE OF ASIA POWER PROJECTS P. LTD. (SUPRA). 32. THE LEARNED COUNSEL FOR THE REVENUE STRENUOUSLY CO NTENDED THAT A NEW PROJECT HAD EMERGED AND IT IS IMMATERIAL WHETHER MACHINERY WAS REDUCED TO SCRAP AND ORDERED TO BE SOLD AND WHAT IS REQUIRED TO BE SEEN IS THAT THE EXPENDITURE WAS INCURRED FROM THE CAPITAL ACCOUNT. 33. IN OUR CONSIDERED VIEW, RELIANCE PLACED ON THE DEC ISION OF THIS COURT IN THE CASE OF E.I.D. PARRY (INDIA) LTD. (SUPRA) AND THE KERALA HI GH COURT IN THE CASE OF MALABAR & PIONEER HOSIERY (P.) LTD. (SUPRA) IS OF LITTLE AVAI L, AS IN BOTH CASES, IT WAS FOR A NEW PROJECT, IN CONTRA DISTINCTION WITH THE FACTUAL POS ITION IN THE CASE ON HAND. THEREFORE, THOSE DECISIONS ARE FACTUALLY DISTINGUISHABLE. HEAV Y RELIANCE WAS PLACED ON THE DECISION OF THIS COURT IN THE CASE OF MASCON TECHNICAL SERVI CES LTD. (SUPRA). 34. AT THE FIRST BLUSH IT APPEARS THAT THE DECISION WO ULD HELP THE CASE OF THE REVENUE, BUT ON A CLOSER READING IT PROVES OTHERWISE. THE QUESTI ON WAS WHETHER THE ASSESSEE WAS JUSTIFIED IN SEEKING FOR BIFURCATION OF THE EXPENSE S 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 O F BROOKE BOND INDIA LTD. (SUPRA), IT WAS HELD THAT EXPENDITURE, IN CONNECTION WITH TH E 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 O F 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 TOW ARDS ISSUE EXPENSES INCURRED DURING THE YEAR AND THEY FOUND THERE WAS NO JUSTIFI ABLE 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 N EW ONE AND IT WAS A DECISION TAKEN BY THE GOVERNMENT AFTER ABOUT 12 YEARS AFTER THE PE TITIONER WAS INVITED TO TAKE OVER THE PROJECT, WHICH WAS ALREADY IN EXISTENCE, AS THEY WE RE AN EXPERT IN THE SAME LINE OF BUSINESS. THEREFORE, ON FACTS, WE FIND THAT THE CIT (A) WAS PERFECTLY RIGHT IN DELETING THE ADDITION AND HOLDING THAT THE EXPENDITURE WAS REVEN UE NOT CAPITAL EXPENDITURE. WE MAY POINT OUT THAT THE DECISION IN THE CASE OF IDEAL CE LLULAR LTD. (SUPRA) WAS ALSO A CASE WHERE THE EXPENDITURE WAS INCURRED TO BRING INTO EX ISTENCE A NEW ASSET, WHICH IS NOT SO IN THE CASE ON HAND. THEREFORE, THE SAID DECISION I S ALSO DISTINGUISHABLE ON FACTS. 35. IN THE RESULT, BOTH THE TAX CASE APPEALS ARE ALLOW ED, THE ORDER PASSED BY THE TRIBUNAL IS SET ASIDE AND THE SUBSTANTIAL QUESTIONS OF LAW FRAMED FOR CONSIDERATION ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 15 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 WE FIND THE FACTS OF THE CITE CASE LAW QUITE IDENTI CAL TO THE FACTS OF THE PRESENT CASE. THEREFORE, IN PRINCIPLE, WE AGREE WIT H THE SUBMISSIONS OF LD. AR THAT THE AFORESAID EXPENDITURE, BEING BUSINESS LOSS FOR THE ASSESSEE, WAS ALLOWABLE TO HIM ONCE IT WAS ESTABLISHED THAT T HE PROJECT COULD NOT TAKE- OFF AND THE MANAGEMENT CONSIDERED IT PRUDENT TO WRO TE-OFF THE SAME IN THE BOOKS OF ACCOUNTS. 5.5 AT THE SAME TIME, WHILE GOING THROUGH PAPER BOOK PAGE NUMBERS 25 & 54, WE FIND THAT THE ASSESSEE HAS PLACED TWO IDENTICAL BOARD RESOLUTIONS STATED TO BE PASSED IN TWO DIFFERENT BOARD MEETINGS I.E. 19/02/2007 & 02/07/2007 WHEREIN THE BOARD OF DIRECTORS OF THE AS SESSEE COMPANY HAS DECIDED TO WRITE-OFF THE STATED ADVANCES IN THE BOO KS OF ACCOUNT. THE DATES OF THE TWO BOARD MEETINGS FALL IN TWO DIFFERENT YEA RS AND IT BECOMES IMPORTANT TO ASCERTAIN THE TRUE FACTUAL MATRIX SINC E THE CLAIM OF THE ASSESSEE COULD BE ADMISSIBLE ONLY IN THE YEAR IN WH ICH THE MANAGEMENT FINALLY TOOK A DECISION TO WRITE-OFF THE SAME IN TH E BOOKS OF ACCOUNTS. AS A LOGICAL CONSEQUENCE, IT ALSO BECOME IMPERATIVE TO F IND OUT THAT THE AFORESAID CLAIM HAS NOT BEEN CLAIMED /ALLOWED TO TH E ASSESSEE IN ANY OF THE OTHER YEARS. SECONDLY, LD. CIT(A) HAS NOTED THAT CO MPLETE DETAILS OF EXPENDITURE COULD NOT BE FILED BY THE ASSESSEE. KEE PING 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. A O FOR VERIFICATION OF AFORESAID FACTS. 6. THE APPEAL STAND ALLOWED FOR STATISTICAL PURPOSE S. 16 ITA NO.1115/MUM/2012 ADITYA BIRLA POWER COMPANY LIMITED ASSESSMENT YEAR-2007-08 ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH SEPTEMBER, 2018 SD/- SD/- (C.N.PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07.09.2018 SR.PS:-THIRUMALESH ( COPY OF THE ORDER FORWARDED TO : 1. )*+,-. ( THE APPELLANT 2. 234-. ( THE RESPONDENT 3. 84984 :; < )*+, = ( THE CIT=A< 4. 84984 :; ( CIT CONCERNED 5. DEFG+42H;HIJ K 849)*+,L4)IJ9M K ( DRK ITATK MUMBAI 6. GOPQ, ( GUARD FILE '# $ %'&/ BY ORDERK ( / %)'*+,-'& =DY.(ASSTT.REGISTRAR< *&-.*/0&1 2 / ITAT2 MUMBAI