ACIT, CHENNAI V. M/s. Tamil Nadu Industrial Development Corporation Ltd., CHENNAI

ITA 351/CHNY/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8307 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 08-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2012
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Capital receipt; Commercial expediency; Revised return; Revenue expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 3 51 AND 610/MDS/2012 ASSESSMENT YEAR S :200 7 - 08 AND 2008 - 09 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I II(2) , CHENNAI 600 034. VS. M/S. TAMIL NADU INDUSTRIAL DEVELOPMENT CORPORATION LTD., 19A, RUKMINI LAKSH MIPATHY SALAI, EGMORE, CHENNAI 600 008. [PAN: A AACT3409P ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI JOE SEBASTIAN , CIT - DR / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN , ADVOCATE / DATE OF HEARING : 0 8 . 1 0 .201 5 / DATE OF P RONOUNCEMENT : 05 . 01 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST SEPARATE ORDER S OF THE LD. CIT (APPEALS) - I V , CHENNAI , DATED 02 . 11 . 20 1 1 AND 01.12.2011 RELEV ANT TO THE ASSESSMENT YEAR S 200 7 - 08 AND 2008 - 09 RESPECTIVELY . T HE REVENUE HAS RAISED COMMON GROUND S WITH REGARD TO DELETION OF DISALLOWANCE OF EXPENDITURE BY HOLDING THAT THE WRITE OFF OF THE COST OF INVESTMENTS IN EQUITY SHARES IS ALLOWABLE AS REVENUE LOS S AND ALSO RAISED AN ADDITIONAL GROUND WITH REGARD TO DELETING THE ADDITION MADE IN I.T.A. NO S . 351 & 610/M/12 2 RESPECT OF THE ASIDE GRANT RECEIVED FROM THE CENTRAL GOVERNMENT FOR THE ASSESSMENT YEAR 2007 - 08 . FOR THE ASSESSMENT YEAR 2008 - 09, THE REVENUE HAS ALSO RAISED A GROUND WITH REGARD TO DELETING THE DISALLOWANCE OF .2,65,94,188/ - BEING UNSUCCESSFUL PROJECT PROMOTIONAL EXPENSES WRITTEN OFF. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING UNDER THE GOVERNMENT OF TAMIL NADU ENGAGED IN THE BUSINE SS OF PROMOTION OF INDUSTRIES IN TAMIL NADU BY PARTICIPATING IN EQUITY. THE ASSESSEE HAS FILED ITS ORIGINAL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007 - 08 ON 30.10.2007 DECLARING A BUSINESS LOSS OF .9,02,78,033/ - . SUBSEQUENTLY, THE ASSESSEE HAS FILED IT S REVISED RETURN ON 31.03.2008 DECLARING .18,55,78,033/ - AS BUSINESS LOSS. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTIC E, THE AR OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND FILED THE DETAILS CALLED FOR. AFTER VERIFYING THE DETAILS FILED BY THE ASSESSEE AND CONSIDERING THE SUBMISSIONS DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS COMPLETED THE A SSESSMENT UNDER SECTION 143(3) OF THE ACT BY DETERMINING THE ASSESSEE S INCOME AT .15,98,97,068/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND CHALLENGED TWO ISSUES VIZ., THE FIRST ISSUE RELATES TO DISALLOWANCE OF I.T.A. NO S . 