TaxTMI 
TaxTMI 
2015 (3) TMI 849
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....en construction/acquisition of new facility is abandoned at the work-in-progress stage, the expenditure does not result in an enduring advantage and such expenditure, when the same is written off, has to be allowed under section 37 of the Income Tax Act, 1961. The learned Tribunal reversing the order of CIT (A) held that the expenditure incurred in the earlier years could not be deducted in the year under consideration. Aggrieved by the order of the learned Tribunal, the assessee has come up in appeal. The following question of law was framed when the appeal was admitted. "Whether the Tribunal substantially erred in law in disallowing the expenditure allegedly incurred by the assessee for preparation of the feasibility study report and ca....
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....e. However, the Tribunal found that the expenditure did not result in bringing into existence any capital asset of enduring in nature. The Tribunal further found that the decision of the Calcutta High Court in the case of Hindusthan Aluminium Corporation Ltd. v. CIT [1986] 159 ITR 673 was applicable and following that decision held that the expenditure was allowable as incurred wholly and exclusively for the purpose of the assessee's business. Therefore, the Tribunal deleted the disallowance. The case relied upon by the Tribunal was subsequently followed in the case of Asiatic Oxygen Ltd. v. CIT [1991] 190 ITR 328 (Cal). This court in the said case reiterated the view taken in Hindusthan Aluminium Corporation Ltd.'s case [1986] 159 ITR 673 ....
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....lar income acccrued or arose." In Swadeshi Cotton and Flour Mills Pvt. Ltd. on a similar question the said court held:- "The system of re-opening of accounts does not fit in with the scheme of the Income-tax Act. As far as receipts are concerned there can be no re-opening of accounts, and the position is the same in respect of expenses". Mr. R.N Bandopadhyay, learned Advocate appearing on behalf of the Revenue relying upon the decision in Delhi Tourism and T.D.C Ltd. Vs. CIT reported in (2006) 285 ITR (Delhi) submitted that the expenditure was rightly disallowed by the learned Tribunal as it was made and related to earlier years. We accept Mr. Bajoria's submission regarding the expenditure made for construction/acquisition of new facili....
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.... There would have been no occasion to claim the deduction if the work-in-progress had completed its course. Because the project was abandoned the work-in-progress did not proceed any further. The decision to abandon the project was the cause for claiming the deduction. The decision was taken in the relevant year. It can therefore be safely concluded that the expenditure arose in the relevant year. Reference in this regard may be made to the decision in the case of CIT Vs. Indian Mica Supply Co. P. Ltd. reported in (1970) 77 ITR 20 (SC) wherein the Supreme Court in considering a claim for deduction on arrear lease rents, ascertained subsequently consequent to a compromise arrived in the suit and paid in the relevant assessment year held, in....