AJMER FOOD PRODUSTS (PVT.) LTD., Ajmer v. ACIT, Jaipur

ITA 625/JPR/2014 | 2011-2012
Pronouncement Date: 28-09-2016 | Result: Allowed

Appeal Details

RSA Number 62523114 RSA 2014
Assessee PAN AACCA4735H
Bench Jaipur
Appeal Number ITA 625/JPR/2014
Duration Of Justice 2 year(s) 16 day(s)
Appellant AJMER FOOD PRODUSTS (PVT.) LTD., Ajmer
Respondent ACIT, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-09-2016
Assessment Year 2011-2012
Appeal Filed On 11-09-2014
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHE S JAIPUR JH DQY HKKJR] U;KF;D LNL; OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT JM & SHRI VIKRAM SINGH YAD AV AM VK;DJ VIHY LA-@ ITA NO.625/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S AJMER FOOD PRODUCTS PVT. LTD. C/O R.N. AGARWAL SHARDA BUILDING NAYA BAZAR AJMER CUKE VS. THE JCIT RANGE-2 AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCA 4735 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI M. GARGIEYA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DAGUR (ADDL . CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28.07.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 28/09/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) AJMER DATED 31.07.2914 WHEREIN THE ASSESSEE HAS TAK EN FOLLOWING GROUNDS OF APPEAL: (1) THAT ON THE FACTS AND IN LAW THE LD. CIT(A) HAS WRO NGLY CONFIRMED THE ADDITION OF RS. 45 12 111/- OF PROJECT EXPENSES WRI TTEN OFF. (2) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 45 738/- U/S 40A(3). 2. IN RESPECT OF GROUND NO. 1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED RS. 45 12 111/- AS NEW PROJEC T EXPENSES WRITTEN OFF. THE AO STATED THAT THERE WAS AN AGRICULTURAL LAND A T VILLAGE GANERA PUSHKAR IN ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 2 THE NAME OF SHRI MANOJ KUMAR SHARDA MD OF THE ASSE SSEE COMPANY WHICH WAS TAKEN ON LEASE BY THE ASSESSEE COMPANY FROM THE YEAR 2007 FOR DEVELOPING A RESORT AND LEASE RENT WAS BEING REGULA RLY PAID. FOR CONSTRUCTING THE RESORT CHANGE OF LAND WAS APPROVED BY MUNICIPA L COUNCIL PUSHKAR AND BY THE SENIOR TOWN PLANNER AJMER AND HENCE WORK WAS S TARTED. HOWEVER IN THE YEAR 2010 NEW RULES WERE MADE EFFECTIVE AND WERE R ECEIVED FROM THE SENIOR TOWN PLANNER STATING THAT A NEW S. 90A FOR CHANGE O F LAND USE AND REGARDING THE ROAD WIDTH FOR A RESORT BY THE GOVERNMENT AUTHO RITIES. DUE TO THIS ALL THE ASSESSEE AGAIN APPLIED FOR CHANGE OF LAND USE AS PE R THE NEW S. 90A. ACCORDINGLY THE EXPENSES INCURRED OF RS. 45 12 111 /- ON THIS PROJECT WERE WRITTEN OFF AS REVENUE EXPENDITURE. THE CLAIM OF TH E ASSESSEE HOWEVER DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER AS WELL AS W ITH THE LD CIT(A). HENCE THE PRESENT APPEAL BEFORE US. 2.1 WE NOW REFER TO THE FINDINGS OF THE LD. CIT(A) WHICH IS REPRODUCED AS UNDER: I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE ASSESSEE HAS CLAIMED TO HAVE INVESTED 45 L2 111/- ON THE LEASED LAND OF THE DIRE CTOR OF THE ASSESSEE COMPANY FOR ESTABLISHING A ALL TOGETHER NEW PROJECT I.E. A RESORT. THE EXPENSES WERE INCURRED BETWEEN THE YEARS 2006-07 TO 2010-11. DURING ALL THESE YEARS THE SAID EXPENSES WERE BEING CAPIT ALIZED BY THE ASSESSEE AND NO DEPRECIATION ETC. WAS CLAIMED. DUE TO INTRO DUCTION OF NEW RULES FOR LAND USE AND ROAD WIDTH FOR THE RESORT BY THE G OVERNMENT AUTHORITIES ASSESSEE HAD TO SCRAP THE EARLIER PROJ ECT AND APPLIED FOR THE CHANGE OF LAND USE AS PER THE NEW RULE I.E. 90A. HO WEVER IT IS APPARENT THAT THE EXPENSES INCURRED WERE SHOWN AND ACCEPTED ALL ALONG AS CAPITAL EXPENSES BY THE ASSESSEE AND IN NONE OF THE YEARS T HEY WERE CLAIMED AS REVENUE EXPENSES. THE NATURE OF EXPENSES CANNOT CHA NGE IN THE YEAR WHEN THE SAID PROJECT WAS SCRAPED. THE NATURE OF EX PENSES REMAINS THE SAME AS EARLIER CLAIMED BY THE ASSESSEE FROM A.Y. 2 007-08 TO 2011-12. AS SUCH THIS IS THE CAPITAL LOSS INCURRED BY THE ASSE SSEE AND SAID LOSS IS NOT ALLOWABLE TO SET OFF AGAINST THE INCOME FROM JOB WO RK BUSINESS OF THE ASSESSEE. ALSO IT IS NOT THE CASE OF ASSESSEE THAT ASSESSEE HAS INCURRED THE ABOVE EXPENSES AS REVENUE EXPENSES FOR THE CURRENT BUSINE SS OF MANUFACTURING OF BISCUITS OF PARLE BISCUITS ON JOB WORK BASIS. AC CORDINGLY THE CLAIM OF THE ASSESSEE IS NOT LIABLE TO BE SET OFF AS REVENUE EXPENSES AGAINST ABOVE ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 3 BUSINESS. 