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TMI Blog2017 (6) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the expenditure. In the case under consideration the incurring of expenditure is not in doubt, the AO has not held that expenditure was not incurred for development of software i. e. for the existing business of the assessee. See IL FS Education and Technology Services Private Ltd [ 2013 (4) TMI 992 - ITAT CHENNAI] , M/S BINANI CEMENT LTD.[ 2015 (3) TMI 849 - CALCUTTA HIGH COURT] and Indoram Synthetic India Private Ltd. [ 2009 (9) TMI 635 - DELHI HIGH COURT] Thus we hold that the order of the FAA does not suffer from any legal or factual infirmity. As far as case of EID Perry[ 2001 (11) TMI 25 - MADRAS HIGH COURT] is concerned, we would like to state that in that matter the Hon ble Madras High Court had held that it was clear from the assessee s own case that the expenditure was incurred for the purpose of setting up a new project. The case before us, is not of setting up of new project . In that matter the assessee, a manufacturer of sugar, wanted to set up a new project for the manufacture of methanol. Thus, the case is of no help to decide the issue. Effective ground of appeal against the AO. - ITA No. 3629/Mum/2015&7668/Mum/13, CO. sNo. /13&14/Mum/2017 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as part of capital work in progress for the assessment years 2004 05 to 2007 08, that assessee had to establish that expenses were not in the nature of expenses described in section 30 36 of the Act, that the assessee had failed to discharge its onus. Finally, he made an addition of ₹ 7. 09 crore to the income of the assessee. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions. In its appeal the assessee challenged the reopening of the assessment also. The FAA held that the AO was justified in reopening the assessment. In that regard he referred to the case of Consolidated Photo and Finvest (281 ITR 394)and dismissed the ground raised by the assessee about reopening. On merits he held that the assessee had emphasised that expenditure in question was for development of a new product, that the new product was a product in the assessees existing business line. He referred to the case of IL FS Education and Technology Services Private Ltd. (ITA/765/Mum/2009, AY. 2004-05, dated 10/04/2013)and to the judgment of Hon ble Delhi High Court in the case of Indoram Synthetics India Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ram Synthetic India Private Ltd. (supra). We find that facts of these cases are almost similar to the facts of the case under consideration. 5. 1. Facts of Indoram Synthetic India Private Ltd(supra)were that the assessee was in the business of manufacture of yarn and polyester. According to the assessee, for several years prior to the previous year relevant to the AY. 2000-01 it had been generating substantial surplus cash from its existing business of manufacture of yarn and polyester. With a view to utilising the cash surplus available and with a view to expanding its existing operations, it commenced the setting up of a spinning and weaving unit for the manufacture of fabric and textile during the financial year 1995-96 in the State of Karnataka. The unit was in line with the assessee s strategy to expand its business operations in the same line of business through vertical integration, by utilising as raw materials for the proposed new unit, the products such as yarn and polyester, manufactured by the existing units. For setting up the new unit, the assessee identified manpower from the existing pool of resources of the assessee. Furthermore, the unit was proposed to be esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating the same as the expenditure was capital in nature. On appeal, the Ld. CIT(A) confirmed the disallowance made by the AO. Aggrieved by the impugned decision, the assessee has raised this ground in the appeal before us. 3. 2 Before us, the Ld. AR has stated that the expenditure relates to acquisition of rights, license, expenses for development of educational software and other related expenses. In keeping with the company s policy, these expenses are to be capitalized as intellectual property rights (IPR) upon completion of the project. After capitalization, they are amortized over a period of five years. However, during the current year, it is realized that some of these projects are not likely to result in any economic benefits and hence the capital work in progress of these projects is written off and the projects have been abandoned. The capital work in progress written off pertains to certain software under development for educational programs. However, these software are not ready for marketing and hence the same were written off. In support of the contention that the expenses are revenue in nature, the Ld. AR has relied on the decisions of the ITAT in the cases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 83, 20, 841/-. Ground No 1 is thereby allowed. Here, we would also like to refer to the case of Binani Cement Ltd. (380 ITR 116)of the Hon ble Calcutta High Court. Facts of the case are that the FAA found that the assessee claimed deduction of the expenditure on a project which had been abandoned when it was found to be unviable, that the expenditure 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, that since that stage was not reached no asset having come into existence the capital work-in-progress it had to be written off. He held that when construction/acquisition of a new facility was abandoned at the work-in-progress stage, the expenditure did not result in an enduring advantage and such expenditure, when written off, had to be allowed u/s. 37 of the Act. The Tribunal reversed the order of the FAA holding that the expenditure incurred in the earlier years could not be deducted in the year 2003-04. On appeal Hon ble High Court held there was no challenge on the finding of the Commissioner (Appeals) on the facts before the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that there was delay of about three years in filing of the CO for the year under appeal and the assessee has stated that it was under bonafide belief that for filing CO, involving a legal issue, there is no time limit. In our opinion, reason given by the assessee for filing belated CO does not fall under the category of a reasonable cause. Law of limitation is integral part of taxlitigation and it cannot be and should not be taken lightly. Act provides filing of cross appeal or cross objections against the order of the CIT(A). AO. s/assessees have to decide as to which remedy they want to resort to for challenging the order of the FAA. There is third option and that is raising an issue as per the provisions of Rule 27. If the AO/assessee opts for first two options he has to adhere to the time schedule prescribed by the statute. In case of delay, it is his responsibility to explain as to why he could not approach the Tribunal within the stipulated time period. It is said that in tax appeals delay of each day has to be explained and the explanation should be such that even a common person finds it a possible explanation. The reason given by the assessee for the delay in filing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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