ATE ENTERPRISE PRIVATE LIMITED ,MUMBAI vs. INCOME TAX OFFICER, CIRCLE 9(1)(1), MUMBAI

सुनवाई की तारीख / Date of Hearing 05/07/2023 घोषणा की तारीख /Date of Pronouncement 10/07/2023 आदेश / ORDER PER PAVAN KUMAR GADALE - JM:

The assessee has filed the appeal against the order of CIT(A)/NFAC Delhi passed under section 250 of the Income Tax Act, 1961 (“the Act”).

3. The brief facts of the case are that, the assessee company is engaged in the business of the trading of textile machinery, spares, accessories, graphics, pumps, industrial products and solar dish and in manufacturing of the textile spares and parts.The assessee had filed return of income for the A.Y 2017-18 on 30.11.2017 disclosing a total loss of Rs.18,70,518/-. Subsequently, the assessee has filed the revised return of income on 24.09.2018 disclosing a total loss of Rs. 21,55,708/-. The case was selected for scrutiny and the notice u/s 143(2) and u/s 142(1) of the Act are issued through ITBA Portal. In compliance to notice, the assessee has furnished the details called for on various dates. The Assessing Officer (A.O) on perusal of the Tax Audit Report clause 21(a), found that the assessee has disclosed the loss on sale of assets sold/discarded of Rs.14,30,947/- and the assessee has added back in the computation of income of Rs. 6,30,083/- and the balance amount of Rs. 8,00,064/- was written off under the head capital WIP. The A.O find that the claim is in the nature of capital expenditure and was disallowed and assessed the total loss of AY 2017-18 M/s ATE Enterprises Pvt Ltd. Rs.13,55,644/- and passed the order U/sec143(3) of the Act dated 20-12-2019.

, statements of facts, submissions and the findings of the AO and was not satisfied with the claim and sustained the disallowance. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.

5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the disaalowance by the Assessing Officer treating as capital expenditure and whereas it represents a capital WIP written off due to non feasibility of the solar project and it’s in the nature of revenue expenditure and substantiated the submissions with the financial statements. Per Contra, the Ld.DR relied on the order of the CIT(A) .

6. We heard the rival submission and perused the material on record. The sole matrix of the disputed the issue, envisaged by the Ld.AR that the CIT(A) has erred in considering the expenditure on the project as capital expenditure. Whereas, the assessee has undertaken a solar project and it was written off due to non feasibility and was debited to the profit and loss account. On perusal of the Audited financial statements at page 4 notes on accounts at Para 1.4 (d)of the Audit Report it was reported that the capital work in progress comprises of cost incurred on property plant and equipment under construction/acquisition that are one not yet ready for their intended use at the balance sheet date. 3 AY 2017-18 M/s ATE Enterprises Pvt Ltd. Further the as per note 11.1 of the Audited Profit &Loss account, the assessee has capitalized some expenditure and whereas in respect of the expenditure on solar project due to non feasibility was treated as “Loss on the discard Assets” and was written off. Whereas the assessee company is engaged in the business of trading of goods and has ventured into manufacturing of solar dish and due to non feasibility has claimed the deduction. The case of the assessee is that it is already engaged in the business of trading of solar dish and hence new project or manufacturing of the same item is only an extension of existing business. Accordingly, it was contended that the loss incurred on abandoning of the project is revenue in nature. We are unable to agree with the same, whereas the trading activity and manufacturing activity are two independent ventures. The risk and reward are totally different. We are of the view that the manufacturing of solar dish is a new venture undertaken by the assessee and the same cannot be treated as an extension of existing business and the loss incurred on the abandonment of the new project is capital in nature. Accordingly, we uphold the decision taken by the CIT(A) on the above discussed reason and dismiss the grounds of appeal of the assessee.