351 & 610/M/12 3 UNSUCCESSFUL PROJECTS WRITTEN OFF BY THE ASSESSEE COMPANY AND THE SECOND ISSUE IS WITH REGARD TO CONSIDERING THE GRANT RECEIVED FROM THE CENTRAL GOVERNMENT AS REVENUE RECEIPTS DISREGARDING THE SUBMISSION OF THE ASSESSEE THAT IT IS A CAPITAL RECEIPT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING T HE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE, THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WITH REGARD TO SECOND ISSUE ALSO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CONSIDERING THE FACTS AND SETTLED RULINGS, THE LD. CIT(A ) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR HAS SUBMITTED THAT WITH REGARD TO WRITTEN OFF OF THE COST OF INVESTMENTS IN EQUITY SHAR ES IS NOT ALLOWABLE AS REVENUE LOSS SINCE THE INVESTMENTS IN GENERAL AND AS PER THE ACCOUNTING PRINCIPLES, THEY ARE TREATED AS CAPITAL IN NATURE, UNLESS THE ASSESSEE IS IN THE BUSINESS OF TRADING IN SUCH SHARES OR SECURITIES. THE LD. DR FURTHER SUBMITTED T HAT THE MAIN BUSINESS OF THE ASSESSEE IS DEVELOPMENT OF INDUSTRIES AND NOT TRADING IN SHARES AND THEREFORE THE SHARES PURCHASED HAS TO BE TREATED AS AN INVESTMENT AND THE ASSESSEE HAS ALSO TREATED THE SHARES AS INVESTMENTS IN THE BALANCE SHEET. SINCE THE A SSESSEE HAS TREATED THE SHARES AS INVESTMENTS, ANY DIMINUTION IN THE VALUE OF SHARES WOULD BE A CAPITAL LOSS AND CANNOT BE ALLOWED AS A REVENUE LOSS. I.T.A. NO S . 351 & 610/M/12 4 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY RELIED ON THE ORDER PASSED BY THE LD. CI T(A), WHEREIN HE HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN I.T.A. NO. 2360/MDS/03 DT. 07.09.2006 . 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKI NG UNDER THE GOVERNMENT OF TAMIL NADU MAINLY TO PROMOTE INDUSTRIES IN TAMIL NADU. THE ASSESSEE HAS DEBITED A SUM OF .6,11,50,145/ - AS INVESTMENTS IN SHARES ALLOTTED BY DIFFERENT COMPANIES. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE EXPENDITURE INCURRED IN THE PROMOTIONAL AND DEVELOPMENTAL ACTIVITIES ARE GROUPED AS PROJECT PROMOTIONAL EXPENSES AND IF THEY AR E SUCCESSFULLY IMPLEMENTED, THE ASSESSEE WILL BE GETTING SHARES BY WAY OF REIMBURSEMENT OF EXPENDITURES INCURRED. THE EXPENDITURES ON UNSUCCESSFUL PROJECTS ARE WRITTEN OFF AS REVENUE EXPENDITURES. ON VERIFICATION OF DETAILS, THE ASSESSING OFFICER HAS OBSER VED THAT THE SHARES WERE ALLOTTED BY THE COMPANIES LONG BACK TO THE ASSESSEE AND THE ABOVE AMOUNT CONSISTS WRITTEN OFF OF COST OF INVESTMENTS IN EQUITY SHARES OF FOUR COMPANIES, WHICH HAVE BEEN WOUND UP AND THERE WAS NO POSSIBILITY OF RECOVERING THE INVES TMENT COST. SINCE THE ABOVE AMOUNT WAS NOT REALIZABLE, THE ASSESSEE HAS WRITTEN OFF THE EXPENDITURE AND ALSO CONVERTED INTO SHARES IN RETURN TO PROJECT EXPENSES. THE SHARES HAVE ALSO BEEN TRANSFERRED TO DE - MAT ACCOUNT. AS THE EXPENDITURE HAS BEEN CONVERTED I.T.A. NO S . 