The Laurels Corporation, Surat V. DCIT, Central Circle-1, , Surat

ITSSA 09/SRT/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0926 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 07-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: RICHA AGARWAL
• Keywords: Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./IT(SS)A NO.09/SRT/2018 ( [ [ / ASSESSMENT YEAR: (2013-14) (VIRTUAL COURT HEARING) THE LAURELS CORPORATION, TP 13, F.P. 117, OPP. CAPITAL GREEN, VESU, BHARTHANA, SURAT 395007. VS . THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, SURAT. ./ ./ PAN/GIR NO.: AAHFT 9097 P (ASSESSEE) (RESPONDENT) ASSESSEE BY : MS. RICHA AGARWAL - CA RESPONDENT BY : SHRI O.P.VAISHNAV CIT(DR) / DATE OF HEARING : 06/07/2021 /DATE OF PRONOUNCEMENT : 12/07/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY ASSESSEE PERTAINING TO ASSESSMENT YEAR 2013-14 IS DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-4, SURAT [LD.CIT(A)], DATED 04.06.2018. 2. GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DISALLOWING THE REVENUE EXPENDITURE AMOUNTING TO THE TUNE OF RS.58,536/- TREATING THE SAME AS CAPITAL EXPENDITURE ON ACCOUNT OF NO SALE REPORTED DURING THE YEAR. THE ASSESSEE PRAYS THAT THE DISALLOWANCE OF RS.58,536/- MADE TREATING REVENUE EXPENDITURE AS CAPITAL EXPENDITURE BE ALLOWED AS REVENUE EXPENDITURE. 3. SO FAR AS THIS GROUND OF APPEAL IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS A PARTNERSHIP FIRM AND HAS FILED ITS RETURN OF INCOME FOR A.Y. 2013-14 ON 05.08 2013 DECLARING LOSS OF RS. 58,536/-. LEARNED A.O. OBSERVED THAT ASSESSEE HAD CLAIMED VARIOUS INDIRECT EXPENSES TO THE TUNE OF RS. 58,536/- WHICH ARE AS FOLLOWS: PAGE | 2 IT(SS)A NO.09/SRT/2018 FOR A.Y. 2013-14 M/S.THE LAURELS CORPORATION SR.NO. NATURE OF EXPENSE AMOUNT 1. BANK CHARGES 168/- 2. COMPUTER EXPENSE 400/- 3. GENERAL EXPENSE 23,799/- 4. INTERNET EXPENSE 6,600/- 5. OFFICE EXPENSE 20,949/- 6. STAMP PAPER EXPENSE 1,142/- 1,142/- 7. STATIONERY AND PRINTING EXPENSE 4,143/- 8. TELEPHONE EXPENSE 1,155/- TOTAL 58,356/- THE ASSESSING OFFICER TREATED ABOVE MENTIONED EXPENSES AS CAPITAL EXPENDITURE AND ADDED THE SAME IN WORK-IN -PROGRESS OF THE ASSESSEE. 4. ON APPEAL, LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF LD CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. MS. RICHA AGARWAL, LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE HAD FILED A RETURN OF INCOME CLAIMING A LOSS OF RS. 58,356/- ON ACCOUNT OF REVENUE EXPENSES AND CARRIED FORWARD THE BUSINESS LOSS. ALL THESE EXPENSES ARE REVENUE IN NATURE AND THEREFORE, SHOULD BE ALLOWED AS REVENUE EXPENSES. 6. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT REVENUE EXPENSES ARE THE COSTS THAT ARE INCURRED ON REGULAR BASIS AND THE BENEFIT OF THIS COST IS OBTAINED OVER A RELATIVELY SHORT PERIOD OF TIME (I.E WITHIN SAME FINANCIAL YEAR). THESE ARE THE EXPENSES REQUIRED TO MEET THE ONGOING OPERATIONAL COSTS OF RUNNING A BUSINESS AND THUS ARE ESSENTIALLY THE SAME AS OPERATING COST. REVENUE EXPENSE IS AN AMOUNT THAT IS EXPENSED IMMEDIATELY IN THE YEAR OF OCCURRENCE. ON PERUSAL OF THE ABOVEMENTIONED EXPENSES, IT IS CLEARLY EVIDENT THAT THESE EXPENSES CANNOT BE TERMED AS CAPITAL EXPENDITURE AS THESE PAGE | 3 IT(SS)A NO.09/SRT/2018 FOR A.Y. 2013-14 M/S.THE LAURELS CORPORATION EXPENSES RELATES ONLY TO THE PERIOD IN WHICH THEY HAVE BEEN INCURRED. FURTHER, THE ABOVEMENTIONED EXPENSES ARE OF THE NATURE WHICH IS NOT DIRECTLY ATTRIBUTABLE TO THE CONSTRUCTION ACTIVITY BUT HAD BEEN INCURRED FOR CARRYING OUT THE DAY TO DAY OPERATIONS. WE NOTE THAT HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI MANAGEMENT CORPN. LTD. [1976] 102 ITR 25 (GUJ.), HELD THAT BUSINESS COMMENCES WITH THE FIRST ACTIVITY FOR ACQUIRING BY PURCHASE OR OTHERWISE IMMOVABLE PROPERTY. THERE MAY BE AN INTERVAL BETWEEN THE SETTING UP OF THE BUSINESS AND THE COMMENCEMENT OF THE BUSINESS. ALL EXPENSES INCURRED DURING THAT INTERVAL ARE ALSO PERMISSIBLE FOR DEDUCTION. FROM THE ABOVE DICTUM OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARABHAI MANAGEMENT CORPN. LTD(SUPRA), IT IS ABUNDANTLY CLEAR THAT ALL THE EXPENSES INCURRED AFTER THE BUSINESS HAD BEEN SET UP ARE ALLOWABLE AS BUSINESS DEDUCTION UNDER SECTION 37 OF THE ACT. THERE MAY BE INTERVAL BETWEEN THE SETTING UP OF THE BUSINESS AND THE ACTUAL COMMENCEMENT OF THE BUSINESS BUT ALL THE EXPENSES INCURRED DURING THE INTERVAL OF SETTING UP OF THE BUSINESS AND THE COMMENCEMENT OF THE BUSINESS ARE ALSO PERMISSIBLE FOR DEDUCTION. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO TREAT THE ABOVE MENTIONED EXPENSES OF RS.58,356/- AS REVENUE EXPENDITURE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED ON 12/07/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 12/07/2021 / SGR TRUE COPY COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT