2015 (7) TMI 898 - AT - Income Tax

Disallowance of loss relating to 'Talcher Transmission Line' - Held that - project could not be said to have ceased to exist and the expenses claimed by the assessee was of such nature that would not result into any revenue for the assessee and therefore the same could not be booked as work in progress. Accordingly, we note that the AO was not correct to deny the amount of loss as claimed by the assessee on Talcher Transmission Line project. Hence, we are of the considered view that the CIT(A) was right in deleting the addition which was made by the AO without any logical reasoning and thus we are unable to see any infirmity, perversity or any other valid reason to interfere with the impugned order and we uphold the same. Accordingly, sole ground of the revenue being devoid of merits is dismissed. - Decided against Revenue.

Summary

Issues:
1. Disallowance of loss relating to 'Talcher Transmission Line' for Asstt. Year 2006-07.

Analysis:
The appeal was filed by the revenue against the order of the CIT(A)-XXIX, New Delhi regarding the disallowance of a loss amounting to Rs. 26,87,986 on account of the 'Talcher Transmission Line' project. The revenue contended that the CIT(A) erred in deleting the addition and ignored the completion of the project as declared by the assessee. The revenue argued that the AO's conclusion was justified in disallowing the loss, either by booking total expenses as work-in-progress or by disallowing the net expense. Despite the absence of the assessee during the hearing, the Tribunal proceeded with the case based on the submissions of the ld. DR representing the revenue.

The CIT(A) had granted relief to the assessee by observing that the project did not cease to exist, and the expenses incurred were directly related to the project. It was noted that recovery amounts from various entities had either been taxed in earlier years or were pending settlement. The CIT(A) disagreed with the AO's view that all expenses should be shown as work-in-progress, as there was no further payment expected from PGCIL. The liability for the claimed expenses had crystallized during the relevant year, justifying the allowance of the loss claimed by the appellant on the project.

The Tribunal concurred with the CIT(A)'s findings that the project was ongoing, and the expenses incurred would not generate revenue for the assessee, thus not qualifying for work-in-progress classification. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO. The Tribunal found no valid reason to interfere with the CIT(A)'s order, as the revenue's sole ground lacked merit. Therefore, the appeal of the revenue was dismissed, affirming the deletion of the disallowed loss amount related to the 'Talcher Transmission Line' project for the assessment year 2006-07.