351 & 610/M/12 5 INTO INVESTMENT, THE ASSESSING OFFICER HAS HELD THAT THE SAME WOULD NOT FALL UNDER THE NATURE OF REVENUE AND ACCORDINGLY DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE HAS INVESTED IN THE EQUITY SHARES OF FOUR COMPANIES AND ALL THE FOUR COMPANIES HAVE BECOME DEFUNCT AND HENCE NOTHING WAS REALIZABLE FROM THESE COMPANIES. THEREFORE, THE ASSESSEE HAS WRITTEN OFF AS REVENUE E XPENDITURE. BY RELYING ON THE DECISION IN ASSESSEE S OWN CASE IN I.T.A. NO. 2360 / MDS/03 DATED 07.09.200 6 , THE AR OF THE ASSESSEE HAS STRONGLY CONTENDED THAT WHEN THE PROFIT ON SALE OF DISINVESTMENT IS TO BE TREATED AS INCOME AND CONSEQUENTLY, WHEN THE INVE STMENTS WERE WRITTEN OFF, THEN THE SAME SHOULD BE ALLOWED AS BUSINESS LOSS. THE ABOVE ORDER OF THE TRIBUNAL WAS DELIVERED ON DIFFERENT SET OF FACTS, WHEREIN, THE TRIBUNAL HAS OBSERVED THAT THE INVESTMENT IN QUESTION WAS IN THE NORMAL COURSE OF BUSINESS AND THE DIVIDEND INCOME RECEIVED ON THE SHARES IN QUESTION FORMED PART OF THE BUSINESS INCOME OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE IS HOLDING THE INVESTMENT IN SHARES IN CAPITAL FIELD AND IT WAS NOT TREATED AS STOCK - IN - TRADE , THE REALIZATION OF INVESTMENT AND LOSS ARISING OUT OF IT ONLY IN A CAPITAL FIELD AND IT IS ONLY A CAPITAL LOSS. FOR THIS PURPOSE, THE LD. DR PLACED RELIANCE ON THE JUDGEMENT IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. V. CIT [2013] 354 ITR 35 (AP). ACCORDINGLY, WE REV ERSE THE I.T.A. NO S . 351 & 610/M/12 6 ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY REVENUE IS ALLOWED. 7. WITH REGARD TO THE ADDITIONAL GROUND RAISED BY THE REVENUE RELATES TO DELETING THE ADDITION MADE IN RESPECT OF THE ASID E GRANT RECEIVED BY THE ASSESSEE, THE AS SESSEE HAS RECEIVED THE GRANT OF .9.53 CRORES FROM CENTRAL GOVERNMENT TOWARDS ASIDE AND WRONGLY TREATED THE AMOUNT RECEIVED AS A REV ENUE RECEIPT INSTEAD OF TREATING IT AS A CAPITAL RECEIPT . IT WAS ACTUALLY A CAPITAL GRANT WHICH IS TO BE FURTHER GIVEN AS L OANS/INVESTMENTS TO VARIOUS COMPANIES TOWARDS THE PROMOTION OF INDUSTRIES IN TAMIL NADU AND WHATEVER INCOME THAT IS GENERATED OUT OF THESE LOANS ARE ONLY TO BE OFFERE D AS INCOME . I N VIEW OF THE OBSERVATIONS OF THE COMPTROLLER AND AUDIT GENERAL, THE MISTAKE WAS RECTIFIED AND REVISED RETURN WAS FILED TREATING THE AMOUNT AS CAPITAL RECEIPT . HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE AND TREATED IT AS A REVENUE RECEIPT SINCE THE ASSESSEE HAS TREATED THE SAME AS REVENUE RECEIPT IN THE ORIGINAL RETURN OF INCOME. THEREFORE, THE ASSESSING OFFICER ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 8. BEFORE THE LD. CIT(A), T HE AR OF THE ASSESSEE HAS ARGUED THAT THE AMOUNT RECEIVED BY THE CENTRAL GOVERNMENT IS ONLY TOWARD S CAPITAL GRANT FROM THE MINISTRY OF COMMERCE AND INDUSTRY IN A SCHEME OF GOVERNMENT OF INDIA AND THESE GRANTS WERE DISBURSED BY ASSESSEE COMPANY DURING THE I.T.A. NO S . 