TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 37
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....ng the disallowance of Rs..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 business 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 Rs..9,02,78,033/-. Subsequently, the assessee has filed its revised return on 31.03.2008 declaring Rs..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 notice, 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 assessment under section 143(3) of the Act by determining the assessee's income at Rs..15,98,97,068/- after making various additions. 3. The assessee carried the matter in appeal before the....
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.... expenditures incurred. The expenditures on unsuccessful projects are written off as revenue expenditures. On verification of details, the Assessing Officer has observed 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 investment 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 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 expenditure....
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....nts were disbursed by assessee company during the year to Ennore SEZ Company, Perambalur SEZ and Tanflora Infrastructure Park. Whenever there is an income 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 Comptroller and Auditor General of India, during its audit has mentioned that this is only 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. Subsequently, 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 of 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 the case of Sahney Steel & Pres....
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....istake. In view 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 accounts 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 of 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 from 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 schem....
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....llowance 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 decided 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 Rs..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 the opinion that the same was capital in 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 are 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 ass....