Keerthi Industries Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-2(1), Hyderabad

ITA 381/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0626 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 19-05-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 22-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 381/HYD/2019 ASSESSMENT YEAR: 2014-15 KEERTHI INDUSTRIES LIMITED, HYDERABAD [PAN: AAFCS3938P] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V.SIVA KUMAR, AR FOR REVENUE : SHRI SUNKU SRINIVASU, DR DATE OF HEARING : 19-05-2021 DATE OF PRONOUNCEMENT : 15-07-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2014-15 ARISES FROM TH E CIT(A)-12, HYDERABADS ORDER DATED 04-02-2019 PASSED IN APPEAL NO.10233/2018-19, INVOLVING PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. COMING TO THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FAC TS IN TREATING ITS CLAIM OF RS.1,81,29,772/- INCURRED ON ABA NDONED SUGAR PROJECTS AS CAPITAL IN NATURE. THE CIT(A)S DETAILED DISCUSSION TO THIS EFFECT READS AS UNDER: ITA NO. 381/HYD/2019 :- 2 -: 5. ADDITION ON ACCOUNT OF DISALLOWANCE OF CAPITAL EXPENDITURE OF RS.1,81,29,772/- : 5.1 THE ASSESSING OFFICER MADE THE ADDITION STATING AS UNDER: - '3. DURING ASSESSMENT PROCEEDINGS IT-WAS NOTICED TH AT ASSESSEE HAD WRITTEN OFF EXPENSES OF RS.1,81,29,722/- IN P&L REL ATED TO ABANDONED SUGAR PROJECT. VIDE THIS OFFICE NOTICE U/ S.142(1), ASSESSEE WAS ASKED TO EXPLAIN WHY THESE EXPENSES SHOULD NOT BE ADDED TO COMPUTATION OF INCOME AS THESE EXPENDITURE IS CAPIT AL IN NATURE. IN RESPONSE, ASSESSEE VIDE ITS LETTER DATED 7.10.2016 AND 21.10.2016 HAS FURNISHED THE DETAILS OF SUGAR PROJECT EXPENSES INCURRED FROM 2007 TO 2013. 3.1 THE FACTS ARE THAT THE ASSESSEE HAS PLANNED TO INSTALL 3500TPD INTEGRATED SUGAR MILL, 50 KLPD ETHANOL PLANT AND 20 MW CO- GENERATION POWER PLANT AT MOSTTOR VILLAGE, YADGIR D ISTRICT, KARNATAKA. THE COMPANY HAS OBTAINED THE INPRINCIPLE APPROVAL F ROM GOVEMMENT OF KARNATAKA FOR ESTABLISHING THE FACTORY. THE COMP ANY HAS PURCHASED 97 ACRES AND 19 GUNTAS OF LAND FOR ESTABL ISHMENT OF THE PROJECT. THE NATURE OF THE' EXPENSES INCURRED UNDER THE HEAD 'SUGAR PROJECT EXPENSES WRITTEN OFF' ARE CONTRACT EXPENSES , VEHICLES, ENGINEERING AND CONSULTANCY CHARGES, PURCHASE OF PI PELINE, JUNGLE CLEARANCE, UPFRONT FEE TOWARDS LOAN, TA/DA BILLS, P URCHASE OF ASSETS AND OTHER SITE EXPENSES. THE ASSESSEE EXPLAINED THAT THE REASON FOR ABANDONI NG THE PROJECT WAS THAT 'BY THE TIME IT OBTAINED ALL THE APPROVALS FROM GOUT OF KARNATAKA, DEMAND FOR SUGAR DECLINED AND BANKS EXPR ESSED THEIR INABILITY TO FINANCE SUGAR PROJECTS AS THEY WERE OV ER EXPOSED TO SUGAR INDUSTRY.' 