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TMI Blog2025 (2) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... he due procedure - HELD THAT:- DR has no objection. Accordingly, we restore this issue to the file of the Assessing Officer with a direction to verify the record and give appropriate credit of the DDT as per fact and law. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant that the issue under adjudication in the present appeal is not with regard to the correctness of the claim of expenditure, but whether the CPC was right in making this adjustment of Rs. 1.17 crores when the same was qualified by the Accountant for disallowance, but omitted to be added back in the return of income as business profits. 4.3.5 In this regard, it is concluded that when there is a mismatch between the corresponding item as per column 21(a) (2) of Form no.3CD and Schedule BP of e-filed ITR, the corresponding difference has to be necessarily added to the total income as adjustment u/s.143(1). This adjustment undertaken by the CPC adheres to the provisions of S.143(1)(a)(iv) of the Act. In all the case laws relied upon, the action of the Assessing officer in disallowing the claim of expenditure was contested, but none of them relate to the adjustment made by CPC while the Audit report has qualified its disallowance. Therefore, these decisions rendered in an altogether different context are not found applicable to the facts of the case under consideration and hence not taken cognizance. 4.3.6 As stated earlier, the ground of appeal is confined, as to whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d relevant facts/documents are available on record with the Ld. AO. 4.2 The Appellant prays that the Ld. AO be directed to grant credit of DDT Ground No. 5 5.1 Without prejudice to the Ground No. 4 and on the facts and circumstances of the case, and in law, the Ld. AO erred in levying interest under section 115P of the Act. 5.2 The Appellant prays that Ld. AO be directed to delete interest under section 115P of the Act. The Appellant craves leave to add, alter, amend, substitute or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing so as to enable the Hon'ble Tribunal members to decide these according to the law. The Grounds stated above are independent of, and without prejudice to one another. 6. The ground of appeal No.1 being general in nature is dismissed. 7. The grounds of appeal No.2 and 3 relate to the order of the Ld. Addl./JCIT(A) in confirming the disallowance of Rs. 1,17,25,562/- made by the Assessing Officer in relation to the IPO expenditure for abandoned / aborted project u/s 37 of the Act. 8. Referring to the details of the publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal Oil Foods Ltd vs. JCIT vide ITA No.2515/Ahd/2010, order dated 05.07.2013 vii) Kalpesh Synthetics (P.) Ltd. vs. DCIT (2022) 195 ITD 142 (Mumbai-Trib.) 12. The Ld. DR on the other hand while supporting the order of the Ld. Addl./JCIT(A) submitted that why the assessee uploaded the report once the auditor did not agree with the proposition of the assessee treating such IPO expenses as revenue in nature. 13. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. Addl./JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the CPC in the instant case made disallowance of Rs. 1,17,25,562/- due to variation between the value reported by the tax auditor in Form No.3CD to that of entry in ITR. We find although the assessee submitted before the Ld. Addl./JCIT(A) that the expenditure on account of abandoned / aborted IPO is revenue expenditure in view of the decision of the Hon'ble Bombay High Court in the case of CIT vs. Nimbus Communication Ltd (supra), the Ld. Addl./JCIT(A) upheld the action of the Assessing Officer, the reasons of which have already be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decide the substantial questions of law framed for consideration, we would have to apply the proper test, which would distinguish capital and revenue expenditure. This question came up for consideration before the Hon'ble Supreme Court in Empire Jute Co. Ltd. (referred supra). It was pointed out that from time to time cases have evolved various tests for distinguishing between capital and revenue expenditure, but, no test is paramount or conclusive. Further, there is no all-embracing formula, which can provide a ready solution to the problem; no touchstone has been devised. It was pointed out that every case has to be decided on its own facts keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. After referring to the decision of Lord Radcliffe in CIT v. Nchanga Consolidated Copper Mines Ltd. [1965] 58 ITR 241 (PC), it was held that it would be misleading to suppose that, in all cases, securing a benefit for the business would be prima facie capital expenditure "so long as the benefit is not so transitory as to have no endurance at all". 21. Further, it was held that there may be cases where expenditure even if incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to acquire land, import machinery etc. In the meantime, 12 years had passed by and the project had not taken off. The IDBI had withdrawn from the project, as it was found to be unviable and another co-promoter viz., M/s. Khaltan Supermag Limited was brought in and a joint sector company was formed with the assessee subject to certain conditions. However, the said co-promoter, M/s. Khaltan Supermag Limited expressed inability to be a part of the project and after 12 years, the Government took a decision to sell the project and consequently, cancelled the allotment of 47 acres of land in favour of the assessee. The above facts clearly demonstrate that the assessee though had entered into arrangement with the banks and co-promoters and took action for acquisition of land, import of machineries, etc., no new venture was established by the assessee. The venture, which was to be taken over by the assessee and operated did not fructify, not on account of the conduct of the assessee, but on account of the decision of the Government of Tamil Nadu. In our considered view, the decision of the Government of Tamil Nadu to sell the project is a very important fact, which has to be borne in mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al nature entitled to depreciation after completion and on commencement of its use for business and that stage having not reached and no asset having come into existence, the capital work-in-progress had to be written off as such. 30. In the case of Asia Power Projects (P.) Ltd. (supra), the High Court of Karnataka held that, if the assessee incurs a liability and when the contract under which that liability was incurred was terminated and when no amounts under the or in pursuance of a claim is receivable, he is entitled to claim the said amount incurred as expenditure in implementing the contract as a set off under Section 37(1) read with 28 of the Income Tax Act, 1961. 31. Insofar as the abandoned feature films are considered, a Division Bench of this Court in the case of Tiruvengadam Investments (P.) Ltd. v. Asstt. CIT [2016] 95 CCH 0024, referring to a circular issued by the CBDT in Circular No.16/2015 dated 06.10.2015, held that film production expenses of abandoned films should be treated as revenue expenditure. This decision was followed in the case of Asia Power Projects P. Ltd. (supra). 32. The learned counsel for the Revenue strenuously contended that a new project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Cellulura Ltd. (supra) was also a case where the expenditure was incurred to bring into existence a new asset, which is not so in the case on hand. Therefore, the said decision is also distinguishable on facts." 10. It can be noticed that the Hon'ble Madras High Court also placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Idea Cellular Ltd., 76 Taxmann.com 77. It is admitted fact in the present case that as result of subject expenditure, no new asset had come into existence nor had any benefit of enduring nature accrued. Therefore, ratio of above decision is squarely applicable to the facts of present case. Accordingly, we direct Assessing Officer to allow the expenditure incurred on abandoned IPO as revenue expenditure. Accordingly, this ground is allowed." 16. Similar view has been held by the Co-ordinate Benches of the Tribunal in various other decisions of the Bench relied upon by the Ld. Counsel for the assessee in the paper book. 17. So far as the observations of the Ld. Addl./JCIT(A) that when there is mismatch of corresponding item as per column 21(a)(2) of Form No.3CD and Schedule BP of e-filed ITR, the corresponding difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon'ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well. 10. In view of the detailed discussions above, we are of the considered view that the impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same. As we hold so, we make it clear that our observations remain confined to the peculiar facts before us, that our adjudication is confined to the limited scope of adjustments which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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