Sahitya Housing Private Limited V. Commissioner of Income Tax - III, Hyderabad

ITTA/310/2013

AI Insights

The case involves Sahitya Housing Private Limited, which appealed against the decision of the Income Tax Appellate Tribunal (ITAT) that disallowed a deduction for an expenditure of Rs.2,09,47,994. This expenditure was incurred on an aborted real estate venture during the assessment year 2008-09. The appellant argued that the expenditure was part of its regular business activities and should be deductible. However, the ITAT and the lower authorities found that the expenditure was not related to the ongoing business activities but was for the commencement of a new venture, thus capital in nature. The High Court agreed with this interpretation and dismissed the appeal, citing the absence of any legal question warranting adjudication under Section 260A of the Income Tax Act, 1961.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 796381 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 31-07-2013
• Assessment Year: misc
• Other Referred Cases: INDO RAMA SYNTHETICS (I) LTD v. COMMISSIONER OF INCOME TAX
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Business expenditure; Capital expenditure; Commencement of business; Abortive venture
• Section: 260A

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE K.C. BHANU I.T.T.A.No.310 of 2013 Date: 31-07-2013 Between: Sahitya Housing Private Limited, Flat No.316, Swarnajayanthi Complex, Main Road, Ameerpet, Hyderabad 500 016 Represented by its Managing Director T.Veeraiah Chowdary S/o. Saidulu Chowdary … Appellant And 1. Commissioner of Income Tax - III, Hyderabad. … Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE K.C. BHANU I.T.T.A.No.310 of 2013 JUDGMENT: (Per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred against the judgment and order of the learned Tribunal dated 22-02-2013 in I.T.A.No.289/Hyd/2012, in relation to assessment year 2008-09, and is sought to be admitted on the following suggested questions of law: i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the expenditure of Rs.2,09,47,994/- incurred by the appellant on one aborted venture out of many real estate ventures carried out as part of the regular business activity of the appellant with the aid of common control and common funds is not for purposes of the business of the appellant and is consequently not eligible for deduction while computing the profits and gains of the real estate business of the appellant? ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in sustaining the orders of the Assessing Officer and the CIT (A) in disallowing the expenditure of Rs.2,09,47,994/- incurred on the abortive venture when the revenue has chosen to tax the admission fee in respect of the same venture? iii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the expenditure incurred did not relate to A.Y. 2008-09 contrary to the findings of the Assessing Officer and the CIT (A) both of whom disallowed the expenditure for the only reason that the expenditure was on an aborted venture and is therefore akin to expenditure for commencement of business? 2. We have heard the learned counsel for the appellant and gone through the impugned judgment and order of the learned Tribunal. 3. The issue is whether the expenditure incurred by the assessee for commencement of his business is in the nature of business expenditure or capital expenditure. 4. All the authorities below have come to a fact finding that the expenditure incurred does not relate to any business. We just quote the fact finding of the learned Tribunal: “In the present case, the expenditure incurred is not in the assessment year under consideration and also not relating to carrying on of business of the assessee but for the purpose of commencement of business of the assessee. The expenditure incurred is for the purpose of commencement of business of the assessee which cannot be construed as wholly and exclusively laid down for the purpose of the business. There is a difference between expenditure incurred for the purpose of business and expenditure incurred for the purpose of commencement of business. In the present case, the expenditure incurred by the assessee cannot be construed as expenditure incurred for carrying on the business of the assessee.” 5. In view of the concurrent fact findings of all the authorities below, we are of the view that in the absence of any allegation that the fact findings of the authorities are perverse or non-consideration of the legally acceptable materials, this Court cannot undertake the fact finding exercise under Section 260A of the Income Tax Act, 1961. 6. Learned counsel for the appellant has cited the judgment of the Delhi High Court in case of INDO RAMA SYNTHETICS (I) LTD v. COMMISSIONER OF INCOME TAX [1]. He has drawn our attention to paragraph-10 of the said report wherein it was observed as follows: “If the expenditure is incurred for starting new business which was not carried out by the assessee earlier, then such expenditure is held to be of capital nature. In that even it would be irrelevant as to whether project really materialized or not. However, if the expenditure incurred is in respect of the same business which is already carried on by the assessee, even if it is for the expansion of the business, namely, to start new unit which is same as earlier business and there is unity of control and a common fund, then such an expense is to be treated as business expenditure.” This judgment factually does not help in this case. 7. In this case, on fact finding the learned Tribunal concluded that the expenditure is incurred for mere commencement of the business of the assessee and it is not incurred in continuation of the business. Therefore, we hold that all the authorities below have correctly disallowed this expenditure holding that the same is not business expenditure. On the discussion above, we do not find any element of law involved in this matter for adjudication. 8. Hence, the appeal is dismissed at the threshold. There will be no order as to costs. Miscellaneous Petitions pending, if any, shall stand closed. _________________ K.J. SENGUPTA, CJ _________________ K.C. BHANU, J Date: 31-07-2013 YCR [1] (2011) 333 ITR 18 (Del) "