2.2 THE LD. AR ARGUED THE MATTER AT LENGTH AND HAS SUBMITTED THROUGH ITS WRITTEN SUBMISSIONS AS UNDER: 1. FIRSTLY WE STRONGLY RELY UPON THE WRITTEN SUBM ISSIONS FILED BEFORE THE LD. CIT (A) AS UNDER: YOUR HONOUR HERE I WOULD LIKE TO SUBMIT THAT THE L EARNED ASSISTANT COMMISSIONER HAS DISALLOWED THE EXPENSES ON TWO GRO UNDS: 1. THAT THE EXPENSES ARE CAPITAL IN NATURE AND SAME WERE KEPT IN WORK-IN- PROGRESS IN SCHEDULE OF ASSETS. AND 2. THESE EXPENSES PERTAIN TO VARIOUS PRECEDING FINA NCIAL YEAR. THAT THE CAPITAL EXPENSES ARE THOSE EXPENSES WHICH WERE INCURRED WITH A VIEW TO BRINGING INTO EXISTENCE AS NEW ASSET AND FOR THE ENDURING BENEFIT OF A TRADE WHEREAS IN THE CASE OF APPELLANT NO NEW ASSET CAME INTO EXISTENCE AND MOREOVER THE EXPENDITURE INCURRED PREVIOUSLY WAS OF NO USE DUE TO CHANGE OF GOVERNMENT POLICY AND THE APPELLANT HAS TO DEMOLISH THE GROUND WORK IT IS REVENUE EXPENSES OR MAY BE TAKEN AS BUSINESS LOSS W HICH IS ALLOWABLE. I RELY ON THE FOLLOWING RULINGS: CIT VS PRIYA VILLAGE ROAD SHOWS LTD. 332 ITR 594 CIT VS MONNET INDUSTRIES LTD. 332 ITR 627 DCIT VS. ASSAM ASBESTOS LTD. 263 ITR 357 INDO RAMA SYNTHETICS INDIA LTD. VS. CIT 333 ITR18 LAKE PALACE HOTELS AND MOTELS PVT. LTD. VS. CIT 213 ITR 735 (RAJ) YOUR HONOUR IN THE AFORESAID JUDGMENT THE RAJASTHAN HIGH COURT HELD THAT THE DISMANTLING CHARGES INCURRED BY THE ASSESSEE ARE CA PITAL IN NATURE PARTICULARLY WHEN THE NEW CONSTRUCTION WAS DONE EIT HER IN THE YEAR OR IN THE SUCCEEDING YEARS WHEREAS THE APPELLANT HAS ALREADY STARTED THE NEW PROJECT WITH AMENDED RULES OF RAJASTHAN GOVT. HENCE THIS RU LING IS IN FAVOUR OF THE APPELLANT. COPIES OF SANCTIONED LETTER AND COPY OF RECEIPT OF CHARGES ARE ATTACHED HEREWITH. ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 4 THAT WITHOUT PREJUDICE TO ABOVE THE TOTAL EXPENSES INCLUDES EXPENSE OF RS. 15 00 000/- ARE OF LEASE RENT WHICH WAS PAID YEAR T O YEAR AND THE RENT WAS DULY TAXED IN THE HANDS OF OWNER OF THE LAND YEAR TO YEA R. THAT THE LEASE RENT PAID ARE REVENUE EXPENDITURE AN D THERE IS NO ENDURING BENEFIT. I RELY ON THE FOLLOWING RULING: BAND & PLANTATIONS AND IND. LTD. VS CIT 242 ITR 22. CIT VS BPL SYSTEMS AND PROJECT LTD. 227 ITR 779. THAT AS REGARDS THE SECOND GROUND I HAVE TO SUBMIT THAT ALTHOUGH THE EXPENSES INCURRED IN PREVIOUS YEAR BUT DUE TO GOVERNMENT ORD ERS WHICH WERE RECEIVED THIS YEAR HENCE THESE EXPENSES BECAME BAD THIS YEAR ONLY. HENCE ARE ALLOWABLE THIS YEAR. COPY OF SANCTIONED ORDER IS AT TACHED 2. EXPENDITURE WAS OF REVENUE NATURE AND NOT CAPITA L: 2.1 AT THE OUTSET IT IS SUBMITTED THAT THE ENTIRE S UBJECTED EXPENDITURE THE DETAILS OF WHICH WAS SUBMITTED BEFORE THE AUTHORITI ES BELOW AND AVAILABLE AT (PB 93) WAS CLEARLY OF REVENUE NATURE. THE BASIC C ONSIDERATION OF DECIDING WHETHER A PARTICULAR EXPENDITURE WAS CAPITAL EXPEND ITURE THE TEST IS THAT BY INCURRING SUCH EXPENDITURE A NEW ASSET MUST CAME IN TO EXISTENCE OR IT SHOULD RESULT INTO AN ADVANTAGE OF ENDURING NATURE. HOWEVE R THE AUTHORITIES BELOW HAVE NOT APPLIED THEIR MIND ON THIS ASPECT. THE BIF URCATION OF THE SUBJECTED EXPENDITURE CLEARLY SHOW THAT ALL THE EXPENDITURES LIKE DESIGN FEES TRAVELLING GARDEN EXP. AND MISC. EXP. WERE OF REVENUE NATURE AND THEY DID NOT AT ALL BROUGHT ANY ASSET INTO EXISTENCE NOR ANY ADVANTAGE OF ENDURING NATURE. EVEN THE CIVIL CONSTRUCTION EXP. RELATED TO THE CONSTRUC TION OF A BOUNDARY WALL AND SOME OTHER MINOR CIVIL CONSTRUCTION WHICH ULTIMATE LY HAD TO BE DEMOLISHED. HENCE THE LABOR & WAGES INCURRED WERE A REVENUE EX PENDITURE. THIS IS BECAUSE OF THE PECULIAR FACTS THAT ULTIMATELY BECAU SE OF THE CHANGED RULES AND REGULATIONS/BUILDING BYE LAWS MORE PARTICULARLY RE LATING TO THE RESORT STOOD CHANGED WHICH FACT HAS NOT BEEN DENIED. THE ASSESSE E FEELING COMPELLED HAD TO DEMOLISH THE EARLIER CONSTRUCTION WHICH WAS NO U SE. 2.2 UNDER THESE CIRCUMSTANCES THE SUBJECTED EXPENDI TURE WAS INCURRED FOR THE PURPOSE OF BUSINESS ONLY. IT WAS NEITHER CLAIMED NO R ALLOWED EARLIER AS BUSINESS EXPENDITURE. BUT SINCE IT DIDN'T REACHED T O COMPLETION STAGE NO ASSET HAVING COME INTO EXISTENCE THE CAPITAL-WORK-IN-PR OGRESS HAD TO BE WRITTEN OFF AS SUCH. BY INCURRING SUCH EXPENDITURE NEITHER ANY NEW ASSET CAME INTO ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 5 EXISTENCE NOR ANY ADVANTAGE OF ENDURING NATURE RESU LTED TO THE ASSESSEE NOR IT WAS SO ESTABLISHED. 