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TMI Blog2023 (4) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any expenditure upto 31-12-1994 . The impugned expenses incurred by the assessee of 20.51 lacs have been suitably demonstrated as incurred upto 31-12-1994. Revenue does not dispute this fact - no doubt in the fact that the said expenses have been incurred by the assessee itself, the Shareholders agreement ruling out in clear terms the JV company from bearing these expenses. Assessee had established clearly that this expenditure had been incurred by the assessee itself. We find that the assessee had sufficiently demonstrated compliance with the conditions stipulated by the ITAT for theallowance of the claim, and we hold that the assessee is entitled to the said claim of project expenses in terms of the direction of the ITAT in the first round. Basis of the Revenue for rejecting the claim missed the crux and contents of the directions of the Tribunal, which was simply to the effect that the assessee had to demonstrate incurrence of the expenditure itself, and for the said purpose, the Tribunal had gone to the extent of directing assessee to demonstrate mode of payment and details of payment etc. Facts demonstrated by the assessee clearly showed that the expenditure had been incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of claiming of said deductions. The ld.counsel for the assessee contended that these finding of the authorities below was contrary to the facts, and therefore, the present appeal before us. 3. Taking first the issue relating to claim of expenses pertaining to abandoned project, the ld.counsel for the assessee pointed out that this issue was raised vide ground no.2 and 2.1 as under: "2. The learned CIT(A) erred in law and on facts in upholding the disallowance of expenses written off incurred on abandoned project - Acrylon Nitric Project of Rs.20,51,000/- made by AO. It is submitted it be so held now. 2.1. The learned CIT(A) erred in law and on facts in exceeding his jurisdiction by adjudicating on the merits of the claim regarding allowability of expenditure on abandoned project written off despite the fact that the decision of the Hon'ble ITAT on merits was accepted by the AO by not challenging the same before the High Court. It is submitted that it be so held now and the finding of the Hon'ble CIT(A) at Para 5.1.3 of the appellate order be struck down." 4. The facts relating to the issue were pointed out from the order of the ITAT in the first round in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,939/- was claimed as expenses, which was denied bythe Revenue holding that since the business had not commenced, the expenditure could not be allowed. The ld.counsel for the assessee drew our attention to para-8 of the order wherein the ITAT had adjudicated the issue as under: "8. We have considered the rival submissions and perused the material on record. In our considered view what is to be seen is whether assesseeis able to start a new project. If assessee is not in the line of business and incurs expenditure on setting up of business which business is subsequently abandoned then such expenditure cannot be allowed as there is no business in existence. Where the assessee is already in the business then creating another unit will only be an extension of business. If assessee would have succeeded in creating an asset and established the project the expenditure so incurred would have to be capitalized with respect to that project but so long project does not see the light and no new asset is created then whatever expenditure is incurred by the assessee, it would be allowable expenditure of the existing business. Bifurcation of expenditure from the existing business to the new p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not the new company floated. 7. The ld.counsel for the assessee thereafter pointed out that in the second round before the Revenue authorities, the assessee had demonstrated incurrence of these expenses by the assessee itself, and not by Gujarat Acrylics Ltd.. Inthis regard, he pointed out that it had been shown to the authorities below that as per the terms of agreement between the assessee and Modi Rubber Ltd. and Madalsa Mauritius, by virtue of which the entity Gujarat Acrylics Ltd. was set up as joint venture of the assessee and Modi Rubber Ltd., and Madalsa Mauritius, it was agreed that the respective parties were to bear cost incurred by them upto31.12.1994. Our attention was drawn to the said agreement dated 6.1.1995 placed before us at PB Page NO.58 to 75, more particularly, Page No.70 where relevant clause 32 of the agreement stated so as under: "32. The respective parties agree to bear for the time being costs incurred by them upto 31st December, 1994 other than equally sharing the fees tobe paid to Tecnimont S.p.A., Italy and Tecnimont India P.Ltd. for the detailed feasibility study; provided however the parties shall mutually agree on any of the costs and expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that claim of expenditure had been denied holding that the assessee had not complied with the directions of the ITAT on the ground that mode of payment; and to whom the payment was made and nature of expenditure claimed had not been furnished by the assessee. The ld.counsel for the assessee contended that the crux of the directions of the ITAT was to allow the claim if it was the assessee who had incurred the expenditure and not the new entity i.e. Gujarat Acrylics Ltd., which he stated had been demonstrated by the assessee, and therefore, authorities below erred in not allowing the claim of the assessee. 11. The ld.DR however, relied on the order of the ld.CIT(A). 12. We have heard the rival contentions and have gone through the directions of the ITAT in the first round. It is evident from the same that the ITAT held that the claim of expenditure incurred by the assessee on the abandoned project, amounting to Rs.20.50 lakhs, was allowable to it subject to the assessee demonstrating the fact that it had incurred the expenditure itself, and not through Gujarat Acrylics Ltd., an Joint Venture entity of the assessee and others. This fact, we find, has been suitably demonstrated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) failed to appreciate that the ITAT directed AO to verify that payment is made for such wage settlement and payment in the year for settlement was not required. It is submitted that it be so held now. 3.1. Without prejudice to the above, the learned CIT(A) erred in not adjudicating the ground of the appellant to allow the deduction of wages actually paid amounting to Rs.81,00,000/- in AY 2001-02. It is submitted it be so held now and direction be given." The direction of the ITAT in this regard in the first ground was pointed out to us from page no.84 of the order para-7 as being as under: "7. Having heard both the sides, we have carefully gone through the orders of the authorities below as well as relevant direction of the Tribunal contained in order of the ld. CIT(A) in the assessment years 1996-97 and 1997-98. Admittedly, the department has accepted the order of the ld. CIT(A) whereby she directed the AO to allow deduction in the year of actual payment, when wage settlement is finalized. This direction is contained in para 4.2 of the order of ld. CIT(A)-I, Baroda in Appeal No.XIV/JCIT SR.7/3/99-00 dated 27.12.2001 for the assessment year 1996-97 and in para 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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