Crystallised expenditure and year-wise nexus govern deductibility of project costs, with partial relief granted.

Electricity charges for obtaining a project supply connection were allowed in the relevant year because the installation certificate showed permission for commencement of energy supply during that year, the payment was undisputed, and the liability had crystallised in the year of claim. The disallowance was deleted. Borewell expenses incurred in an earlier year and written off in the year under appeal were not allowed because the assessee could not establish that the amount was an advance, that the borewell was put to use in the relevant year, or that there was a proper year-wise nexus with the project. The disallowance was sustained, resulting in only partial relief.

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Issues: (i) Whether electricity charges paid for obtaining supply connection for the project were allowable in the year of claim, and whether they could be treated as prior period expenditure; (ii) Whether borewell expenses incurred in an earlier year but written off in the year under appeal were allowable as deduction.

Issue (i): Whether electricity charges paid for obtaining supply connection for the project were allowable in the year of claim, and whether they could be treated as prior period expenditure.

Analysis: The electricity installation certificate showed that permission for commencement of supply of energy was granted during the relevant previous year. The payment related to the project connection was not disputed, and no contrary material was brought by the Revenue to show that the claim lacked nexus with the year under appeal. In these circumstances, the expenditure was held to have crystallised in the relevant year and was allowable in computation of income.

Conclusion: The disallowance of electricity charges was deleted and the claim was allowed in favour of the assessee.

Issue (ii): Whether borewell expenses incurred in an earlier year but written off in the year under appeal were allowable as deduction.

Analysis: The borewell expenditure was found to have been incurred in an earlier year, and the assessee did not produce material to show that the amount had remained as an advance, that the borewell was put to use during the relevant year, or that the claim had any proper year-wise linkage. The findings of the lower authorities on lack of supporting evidence and on the need to match the expenditure with the relevant project were not displaced.

Conclusion: The disallowance of borewell expenses was sustained and the claim was rejected against the assessee.

Final Conclusion: Relief was granted only on the electricity-charges issue, while the disallowance of borewell expenses was maintained, resulting in a partial allowance of the appeal.

Ratio Decidendi: Expenditure is allowable in the year in which the liability crystallises and is evidenced as relating to the relevant previous year, but a claim for earlier-year expenditure cannot be allowed without proof of its year-wise nexus and supporting material.

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