Law: Income Tax Act, 1961

Section: 37(1)

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Expenditure on construction of new facility written off) - Assessment year 2002-03 - Assessee company, in earlier year, incurred certain expenditure for construction/acquisition of new facility - However, said construction/acquisition was abandoned at work-in-progress stage only - Whether since decision to abandon project was taken in relevant year for purpose of business, it could be concluded that writing off of said expenditure by assessee arose in relevant year only and, hence, would be an allowable expenditure - Held, yes [Para 11] [In favour of assessee] CASE REVIEW CIT v. Indian Mica Supply Co. (P.) Ltd. [1970] 77 ITR 20 (SC) (para 13)followed. CASES REFERRED TO CIT v. Graphite India Ltd. [1996] 221 ITR 420 (Cal.) (para 3), CIT v. A. Gajapathy Naidu [1964] 53 ITR 114 (SC) (para 4), CIT v. Swadeshi Cotton & Flour Mills (P.) Ltd. [1964] 53 ITR 134 (SC) (para 4), Delhi Tourism & TDC Ltd. v. CIT [2006] 285 ITR 114/155 Taxman 10 (Delhi)(para 6) and CIT v. Indian Mica Supply Co. (P.) Ltd. [1970] 77 ITR 20 (SC) (para 12). R.N. Bajoria, Moloy Dhar, A.K. Dey and Akhilesh Gupta for the Appellant. R.N. Bandopadhyay and Ms.Smita Das De for the Respondent. JUDGMENT Arindam Sinha, J. - The subject matter of challenge in this appeal is a judgment and order dt. 15th May, 2009 by which learned Tribunal allowed an appeal preferred by the Revenue against an order passed by CIT(A) by which the CIT(A) had held that when construction/acquisition of new facility is abandoned at the work-in-progress stage, the expenditure does not result in an enduring advantage and such expenditure, when the same is written off. has to be allowed under s. 37 of the IT Act, 1961. The learned Tribunal reversing the order of CIT(A) held that the expenditure incurred in the earlier years could not be deducted in the year under consideration. 2. Aggrieved by the order of the learned Tribunal, the assessee has come up in appeal. The following question of law was framed when the appeal was admitted: "Whether the Tribunal substantially erred in law in disallowing the expenditure allegedly incurred by the…

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