TaxTMI 
TaxTMI 
2021 (7) TMI 893
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat assessee had written off expenses of Rs. 1,81,29,722/- in P&L related to abandoned sugar project. Vide this office notice u/s. 142(1), assessee was asked to explain why these expenses should not be added to computation of income as these expenditure is capital in nature. In response, assessee vide its letter dated 7.10.2016 and 21.10.2016 has furnished the details of sugar project expenses incurred from 2007 to 2013. 3.1 The facts are that the assessee has planned to install 3500TPD integrated sugar mill, 50 KLPD ethanol plant and 20MW co-generation power plant at Mosttor Village, Yadgir District, Karnataka. The company has obtained the in-principle approval from government of Karnataka for establishing the factory. The company has purchased 97 acres and 19 guntas of land for establishment of the project. The nature of the" expenses incurred under the head "sugar project expenses written off' are contract expenses, Vehicles, Engineering and consultancy charges, purchase of pipeline, jungle clearance, upfront fee towards loan, TA/DA bills, purchase of assets and other site expenses. The assessee explained that the reason for abandoning the project was that "by the time i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usiness expenditure-Allowable as Assessment year 1971-72 Assessee spent some amount on project reports on manufacturing insecticide formulation and for survey report on extra melkral alcohol - Assessee's claim as revenue expenditure was disallowed as project reports did not materialize and as the expenditure was incurred with a view to manufacturing new products - Whether expenditure was attributable to capital having been incurred with a view to bringing an asset or advantage into existence and having enduring benefit-Held, yes - Whether, merely because project did not materialize, nature of expenditure would not change to revenue - yes" 3.3 The existing case law on this issue are reviewed by the Hon'ble Delhi High court in the case of CIT vs. Priya Village Roadshows Ltd. 228 CTR 271 wherein the Hon'ble Delhi High Court not only considered its own order in the case of Triveni engineering Works Ltd. us. CIT 232 ITR 639 and CIT vs. Modi Industries 200 ITR 341 but also considered the principles established by the Hon'ble Supreme Court in the case of empire Jute Co. Ltd. vs. CIT 124 ITR 1 and the leading case on the issue of Atherton us. British Insulated Helsby Cabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Board in Board Meeting held on 30-01-2007. Accordingly appellant filed Industrial Entrepreneur Memorandum (IEM) and obtained acknowledgement from Ministry of Commerce and Industry, Government of India which is a pre requisite for setting up an Industry. Thereafter the Appellant started taking various steps required for setting up sugar factory. Appellant also filed application with various banks viz., Andhra Bank, SCF Branch, Somajiguda, State Bank of India, Industrial Finance Branch, Somajguda, Canara Bank, Somajiguda Branch, Punjab National Bank, Musheerabad Branch, Indian Bank, Hyderabad Main Branch, Abids, Oriental Bank of Commerce, Jubilee Hills Branch By the time the Appellant obtained all the required approvals (rom Government of Karnataka in 2014, demand for Sugar declined and most of banks except Andhra Bank expressed their inability to finance Sugar Projects as they are overexposed to sugar industry. As the Sugar factory requires huge capital for setting up and as the Appellant could not arrange required finances, Appellant decided not to pursue setting up sugar factory and decided to write off the revenue expenditure incurred for setting up sugar factory in its Board m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ative expenses incurred for setting up sugar factory is allowable as deduction. Similarly view is held in the following cases also though facts of the cases are slightly different. i) Indorama Synthetics Ltd. us. CIT (333 ITR 18 - Del HC) ii) CIT us. Tata Robbins Fraser Ltd. (253 CTR 227-Jarkhand HC) iii) Binani Commercial Ltd. vs. CIT (380 ITR 116 - Cal HC)" 5.3 I have carefully considered the submissions of the appellant as well as the order of the Assessing Officer. It is clear from the AR's submission that the impugned expenses were incurred on the setting up of a new project i.e., a sugar factory, which could not take off. It is the contention of the AR that the expenses, which have been written off during the year under consideration, are revenue expenses; while the A.O. has disallowed the same, holding the expenses to be capita] in nature. Various judgments on this issue, relied upon by the appellant's AR, have been perused. It is seen that the said judgments do not help the case of the appellant, since they are on a different set of facts. The issue, in all its aspects, has been elaborately discussed by the Hon'ble Delhi High Court in the case of CIT Vs.....