3.THIS VIEW FINDS SUPPORT FROM FOLLOWING DECISION: 3.1 THE FACTUAL MATRIX INVOLVED IN THE CASE OF BINA NI CEMENT LTD. VS. CIT (2016) 380 ITR 0116 (CAL)/(2015) 118 DTR 0061 (CAL) (DPB 1 -6) IS EXACTLY SIMILAR AS IN OUR CASE IN AS MUCH AS IN THE CITED CASE THE TRIBU NAL REVERSED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HOLDING THAT WHEN CON STRUCTION/ACQUISITION OF NEW FACILITY IS ABANDONED AT THE STAGE OF WORK IN P ROGRESS THE EXPENDITURE DOES NOT RESULT IN ADVANTAGE OF ENDURING NATURE AND SUCH EXPENDITURE WHEN WRITTEN OFF HAS TO BE ALLOWED U/S 37 OF THE INCOME TAX ACT 1961 AND THEREFORE OUR CASE IS DIRECTLY COVERED BY THE SAID DECISION WHEREIN IT WAS HELD THAT BUSINESS EXPENDITUREALLOWABILITYTRIBUNAL DISALLO WED EXPENDITURE ALLEGEDLY INCURRED BY ASSESSEE FOR PREPARATION OF F EASIBILITY STUDY REPORT AND CAPITAL-WORK-IN-PROGRESS IN EARLIER YEARS WHICH WR ITTEN OFF DURING PREVIOUS YEAR CORRESPONDING TO ASSESSMENT YEAR 2002-03 SINCE PROP OSED PROJECT WAS ABANDONEDHELD FACTS OF PRESENT CASE WERE COVERED IN CASE OF CIT VS. GRAPHITE INDIA LTD. (1996) 221 ITR 420 (CAL) WHEREI N IT WAS HELD THAT EXPENDITURE MADE FOR CONSTRUCTION/ACQUISITION OF NE W FACILITY SUBSEQUENTLY ABANDONED AT WORK-IN-PROGRESS STAGE WAS ALLOWABLE A S INCURRED WHOLLY OR EXCLUSIVELY FOR PURPOSE OF ASSESSEES BUSINESSFURT HER THERE WOULD HAVE BEEN NO OCCASION TO CLAIM DEDUCTION IF WORK-IN-PROGRESS HAD COMPLETED ITS COURSE BECAUSE PROJECT WAS ABANDONED WORK-IN-PROGRESS DID NOT PROCEED ANY FURTHERDECISION TO ABANDON PROJECT WAS CAUSE FOR C LAIMING DEDUCTIONSAID DECISION WAS TAKEN IN RELEVANT YEARIT CAN THEREFOR E BE CONCLUDED THAT EXPENDITURE AROSE IN RELEVANT YEARASSESSEES APPEA L ALLOWED CONCLUSION: EXPENDITURE MADE FOR CONSTRUCTION/ACQUISITION OF NE W FACILITY SUBSEQUENTLY ABANDONED AT THE WORK-IN-PROGRESS STAG E IS ALLOWABLE AS INCURRED WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. 3.2 SIMILARLY IN CIT VS. GRAPHITE INDIA LTD. (1996) 221 ITR 420) (CA L) (DPB 7-11) WHEN THE DISPUTE WAS THAT WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE EXPENDITURE INCURRED FOR THE ASSESSEES PROPOSE D PETRO-CHEMICAL PROJECT WAS REVENUE EXPENDITURE AND TO BE ALLOWED AS A DEDU CTION IT WAS HELD THAT: ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 6 SO FAR AS QUESTION NO.4 IS CONCERNED THE TRIBUNAL RECORDED THE FINDING THAT THE ASSESSEE SPENT AN AMOUNT OF RS.56 665 AS PROJEC T EXPENDITURE. THE EXPENDITURE REPRESENTED FEES PAID TO ENGINEERING IN DIA LTD. IN CONNECTION WITH THE PETRO- CHEMICAL PROJECT REPORT. THE AMOUNT WAS PAID BY THE ASSESSEE IN ORDER TO EXPLORE THE POSSIBILITY OF SETTING UP O F A PETRO-CHEMICAL PROJECT WHICH COULD PROVIDE A CAPTIVE PLANT FOR MANUFACTURE OF RAW MATERIAL AT THE ASSESSEES OWN FACTORY WHICH WOULD HELP THE ASSESSE E IN GETTING CONTINUOUS SUPPLY OF RAW MATERIAL EVEN DURING PERIODS OF ACUTE SHORTAGE. IN FACT THE PROJECT DID NOT MATERIALIZE. THE INCOME-TAX OFFICER AS WELL AS THE COMMISSIONER OF INCOME-TAX (APPEALS) THEREFORE HE LD THAT THE EXPENDITURE WAS CAPITAL IN NATURE. HOWEVER THE TRIBUNAL FOUND THAT THE EXPENDITURE DID NOT RESULT IN BRINGING INTO EXISTENCE ANY CAPITAL A SSET OF ENDURING IN NATURE. THE TRIBUNAL FURTHER FOUND THAT THE DECISION OF THE CAL CUTTA HIGH COURT IN THE CASE OF HINDUSTHAN ALUMINIUM CORPORATION LTD. V. CIT [19 86] 159 ITR 673 WAS APPLICABLE AND FOLLOWING THAT DECISION HELD THAT T HE EXPENDITURE WAS ALLOWABLE AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSINESS. THEREFORE THE TRIBUNAL DELETED THE DISALLOWANCE. T HE CASE RELIED UPON BY THE TRIBUNAL WAS SUBSEQUENTLY FOLLOWED IN THE CASE OF A SIATIC OXYGEN LTD. V. CIT [1991] 190 ITR 328 (CAL). THIS COURT IN THE SAID CA SE REITERATED THE VIEW TAKEN IN HINDUSTHAN ALUMINIUM CORPORATION LTD.S CASE [1986] 159 ITR 673 (CAL). ACCORDING TO US QUESTION NO. 4 IN THIS REFERENCE S TANDS CONCLUDED BY THE AFOREMENTIONED TWO DECISIONS. WE ACCORDINGLY ANSW ER QUESTION NO.4 IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE AND AGAIN ST THE REVENUE. 