351 & 610/M/12 7 YEAR TO ENNORE SEZ COMPANY, PERA M BALUR SEZ AND TANFLORA INFRASTRUCTURE PARK. WHENEVER THERE IS AN I NCOME FROM THESE INVESTMENTS, THE SAME WILL BE OFFERED AS INCOME. BUT THE ENTIRE INVESTMENT CANNOT BE TREATED AS INCOME. THE AR OF THE ASSESSEE HAS ALSO ARGUED THAT EVEN THE C OMPTR O L L ER AND AUDITOR GENERAL OF INDI A , DURING ITS AUDIT HAS M ENTIONED THAT THIS IS ON L Y A CAPITAL GRANT FROM THE CENTRAL GOVERNMENT AND NOT THE INCOME OF THE ASSESSEE COMPANY AND HENCE IT WAS QUESTIONED BY COMPTROLLER AND AUDITOR GENERAL OF INDIA AS TO HOW THE ASSESSEE COMPANY HAS ORIGINALLY TREATED IT AS REVENUE RECEIPT. SUBSEQUENTL Y, THE ASSESSEE COMPANY HAS FILED A REVISED RETURN IN WHICH IT WAS MENTIONED THAT THE RECEIPT IS IN THE NATURE OF CAPITAL AND HENCE TO BE EXCLUDED FROM THE PROFIT & LOSS ACCOUNT FOR THE TAX PURPOSES. AFTER CONSIDERING THE DETAILED EXPLANATION FROM THE AR O F THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 9. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR AND SUBMITTED THAT THE RECEIPTS SHOULD BE TREATED AS REVENUE IN NATURE AND RELIED ON THE DECISION IN TH E CASE OF SAHNEY STEEL & PRESS WORKS LTD. & OTHERS 228 ITR 253 (SC) & CIT V. PONNI SUGARS AND CHEMICALS LTD. 306 ITR 392 (SC). 10. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). I.T.A. NO S . 351 & 610/M/12 8 11. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS RECEIVED THE GRANT OF .9.53 CRORES FROM CENTRAL GOVERNMENT TOWARDS ASIDE AND WRONGLY TREATED THE AMOUNT RECEIVED AS A REV ENUE RECEIPT IN ITS BOOKS. SINCE THE COMPTROLLER AND AUDITOR GENERAL OF INDIA NOTICED THE MISTAKE, SUBSEQUENTLY, THE ASSESSEE HAS RECTIFIED THE MISTAKE AND FILED THE REVISED RETURN WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME. WHEN THE MATTER WAS CARRIED BEFORE THE LD. CIT(A), THE LD. CIT(A) HAS OBSERVED AS UNDER: 5.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE AND I AM OF THE VIEW THAT THE GRANTS RECEIVED UNDER THE ASIDE SCHEME ARE NOT REVENUE RECEIPTS FOR THE FOLLOWING REASONS. A. THERE IS A NODAL AGENCY NOMINATED BY THE STATE GOVERNMENT AND THERE WILL BE A REPRESENTATIVE OF THE STATE GOVERNMENT ON THE BOARD TO DECIDE TO WHOM THE LOANS ARE TO BE GRANTED OR INVESTMENTS ARE TO BE MADE OUT OF THIS 'GRANT' OF CENTRAL GOVERNMENT. THEN, THE GRANTS RELEASED BY THE CENTRAL GOVERNMENTS WILL BE DISBURSED TO VARIOUS COMPANIES THROUGH THE ASSESSEE COMPANY. B. COMPTROLLER & AUDIT OR GENERAL OF INDIA AND OTHER AUDIT AGENCIES OF CENTRAL GOVERNMENT HAVE ALSO MENTIONED THAT THE RECEIPTS SHOULD BE TREATED AS CAPITAL RECEIPTS BECAUSE IT IS NOT THEIR INCOME. IT IS TO BE TREATED AS CORPUS FUND AND INVESTMENTS ARE TO BE MADE OUT OF THESE CR EDITS. WHATEVER THE REVENUE THAT IS YIELDED FROM THESE COMPANIES