3.1.2 FURTHER THE ASSESSEE VIDE LETTER DATED 21.10. 2016 SUBMITTED MINUTES OF MEETING OF THE BOARD OF DIRECTORS, WHERE IN IT IS MENTIONED AS UNDER 'RESOLVED THAT TO DEBIT THE EXPENDITURE THAT HAS BE EN CAPITALIZED IN THE SUGAR DIVISION, FROM INCEPTION TO TILL DATE OF RS.1,81,29,772/- TO THE REVENUE ACCOUNT AS THE CONTINUITY OF THE PROJEC T IS IN UNCERTAIN'. HOWEVER THE AUDITED ACCOUNTS OF THE COMPANY DO NOT SPEAK ABOUT THE ABANDONING THE PROJECT. ON PAGE 8 OF THE AUDITED AC COUNTS, IT HAS BEEN MENTIONED THAT IN VIEW OF THE ADVERSE MARKET F OR SUGAR INDUSTRY AND ONGOING CASH CRUNCH IN THE COMPANY, COULD NOT T AKE 'EFFECTIVE STEPS' AS DEFINED IN SUGAR CONTROL ORDER TO IMPLEME NT THE SUGAR PROJECT'. HENCE THE COMPANY HAS NOT DECIDED TO ABAN DON THE PROJECT. THE COMPANY HAS PURCHASED LAND AND HAS SHOWN IT IN THE FIXED ASSETS SCHEDULE OF SUGAR DIVISION. IT IS WRITING OF F OTHER EXPENSES SHOWN AS CAPITAL WORK IN PROGRESS. AS THE COMPANY H AS NOT DECIDED ITA NO. 381/HYD/2019 :- 3 -: TO ABANDON THE PROJECT, THE WRITE OFF IS CONTINGENT WHICH CANNOT BE ALLOWED IN COMPUTATION OF INCOME. 3.2 IN THIS REGARD IT IS FURTHER SUBMITTED THAT UND ER THE PROVISIONS OF THE ACT, ONLY THE REVENUE EXPENSES ARE ALLOWABLE AS DEDUCTIONS WHILE COMPUTING THE TAXABLE INCOME UNDER THE HEAD INCOME FROM BUSINESS. THE EXPENSES IN CAPITAL NATURE CANNOT BE ALLOWED AS REVENUE EXPENSES UNDER ANY OF THE SECTIONS 30 TO 37 OF THE INCOME TAX ACT. HOWEVER THERE ARE CERTAIN EXPENSES WHICH ARE PRIMAR ILY CAPITAL EXPENSES IN NATURE BUT ALLOWABLE AS DEDUCTION BEING PRELIMINARY AND PREOPERATIVE EXPENSES. IN THE PRESENT CASE THE CAPI TAL WORK IN PROGRESS, CLAIMED AS WRITTEN OFF IS NOT IN NATURE O F PRELIMINARY OR PREOPERATIVE EXPENSES. FURTHER THE EXPENDITURE INCU RRED IS NOT WHOLLY AND EXCLUSIVELY FOR THE PRESENT BUSINESS OF THE ASS ESSEE BUT IT IS CAPITAL EXPENDITURE INCURRED TO SET UP ANOTHER BUSI NESS. 3.3 THE ISSUE OF WRITE OFF OF CAPITAL EXPENDITURE I NCURRED ON ABANDONED PROJECTS HAS BEEN SUBJECT OF DISCUSSION O F VARIOUS COURT DECISIONS. THE DELHI HIGH COURT IN THE CASE OF TRIV ENI ENGINEERING WORKS LTD VERSUS CIT 100 TAXMAN 19. HAS HELD THE SA ME AS CAPITAL EXPENSES. THE RELEVANT HEAD NOTE IS QUOTED BELOW- 'SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINE SS EXPENDITURE - ALLOWABLE AS ASSESSMENT YEAR 1971-72 ASSESSEE SPENT SOME AMOUNT ON PROJECT REPORTS ON MANUFACTURING INSECTICIDE FOR MULATION AND FOR SURVEY REPORT ON EXTRA MELKRAL ALCOHOL - ASSESSEE'S CLAIM AS REVENUE EXPENDITURE WAS DISALLOWED AS PROJECT REPORTS DID N OT MATERIALIZE AND AS THE EXPENDITURE WAS INCURRED WITH A VIEW TO MANUFACTURING NEW PRODUCTS - WHETHER EXPENDITURE WAS ATTRIBUTABLE TO CAPITAL HAVING BEEN INCURRED WITH