TMI Blog2015 (4) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses debited to the profit and loss account of the M/s. V.V. Realtors are expended only and exclusively for the business of the assessee.Nothing has been placed before us to demonstrate that the assessee has carried out any regular systematic business activity. We do not find any reason to interfere with the order of the Ld. CIT(A) - Decided against assessee. Allowance part of the expenses as a deduction against income from short term capital gains - Held that:- In this case the assessee has claimed the expenditure in different head and the said act of the assessee should not deprive him for claiming the allowable expenditure in computing the income under any of other head. We, accordingly, direct the Assessing Officer on the basis of observations of the Ld. CIT(A) to allow the following expenditure after verification - (i) brokerage and commission of ₹ 2,97,200/-, (ii) corporation charges of ₹ 2,000/-, (iii) Departmental expenses of ₹ 3,550/-, (iv) land survey charges of ₹ 2,500/- and (v) legal and professional charges of ₹ 37,500/-. Needless to say the assessee should be given opportunity of being heard as per the principles of natural justic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the Capital Gains. 3. The assessee challenged the disallowance of loss made by the Assessing Officer before the Ld. CIT(A). It was pleaded before the Ld. CIT(A) that the assessee has incurred various expenses on the set up of office at 448, Mangalwar Peth, Pune in connection with his Proprietary concern. It was further pleaded that the assessee is a partner in many partnership firms which are engaged in construction and development businesses. The assessee also claimed that he is also engaged in construction activity in individual capacity. The assessee also relied on the decision of the Hon'ble High Court of Bombay in the case of Western India Vegetable Products 26 ITR 151 and decision of the ITAT, Pune in the case of Styler India Pvt. Ltd. Vs. Jt. CIT 113 ITD 55 (TM). The Ld. CIT(A) is not impressed with the contention of the assessee and he confirmed the action of the Assessing Officer declining to give benefit of set off of the loss of M/s. V.V. Realtors. The findings of the Ld. CIT(A) are as under: 5.2. I have considered the submission made by the appellant and perused material on record. On perusal of the computation of income it is seen that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial activity, which is carried on with the end in view of making or earning profits. Thus in order to the deductible u/s 37(1) the expenditure must be incurred for the purpose of business which was in existence in the accounting year and the profits of which are under assessment. If during the relevant period there was, in fact, no business either because it was discontinued or for some other reason it had ceased to exist, the question of computation of its income after deducting the expenses cannot arise. The appellant has contended that the expenses have been incurred on set up of office for the proprietary concern and that the appellant is also engaged in construction activity in individual capacity. It has thus been stated that the expenditure has been incurred towards establishment and administrative purposes for setting up the office and once the business is set up of carrying on business of purchase and sale of land, the expenditure incurred for such business has to be allowed. 5.3. In the case of Western India Vegetable Product (1954) 26 ITR 151 (Bom), the Bombay High Court held that an assessee who was incorporated as a company and in the process of purchasing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on record proof to prove that the sum so expended was wholly and exclusively utilized for the business, the decision of the Assessing Officer in making the addition of ₹ 9,00,993/- on this account was on a sound basis and liable to be upheld and ground no. 3 raised by the appellant is, therefore, dismissed. Now the assessee is in appeal before us. 4. We have heard the rival submissions of the parties and perused the record. The assessee has also filed the small compilation having 14 pages which is also considered. The Ld. Counsel reiterated the argument made before the Ld. CIT(A). We have perused the profit and loss account copy of which placed at Page No. 10 which is in respect of M/s. V.V. Realtors for the year ending 31-03-2008. The assessee has booked different expenditure and declared the loss of ₹ 9,00,993/-. The argument of the Ld. Counsel is that the Short Term Capital Gains declared by the assessee is in respect of sale of plots of land and the assessee has only changed the head of taxability of the business activity but otherwise the assessee has done the business. We are unable to accept the plea of the Ld. Counsel. As per the provisions of Sec. 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the different expenses debited to the profit and loss account and has held that some of the expenses prima facie relate to the investments made by the assessee in lands on which the Short Term Capital Gain is declared. 7. In this case the assessee has claimed the expenditure in different head and the said act of the assessee should not deprive him for claiming the allowable expenditure in computing the income under any of other head. We, accordingly, direct the Assessing Officer on the basis of observations of the Ld. CIT(A) to allow the following expenditure after verification - (i) brokerage and commission of ₹ 2,97,200/-, (ii) corporation charges of ₹ 2,000/-, (iii) Departmental expenses of ₹ 3,550/-, (iv) land survey charges of ₹ 2,500/- and (v) legal and professional charges of ₹ 37,500/-. Needless to say the assessee should be given opportunity of being heard as per the principles of natural justice. Accordingly, Ground No. 3 is allowed for the statistical purposes. 8. In the result, the assessee s appeal is partly allowed for the statistical purposes. (Pronounced in the open Court on 25.4.2014) - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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