3.3 IN DALMIA JAIN & CO. VS. CIT (1971) 81 ITR 754 (SC) IT WAS HELD THAT IN DECIDING WHETHER A PARTICULAR EXPENDITURE IS CA PITAL OR REVENUE IN NATURE WHAT THE COURTS HAVE TO SEE IS WHETHER THE EXPENDIT URE IN QUESTION WAS IN CURRED TO CREATE ANY NEW ASSET OR WAS INCURRED FOR MAINTAINING THE BUSINESS OF THE COMPANY. IF IT IS THE FORMER IT IS CAPITAL EXP ENDITURE. IF IT IS THE LATTER IT IS REVENUE EXPENDITURE. 3.4 IN CIT VS. PIONEER ENGG. SYNDICATE (1988) 38 TA XMAN 151 (MAD) IT WAS HELD THAT IT WOULD NOT BE ENOUGH TO MERELY ASCERTAIN WHETHER A PARTICULAR EXPENDITURE HAS RESULTED IN ANY ADVANTAGE OF AN ENDURING CHARAC TER. THE ADVANTAGE MUST BE IN A COMMERCIAL SENSE AND FURTHER IT MUST BE I N CAPITAL FIELD. IF THERE IS A PAYMENT MADE ON THE GROUND OF COMMERCIAL EXPEDIENCY AND IF SUCH PAYMENT DOES NOT RESULT IN THE ACQUISITION OF ANY CAPITAL A SSET OR AN ENDURING BENEFIT ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 7 MERELY BECAUSE SUCH PAYMENT IS MADE TO GET RID OF T HE LIABILITY WHICH IS MUCH LARGER THE OUTGOING AMOUNT CANNOT BE CONSIDERED AS CAPITAL IN NATURE. 4.PAST HISTORY DISTINGUISHABLE AND NOT BINDING: 4.1 IN THE EARLIER YEARS THE EXPENDITURE INCURRED W AS KEPT UNDER THE HEAD WORK IN PROGRESS WHICH IS NEITHER OF REVENUE NATURE NOR OF CAPITAL NATURE BUT IT WAS AWAITING COMPLETION AND THEREAFTER WAS TO BE ALLOCA TED. IT WAS NOT THE CASE OF REVENUE THAT THE ASSESSEE HAS SHOWN SUCH EXPENDITUR E TO BE CAPITAL-WORK IN PROGRESS. THEREFORE THEIR ALLEGATION THAT IN THE P AST THE ASSESSEE HAD BEEN SHOWING SUCH EXPENSES TO BE OF CAPITAL NATURE AND N O DEPRECIATION WAS CLAIMED IS NOTHING BUT WAS A MISCONCEPTION ON THEI R PART. ON THE COMPLETION WHEN A NEW ASSET COULD BE BROUGHT IN TO EXISTENCE ALL THESE EXPENSES WOULD HAVE BEEN ALLOCATED UNDER THE PROPER HEADS. OTHERWI SE ALSO THERE IS NO ESTOPPEL AGAINST STATUE. 4.2 CASE LAW WHICH SUPPORT THAT THERE IS NO ESTOPPE LS ARE AS UNDER: 4.2.1 IN CIT VS. ESCORTS AUTO COMPONENTS LTD. (2010 ) 323 ITR 0011/34 DTR 0280 (P&H) WHEREIN IT WAS HELD THAT BUSINESS EXPENDITURECAPITAL OR REVENUE EXPENDITUR EEXPENDITURE ON EXPANSION OF EXISTING BUSINESSASSESSEE HAD INCURRE D EXPENDITURE ON DIVERSIFICATION AND EXPANSION OF NEW PRODUCT RANGE INCLUDING ACQUISITION OF MACHINERY TO AID SUCH EXPANSIONMERELY BECAUSE THE ASSESSEE HAS DECLARED BY GIVING A NOTE IN ITS ORIGINAL RETURN THAT IT WAS AN EXPENDITURE PERTAINING TO NEW PROJECT AND IS OF CAPITAL IN NATURE THE AO COU LD NOT HAVE TREATED THE SAME AS THE CAPITAL EXPENDITUREMOREOVER THE FINDING OF THE TRIBUNAL THAT THE EXPENDITURE INCURRED WAS REVENUE EXPENDITURE AND/OR FOR BUSINESS PURPOSE HAS NOT BEEN CHALLENGED NOR THERE IS ANY CHALLENGE TO THE FINDING THAT NO CAPITAL ASSET HAS COME INTO EXISTENCEEXPENDITURE W AS THEREFORE ALLOWABLE AS REVENUE EXPENDITURE 4.2.2 IN CIT VS. USHA IRON & FERRO METAL CORPN. LTD . (2008) 296 ITR 0140 (DEL) WHEREIN IT WAS HELD THAT BUSINESS EXPENDITURECAPITAL OR REVENUE EXPENDITUR EEXPENDITURE ON ESTABLISHMENT OF UNIT FOR MANUFACTURING RAW MATERIA LASSESSEE ENGAGED IN MANUFACTURE OF CTD BARS INCURRING EXPENDITURE ON E STABLISHMENT OF STEEL MELTING SHOP FOR MANUFACTURE OF BILLETS USED AS RAW MATERIAL FOR MANUFACTURING ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 8 CTD BARS SAME WAS FOR EXPANSION OF EXISTING BUSINE SS HENCE REVENUE EXPENDITUREFACT THAT ASSESSEE HAD TREATED THE AMOU NT AS CAPITAL EXPENDITURE IN ITS BOOKS WOULD NOT BIND ITNO SUBST ANTIAL QUESTION OF LAW ARISE. 