G.D.Agrawal, Vice President - (1.) THE appeal by the Revenue is directed against the order of learned CIT(A) -III, New Delhi dated 7th September, 2010 for the AY 2002 -03.
(2.) THE grounds raised by the Revenue read as under: - - "1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 37,67,394/ - by holding it as revenue expenditure. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in relying upon the decision of ITAT in case of ONGC Videsh Ltd. without appreciating that facts of that case are different from the present case. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 3. We have heard the arguments of both the sides and perused relevant material placed before us. It was pointed out by the learned counsel that the Assessing Officer has disallowed the sum of Rs. 37,67,394/ - in respect of abandonment of theme amusement park treating as a capital expenditure. He submitted that the nature of the expenditure was travelling, designing, consultancy fees, legal fees etc. Thus, the entire expenditure was of revenue nature. The assessee who is in the business of construction and development of real estate had applied for allotment of land from Noida authorities for the theme amusement and entertainment park project. He had also given the deposit of Rs. 50 lakhs with the Noida authorities for the allotment of land. However, the Noida authorities did not allot the land for the amusement park and refunded Rs. 50 lakhs of security deposit given by the assessee. Therefore, the assessee claimed the revenue expenditure incurred in respect of such project by the assessee which was in the nature of travelling, designing, consultancy fees, legal fees etc. He submitted that the issue under consideration is squarely covered in favour of the assessee by the decision of Hon'ble Jurisdictional High Court in the case of Indo Rama Synthetics India Ltd. v. CIT - : [2011] 333 ITR 18 (Delhi), wherein their Lordships held: - - "allowing the appeal, (i) that the expenditure incurred was in the nature of salary, wages, repairs, maintenance, design and engineering fee, travelling and other expenses of administrative nature. Indubitably, in the normal course, these expenses would be treated as revenue expenditure. The unit, which the assessee proposed to set up had inextricable linkage with the existing business of the assessee. The proposed business was not an individual business but vertical expansion of the existing business. Thus, the test of existing business with common administration and common fund was met. Since the project was abandoned, no new asset also came to be created. The expenditure was deductible."
(3.) AFTER considering the arguments of both the sides and the facts of the case, we are of the opinion that the ratio of the above decision of Hon'ble Jurisdictional High Court would be squarely applicable to the facts under appeal. The assessee is in the business of construction and development of real estate. The net sales during the year under consideration from the real estate business was Rs. 49.44 crores. Therefore, the development of theme amusement and entertainment park was in the line of business of development of real estate. The expenditure incurred by the assessee was in the nature of revenue expenditure viz., on travelling, designing, consultancy fee, legal fee etc. The project was abandoned because the Noida authorities refused to allot the land. Therefore, the ratio of the above decision of Hon'ble Jurisdictional High Court would be squarely applicable. Respectfully following the same, we uphold the order of learned CIT(A) and dismiss the appeal filed by the Revenue.;