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10. In regard to ground No.4.1, 4.2 & 4.3 it was submitted by the learned DR that the assessee had incurred a project development expenditure at Coimbatore. It was the submission that the assessee had subsequently abandoned the project. It was the submission that the expenditure was in the I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 nature of architect fee and soil testing charges in regard to a project which the assessee had proposed to start at Coimbatore. It was the submission that the project had to be scrapped as the title to the land on which the project was to be started was held to be defective due to a Supreme Court order wherein it had been held that the seller had no title to the property. It was the submission that as the assessee had abandoned the project the claim of revenue expenditure was not allowed by the Assessing Officer and by relying upon the decision of the Hon'ble Madras High Court in the case of CIT v. Soft Beverages (P) Ltd. reported in 245 ITR 194 as also the decision of the Hon'ble Gujarat High Court in the case of Gujarat Mineral Development Corporation reported in 143 ITR 822 treated the loss as capital in nature. It was the submission that the learned CIT(A) had by relying upon the decision of the Hon'ble Madras High Court in the case of Seshasayee Paper And Boards reported in 243 ITR 421 as also the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Anjani Kumar Compnay Limited reported in 259 ITR 114 directed the Assessing Officer to allow the loss as a revenue expenditure. It was the submission that the expenditure incurred by the assessee was capital in nature insofar as it was towards the soil testing and architect fee for the putting up of a building and consequently same was liable to be held as a capital expenditure and the loss thereon as a capital loss. The learned DR further relied upon the decision of the Hon'ble Madras High Court in the case of E.I.D. Parry (India) Ltd. v. CIT reported in 257 ITR 253.

I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07

11. In reply, the learned authorised representative vehemently supported the order of the learned CIT(A). It was the submission that the expenditure incurred by the assessee was on account of an existing business and not of a new business.

12. We have considered the rival submissions. A perusal of the decision of the Hon'ble Madras High Court in the case of E.I.D. Parry (India) Ltd., referred to supra, clearly shows that in the said case the assessee wanted to set up a new project for the manufacture of methanol at Ennore. The assessee had incurred various expenditures and the project was subsequently abandoned. The Hon'ble Madras High Court held that it was clear from the assessee's own case that the expenditure was incurred for the purpose of setting up of a new project and the subsequent abandonment of that project did not on that score convert what was an expenditure in the nature of capital expenditure into a revenue expenditure. Applying the said principles to the case of the assessee herein, it is noticed that the expenditure incurred by the assessee was in relation to a new project at Coimbatore. True, the assessee is in the business of running hotel business. The project at Coimbatore is not an expansion or an extension of the hotel business of the assessee. Each hotel put up by the assessee is a different project insofar as some licences are required and separate sanctions have to be taken. The permissions and sanction for the project at Coimbatore are not an extension of the permission or the licence available to the assessee in regard to I.T.A. Nos. 1974/Mds/2008& 2314/Mds/07 its business of running of hotels. As it is the project at Coimbatore which is a separate project as such, which has been abandoned and the expenditure incurred by the assessee on such project being the soil testing fee and architect's fee which are obviously for the purpose of putting up a building or a hotel which itself is a capital asset, the expenditure incurred is in the capital field and the loss on the abandonment also falls in the capital field. In the circumstances, grounds 4.1, 4.2 and 4.3 of the Revenue's appeal stand allowed and the order of the learned CIT(A) is reversed on this issue and that of the Assessing Officer restored.