4.2.3 IN AVERY INDIA LTD. VS. CIT (1993) 199 ITR 74 5 (CAL) IT WAS HELD THAT WHETHER OR NOT AN EXPENDITURE IS REVENUE EXPENDITU RE OR CAPITAL EXPENDITURE DOES NOT DEPEND ON THE ADMISSION OF THE ASSESSEE 5.THE EXPENSES INCURRED FOR THE PURPOSE OF SAME BUS INESS: 5.1 THE AUTHORITIES BELOW HAVE ALSO RAISED AN OBJEC TION THAT THE SUBJECTED EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE OF BUS INESS. THE LD. CIT(A) HAS HELD THAT SUCH EXPENDITURE COULD NOT HAVE BEEN GIVE N THE BENEFIT OF SET OFF AGAINST THE INCOME FROM JOB WORK BUSINESS OF THE AS SESSEE. HOWEVER THE AUTHORITIES BELOW HAVE NOT APPRECIATED THE SETTLED LEGAL POSITION IN AS MUCH AS IT WAS A CASE OF COMPLETE INTERCONNECTION INTERLAC ING AND INTERDEPENDENCE BETWEEN THE OLD BUSINESS BISCUIT DIVISION AND THE N EW BUSINESS OF RESORT. THE LAW IS WELL SETTLED THAT IF THERE EXIST THE INT ERCONNECTION INTERLACING AND INTERDEPENDENCE THE AO HAS NOT MADE OUT THAT THE BI SCUIT DIVISION WAS ENTIRELY SEPARATE FROM THE RESORT. INFACT BOTH THE SE DIVISIONS ARE UNDER THE SAME MANAGEMENT-CONTROL (THERE WAS A COMMON BOARD O F DIRECTORS) BOTH THE DIVISIONS. FURTHER THERE WERE COMMON FUNDS AND BOT H ARE FINANCIALLY INTERCONNECTED. THE ACCOUNTING WAS COMMON. ALL THES E FACTS ARE CLEARLY EVIDENT FROM THE AUDITED BALANCE SHEET. 5.2.1 FURTHER THE HONBLE RAJASTHAN HIGH COURT IN T HE CASE OF MAHARAJA SHRI UMAID MILLS LTD. VS. CIT (1989) 175 ITR 72 (RAJ)/(1 988) 68 CTR (RAJ) 187 HAD AN OCCASION TO DEAL WITH THIS ISSUE. THERE ALSO THE EX PENDITURE INCURRED IN OBTAINING SURVEY AND FEASIBILITY REPORT FOR SETTING UP POLYETHYLENE PLANT FOR MANUFACTURING PACKING MATERIAL WAS TREATED AS REVEN UE EXPENDITURE AS THE NEW VENTURE WAS INTERCONNECTED AND FORMED PART OF E XISTING BUSINESS. 5.2.2 IN ACIT VS. GRAVIS FOODS PVT. LTD. (2015) 44 CCH 0560 (MUM TRIB) IN PARA 12 IT WAS HELD INTERLACING OF THE ACCOUNTS MANAGEMENT AND CONTRO L: IT WAS A SETTLED PROPOSITION IN LAW THAT SO LONG AS THERE EXISTS THE INTERLACING OF THE CONTROL & ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 9 MANAGEMENT INTERLACING OF THE ACCOUNTS ETC NO NEW BUSINESS IS SAID TO HAVE BEEN SET UP. IN THE INSTANT CASE NONE OF THESE TES TS ARE CLEARED. AO HAS NOT MADE OUT THAT THE MAWA DIVISION WAS ENTIRELY SEPARA TE FROM THE POINTS OF THE ABOVE AND IT IS UNCONNECTED TO THE ICE-CREAM DIVIS IONS. ACTUALLY BOTH THESE DIVISIONS ARE UNDER THE SAME MANAGEMENT-CONTROL AND ARE FINANCIALLY INTERCONNECTED. IN THAT SENSE THE CIT(A) HAD NOT A PPLIED HIS MIND TO THE SAID SETTLED LEGAL PROPOSITIONS. 5.2.3 IN CIT VS. MONNET INDUSTRIES LTD. (2011) 332 ITR 0627/(2008) 16 DTR 0307 IT WAS HELD THAT: BUSINESS EXPENDITUREINTEREST ON BORROWED CAPITAL AMOUNT BORROWED FOR SETTING UP A NEW PLANTTRIBUNAL FOUND AS A FACT THA T THERE WAS A COMMON BOARD OF DIRECTORS OF THE ASSESSEE COMPANY CONTROLL ING THE FERRO ALLOYS PLANT AS WELL AS THE NEWLY SET UP SUGAR PLANT FUNDS FOR THE TWO PLANTS WERE COMMON AND MARKETING OF THE FINAL PRODUCTS OF BOTH DIVISIO NS WAS CARRIED OUT UNDER THE SUPERVISION AND CONTROL OF THE SAME SET OF EXECUTIV ES AT THE HEAD OFFICETHUS THE FERRO ALLOYS PLANT AND THE SUGAR PLANT WERE IN THE SAME FOLD OF BUSINESS THE FACT THAT THE LOAN OR CAPITAL BORROWED HAS BEEN USED FOR PURCHASE OR IN CONNECTION WITH BRINGING INTO EXISTENCE A CAPITAL A SSET OR NOT HAS NO IMPACT IN DETERMINING WHETHER THE INTEREST PAID ON BORROWED C APITAL OUGHT TO BE ALLOWED UNDER S. 36(1)(III)AS LONG AS A LOAN IS TA KEN OR CAPITAL IS BORROWED FOR THE PURPOSES OF THE BUSINESS WHICH HAS ALREADY COMM ENCED ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF INTEREST PAID THEREO NIN VIEW OF THE FINDING OF THE TRIBUNAL IT CANNOT BE SAID THAT THE ASSESSEE H AD NOT COMMENCED ITS BUSINESS AND HENCE INTEREST HAS TO BE CAPITALIZED THEREFORE THE INTEREST WAS PAID BY THE ASSESSEE ON BORROWED CAPITAL FOR THE PU RPOSES OF BUSINESS AND WAS RIGHTLY ALLOWED AS DEDUCTION UNDER S. 36(1)(III) HELD: THE TRIBUNAL FOUND AS A FACT THAT THERE WAS A COMMON BOARD OF DIRECTORS CONTROLLING THE FERRO ALLOYS PLANT AS WELL AS THE S UGAR PLANT WHICH OPERATED FROM THE HEAD OFFICE LOCATED AT DELHI FUNDS FOR TH E TWO PLANTS WERE COMMON AND HENCE THERE WAS INTERMINGLING AND INTERLACING OF FUNDS AS ALSO THE FACT THAT EVEN THOUGH THE TWO DIVISIONS WERE GEOGRAPHICA LLY LOCATED AT DIFFERENT SITES MARKETING OF THE FINAL PRODUCTS WAS CARRIED OUT UNDER THE SUPERVISION AND CONTROL OF THE SAME SET OF EXECUTIVES AT THE HE AD OFFICE. THUS THERE IS NO DIFFICULTY IN HOLDING THAT THE SUGAR PLANT AND THE FERRO ALLOYS PLANT WERE IN THE SAME FOLD OF BUSINESS. ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 10 5.2.4 IN JAY ENGINEERING WORKS LTD. VS. CIT (DEL) ( 2009) 311 ITR 0405/ (2008) 166 TAXMAN 0115 IT WAS HELD THAT THE NATURE OF THE NEW BUSINESS IS NOT A DECISIVE T EST FOR DETERMINING WHETHER OR NOT THERE IS AN EXPANSION OF AN EXISTING BUSINES S. THE NATURE OF THE BUSINESS COULD BE DISTINCT. WHAT IS OF IMPORTANCE IS THAT TH E CONTROL OF BOTH THE VENTURES THE EXISTING VENTURE AS WELL AS THE NEW V ENTURE MUST BE IN THE HANDS OF ONE ESTABLISHMENT OR MANAGEMENT OR ADMINISTRATIO N. THE PLACE OF BUSINESS OF THE EXISTING BUSINESS AND THE NEW BUSINESS MAY N OT BE IN CLOSE PROXIMITY. HOWEVER THE FUNDS UTILISED FOR THE MANAGEMENT OF B OTH THE CONCERNS MUST BE COMMON AS REFLECTED IN THE BALANCE SHEET OF THE COM PANY. THE CONTROL OVER THE TWO UNITS IS IN THE HANDS OF THE SAME MANAGEMEN T AND ADMINISTRATION. THERE IS NO DOUBT ON THIS SCORE AND IN FACT THE AN NUAL REPORT OF THE ASSESSEE MAKES A REFERENCE TO THE PROJECT AT HYDERABAD. THER E CAN BE NO DISPUTE FROM THE FACTS THAT HAVE BEEN PLACED ON RECORD THAT THE NEW VENTURE WAS MANAGED FROM COMMON FUNDS AND THERE IS THE NECESSARY UNITY OF CONTROL LEADING TO AN INTERCONNECTION INTERDEPENDENCE AND INTERLACING OF THE TWO VENTURES SUCH THAT IT CAN BE SAID THAT THE FUEL INJECTION EQUIPME NT PROJECT IS ONLY AN EXTENSION OF THE EXISTING BUSINESS OF THE ASSESSEE AND THEREFORE THE EXPENDITURE INCURRED BY THE ASSESSEE ON THIS PROJEC T IS A REVENUE EXPENDITURE. 5.2.5 IN INDO RAMA SYNTHETICS (I) LTD. VS. CIT (201 1) 333 ITR 0018/(2009) 32 DTR 0322 (DEL) WHEREIN EXACTLY ON SIMILAR FACTS AND CI RCUMSTANCES IT WAS HELD THAT THE EXPENDITURE INCURRED WAS IN THE NATURE OF SALA RY WAGES REPAIRS MAINTENANCE DESIGN AND ENGINEERING FEE TRAVELLING AND OTHER EXPENSES OF ADMINISTRATIVE NATURE. INDUBITABLY IN NORMAL COURS E THESE EXPENSES WOULD BE TREATED AS REVENUE EXPENDITURE. THE UNIT WHICH THE APPELLANT PROPOSED TO SET UP HAD INEXTRICABLE LINKAGE WITH THE EXISTING BUSI NESS OF THE APPELLANT. THE PROPOSED BUSINESS WAS NOT AN INDIVIDUAL BUSINESS BU T VERTICAL EXPANSION OF THE PRESENT BUSINESS. THUS TEST OF EXISTING BUSINESS W ITH COMMON ADMINISTRATION AND COMMON FUND IS CLEARLY MET. SINCE THE PROJECT W AS ABANDONED NO NEW ASSET ALSO CAME TO BE CREATED. THE AUTHORITIES BELO W ADOPTED A WRONG APPROACH BY NOT TREATING THE EXPENDITURE AS REVENUE EXPENDITURE ONLY BECAUSE THE UNIT WAS TO BE SET UP IN KARNATAKA WHICH WAS G EOGRAPHICALLY AT A DISTANCE FROM THE EXISTING UNIT.INDO RAMA SYNTHETICS (I) LT D. VS. DY. CIT (2009) 31 DTR (DEL)(TRIB) 42 SET ASIDE; CIT VS. PRIYA VILLAGE ROA DSHOWS LTD. (2010) 228 CTR (DEL) 271 AND CIT VS. MONNET INDUSTRIES LTD. (2009) 221 CTR (DEL) 266 : (2008) 16 DTR (DEL) 307 FOLLOWED; VEECUMSEES VS. CIT (1996 ) 133 CTR (SC) 500 : (1996) 220 ITR 185 (SC) RELIED ON. ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 11 6. THE SUBJECTED EXPENDITURE WAS RIGHTLY CLAIMED AS REVENUE EXP IN THIS YEAR IN THE FACTS OF THE PRESENT CASE AND THIS ASPECT IS AL SO DIRECTLY COVERED BY THE CASE OF GRAPHITE (SUPRA) WHEREIN IT WAS HELD: 11. FOLLOWING THE JUDGMENT IN THE CASE OF GAJAPATH I NAIDU (SUPRA) THE QUESTION TO BE ASKED IS WHEN DID THE EXPENDITURE CL AIMED BY WAY OF DEDUCTION ARISE? THERE WOULD HAVE BEEN NO OCCASION TO CLAIM T HE DEDUCTION IF THE WORK- IN-PROGRESS HAD COMPLETED ITS COURSE. BECAUSE THE P ROJECT WAS ABANDONED THE WORK-IN-PROGRESS DID NOT PROCEED ANY FURTHER. THE D ECISION TO ABANDON THE PROJECT WAS THE CAUSE FOR CLAIMING THE DEDUCTION. T HE DECISION WAS TAKEN IN THE RELEVANT YEAR. IT CAN THEREFORE BE SAFELY CONCLUDED THAT THE EXPENDITURE AROSE IN THE RELEVANT YEAR. 7. LEASE PAID IS REVENUE EXPENDITURE: 7.1 FURTHER THERE CAN BE A LEAST DOUBT THAT ANNUAL LEASE PAID TOTALING TO RS. 15 00 000/- BY THE ASSESSEE THIS YEAR AND IN THE PA ST IS A REVENUE EXPENDITURE. SUCH EXPENDITURE DOES NOT BRING INTO ANY NEW ASST I NTO EXISTENCE NOR ANY ADVANTAGE OF ENDURING NATURE AND HENCE FULLY ALLOWA BLE U/S 37(1) OF THE ACT. EVEN WHERE THE ASSESSEE MADE AN ATTEMPT TO CLAIM D EPRECIATION ON EXPENDITURE INCURRED ON LEASEHOLD LAND BY TAKING HE LP OF EXPLANATION 1 TO S. 32(1) THE SAME WAS DENIED IN THE CASE OF CIT VS. T VS LEAN LOGISTICS LTD (2007) 293 ITR 0432/212 CTR 0536 (MAD). 3. THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER O F THE LOWER AUTHORITIES. