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TMI Blog2010 (9) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that in the facts and circumstances, as the expenditure has been incurred for the purpose of expansion of business/ same business, the same is fully allowable as deduction. It is submitted that it be so held now. Without prejudice to the above, it is submitted hat the expenses incurred on abandoned Acrvlon Nitric project being business loss incurred by your appellant, the same should be allowed while computing the income. (3) The learned Commissioner of Income-tax (Appeals) erred in not allowing the claim of deduction for the subsidy received Rs.60.22 crores credited to profit and loss A/c, but eventually was repayable and repaid to Government in Asst. year 2001-02 due to reduction in subsidy on account of revision in retention price. Your appellant submits that in the facts and circumstances, the learned CIT(A) ought to have allowed the chum for deduction of the amount of subsidy recovered by the Government. Your appellant submits that deduction for the subsidy recovered by the Government be granted now because such subsidy receipt was riot the real income of the assessee. (4) The learned Commissioner of Income-tax (Appeals) erred in not allowing the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was initiated at Dahej as a joint venture with M/s Modi Rubber Ltd. For this purpose assessee company floated another company named as Gujarat Acrylics Ltd. As per share holders agreement completed on 6.1.1995 cost and expenditure in the project incurred upto 31.12.1994 was to be borne by the respective parties except the fees payable to an Italian concern. The Italian concern was engaged for preparing feasibility report. The assessee company incurred upto 31.12.1994 an expenditure of Rs.20,50,939/-. The other partner in the joint venture required the project to be shifted to Haldia from Dahej to which assessee company did not agree and accordingly assessee decided to abandon the project and claimed the expenditure as Revenue expenditure. The AO disallowed the claim on the ground that all the expenditure have been incurred for setting up of a new project which was abandoned mid-way. This business was not commenced and therefore, expenditure cannot be allowed unless there is some relatable income. Accordingly he proposed an addition of Rs.20.51 lacs. The ld. CIT(A) confirmed the addition by holding that the expenditure was incurred on an entirely new project for which separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and, therefore, expenditure incurred on new project is revenue expenditure. (3) Excel Industries Ltd. vs. DCIT (2004) 86 TTJ (Mumbai) 840 It is held therein that where project expenses are written off and concerned project was undertaken in the course of existing business and was not a different or new project and the project is abandoned during the relevant previous year as it was found commercially unviable, than loss incurred would be revenue loss. (4) Indo Rama Synthetics (I) Ltd. vs. CIT (2009) 185 Taxman 277 It was held therein that where project is abandoned and no new asset came to be created, expenditure in the nature of salary, wages, repairs, maintenance, design and engineering fee, etc. incurred on the proposed unit constituted revenue expenditure. (5) ONGC Videsh Ltd. vs. DCIT (2010) 127 TTJ (Del) 497 It is held therein that expenditure incurred pertaining to abandoning the project would be revenue expenditure. Where assessee is engaged in the business of exploration and production of oil and claimed deduction of expenditure pertaining to an abandoned project in the year of its incurrence, it would be allowable as revenue expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d but where it was originally incurred by the new entity and on abandoning the project, it was shifted to the assessee company then such expenditure cannot be allowed. For the limited purpose, we restore this issue to the file of AO. This ground of assessee is allowed but for statistical purposes. 9. Ground No.3 relates to subsidy of Rs.60.22 crores. This ground is not pressed hence it is rejected. 10. Ground No.4 relates to depreciation on plant and machinery. We have heard the parties. This issue is covered in favour of assessee by the decision of the Tribunal in ITA No.3228/Ahd/2003 for Asst. Year 1999- 2000 in assessee s own case, as per para 7 to 7.3 as under :- 7. As regards issue of depreciation raised in ground no.3 in the appeal of the assessee the ld. CIT(A) while distinguishing the decision of the Hon. Jurisdictional High Court in the case of Ashima Syntex Ltd. (supra) held that the present case is different from that of Ashima Syntex Ltd. where the machines installed worked immediately and strictly there was no trial run as such in the case of M/s GSFC retrial run has continued for over two years and therefore, the assessee cannot claim the benefit of depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of the business will satisfy for attracting allowance, it is not open for the Revenue to read into the section any words of limitation so as to affect the interest of the assessee. It is with a view to the business of the assessee that the assessee used the machinery for the purposes of its business in causing those to go into trial production. If that is not using the machinery for the purposes of the business, then how else the above activity of the assessee can be described in that regard. 7.3 In view of the foregoing, we have no hesitation in setting aside the findings of the ld. CIT(A) in the matter of depreciation on plant and machinery under trial runs and accordingly, direct the AO to allow the claim of the assessee in accordance with the provisions of section 32 of the Act. Thus, ground no.3 in the appeal of the assessee is allowed. Respectfully following the above decision we allow the claim of the assessee. 11. Ground No.5 relates to claim of deduction of the subsidy. This ground is not pressed and hence it is rejected. 12. The appeal filed by the assessee is partly allowed and partly allowed for statistical purposes. Revenue s appeal 13. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of commercial production and the inputs and outputs have already been netted by GSFC and the net result has been capitalized. Considering the facts and circumstances of the case and the guidelines of the ICAL, we are in agreement with the ld. CIT(A) that any attempt to tax the production, which is already accounted for as input for the fertilizer plant and the captive inputs of other units utilized in Ammonia IV plant, if not allowed to be set off against the production of the plant, would lead to a distorted picture of the accounts of M/s GSFC. In these circumstances, especially when Revenue have not placed before us any material contrary to the aforesaid findings of the ld. CIT(A) in so far as addition of Rs.10,99,25,676 is concerned nor pointed out any contrary decision, we have no hesitation in upholding the findings of the ld. CIT(A) while relying upon the decision of the Hon. Apex Court in Bokaro Steel Ltd. Therefore, ground No.1 in the appeal of the Revenue is dismissed. Respectfully following the above decision of the Tribunal, we dismiss this ground of Revenue. 15. Ground No.1(ii) relates to income from other sale of Ammonia of Rs.31.89 crores. This issue is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the present case, it is an admitted fact that ownership of water supply lying as well as electric line laid down by the GACL and GEB respectively was to remain with GACL and GEB for all times to give, the expenditure incurred by the assessee, though was to facilitate the carrying on of its business, but had not resulted in acquisition of any asset by the assessee and if that is the case, then the assessee s case is squarely covered by the decision of Hon. Supreme Court in the case of Empire Jute Co. Ltd. (supra). 23. We are, further of the opinion that the issues involved in ground No.1(iii) 1(iv) of Revenue s appeal (supra), is covered in favour of assessee and against the Revenue by the decision of Hon. High Court of Gujarat in the case of Navsari Cotton Silk Mills Ltd. 135 ITR 546 (Guj) (supra) also because of the nature of expenditure in that case which was contribution towards municipality for providing underground pipeline for disposal of effluent discharged by the company, was held to be Revenue expenditure. The assessee s case, in our opinion, is also covered by the proposition of law laid down by the Hon. High Court of Gujarat in the case of Alembic Glass I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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