Advance Given For Hospital Project, Later Abandoned, Allowable As Revenue expenditure: ITAT

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that the advance was given for setting up a hospital project, and since the project was abandoned and the advance given could not be recovered, the sum is allowable as a revenue expenditure.

The two-member bench of Sonjoy Sarma (Judicial Member) and Manish Borad (Accountant Member) has observed that the advance was given for setting up a hospital project that was abandoned as a business loss under Section 28(1) of the Income Tax Act.

The assessee/appellant is a limited company that runs a hospital by the name of Amri Hospital and also runs a diagnostic center.

The assessee advanced the sum to various persons in relation to another hospital project at Siliguri. But, subsequently, the project was abandoned and the allotment of land was surrendered. The assessee claimed the amount of expenditure by writing it off from the profit and loss account.

The AO disallowed the sum, treating it as capital in nature.

The assessee appealed before the CIT (A). The CIT(A) granted the assessee's appeal, ruling that the sum is a business loss because the project was abandoned and the advance given could not be recovered.

The ITAT, while relying on the Supreme Court's decision in the case of CIT vs. Woodward Governor, upheld the observation of CIT(A) and noted that any advance given is allowable as a revenue expenditure.

Case Title: DCIT Versus AMRI Hospitals Ltd.

Citation: I.T.A. No.: 977/Kol/2018

Date: 20.10.2022

Counsel For Appellant: Atahar H. Choudhury

Counsel For Respondent: A.K. Tibrewal and Amit Agrawal

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