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE YEAR UNDER CONSIDERATION TH E ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 45 12 111/- AS NEW PROJECT EXPENSE W RITTEN OFF IN ITS PROFIT AND LOSS ACCOUNT. THE EXPENSES RELATES TO DEVELOPMENT OF A RESORT ON A PIECE OF LAND TAKEN ON LEASE AT VILLAGE GANERA PUSHKAR. T HE WORK OF CONSTRUCTING THE RESORT WAS STARTED IN THE YEAR 2007 AFTER SEEKING N ECESSARY CHANGE IN LAND USE AND OTHER APPROVALS BY MUNICIPAL COUNCIL PUSHKAR AN D BY THE SENIOR TOWN PLANNER AJMER. DURING THE YEAR UNDER CONSIDERATION THERE WERE POLICY CHANGES INTRODUCED BY THE GOVT. AUTHORITIES IN TERM S OF CHANGE OF LAND USE AND THE WIDTH OF THE ROAD ETC. CONSEQUENT TO SUCH CHANGES IN THE GOVT. POLICY THE APPELLANT HAD TO ABANDONED THE EXISTING PROJECT . THEREFORE THE DECISION WAS TAKEN DURING THE YEAR TO WRITE OFF THE EXPENSES OF RS. 45 12 111/- WHICH HAVE BEEN INCURRED RIGHT FROM THE YEAR 2007 ONWARDS AND REFLECTED IN THE ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 12 BOOKS OF ACCOUNTS UNDER THE HEAD WORK IN PROGRESS . THE SAID EXPENDITURE RELATES TO LEASE RENT DESIGN FEES TRAVELLING EXPE NSES GARDEN EXPENSES AS WELL AS EXPENSES RELATING TO CONSTRUCTION OF BOUNDARY WA LL AND SOME OTHER MINOR CIVIL CONSTRUCTION WORKS. IN THE ABOVE FACTUAL MAT RIX THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE IS ELIGIB LE TO CLAIM THE SAID EXPENDITURE IN RESPECT OF A RESORT BEING DEVELOPED WHICH IS BEING ABANDONED AT THE STAGE OF WORK IN PROGRESS DUE TO THE CHANGE IN THE GOVT. POLICY REGULATING THE DEVELOPMENTS OF SUCH RESORT. GIVEN THAT THE RE SORT HAS BEEN ABANDONED AT THE STAGE OF WORK IN PROGRESS THE EXPENDITURE INCU RRED HAS NOT RESULTED IN CREATION OF ANY NEW ASSET(S) OR HAS NOT RESULTED IN TO AN ADVANTAGE OF ENDURING NATURE IN THE HANDS OF THE ASSESSEE. EVEN LOOKING AT THE NATURE OF EXPENDITURE EXCEPT FOR THE EXPENDITURE RELATING TO CONSTRUCTION OF BOUNDARY WALL AND SOME OTHER MINOR CIVIL CONSTRUCTION WORK ALL THE EXPENS E ARE IN THE NATURE OF REVENUE EXPENDITURE. EVEN IN RESPECT OF EXPENDITUR E RELATING TO CONSTRUCTION OF BOUNDARY WALL IT IS MORE IN THE NATURE OF TEMPO RARY CONSTRUCTION WHICH HAS BEEN DONE BY THE ASSESSEE AND WHICH ULTIMATELY HAD TO BE DEMOLISHED. THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF BENANI CEMENT LTD. (SUPRA) AND GRAPHITE INDIA LTD. (SUPRA) DIRECTLY SUPPORTS THE CASE OF THE ASSESSEE. FURTHER IN RESPECT OF WHETHER THERE IS C OMPLETE INTER CONNECTION INTERLACING AND INTERDEPENDENCE BETWEEN THE BISC UIT DIVISION AND THE NEW BUSINESS RELATING TO DEVELOPMENT OF RESORT THE LD. AR HAS SUBMITTED THAT BOTH THESE DIVISIONS ARE UNDER THE SAME MANAGEMENT CON TROL HAVING COMMON FUNDS AND FINANCIALLY AND ECONOMICALLY ARE INTERCON NECTED. THE SAID FACTS REMAIN UNCONTROVERTED BEFORE US. THE DECISION OF H ONBLE DELHI HIGH COURT IN CASE OF JAY ENGINEERING WORKS LTD. (SUPRA) DIRE CTLY SUPPORTS THE CASE OF THE ASSESSEE WHEREIN IT WAS HELD THAT THE NATURE OF TH E NEW BUSINESS IS NOT A DECISIVE TEST FOR DETERMINING WHETHER OR NOT THERE IS AN EXPANSION OF AN EXISTING BUSINESS. THE NATURE OF THE BUSINESS COUL D BE DISTINCT. WHAT IS OF IMPORTANCE IS THAT THE CONTROL OF BOTH THE VENTURES THE EXISTING VENTURE AS WELL AS THE NEW VENTURE MUST BE IN THE HANDS OF ON E ESTABLISHMENT OR MANAGEMENT OR ADMINISTRATION. THE PLACE OF BUSINES S OF THE EXISTING BUSINESS AND THE NEW BUSINESS MAY NOT BE IN CLOSE PROXIMITY. HOWEVER THE FUNDS UTILIZED FOR THE MANAGEMENT OF BOTH THE CONCERNS M UST BE COMMON AS REFLECTED IN THE BALANCE SHEET OF THE COMPANY. THE CONTROL OVER THE TWO UNITS IS IN THE HANDS OF THE SAME MANAGEMENT AND ADMINIST RATION. FURTHER THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF MAHARAJA SHRI UMAID MILLS (SUPRA) ALSO SUPPORTS THE CASE OF THE ASSES SEE. IN LIGHT OF ABOVE AND GIVEN THE FACTS THAT THE DECI SION TO ABANDON THE PROJECT WAS TAKEN DURING THE YEAR DUE TO THE CHANGE IN GO VT. POLICY THE EXPENSES ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 13 RELATING TO THE RESORT WHICH HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS HAVE BEEN RIGHTLY BEEN CLAIMED BY THE ASSESSEE AS R EVENUE EXPENDITURE. IN