A VIEW TO BRINGING AN ASS ET OR ADVANTAGE INTO EXISTENCE AND HAVING ENDURING BENEFIT -HELD, Y ES - WHETHER, MERELY BECAUSE PROJECT DID NOT MATERIALIZE, NATURE OF EXPENDITURE WOULD NOT CHANGE TO REVENUE - YES' 3.3 THE EXISTING CASE LAW ON THIS ISSUE ARE REVIEWE D BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRIYA VILLA GE ROADSHOWS LTD. 228 CTR 271 WHEREIN THE HON'BLE DELHI HIGH COURT NO T ONLY CONSIDERED ITS OWN ORDER IN THE CASE OF TRIVENI ENG INEERING WORKS LTD. US. CIT 232 ITR 639 AND CIT VS. MODI INDUSTRIES 200 ITR 341 BUT ALSO CONSIDERED THE PRINCIPLES ESTABLISHED BY THE H ON'BLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. VS. CIT 1 24 ITR 1 AND THE LEADING CASE ON THE ISSUE OF ATHERTON US. BRITISH I NSULTATED HELSBY CABLES LTD. (L925) 10TC 155 AND CAME TO A CONCLUSIO N AS UNDER: '10. A HARMONIOUS READING OF THE AFORESAID TWO JUDG MENTS OF THIS COURT, NAMELY, TRIVENI ENG. WORKS LTD. (SUPRA) ON T HE ONE HAND, MODI INDUSTRIES (SUPRA) ON THE OTHER, WOULD CLEARLY DEMO NSTRATE THAT ONE HAS TO KEEP IN MIND THE ESSENTIAL PURPOSE FOR WHICH SUCH AN EXPENDITURE IS INCURRED. IF THE EXPENDITURE IS INCU RRED FOR STARTING NEW ITA NO. 381/HYD/2019 :- 4 -: BUSINESS WHICH WAS NOT CARRIED OUT BY THE ASSESSEE EARLIER, THEN SUCH EXPENDITURE IS HELD TO BE OF CAPITAL NATURE. I N THAT EVENT IT WOULD BE IRRELEVANT AS TO WHETHER PROJECT REALLY MATERIAL IZED OR NOT. HOWEVER, IF THE EXPENDITURE IS INCURRED IN RESPECT OF THE SAME BUSINESS WHICH IS ALREADY CARRIED ON BY THE ASSESSE E, EVEN IF IT IS FOR THE EXPANSION OF THE BUSINESS, NAMELY, TO START NEW UNIT WHICH IS SAME AS EARLIER BUSINESS AND THERE IS UNIT OF CONTR OL AND A COMMON FUND, THEN SUCH AN EXPENSE IS TO BE TREATED AS BUSI NESS EXPENDITURE. IN SUCH CASE WHETHER NEW BUSINESS/ASSET COMES INTO EXISTENCE OR NOT WOULD BECOME A RELEVANT FACTOR. IF THERE IS NO CREA TION OF NEW ASSET COMES INTO EXISTENCE WHICH IS OF ENDURING BENEFIT, THEN SUCH EXPENDITURE WOULD BE OF CAPITAL NATURE.' HENCE IT HAS BEEN LAID DOWN BY HON'BLE HIGH COURT T HAT IF THE EXPENDITURE IS INCURRED FOR STARTING NEW BUSINESS W HICH WAS NOT CARRIED OUT BY ASSESSED EARLIER, THEN EXPENDITURE I S CAPITAL IN NATURE. THE ITAT MUMBAI HAS IN ITS DECISION IN CASE OF ESSE L PREPACK: LTD (ITA NO. 712286 7408/MUM/2007) HELD EXPENSES INCURR ED TOWARDS ABANDONED PROJECT ARE CAPITAL IN NATURE. FURTHER TH E ITAT CHENNAI IN CASE OF M/S. FAURECIA EMISSIONS CONTROL TECHNOLOGIE S INDIA PUT. LTD HAS HELD THAT CLAIM OF CAPITAL WORK IN PROGRESS ON ACCOUNT OF ABANDONED PROJECT CANNOT BE ALLOWED AS REVENUE EXPE NDITURE. 3.4 IN VIEW OF ABOVE DISCUSSION AND FACTS OF THE CA SE, IT IS HELD THAT AMOUNT OF RS.1,81,29,772/- IS A CAPITAL EXPENDITURE AND CANNOT BE ALLOWED AS REVENUE EXPENDITURE. 