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TMI Blog2013 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding year and in the subsequent year - Decided against assessee. Technology transfer fee - Held that:- The technical collaboration agreement had been entered into for starting a nursery for commercial production of bivoltine silk cocoons - The project ultimately became unviable and never started - Any expenditure incurred in connection with the project such as technical fees etc, has been considered as capital expenditure by CIT(A). Other expenses which are quite insignificant have also been rightly disallowed as the business has discontinued - Decided against assessee. - ITA NO.6505/Mum/2010 - - - Dated:- 20-9-2013 - R K Gupta And Rajendra Singh, JJ. For the Appellant : Shri R Muralidhar For the Respondent : Ms Tripura S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness in foreseeable future. The AO, therefore, asked the assessee to explain as to why the expenses were claimed should not be disallowed. The assessee submitted that the expenses incurred for the purpose of business only and therefore, should be allowed. AO however did not accept the explanation given. It was observed by him that the expenses can be allowed only for purpose of carrying on the business and in this case the auditors report clearly mentioned that the assessee had discontinued the business and, therefore, the AO held that expenses were not allowable. In regard to interest of Rs.1,23,25,000/- on custom duty, AO noted that the interest was for the period from 10.11997 to 31.03.2002 and therefore did not relate to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement dealt with termination by any of the parties. In this case the termination had been done under mutual consent and compromise and, therefore, the said para was not applicable. The agreement had been terminated as the project had become unviable for various reasons and no for any breach of contract from either side. AO observed that in case of termination of agreement due to project becoming unviable, there was no attendant liability on any of the parties. Moreover it was also pointed out that the termination agreement clearly mentioned that there were certain disputes and differences between the parties. AO, therefore, held that the termination agreement was nothing but a self serving document and had no contractual value. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical know how for purchase of capital equipment etc. which had no element of revenue expenditure. Moreover the assessee had not carried out any business activity and had incurred the expenditure in relation to new project and not the existing business of the assessee. CIT(A), therefore held that the technical know how fees was capital in nature. He also agreed with the AO for disallowance of other expenses as the business had discontinued. Aggrieved by the decision of CIT(A) the assessee is in appeal before Tribunal. 4. Before us, the learned AR for the assessee submitted that the assessee had not closed down the business. The assessee no doubt had decided to close down the operations but due to pending claims of creditors and certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. In addition it has also been held that expenses on custom duty did not relate to the year under consideration as the assessee was following the mercantile system of accounting and the technology transfer fees was capital in nature, sales tax of Rs. 86,049/- was not allowable as the same was penalty in nature. We have considered the various aspects of the matter. The auditors have prepared the accounts as a non going concern and have also mentioned that the management had no intention to continue the business in the unforeseeable future. The assessee in the written submission filed before CIT(A), placed at page 72 of the paper book also mentioned that the assessee had decided to close down the operation as the project was not viabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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