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TMI Blog2013 (12) TMI 1574X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record. So far the undisputed fact remains that the parts were to be utilized for commissioning of a new project, therefore, are in the nature of capital assets.The ld.CIT(A) has erred in not considering this aspect. After considering all aspects of the matter, we restore this issue back to the file of ld.CIT(A) to decide it afresh, after giving opportunity of hearing to the respective parties. - I.T.A. No.1680/Ahd/2010 - - - Dated:- 31-12-2013 - SHRI N.S. SAINI, ACCOUNTANT MEMBER And SHRI KUL BHARAT, JUDICIAL MEMBER Appellant by : Shri O.P.Batheja, Sr.DR Respondent by : Shri J.P.Shah, A.R. ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-VI, Baroda ( CIT(A) for short) dated 17/02/2010 pertaining to Assessment Year (AY) 2004-05. The Revenue has raised the following grounds of appeal:- 1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the disallowance of ₹ 13,29,899/- in respect of advances for purchase of capital goods written off. 1(ii) The CIT(A) failed to appreciate that when an adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure thereof is clearly of capital in nature and it is capital expenditure and it is related to acquisition of a capital assets. Therefore, the same cannot be allowed as business expenditure u/s.37 of the IT Act. In support of this contention, ld.Sr.DR relied on various case-laws. He relied on the decision of the Hon ble ITAT Chennai Bench A rendered in the case of Kwality Fun Foods Restaurants (P.) Ltd. vs. Dy.CIT, Chennai reported at (2007) 108 ITD 274 (Cehnnai). He also relied on the decision of the Hon ble High Court Calcutta rendered in the case of Kanoria Chemicals Industries Ltd. vs. CIT reported at (1995) 78 Taxman 455 (Cal.) 4. On the contrary, ld.counsel for the assessee submitted that the ld.CIT(A) has rightly decided this issue in favour of assessee. He placed reliance on the decision of Hon ble High Court of Jharkhand in the case of CIT vs. Tata Robins Fraser Ltd., decision of Hon ble High Court of Karnataka rendered in the case of CIT/ACIT vs. M/s.Tyco Electronics Corporation India Pvt.Ltd. in ITA No.383 of 2009 and the decision of the Hon ble Coordinate Bench (ITAT A Bench-Ahmedabad) in the case of Ahmedabad Finvest Co.Pvt.Ltd. vs. ITO in ITA No.3050/A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 6. The second ground is against deletion of disallowance in respect of parts imported for SMS project, the ld.Sr.DR submitted that the ld.CIT(A) failed to appreciate the fact that the advances of ₹ 1,19,86,344/- was in respect of the acquisition of capital assets. It is not the case where the parts were imported for running machinery, but a new project was to be established and the parts were used for the commissioning of the machinery. He relied on the following case-laws:- 1. Shree Digvijay Woolen Mills Ltd. vs. CIT (1993) 204 ITR 398 (Gujarat High Court) 2. CIT vs. Shri Digvijay Cement Co.Ltd. (1986) 159 ITR 253 (Gujarat High Court) 3. CIT vs. Jaipur Mineral Development Syndicate (1995) 216 ITR 469 (Rajasthan High Court) 6.1. On the contrary, ld.counsel for the assessee relied upon the decision of Hon ble Gujarat High Court rendered in the case of CIT vs. Gujarat Steel Tubes Ltd. reported at (2002) 258 ITR 235 (Guj.). He reiterated the submissions as were made before the ld.CIT(A) and the same is reproduced as under:- 3. We have further written off ₹ 1,19,86,344/- being amount of asset written off without even acquiring or putting it to use. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) The expenditure relates to the fixed capital as distinct from the circulating capital; (d) The expenditure is of an initial nature to commence a business for the first time; (e) The expenditure incurred is to acquire a concern or goodwill. In the present case, none of the aforesaid circumstances have materialized, an expenditure cannot be treated as capital expenditure merely to provide an alibi for its being disallowed. 5. We further rely on following decisions which supports our stand and allow ability of the expenses referred herein above: (a) Gujarat Mineral Development Corpn Ltd. vs. CIT (143 ITR 822)(Guj.) (b) Hylam Limited v. CIT (87 ITR 310) (AP). (c) Assam Bengal Cement Co.Ltd. v. CIT (27 ITR 34)(SC) (d) Dalmia Jain Co.Ltd. vs. CIT (81 ITR 754)(SC). 6. We further submit that it is fairly well settled that the commercial expediency of a businessman s decision to incur the expenditure cannot be tested on the touchstone of strict legal liability to incur such expenditure. It was held in case of CIT v. Pioneer Engineering Syndicate (175 ITR 93)(Mad) that, if there is a payment made on the commercial expediency and if such payment does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the Port authority started imposing Demurrage charges for not clearing those parts. Subsequently, during year under review, the assessee decided not to clear those parts and asked Port authority to auction out those goods under the Customs Act and clears the import duty, customs duty, etc. recoverable on import of said goods. We find that the assessee has not placed anything on record with regard to the contention that the assessee was unable to clear the parts due to inability to pay customs duties and other charges. The ld.CIT(A) has not given any finding that how much duty and other charges were payable by the assessee and how much has been paid by obtaining the parts even if it is assumed that non-clearance of parts by the assessee was resulted into business loss, then also the assessee is required to substantiate its claim by placing relevant material on record. So far the undisputed fact remains that the parts were to be utilized for commissioning of a new project, therefore, are in the nature of capital assets. The Hon ble High Court of Gujarat in the case of CIT vs. Gujarat Steel Tubes Ltd. reported at (2002) 258 ITR 235 (Guj.) has held that even if the project is aband ..... X X X X Extracts X X X X X X X X Extracts X X X X
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