ONLY HAS TO BE TREATED AS REVENUE RECEIPT. C. NOW, IT IS SETTLED LAW THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ARE NOT CONCLUSIVE AND ALSO NOT BINDING EITHER ON THE ASSESSEE OR ON THE DEPA RTMENT FOR THE TAX PURPOSES. HONOURABLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS HAS HELD THAT THE TREATMENT IN THE BOOKS OF THE ACCOUNT OF THE ASSESSEE IS NOT FINAL AND CONCLUSIVE AND THE LEGISLATIVE INTENT HAS TO PREVAIL OVER THE I.T.A. NO S . 351 & 610/M/12 9 BOOKS OF ACCOUNT OF THE ASSESSEE FOR TAX PURPOSES. EVEN THOUGH, ORIGINALLY, THE ASSESSEE COMPANY HAS TREATED THE GRANT FROM THE CENTRAL GOVERNMENT AS A REVENUE RECEIPT, IT REALISED ITS MISTAKE AND FILED A REVISED RETURN WITHIN THE DUE DATE AND RECTIFIED ITS MISTAKE. IN VI EW OF THE SAME, THE GRANT FROM THE CENTRAL GOVERNMENT IS TREATED AS A CAPITAL RECEIPT AND NOT REVENUE RECEIPT AS HELD BY THE ASSESSING OFFICER. SO THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 12. THERE WAS MISTAKE APPARENT ON THE BOOKS OF ACCOU NTS AND THE SAME WAS RECTIFIED IN VIEW OF THE OBSERVATIONS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA AND OTHER AUDIT AGENCIES OF CENTRAL GOVERNMENT AND MOREOVER THE ASSESSEE HAS RECTIFIED THE MISTAKE AND FILED THE REVISED RETURN WITHIN THE DUE DATE O F FILING OF RETURN OF INCOME. THEREFORE, THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 13. BY RELYING ON THE DECISION IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. & OTHERS (SUPRA), THE LD. DR HAS SUBMITTED THE GRANT RECEIVED F ROM THE CENTRAL GOVERNMENT IS REVENUE IN NATURE. IN THAT CASE, THROUGH A NOTIFICATION THE STATE GOVERNMENT OF ANDHRA PRADESH EXTENDED CERTAIN FACILITIES AND INCENTIVES TO ALL THE NEW INDUSTRIAL UNDERTAKINGS WHICH COMMENCED PRODUCTION ON OR AFTER 01.01.1969 . SINCE ALL THE INCENTIVES ARE PRODUCTION INCENTIVES IN THE SENSE THAT THE COMPANY WILL BE ENTITLED TO THESE INCENTIVES ONLY AFTER IT GOES INTO PRODUCTION. THE SCHEME WAS NOT TO MAKE ANY PAYMENT DIRECTLY OR INDIRECTLY FOR THE SETTING UP OF THE INDUSTRIES. IT IS ONLY AFTER THE INDUSTRIES HAD BEEN SET UP AND PRODUCTION HAD BEEN COMMENCED THAT THE INCENTIVES WERE TO BE GIVEN. HOWEVER, IN THE PRESENT CASE, THE CENTRAL I.T.A. NO S . 351 & 610/M/12 10 GOVERNMENT HAS SANCTIONED THE GRANT TO THE ASSESSEE BEING A PUBLIC SECTOR UNDERTAKING UNDER TH E GOVERNMENT OF TAMIL NADU FOR THE PURPOSE OF PROMOTION OF INDUSTRIES IN TAMIL NADU BY PARTICIPATING IN EQUITY AND THE ASSESSEE COMPANY HAS NOT INVOLVED IN ANY PRODUCTION ACTIVITY, WHEREAS, SAHNEY STEEL & PRESS WORKS LTD. IS A PRIVATE LIMITED COMPANY AND T O IMPROVE ITS PRODUCTION ACTIVITY, THE INCENTIVE WAS GIVEN BY THE STATE GOVERNMENT. THEREFORE, THE CASE RELIED ON BY THE LD. DR HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 14. FURTHER, IN THE CASE OF CIT V. PONNI SUGARS AND CHEMICALS