LIGHT OF ABOVE THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 4. NOW COMING TO GROUND NO 2 THE AO OBSERVED THAT THE ASSESSEE HAD MADE CASH PAYMENT OF RS. 25 328/- TO SHRI DATTAR SI NGH ON ACCOUNT OF WRAPPER CUTTING CHARGES AND RS. 20 410 FOR PURCHASE OF SPAR E PARTS TO TECHMECH ELECTRICALS AND DISALLOWED THE SAME U/S 40A (3) OF THE ACT. 4.1 IN THE FIRST APPEAL THE LD. CIT(A) CONFIRMED T HE ADDITION HOLDING THAT ASSESSEE HAS MADE THE PAYMENT OF RS. 25 328/- AND RS. 20 410/- ON 15.11.2010 AND 18.05.2010 IN CASH IN VIOLATION OF P ROVISIONS OF S. 40A (3) OF THE I.T. ACT. THE ASSESSEE HAS NOT SHOWN HOW THE ASSESS EES CASE IS COVERED UNDER RULE 6DD AS PER WHICH IN EXCESS OF 20 000/- CAN BE ALLOWED. THE CIRCUMSTANCES CITED BY THE ASSESSEE DO NOT FALL UNDER THE EXCEPTI ONS MENTIONED IN RULE 6DD I.T. RULES. ACCORDINGLY THE ADDITION MADE BY THE A O IS CONFIRMED. 4.2 THE LD AR SUBMITTED THAT HE STRONGLY RELY UPON THE WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT (A) (PB 144-148) WHICH IS REPRODUCED AS UNDER: HERE I WOULD LIKE TO SUBMIT THAT THE APPELLANT PAI D RS. 25 328/- IN CASH TO SHRI DATAR SINGH BECAUSE THE PARTY INSISTED TO GIVE THE AMOUNT IN CASH HENCE THE APPELLANT PAID IN CASH IN THE ORDINARY COURSE O F BUSINESS AND FOR THE PURPOSE OF BUSINESS. THAT SIMILARLY THE APPELLANT PURCHASED SPARE PARTS FROM M/S TECHMECH ELECTRICAL DELHI FOR RS. 20 410/- IN CASH. THAT THE APPELLANT DONT HAVE ANY BANK ACCOUNT IN DELHI AND THE OUT ST ATIONED PARTIES DO NOT ACCEPT THE CHEQUES. THAT IN VIEW OF ABOVE MENTIONED FACTS THE ADDITION OF RS. 45 738/- IS UNCALLED FOR AND REQUIRES TO BE DEBITED . ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 14 4.3 THE LD AR FURTHER SUBMITTED THAT IN THE CASE OF ANUPAM TELE SERVICES VS. ITO (2014) 88 CCH 035 (GUJ)(DPB 12-20) THE HONBLE GUJARAT HC FOLLOWED THE DECISIONS IN CASE OF ATTAR SINGH GURUMUKH SINGH VS. ITO (1991) 191 ITR 667 (SC) HOLDING THAT THE SAID DECISION DID NOT ELIMINATE C ONSIDERATION OF BUSINESS EXPEDIENCIES. IT WAS HELD THAT WHERE THERE WERE PEC ULIAR FACTS WHEREIN THE PAYEE INSISTED UPON CASH PAYMENT ONLY AND FOLLOWIN G THE DECISION IN THE CASE OF HARSHILA CHORDIA VS. ITO (2008) 298 ITR 349 (RAJ )(DPB 21-28) IT WAS HELD THAT IN SUCH CASE RIGORS OF SEC.40A(3) OF THE ACT M UST BE LIFTED AND THE ITAT ERRED IN SOLELY RELYING UPON THE RULE 6DD(R) BY WHI CH THEY FOUNDED THE SUBJECTED PAYMENT WAS NOT COVERED. IN THE CASE OF H ARSHILA CHORDIA (SUPRA) IT WAS OBSERVED THAT THE EXCEPTIONS CONTAINED IN RULE 6DD ARE NOT EXHAUSTIVE AND THAT THE SAID RULE MUST BE INTERPRETED LIBERALL Y. IN THE PRESENT CASE ALSO THE ADMITTED FACTS ARE TH AT THE IDENTITY AND EXISTENCE OF THE PAYEES AND GENUINENESS OF THE TRANSACTIONS ARE NOT AT ALL DISPUTED HOWEVER IT WAS ONLY BECAUSE OF THE INSISTENCE OF TH E SELLER THE ASSESSEE HAS TO PAY IN CASH TO DATAR SINGH WHEREAS IN THE SECOND C ASE THE APPELLANT DIDN'T HAVE ANY BANK ACCOUNT AT DELHI THE PLACE WHERE PAY MENT WAS MADE AND THE PAYEE INSISTED ON CASH PAYMENTS. THESE FACTS ARE NO T DENIED. THOUGH CONTENDED BEFORE CIT(A) BUT WAS NOT JUDICIOUSLY APP RECIATED. 4.5 THE GENUINENESS OF THE TRANSACTION AS WELL AS T HE IDENTITY OF THE PAYEE ARE NOT DISPUTED. FURTHER THE APPELLANT HAS EXPLA INED THE BUSINESS EXPEDIENCY OF MAKING THE CASH PAYMENTS TO BOTH THE PARTIES WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. FOLLOWING THE DE CISION OF GUJARAT HIGH COURT IN CASE OF ANUPAM TELE SERVICES (SUPRA) AND R AJASTHAN HIGH COURT IN CASE ITA NO. 625/.JP/14 AJMER FOOD PRODUCTS AJMER VS. JCIT RANE-2 AJMER 15 OF HARSHILA CHORDIA (SUPRA) THE ADDITION OF RS 45 738 UNDER SECTION 40A(3) IS DELETED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/09 /2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 28/09/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- AJMER FOOD PRODUCTS PVT. LTD AJMER 2. IZR;FKHZ@ THE RESPONDENT- THE JT. CIT RANGE-2 AJMER 3. VK;DJ VK;QDR@ CIT AJMER 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-AJMER 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR ITAT JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.625 /JP/2014) VKNS'KKUQLKJ@ BY ORDER LGK;D IATHDKJ@ ASSISTANT. REGISTRAR