TaxTMI 
TaxTMI 
2016 (3) TMI 544
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....he ld. CIT(A) erred in deleting the disallowance of Rs. 1,87,16,047/-, held as pre-operating expense for a "Mawa project" a new project unconnected with existing business as capital in nature and not deductible u/s 37(1) of the Act." 2. "On the facts and circumstances of the case and in law, the ld. CIT(A) erred in considering the expenditure of Rs. 1,87,16,047/- incurred by the assessee on the MAWA project as expenditure incurred for expansion of the existing business of the assessee when it was totally a new business unconnected with the existing business." 2. The common issue raised in the ground no. 1&2 relates to deletion of disallowance of Rs. 1,87,16,047/- on account of pre-operating expense for a "Mawa Project". 3. Th....
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.... was incurred in connection with starting a new project Mawa and the expenditure were incurred for setting a new factory at Amritsar and thus not for the expansion and extension of business but altogether new business. The ld. CIT(A) allowed the appeal of the assessee by following the order of his predecessor in the assessment year 2009-10 by holding that a similar issue came up in assessment year 2009-10 which was decided in favour of the assessee. 4. ld. AR, at the outset, pointed out that the issue in the present appeal is covered in favour of the assessee by its own order in ITA No.1051/Mum/2013 (A.Y. 2009-10) dated 28.8.2015 and therefore prayed that the appeal of the department be dismissed. Ld. DR was in agreement with the argumen....
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....d on acquisition of the capital assets such as plant and machinery, land and building, technical know-how etc., is included in the expenditure claimed by the assessee. 9. New product vs New business: Memorandum of Association of the assessee provides for the following main object of the business of the assessee and the same reads as under: "...to produce or cause to be produced, buy, process, grade, pack, store and sell milk products and ice-cream" 9.1. From the above it is evident that the assessee is engaged in the manufacture of the dairy/milk products, ice creams etc. Accordingly, the manufacture of product of the assessee does not stop with the ice-creams only. Assessee manufactures the ice-creams for the Bas....
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....ave been set up. In the instant case, none of these tests are cleared. AO has not made out that the Mawa division is entirely separate from the points of the above and it is unconnected to the 'ice-cream divisions. Actually, both these divisions are under the same management-control and are financially interconnected. In that sense, the CIT(A) has not applied his mind to the said settled legal propositions. 12. Aborted Expenditure: Further, it is a decided issues legally that the capital expenditure incurred on the 'capital assets' of a aborted project is not an allowable expenditure. However, the 'revenue expenditure' such as the salaries, wages, travelling, rent etc of an aborted project is an allowable expend....