LTD. (SUPR A) ALSO, THE ASSESSEE WAS A COOPERATI VE SOCIETY RUNNING A SUGAR MILL AND THE ELIGIBILITY CONDITION IN THE SCHEMES WAS THAT THE INCENTIVE HAD TO BE UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF AN EXISTING UNIT. IN THE PRESENT CASE, THE ASSESSEE WAS NOT IN RECEIPT OF THE GRANT TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF AN EXISTING UNIT FOR BUSINESS PURPOSE AND MOREOVER THE ASSESSEE IS NOT INVOLVED IN ANY PRODUCTION ACTIVITY AND THE MAIN BUS INESS OF THE ASSESSEE IS PROMOTION OF INDUSTRIES IN TAMIL NADU BY PARTICIPATING IN EQUITY . ACCORDINGLY, THE CASE LAW RELIED ON BY THE LD. DR HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 15. MOREOVER, IN THE PRESENT CASE, THE COMPTROLLER AND AUDI TOR GENERAL OF INDIA AND OTHER AUDIT AGENCIES OF CENTRAL GOVERNMENT HAVE OBSERVED THAT I.T.A. NO S . 351 & 610/M/12 11 THE GRANT OF .9.53 CRORES RECEIVED BY THE ASSESSEE FROM CENTRAL GOVERNMENT TOWARDS ASIDE WAS WRONGLY TREATED THE AMOUNT RECEIVED AS A REV ENUE RECEIPT IN ITS BOOKS AND I N VIEW OF THE ABOVE OBSERVATIONS, THE ASSESSEE REALISED THE MISTAKE AND RECTIFIED THE SAME AND FILED REVISED RETURN BEFORE DUE DATE OF FILING OF RETURN OF INCOME. THEREFORE, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE STANDS CONFIRMED. THUS, THE ADDITIONAL GROUND RAISED BY THE REVENUE STANDS DISMISSED. 16. FOR THE ASSESSMENT YEAR 2008 - 09, THE FIRST EFFECTIVE GROUND RAISED BY THE REVENUE RELATES TO DELETIN G THE DISALLOWANCE TOWARDS WRITE OFF OF INVESTMENTS IN EQUITY SHARES/EXPENDITURE BY WAY OF SHARE APPLICATION MONEY IN RESPECT OF COMPANIES WHICH HAVE BECOME DEFUNCT. SIMILAR GROUND WAS RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007 - 08 AND WE HAVE DECID ED THE ISSUE IN FAVOUR OF THE REVENUE HEREINABOVE. ACCORDINGLY, FOR THE ASSESSMENT 2008 - 09 ALSO, THE GROUND RAISED BY THE REVENUE STANDS ALLOWED . 17. THE NEXT GROUND RAISED BY THE REVENUE IS WITH REGARD TO DISALLOWANCE OF .2,65,94,188/ - BEING UNSUCCESSFUL PROJECT PROMOTIONAL EXPENSES WRITTEN OFF. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE EXPENDITURE RELATES TO EARLIER YEARS AND WAS NOT RELEVANT TO THE CURRENT FINANCIAL YEAR. FURTHER, HE WAS OF TH E OPINION THAT THE SAME WAS CAPITAL IN I.T.A. NO S . 351 & 610/M/12 12 NATURE AND ACCORDINGLY DISALLOWANCE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 18. BEFORE THE LD. CIT(A), THE AR OF THE ASSESSEE HAS STRONGLY CONTENDED THAT THE EXPENSES ON PROJECT PROMOTIONAL ACTIVITY WHICH AR E ULTIMATELY CONSIDERED NOT VIABLE OR NOT IMPLEMENTED ON THE BASIS OF COMMERCIAL EXPEDIENCY AND THEREFORE, THE SAME WERE WRITTEN OFF AS UNSUCCESSFUL PROJECT PROMOTIONAL EXPENSES . IT WAS ALSO SUBMITTED THAT SINCE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROMOTION OF INDUSTRIES IN THE STATE OF TAMIL NADU, THE UNSUCCESSFUL PROJECT PROMOTIONAL EXPENSES WRITTEN OFF ARE IN THE REVENUE FIELD AND REQUIRE TO BE ALLOWED AS BUSINESS EXPEN DITURE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DIRECTED TO DELETE THE DISALLOWANCE MADE BY ASSESSING OFFICER. 19. THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR HAS SUBMITTED THAT THE DEPARTMENT HA S NOT ACCEPTED THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A. NOS. 1413/MDS/2000, 100/MDS/1999, 1669/MDS/2000, 936 & 937/MDS/2003 DATED 04.09.2006 AND THE APPEAL FILED BEFORE THE HON BLE MADRAS HIGH COURT IS PENDING. THEREFORE, IT WAS PLEADE D TO REVERSE THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. 20. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A), WHEREIN HE HAS FOLLOWED THE I.T.A. NO S . 351 & 610/M/12 13 DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EAR LIER ASSESSMENT YEARS. 21. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ISSUES IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS IN I.T.A. NOS. 1413/MDS/2000, 100/MDS/1999, 1669/MDS/2000, 936 & 937/MDS/2003 DATED 04.09.2006, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 9. THE NEXT ISSUE RELEVANT FOR THE ASSESSMENT YEARS 1994 - 95 AND 1999 - 2000 RELATES T O THE ALLOWABILITY OF PROMOTIONAL EXPENSES INCURRED ON UNSUCCESSFUL PROJECTS. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V . SESHASAYEE BROS. P. LTD. 127 ITR 218. IN TH IS CASE, THE ASSESSEE HAD BEEN INVESTING IN SEVERAL PROJECTS AND WHENEVER FEASIBLE, PROMOTING NEW INDUSTRIAL UNDERTAKINGS. IF THE NEW UNDERTAKINGS MATERIALIZED THE EXPENSES WERE TRANSFERRED AND RECOVERED FROM TH E NEW UNIT . HOWEVER, IF THE PROJECT W AS UN SUCCESSFUL, THE ASSESSEE WROTE OFF THE EXPENSES. THE TRIBUNAL HELD THAT AS THE ASSESSEE S BUSINESS WAS PROMOTION OF NEW VENTURES, THE PROJECT EXPENDITURE WAS INCIDENTAL TO THE BUSINESS AND HENCE COULD NOT BE TREATE D AS PRELIMINARY OR CAPITAL IN NATURE AND ACCORDINGLY ALLOWED THE SAME. THE ORDER OF THE TRIBUNAL WAS UPHELD BY THE HON BLE HIGH COURT. RESPECTFULLY FOLLOWING THE PRECEDENT WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 22. BEF ORE US, THE REVENUE COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL AS WELL AS DECISION OF THE HON BLE J URISDICTIONAL HIGH COURT OR FILED ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE ABOVE DECISION. I.T.A. NO S . 351 & 610/M/12 14 THE LD. CIT(APPEALS) HAS RIGHTLY FOL LOWED THE ABOVE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS AND WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS) ON THIS ISSUE . ACCORDINGLY, T HE GROUND RAISED BY THE REVENUE IS DISMISSED. 23. IN THE RESUL T, BOTH THE APPEAL S FILED BY THE REVENUE ARE PARTLY ALLOWED . ORDER PRONOUNCED ON THE 5 TH JANUARY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 05 . 0 1 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.