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TMI Blog2014 (12) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... f AO - since there is no finding of the authorities below regarding nature of the project being undertaken by the assessee at Greater Noida, therefore, the issue of suspension of capitalisation also needs examination of facts at the end of AO – Decided in favour of assessee. Advances given during the course of business in earlier years, written off during the year disallowed – Held that:- A proposal of Reconfiguration of IT Set up for the assessee company has been put up by Shri Abir Basak to Mr. Dinesh Chandna with a bottom line that the commercial term for the same has been negotiated to ₹ 5 lacs with M/s IBM Global Services - the assessee has claimed bad debts of ₹ 5 lakh paid to M/s Trivoli Management, ₹ 1,25,000 to M/s IBM Global Services and ₹ 2,10,000 to M/s IBM Global Services & Excel Computer totalling to ₹ 8,35,000/- as per scope of work, certain devices, systems were proposed to be installed for the purpose of reconfiguration of IT set up of the assessee - the amounts were advanced for purchase of capital assets and as decided in Tulip Star Hotels Limited. Versus Additional Commissioner Of Income-tax, Special Range - 1, New Delhi [2007 (6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of the Income Tax Act, 1961. The AO also made another disallowance amounting to ₹ 8,35,000 being advances given during the course of business in earlier years and which was written off during the financial year under consideration. The AO held that since the amount was either paid to acquire capital asset or in the nature of advance, then it cannot be allowed as revenue expenditure. The AO also made disallowance and additions in respect to late deposit of employer towards ESI and PF and in regard to earlier year s expenses and publicity expenses. Being aggrieved by the above assessment order, the assessee preferred an appeal before the CIT(A) which was partly allowed granting some relief for the assessee but partly disallowed on the issue of expenses treated by the AO as capital expenditure and on the issue of disallowance of bad debts. Now, the assessee has preferred this second appeal against the impugned order of the CIT(A) on both issues with the grounds as reproduced hereinabove. Ground No. 1(a) and (b) of the assessee 3. Apropos these grounds, ld. Counsel of the assessee has drawn our attention towards paper book page no. 12 to 25 wherein we see copy of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has engaged into acquisition of land and construction of building at Noida to expand its business. AO or the ld. CIT(A) has not referred to the nature expansion of the business. Assessee has obtained loan for this project and had capitalized the borrowing cost in the previous year which was ₹ 2898602/- and the current year ₹ 19398338/- upto 12.12.2001. The assessee had incurred ₹ 13231892/- mainly interest expenditure of ₹ 12292275/- after 12.12.2001 which was claimed as revenue expenditure on the ground that it was in accordance with the AS-16 of the Institute of Chartered Accountants of India. It is further claimed that section 36(1)(iii) mandates that amount of interest paid in respect of capital borrowed for the purpose of business as allowable revenue expenditure. The proviso, however, inserted on 1.4.2004 mandates that interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business should not be allowed as deduction for a period upto the date on which the asset was first put to use. Now it is a settled that this proviso is not retrospective in nature. AS-16 as relied by the assessee mandates vide para 6 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- incurred on stamps, registration fee, legal fee etc. in obtaining the loan. In this case it was held that :- (a) loan obtained was not an asset or advance of an enduring nature (b) Expenditure was made for executing the use of money for the certain period and (c) It was irrelevant to consider the object with which the loan was obtained. Consequently, in the circumstances of the case the expenditure was revenue expenditure within section 10(2)(xv). - 220 ITR 185 in the case of Veecumsees vs. CIT. Hon ble Apex Court has held that the Tribunal has given a finding that business carried on by the assessee as Jeweller and business of running Cinema Theatre was composite, interest on such loan had to be treated as deduction under section 36(1)(iii) even after the business of running of theatre had been closed. - 200 ITR 345 CIT vs. Modi Industries. The Hon ble High Court held that when Tribunal had held that the management of new business and earlier business was same and there was unity of control of common fund, the tribunal was justified in holding that business of manufacture of MS Special Alloy wires and billets was expansion of business and not a new business and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st till the asset is put to use. In fact assessee had capitalized these expenditures upto the date of deferral of the project in the present as well as in the preceding assessment year. Hence, in our considered opinion, it would be appropriate, if the present issue regarding finding out as to whether the Noida project was a new project or the expansion of the existing business is remitted to the files of the AO to give a finding thereon, after giving the assessee adequate opportunity of being heard. Accordingly, the issue stands remitted to the files of AO, to consider the case in accordance with the directions as above and in accordance with law. 6. We further observe that the ITAT in para 3.3 has also restored the issue of allowability of interest expenditure to the file of AO as the issue was found to be interlinked with the adjudication of issue raised in ground no. 1 of that appeal which is similar to ground no. 1(a) of the present appeal. Under these facts and circumstances, we are of the considered opinion that since there is no finding of the authorities below regarding nature of the project being undertaken by the assessee at Greater Noida, therefore, the issue of susp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ld. CIT(A) that the amount so advanced was for acquiring capital assets. The CIT(A) has taken into consideration the decision of the Hon'ble Madras High Court in the case of Sembi Traders (supra) and in the case of Hasimara Industries Ltd. (supra), wherein it has been held that the money advanced for acquiring capital assets cannot be allowed as business loss. 38. The Id. counsel of the assessee could not controvert this findings of the Id. CIT(A) as he simply placed reliance on the decision in CIT vs Anjani Kumar Co. Ltd (2003) 259 ITR 114 '(Raj.). The decision relied upon by the ld. Authorised Representative is on some different facts, therefore, we are not inclined to interfere with the findings of the ld. CIT(A) to this extent. Accordingly, the disallowance of ₹ 27.89 lakhs is confirmed. Accordingly, the claim' of the assessee is not allowable. Ground No. 7 is dismissed. 10. On careful perusal of page 10 and 11 of the Paper book of the assessee, we observe that a proposal of Reconfiguration of IT Set up for the assessee company has been put up by Shri Abir Basak to Mr. Dinesh Chandna with a bottom line that the commercial term for the same ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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