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2023 (6) TMI 273 - AT - Income TaxDisallowance of the pre operative expenses - assessee being a limited liability partnership firm incorporated on 08.12.2017 for which the trading operation commenced from 01.01.2018 - assessee is said to have carried out its business only for 3 months and had filed its return of income declaring loss during the impugned year - HELD THAT:- No deviation in the business carried out by the assessee firm which is akin to that of the earlier firms which name has been changed to that of the assessee’s. The lower authorities have not disputed the fact that there was no change in the business subsequent to the name change. The impugned expenses claimed by the assessee pertains to the ‘business expenses’ and not the ‘preoperative expenses’ alleged by the lower authorities. As decided in case of Maruti Insurance Pvt. Ltd. [2021 (4) TMI 875 - DELHI HIGH COURT] wherein it was held that the expenses incurred when the entity is ready to do business and when business is conducted cannot be capitalized as in the present case. The present case in hand is in a better footing than the above mentioned case where the business was carried on much prior to the impugned year and there was only a name change subsequently. No justification in holding the impugned expenses as ‘per operative expenses’ - delete the impugned addition - Ground of assessee allowed. Disallowance of interest paid on late payment - A.O. had disallowed the interest paid on late payment of TDS debited in the profit and loss account - HELD THAT:- CIT(A) correctly confirmed the said disallowance by relying on the decision of Chennai Properties & Investments Ltd. [1998 (4) TMI 89 - MADRAS HIGH COURT] which held that the disallowance of interest expenditure paid u/s. 201(1A) of the Act on late payment of TDS is penal in nature and not compensatory - CIT(A) further held that the same is not ‘business expenditure’ and cannot be termed as ‘compensatory in nature’ as alleged by the assessee. Decided against assessee.
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