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TMI Blog2022 (12) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... to the end of the preceding year. It was only in the current year that the assessee realized that the project cannot be continued and hence wrote off the costs incurred on it. In our considered opinion, no exception can be taken to the assessee s point of view of deciding the year in which the project became unviable so as to write off the revenue costs incurred on it. As the assessee found the project to be lost and decided to write it off, it is this year in which the write off has to be allowed. In view of the fact that the revenue nature of the costs incurred has not been disputed by the AO, we hold that the assessee is entitled to deduction of Rs.7.15 crore in the current year. The impugned order is overturned pro tanto to this ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon to explain as to how the amount could be written off in the year under consideration when majority of the costs on the project were incurred in earlier years, the assessee tendered an explanation to the effect that it was making efforts to market the project by developing a software catering to the needs of the Department of Postal Services, Government of India. When the project was awarded to some other party and there was no hope left for the assessee to reap any benefit out of such software project, the costs incurred on it were written off. The AO accepted the otherwise deductibility of the amount, but disputed the year of deduction by holding that the assessee was not justified in writing off the amount in the year under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the expenses are deductible u/s 37 is not dismissed; however the timing of the claim is what is not acceptable . Once a project is abandoned, all the revenue costs incurred on it become deductible. It manifests that the AO accepted that the expenditure incurred on the project was of the revenue nature but denied the deduction as it did not pertain to the year under consideration. Au contraire, the ld. CIT(A) held the expenditure to be of capital nature resulting in enduring benefit to the assessee but he made it ineligible for depreciation as the so called intangible asset emerging out of such expenditure, was not put to use. 5. The project of development of the software was started by the assessee in an earlier year bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on record necessary details of the project costs which evidently demonstrate that all the expenses incurred were of revenue nature. This approves the raison d etre of the AO that the expenditure is otherwise deductible. 7. The dispute raised by the AO is on the year of deductibility and not the amount of deduction. The year of deductibility is when the assessee realizes that the project has become unworkable and should not be further pursued. It is for the assessee to decide as to when the project becomes unviable and requires to be written off. Unless any mala fide is attributed, the decision of the assessee about the time of shelving off the project has to be respected. 8. The AO in the present case, going with the amount of expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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