5.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT'S AR FILED WRITTEN SUBMISSIONS, CONTESTING THE SAID DISA LLOWANCES AS UNDER: 'THE APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CEMENT, PRINTED CIRCUIT BOARDS AND GENE RATION & SALE OF WIND POWER. IN THE YEAR 2007, WHEN THE APPELLANT WA S EARNING PROFITS, IT WANTED TO DIVERSIFY INTO OTHER BUSINESS ES AND DECIDED TO SET UP A SUGAR FACTORY AS PER THE DECISION OF ITS BOARD IN BOARD MEETING HELD ON 30-01-2007. ACCORDINGLY APPELLANT FILED IND USTRIAL ENTREPRENEUR MEMORANDUM (IEM) AND OBTAINED ACKNOWLE DGEMENT FROM MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA WHICH IS A PRE REQUISITE FOR SETTING UP AN INDUSTRY. THER EAFTER THE APPELLANT STARTED TAKING VARIOUS STEPS REQUIRED FOR SETTING U P SUGAR FACTORY. APPELLANT ALSO FILED APPLICATION WITH VARIOUS BANKS VIZ., ANDHRA BANK, SCF BRANCH, SOMAJIGUDA, STATE BANK OF INDIA, INDUSTRIAL FINANCE BRANCH, SOMAJGUDA, CANARA BANK, SOMAJIGUDA BRANCH, PUNJAB NATIONAL BANK, MUSHEERBAD BRANCH, INDIAN BAN K, HYDERABAD MAIN BRANCH, ABIDS, ORIENTAL BANK OF COMMERCE, JUBI LEE HILLS BRANCH BY THE TIME THE APPELLANT OBTAINED ALL THE REQUIRED APPROVALS (ROM GOVERNMENT OF KARNATAKA IN 2014, DEMAND FOR SUGAR D ECLINED AND ITA NO. 381/HYD/2019 :- 5 -: MOST OF BANKS EXCEPT ANDHRA BANK. EXPRESSED THEIR I NABILITY TO FINANCE SUGAR PROJECTS AS THEY ARE OVEREXPOSED TO S UGAR INDUSTRY. AS THE SUGAR FACTORY REQUIRES HUGE CAPITAL FOR SETTING UP AND AS THE APPELLANT COULD NOT ARRANGE REQUIRED FINANCES, APPE LLANT DECIDED NOT TO PURSUE SETTING UP SUGAR FACTORY AND DECIDED TO W RITE OFF THE REVENUE EXPENDITURE INCURRED FOR SETTING UP SUGAR F ACTORY IN ITS BOARD MEETING HELD ON 29-05-2014. ACCORDINGLY REVENUE EXP ENSES INCURRED FOR SETTING UP SUGAR FACTORY WERE WRITTEN OFF IN IT S ACCOUNTS FOR THE FINANCIAL YEAR ENDED 31.03.2014 AS ACCOUNTS FOR SUC H YEAR WERE NOT CLOSED BY THE TIME OF BOARD RESOLUTION. THE APPELLANT FURTHER SUBMITS THAT IT IS MANAGED BY A BOARD OF DIRECTORS AND ALL THE ACTIVITIES OF THE COMPANY ARE SUPERVISED AND CONTROLLED BY THE SAID BOARD OF DIRECTORS. THUS THE RE WAS COMMON MANAGEMENT FOR ALL ITS BUSINESSES. HENCE THE APPELL ANT SUBMITS THAT SINCE ALL ITS BUSINESSES ARE MANAGED BY BOARD OF DI RECTORS, THERE IS UNITY OF CONTROL OVER ITS BUSINESSES. THUS SINCE AL L THE BUSINESS ACTIVITIES ARE IN CONTROL OF UNIFIED MANAGEMENT, EX PENDITURE INCURRED WHICH IS OF REVENUE EXPENDITURE FOR SETTING UP SUGA R FACTORY WHICH WAS ABANDONED AS IT WAS NOT FEASIBLE AND PROFITABLE TO SET UP AND OPERATE A SUGAR FACTORY, IS ALLOWABLE AS DEDUCTION. IN THIS REGARD, IT IS ALSO RELEVANT TO NOTE THAT VARIOUS FIXED