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TMI Blog2015 (3) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... ortified by the view expressed by the Supreme Court in CIT Vs. Indian Mica Supply Co. P. Ltd. [1970 (4) TMI 6 - SUPREME Court] wherein held that it was only as a result of the compromise that the respondent became entitled to remain in possession of the demised land. Its liability also became ascertained only at that point of time. It cannot be disputed that the respondent in incurring the expenditure had acted in the interest of and for the purpose of its business. The expenditure was not laid out for any purpose other than that of carrying on the business. The deduction was properly admissible under section 10 (2)(xv) of the Act. Section 10 (2) (xv) of the old Act corresponds to section 37 (1) of the present Act. For the aforesaid reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us year corresponding to the assessment year 2002-03 since the proposed project was abandoned? Mr. Bajoria, learned Senior Advocate, appearing for the appellant submitted that the question is partly covered by the decision in CIT Vs. Graphite India Ltd. reported in (1996) 221 ITR 420 (Cal). The relevant question referred by the Tribunal to this court in that case was whether in the facts and circumstances of that case, the Tribunal was justified in holding that the expenditure incurred for the assessee s proposed petro-chemical project was revenue expenditure and to be allowed as a deduction? This court in answering the question, held as follows:- So far as question no.4 is concerned, the Tribunal recorded the finding that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded by the aforementioned two decisions. We, accordingly, answer question no.4 in the affirmative and in favour of the assessee and against the Revenue. Mr. Bajoria further relied on two decisions of the Supreme Court being respectively the decision in CIT Madras Vs. Gajapathy Naidu reported in (1964) 53 ITR 114 (SC) and CIT Madhya Pradesh Nagpur and Bhandara Vs. Swadeshi Cotton and Flour Mills Pvt. Ltd. reported in (1964) 53 ITR 135 (SC). In Gajapathy Naidu on the question of power of the Income Tax Officer to relate back an income the Apex court was of the following view:- When an Income-tax Officer proceeds to include a particular income in the assessment, he should ask himself, inter alia, two questions, namely: (i) what is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowable as incurred wholly or exclusively for the purpose of assessee s business as covered by the decision in Graphite India Ltd. (supra). The issue whether such expenditure could be allowed in the relevant assessment year is however yet to be resolved. The CIT (A) in his order had found as follows:- The company claimed as allowable the expenditure on this abandoned project. While it was found to be unviable, the expenditure on it was for the purpose of business. It was not claimed or allowed earlier as business expenditure because it was of capital nature entitled to depreciation after completion and on commencement of its use for business. But since that stage is not reached - no asset having come into existence - the capital-w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad clearly found that it was only as a result of the compromise that the respondent became entitled to remain in possession of the demised land. Its liability also became ascertained only at that point of time. It cannot be disputed that the respondent in incurring the expenditure had acted in the interest of and for the purpose of its business. The expenditure was not laid out for any purpose other than that of carrying on the business. The deduction was properly admissible under section 10 (2)(xv) of the Act and the matter being self-evident the High Court was fully justified in declining to accede to the prayer made under section 66 (2) of the Income-tax Act, 1922. Section 10 (2) (xv) of the old Act corresponds to section 37 (1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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