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TMI Blog2010 (6) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Project was shelved before commissioning of the plant. 3. In the return of income, the assessee laimed expenditure of ₹ 38,94,913/- in respect of project expenditure written off during the year which has been debited to the Natural Head of Expenses . This expenditure was incurred in the earlier years for development of the project which was later on abandoned. The AO was of the view that such expenditures incurred in the past therefore, it is capital in nature and did not fit within the ambit of section 37 of the Income Tax Act, 1961 for its allowability. Accordingly, the same was disallowed. 4. On appeal, the CIT(A) has found that out ₹ 38,94,913/- a sum of ₹ 35,42,821/- pertains to the Madhya Pradesh Steel Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the previous relevant to the assessment year under consideration, the assessee wrote off an amount of ₹ 38.94.913/- out of which ₹ 35,42,821/- being the expenditure incurred for the Madhya Pradesh Steel Plant Project which was abandoned. The assessee has clarified in the Note no.16 of the notes to computation of total income enclosed along with the return of income, that as per the accounting policy A6(iii), the project and the business development expenditure are written off to the natural heads of the expenses in the year in which the project is abandoned. The expenditure incurred during development and preliminary stages of the Company s new project are carried forward and not as deduction in any of the earlier years. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t but the said expenditure was incurred in the nature of payment of wages, salary, traveling and other administrative expenses. Thus, it is clear that the said expenditure was not incurred for creating any asset or investment in the asset. It is also undisputed fact that the assessee was developing the Madhya Pradesh Steel Plant Project in the existing line of business of the assessee. Therefore, the expenditure was for the extension of the business of the assessee and not for any new business. When it is for extension of existing business and the control of both existing and the extension of new and the proposed venture are in the hands of the same management/administration/ establishment then simply because the new project was to be devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such an expenditure is incurred. If the expenditure is incurred for starting new business which was not carried out by the assessee earlier, then such expenditure is held to be of capital nature. In that event it would be irrelevant as to whether project really materialized or not. However, if the expenditure incurred is in respect of eh same business which is already carried on by the assessee, even if it is for the expansion of the business, namely, to start new unit which is same as earlier business and there is unity of control and common fund, then such an expense is to be treated as business expenditure. In such a case whether new business/asset comes into existence or not would become a relevant factor. If there is no creation of ne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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