ASSETS ACQ UIRED FOR SETTING UP SUGAR FACTORY WERE CAPITALIZED AND NO EXPENDITURE O F RS.1,81,29,772/- (DETAILS FURNISHED HEREUNDER) IS O F CAPITAL NATURE. DETAILS FOR EXPENDITURE OF RS.1,81,29,772/- WRITTEN OFF RS. PROFESSIONAL & CONSULTANCY CHARGES 47,83,040 PURCHASE OF PIPELINE & OTHER MATERIALS 30,93,159 BANK CHARGES TERM LOAN UPFRONT FEE & OTHERS 39,10,8 18 JUNGLE CLEARANCE 13,80,681 TA/DA BILLS 12,31,320 RENT 70,000 SALARIES 23,57,241 ENVIRONMENTAL & POLLUTION CLEARANCE EXPENSES 11,47, 991 ADVERTISEMENT CHARGES 41,920 OTHERS-SITE EXPENSES 1,13,302 TOTAL 1,81,29,772 HENCE THE APPELLANT SUBMITS THAT THE ASSESSING OFFI CER IS NOT JUSTIFIED IN DISALLOWING RS.1,81,29,772/- ON THE GROUND THAT SUCH EXPENDITURE IS CAPITAL EXPENDITURE. IN THIS REGARD, KIND ATTENT ION OF LEARNED COMMISSIONER OF INCOME TAX IS INVITED TO A DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CHEMPLAST SANMAR LTD . VS. ASST. COMMISSIONER OF INCOME TAX, CHENNAI (258 TAXMAN 297 - COPY ENCLOSED HEREWITH), WHEREIN IT IS HELD THAT PREOPER ATIVE EXPENDITURE ITA NO. 381/HYD/2019 :- 6 -: INCURRED BY AN ASSESSEE ON NEW LINE OF BUSINESS IS ALLOWABLE AS REVENUE EXPENDITURE SINCE NEW PROJECT WAS MANAGED F ROM COMMON FUNDS AND CONTROL OVER ALL THE BUSINESS UNITS WAS I N THE HANDS OF THE BOARD OF THE ASSESSEE AND THERE WAS UNITY OF CONTRO L. THE APPELLANT THEREFORE SUBMITS THAT THE FACTS IN THE ABOVE CASE BEING SIMILAR TO ITS CASE, PREOPERATIVE EXPENSES INCURRED FOR SETTING UP SUGAR FACTORY IS ALLOWABLE AS DEDUCTION. SIMILARLY VIEW IS HELD IN T HE FOLLOWING CASES ALSO THOUGH FACTS OF THE CASES ARE SLIGHTLY DIFFERE NT. I) INDORAMA SYNTHETICS LTD US. CIT (333 ITR 18 - DE L HC) II) CIT US. TATA ROBBINS FRASER LTD (253 CTR 227- J ARKHAND HC) III) BINANI COMMERCIAL LTD. VS. CIT (380 ITR 116 - CAL HC) 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ORDER OF THE ASSESSING OFFICER. IT IS C LEAR FROM THE AR'S SUBMISSION THAT THE IMPUGNED EXPENSES WERE INCURRED ON THE SETTING UP OF A NEW PROJECT I.E., A SUGAR FACTORY, WHICH CO ULD NOT TAKE OFF. IT IS THE CONTENTION OF THE AR THAT THE EXPENSES, WHICH H AVE BEEN WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION, ARE REVENU E EXPENSES; WHILE THE A.O. HAS DISALLOWED THE SAME, HOLDING THE EXPEN SES TO BE CAPITA] IN NATURE. VARIOUS JUDGMENTS ON THIS ISSUE, RELIED UPON BY THE APPELLANT'S AR, HAVE BEEN PERUSED. IT IS SEEN THAT THE SAID JUDGEMENTS DO NOT HELP THE CASE OF THE APPELLANT, S INCE THEY ARE ON A DIFFERENT SET OF FACTS. THE ISSUE, IN ALL ITS ASPEC TS, HAS BEEN ELABORATELY DISCUSSED BY THE HON'BLE DELHI HIGH COU RT IN THE CASE OF CIT VS. PRIYA ROADSHOWS LTD., (228 ITR 221), WHEREI N IT HAS BEEN HELD THAT 10. A HARMONIOUS