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TMI Blog2017 (11) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... to be verified by the Assessing Officer. The matter needs to be remanded back before the Assessing Officer for this issue. Needless to say, the assessee be given opportunity of hearing. - I.T.A .No. 3330/DEL/2011 And I.T.A .No. 3331/DEL/2011 - - - Dated:- 2-8-2017 - SHRI R . K . PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh . Samrat Joneja, CA For The Respondent : Sh . R . C . Danday, Sr . DR ORDER PER SUCHITRA KAMBLE, JM These appeals are filed by the assessee against the orders dated 24.03.2011 and 31.03.2011 passed by CIT(A)- Faridabad for A.Ys. 2002-03 2003-04. 2. The grounds of appeal are as under:- ( ITA No . 3330 / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant is not a business loss to be allowed in computing the income of the appellant . 1 . 2 Without prejudice to the above, on the facts and circumstances of the case and in law, the Ld . CIT ( A ) erred in passing the order u / s 250 by misconceiving the facts, making unfounded assumptions on the basis of nomenclature given to the entries in the books of accounts instead of ascertaining the real nature of the transaction which is contrary to law and based on that arriving at the conclusion that the Capital expenditure Rs . 99,25,150 /- incurred by the appellant is not to be treated as a part of Block of assets and depreciation allowance should not be afforded to the appellant . The above grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that in the P L account, the assessee had claimed expenditure of ₹ 47,74,477/- under the head Lock Project written off . Since the expenditure being capital in nature, the A.O recorded the reasons that the income to that extent had escaped assessment and issued notice u/s 148 of the Act on 19/3/2007. In response to the said notice, the assessee filed return declaring same loss of ₹ 40,28,879/-. In response to notice u/s 143(2), the Ld. Counsel of the assessee vide letter dated 14/8/2007 requested for supply of the reasons recorded for reopening of assessment. The copy of reasons recorded was supplied on the same day. In response to further notices u/s 143(2) and 142(1) dated 11/9/2007, the assessee objected to reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the expenditure which was incidental to setting up of project and revenue in nature had to be included as deferred revenue expenditure as the assets so involved in the new project were not put to use for the purpose of business . Only the expenditure of recurring nature can be allowed as eligible business expenditure . Since, the expenditure was incurred on creation of income generating apparatus for the purpose of getting enduring benefits, such expenditure was certainly capital in nature . As contended in ground No . 2, the aforesaid expenditure cannot be legally permitted to form part of block of assets as the assets represented by the said expenditure have not been put to use for the purpose of business, so as to enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o . 3 of appeal also stands dismissed . The Action of the AO in treating the said loss as capital loss and in consequential disallowance thereof is upheld . 6. The Ld. AR submitted that incurring expenses for adding a new product line or for a new model of existing product line is a regular feature of company s business. Sometimes orders are not obtained. Based on matching concept the expenses are recorded in Profit Loss account in the year sales is realized. The obvious reasons for writing off was the change of technology by the customers for which our development was not suitable. This was explained in details and also supported by Affidavit from the assessee. The A.O was requested for direct confirmation from the customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... looked into by the Assessing Officer as well as by the CIT(A). Thus, the expenditure incurred for New Lock project has to be verified by the Assessing Officer as the Ld. AR submitted that New Lock project was a new product line belonging to the same business of the Auto-components and taken under the same company with unity of control and common funds and all the Expenditures, and if the said appreciated individually are all revenue in nature. The same has to be verified by the Assessing Officer. The matter needs to be remanded back before the Assessing Officer for this issue. Needless to say, the assessee be given opportunity of hearing. As relates to Ground No. 2, the same is not pressed by the Assessee, hence dismissed. The Additional Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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