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2023 (4) TMI 313

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....amounting to Rs.20,51,000/- and claim of expenses of wage settlement amounting to Rs.81,00,000/-. It was contended that in the second also both the claims of the assessee had been denied with the finding that the assessee had failed to demonstrate fulfillment of conditions which the ITAT had set out in its direction in the first round to be fulfilled by the assessee for the purpose of claiming of said deductions. The ld.counsel for the assessee contended that these finding of the authorities below was contrary to the facts, and therefore, the present appeal before us. 3. Taking first the issue relating to claim of expenses pertaining to abandoned project, the ld.counsel for the assessee pointed out that this issue was raised vide ground no.2 and 2.1 as under: "2. The learned CIT(A) erred in law and on facts in upholding the disallowance of expenses written off incurred on abandoned project - Acrylon Nitric Project of Rs.20,51,000/- made by AO. It is submitted it be so held now. 2.1. The learned CIT(A) erred in law and on facts in exceeding his jurisdiction by adjudicating on the merits of the claim regarding allowability of expenditure on abandoned project written off despite....

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....t the assessee had claimed expenses of Rs.20.51 lakhs incurred on an abandoned project, Acrylon Nitric project entered into as a joint venture with M/s.Modi Rubber Ltd.; that for the said purpose another company had been floated by the name, Gujarat Acrylics Ltd. But since the project did not take off, all expenses incurred by the assessee in the said project amounting to Rs.20,50,939/- was claimed as expenses, which was denied bythe Revenue holding that since the business had not commenced, the expenditure could not be allowed. The ld.counsel for the assessee drew our attention to para-8 of the order wherein the ITAT had adjudicated the issue as under: "8. We have considered the rival submissions and perused the material on record. In our considered view what is to be seen is whether assesseeis able to start a new project. If assessee is not in the line of business and incurs expenditure on setting up of business which business is subsequently abandoned then such expenditure cannot be allowed as there is no business in existence. Where the assessee is already in the business then creating another unit will only be an extension of business. If assessee would have succeeded in cre....

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.... if it was found that it was the assessee who had actually incurred the expenses, same could be allowed to the assessee, and in the process directed the AO to determine the time of payment, mode of payment; creation of the company, Gujarat Acrylics Ltd. and who made the payment and to whom. In effect to allow the claim only on finding the assessee to have incurred the expenses and not the new company floated. 7. The ld.counsel for the assessee thereafter pointed out that in the second round before the Revenue authorities, the assessee had demonstrated incurrence of these expenses by the assessee itself, and not by Gujarat Acrylics Ltd.. Inthis regard, he pointed out that it had been shown to the authorities below that as per the terms of agreement between the assessee and Modi Rubber Ltd. and Madalsa Mauritius, by virtue of which the entity Gujarat Acrylics Ltd. was set up as joint venture of the assessee and Modi Rubber Ltd., and Madalsa Mauritius, it was agreed that the respective parties were to bear cost incurred by them upto31.12.1994. Our attention was drawn to the said agreement dated 6.1.1995 placed before us at PB Page NO.58 to 75, more particularly, Page No.70 where rele....

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....The ld.counsel for the assessee contended that the assessee had clearly demonstrated fulfillment of the above conditions stated by the ITAT in its directions for claiming the impugned expenses, and therefore, the same was allowable. He thereafter drew our attention to the finding of the ld.CIT(A) while upholding the order of the AO at para 5.1.2 of the order. Referring to the same, he stated that claim of expenditure had been denied holding that the assessee had not complied with the directions of the ITAT on the ground that mode of payment; and to whom the payment was made and nature of expenditure claimed had not been furnished by the assessee. The ld.counsel for the assessee contended that the crux of the directions of the ITAT was to allow the claim if it was the assessee who had incurred the expenditure and not the new entity i.e. Gujarat Acrylics Ltd., which he stated had been demonstrated by the assessee, and therefore, authorities below erred in not allowing the claim of the assessee. 11. The ld.DR however, relied on the order of the ld.CIT(A). 12. We have heard the rival contentions and have gone through the directions of the ITAT in the first round. It is evident from....

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....: "3. The learned CIT(A) erred in upholding the disallowance of Rs.81,00,000/- on account of wage settlement stating that the AO has explicitly followed the directions of Hon'ble ITAT despite the fact that appellant had substantiated in accordance with ITAT's directions that claim of wage settlement was finalized during the year and payment had actually been made by appellant. The learned CIT(A) failed to appreciate that the ITAT directed AO to verify that payment is made for such wage settlement and payment in the year for settlement was not required. It is submitted that it be so held now. 3.1. Without prejudice to the above, the learned CIT(A) erred in not adjudicating the ground of the appellant to allow the deduction of wages actually paid amounting to Rs.81,00,000/- in AY 2001-02. It is submitted it be so held now and direction be given." The direction of the ITAT in this regard in the first ground was pointed out to us from page no.84 of the order para-7 as being as under: "7. Having heard both the sides, we have carefully gone through the orders of the authorities below as well as relevant direction of the Tribunal contained in order of the ld. CIT(A) in th....