READING OF THE AFORESAID TWO JUDG MENTS OF THIS COURT, NAMELY, TRIVENI ENG. WORKS LTD. (SUPRA) ON T HE ONE HAND, MODI INDUSTRIES (SUPRA) ON THE OTHER, WOULD CLEARLY DEMO NSTRATE THAT ONE HAS TO KEEP IN MIND THE ESSENTIAL PURPOSE FOR WHICH SUCH AN EXPENDITURE IS INCURRED. IF THE EXPENDITURE IS INCU RRED FOR STARTING NEW BUSINESS WHICH WAS NOT CARRIED OUT BY THE ASSESSEE EARLIER, THEN SUCH EXPENDITURE IS HELD TO BE OF CAPITAL NATURE. I N THAT EVENT IT WOULD BE IRRELEVANT AS TO WHETHER PROJECT REALLY MATERIAL IZED OR NOT. HOWEVER, IF THE EXPENDITURE IS INCURRED IN RESPECT OF THE SAME BUSINESS WHICH IS ALREADY CARRIED ON BY THE ASSESSE E, EVEN IF IT IS FOR THE EXPANSION OF THE BUSINESS, NAMELY, TO START NEW UNIT WHICH IS SAME AS EARLIER BUSINESS AND THERE IS UNIT OF CONTR OL AND A COMMON FUND, THEN SUCH AN EXPENSE IS TO BE TREATED AS BUSI NESS EXPENDITURE. IN SUCH CASE WHETHER NEW BUSINESS/ ASSET COMES INTO EXISTENCE OR NOT WOULD BECOME A RELEVANT FACTOR. IF THERE IS NO CREATION OF NEW ASSET COMES INTO EXISTENCE WHICH IS OF ENDURING BEN EFIT, THEN SUCH EXPENDITURE WOULD BE OF CAPITAL NATURE.' IT HAS BEEN CLEARLY LAID DOWN BY THE HIGH COURT THA T 'IF THE EXPENDITURE IS INCURRED FOR STARING NEW BUSINESS WH ICH WAS NOT ITA NO. 381/HYD/2019 :- 7 -: CARRIED OUT BY THE ASSESSEE EARLIER, THEN SUCH EXPE NDITURE IS HELD TO BE OF CAPITAL NATURE.' THE CASE OF THE APPELLANT HE RE SQUARELY FALLS IN THIS CATEGORY. THE EXPENSES INCURRED, THEREFORE, BE ING CAPITAL IN NATURE, HAVE BEEN RIGHTLY DISALLOWED BY THE ASSESSI NG OFFICER. THE ADDITION MADE IS THEREFORE CONFIRMED, AND ALL GROUN DS RELATED TO THIS ISSUE ARE DISMISSED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS. IT HAS COME ON RECORD THAT BOTH THE LEARNED LOWER AUTHORITIES HAVE HELD THAT ONCE THE EXPENDITURE INCURRE D FOR STARTING NEW BUSINESS FORMS CAPITAL EXPENDITURE, THE VE RY ANALOGY IS TO BE ADOPTED QUA OF THE ABANDONMENT OF A NEW PROJECT AS WELL. WE FIND NO MERIT IN THE INSTANT REASON ING IN LIGHT OF THE M/S.BINANI CEMENT LTD. VS. CIT (2016) [38 0 ITR 116] (CAL) THAT THE IMPUGNED CLAIM INDEED FORMS REVENU E AND NOT CAPITAL EXPENDITURE. WE THUS REVERSE BOTH THE LEARNER LOWER AUTHORITIES ACTION DECLINING THE ASSESSEES CLAIM FO R THIS SOLE REASON ALONE. 4. THIS ASSESSEES APPEAL IS ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.GO DARA) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 15-07-2021 TNMM ITA NO. 381/HYD/2019 :- 8 -: COPY TO : 1.KEERTHI INDUSTRIES LIMITED, PLOT NO.40, IDA, BALA NAGAR, HYDERABAD. 2.THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1 ), HYDERABAD. 3.CIT(APPEALS)-12, HYDERABAD. 4.PR.CIT-II, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.