Tribunal overturns disallowance of 'Project Development cost written off', allows deduction.

The Tribunal allowed the appeal, overturning the disallowance of Rs.7,15,81,164/- towards 'Project Development cost written off'. It emphasized the validity of the assessee's decision to write off costs in the current year after realizing the project's failure, acknowledging the revenue nature of the expenses. The Tribunal held that the expenses were deductible in the current year, contrary to the CIT(A)'s decision to treat them as capital in nature and deny depreciation.

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Issues:
Confirmation of disallowance of Rs.7,15,81,164/- towards 'Project Development cost written off'.

Analysis:
The appeal challenged the correctness of the order passed by the CIT(A)-6, Pune regarding the disallowance of Rs.7,15,81,164/- made by the Assessing Officer towards 'Project Development cost written off'. The Assessing Officer observed that the majority of project costs were incurred in earlier years, with only a salary cost incurred in the year under consideration. The assessee explained that the project was shelved after realizing it was not feasible, leading to the write-off. The AO accepted the expenditure's deductibility but disputed the timing of the write-off. The CIT(A) upheld the disallowance, considering the expenses as capital in nature and denying depreciation due to the project not being utilized. The Tribunal noted the project's unsuccessful outcome and the costs being written off due to its unviability. The AO did not contest the expenses' allowability but questioned the year of deductibility. The Tribunal held that the assessee's decision to write off the costs in the current year, upon realizing the project's failure, was valid. As the revenue nature of the costs was undisputed, the Tribunal allowed the deduction of Rs.7.15 crore for the current year, overturning the impugned order partially.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of respecting the assessee's decision on the timing of project write-offs and recognizing the revenue nature of the costs incurred.

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