| COURT: | ITAT Mumbai |
| CORAM: | Ashwani Taneja (AM), Joginder Singh (JM) |
| SECTION(S): | 28, 3, 37(1) |
| GENRE: | Domestic Tax |
| CATCH WORDS: | business expenditure, deductibility, setting up of business |
| COUNSEL: | Satish Mody |
| DATE: | August 28, 2016 (Date of pronouncement) |
| DATE: | February 15, 2016 (Date of publication) |
| AY: | 2008-09 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| There is a distinction betwen "setting up" and "commencement" of a business. A business is "set up" and expenditure is deductible even if assessee has no customers and no income | |
The assessee has already purchased residential flat for the purpose of resale/lease, and therefore assessee was apparently ready to do its business. Under these circumstances, it can be said that the business is set up by the assessee during the year under consideration. For the deductibility of expenses incurred after this stage, earning of the business income is not a mandatory condition under the law. The assessee may not have been successful in getting customers or earning the business income, but if the assessee has done requisite preparations and if the assessee can be said to be in a position to cater to its customers, then it can be said that business is set up and it would amount to carrying on the business and accordingly the expenses would stand allowable to the assessee, irrespective of the fact whether actually assessee got any customer and earned any business income during the year or not.
In following cases it has been held that whether income has been earned or not and whether ultimate benefit has accrued immediately or not, the expenses incurred shall be allowable if these have been incurred for the purpose of business or for commercial expediency:-
1. Eastern Investments Ltd. Vs. CIT (20 ITR 1) (SC)
2. J.R. Patel & Sons Pvt. Ltd. 69 ITR 782 (Guj)
3. Raipur Mfg. Co. Ltd. (84 ITR 508,516) (Guj)
4. Security Printers of India Pvt. Ltd. (78 ITR 766,774) (All)
5. Tatasons Ltd. (18 ITR 460,467) (Bom)
6. Walchand & Co. P. Ltd.(65 ITR 381, 385) (SC)
7. J.K. Woolen Manufactures (72 ITR 612) (SC)
8. Aluminium Corp. of India Ltd. (86 ITR 11, 17) (SC)
9. Orissa Cement Ltd. (73 ITR 14, 17) (Del)
In following cases it has been held that expenses shall become deductible after setting up of the business, even if commencement of business has not yet taken place:
1.CIT Vs. Ralliwolf Ltd. (121 ITR 262) (Bom)
2.Saurashtra Cement & Chemical Industries Ltd. (91 ITR 170) (Guj)
3.Western India Vegetable Products Ltd. (26 ITR 151)
4.Ramaraja Surgical Cottons Mills Ltd. (63 ITR 478)
5. CIT v. Whirlpool of India Ltd 318 ITR 347 (Delhi High Court)
DHL Express (I) Pvt. Ltd. v. ACIT 124 TTJ 108, CIT Vs. ESPN Software India (P) Ltd. 301 ITR 368 (Del), CIT vs Sardar Sarovar Narmada Nigam Ltd 364 ITR 477 (Guj)
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