9911796707
TMI Blog2023 (10) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been controverted by bringing any material to this effect. AO has disallowed the claim of loss by holding it as capital in nature. It is also noted that the assessee has accounted the expenditure incurred by it as capital work in progress on which no depreciation had been claimed as these assets were never put to use. We note that it is the prerogative of assessee to conduct and plan its business considering economic viability and making of profits. It is the sole discretion of the assessee to make its business decisions for the conduct and the manner in which it wants to plan its business. The dynamics of business are variable and depend upon several factors and consideration, based on which assessee takes its business decision. In the present case before us, assessee found its expansion by setting up a clinic as economically not viable and in order to save its future loss has dropped and abandoned the said project. In order to mitigate the future loss, and to recoup maximum for the expenditure already incurred, the assets deployed on the expansion were put to sell, resulting in the loss which has been claimed by the assessee in computing its profit and loss from busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected the same. 3.1. In respect of the second issue of disallowance of Rs. 48,36,016/- being loss on sale of assets, assessee had planned to set up a clinic towards expansion of its business. Expenditure incurred by it in this regard were accounted as capital work in progress. Since the clinic was not ready to use, the same was not added to the block of assets and accordingly, no depreciation was claimed on the same. In the year under consideration, assessee analysed to arrive at a conclusion that setting up of clinic would not be economically viable and in order to save future losses, this expansion of business by setting up of clinic was dropped. Accordingly, assets in this respect were put to sell and the difference between realisation of sales and expenditure incurred up to the date were charged to P L Account, claiming it as a loss, amounting to Rs. 48,36,016/-. Ld. AO disallowed the claim by holding that it is a capital loss. Aggrieved, assessee went in appeal before the Ld. CIT(A), who has sustained the above two disallowances made by the Ld. AO. Aggrieved, assessee is in appeal before the Tribunal. 4. Before us, Ld. Counsel submitted that assessee is engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lkata in assessee s own case (supra) are extracted as under: 2. ITA No.237/Kol/2023 The sole issue raised by the assessee in this appeal is relating to disallowance of Rs. 7,73,14 356/- u/s 35AD being capital expenditure incurred for the purpose of specified business. 3. The brief facts of the case are that the assessee company filed its return of income for the assessment year 2014-15 on 29.11.2014 declaring total loss of Rs. 24,43,04,021/-. The case was subsequently selected for scrutiny and assessment order under section 143(3) of the Income Tax Act was passed on 28.12.2016 determining the total loss at Rs. 24,42,58,745/-. Subsequently, the said assessment order was subjected to revision u/s 263 of the Act. On the basis of the verification of material available on records, it was found that the assessment order u/s 143(3) dated 28.12.2016 was erroneous so far as it is prejudicial to the interest of the revenue on the following ground: it has claimed a deduction of Rs. 7,73,14,356/- u/s 35AD of the Income Tax Act. The above expenditure was actually incurred by the assessee after commencement of the business and claimed in the next previous year in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 35AD of the Act, the expenditure incurred wholly and exclusively for the purpose of any specified business shall be allowed as deduction during the previous year in which the assessee commences operations of his specified business. The AO observed that though the assessee had taken up the construction of warehousing facility during the year which is covered under the specified business, however, in view of the proviso to Section 35AD, the deduction was available to the assessee whose date of commencement of business is on or after 01.04.2009 and since in this case the assessee has existing business of warehousing and hence, it cannot be said that the assessee had commenced the business of warehousing during the year under consideration. He, therefore, disallowed the deduction claimed by the assessee u/s 35AD of the Act. The ld. CIT(A) upheld the above finding of the AO. 11. We have heard the rival contentions. To better understand the case, we deem it fit to first reproduce the provisions of Section 35AD of the Act : Deduction in respect of expenditure on specified business. [35AD. (1) An assessee shall be allowed a deduction in respect of the whole of any exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the part of the lower authorities in denying the deduction to the assessee u/s 35AD of the Act. This ground is, accordingly, allowed in favour of the assessee. 14. In view of this, the legal grounds relating to the reassessment are decided against the assessee whereas the grounds taken on merits regarding the allowability of the claim of deduction u/s 35AD are allowed in favour of the assessee. So respectfully following the aforesaid referred to order dt. 19/03/2019 in assessee's own case for the A.Y. 2012-13 in ITA No. 239/Chd/2016, the present case is remanded back to the file of the A.O. to be decided as per the directions given in the aforesaid referred to order dt. 19/03/2019. 5. We are in agreement with the above decisions of the Chandigarh Bench of the Tribunal. In view of this, the disallowance made by the lower authorities is ordered to be deleted. 5. On confrontation of these submissions to the Ld. Sr. DR, nothing contrary was brought on record. Considering the facts and circumstances of the present case, there being no material change in the facts and the applicable law as compared to the preceding years, we follow the decision of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is set up were put to sell which resulted into certain losses as tabulated above. Assessee has thus, claimed this as expenditure incurred wholly and exclusively for the purpose of business which remained to be capitalised for the purpose of claiming depreciation u/s. 32 of the Act. These assets were never put to use and no depreciation was claimed on the said assets. 6.2. To buttress the contention, Ld. Counsel placed reliance on the decision of Hon ble jurisdictional High Court of Calcutta in the case of Binani Cement Ltd. Vs. CIT (2016) 380 ITR 116 (Cal) wherein it was held that Expenditure made for construction/acquisition of new facility subsequently abandoned at the work-in-progress such was allowable as incurred wholly or exclusively for the purpose of assessee s business. While answering the substantial question of law in favour of the assessee, Hon ble Court observed as under: The issue whether such expenditure could be allowed in the relevant assessment year is however yet to be resolved. The CIT(A) in his order had found as follows:- 'The company claimed as allowable the expenditure on this abandoned project. While it was found to be unviable, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
