TMI Blog2023 (5) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... which were not paid before the due date of filing the return of income - As the expense was not by the assessee before the due date of filing the return of income, the disallowed the same and added to the total income of the assessee - HELD THAT:- Admittedly, the genuineness of the expense has not been doubted by the authorities below. The expense claimed by the assessee was disallowed mainly on the reasoning that the conditions specified u/s 43B of the Act were not satisfied. Admittedly, the expense in the present case is to be allowed on payment basis under the provisions of the section 43B of the Act. Accordingly, set aside the order of the CIT(A) with the direction to the AO to allow the impugned expense on payment basis as per the provision of section 43B - Hence, the ground of appeal of the assessee is allowed for statistical purposes. - ITA Nos. 3555/AHD/2015, 1014 & 1015/AHD/2018 - - - Dated:- 5-4-2023 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER Assessee by : Shri Dhrunal Bhatt, A.R Revenue by : Shri Sanjaykumar Kumar, Sr. D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned three appeals have been filed at the instance of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of appellant is set up and hence depreciation ought to have been allowed on the compound wall as well as preliminary expenses incurred for the purpose of business. 6. The learned CIT (A) has further erred in holding that NA conversion charges of Rs. 44,44,000/- foils u/s 43B of the I. T. Act and hence the same is properly disallowed, he has further erred in taking a view that the said expenditure is a part of land cost and has to be capitalized and hence not allowable as revenue expenditure. He has further erred in holding that the NA conversion charges is in the nature of duty/cess/fees payable to the government undertaking i.e. GIDC. It is submitted that the GIDC is not a government and hence Section 43B is not attracted. Your appellant craves for leave to add/alter/amend/withdraw/modify any of the above grounds before hearing. 3. The first interconnected issue raised by the assessee in ground Nos. 1 to 5 are that the Ld. CIT(A) erred in confirming the addition of Rs. 55,72,136/- and Rs. 10,10,513/- representing the business expenses and depreciation claim u/s 32 of the Act on the reasoning that the business was not set up and commenced. 4. The facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd were capital in nature which were to be capitalised along with the cost of the project itself, 2.9 Merely appellant's taking the plea that the Board of Directors have passed a resolution regarding commencement of business which only says that through this resolution, the Board has directed the Directors to obtain the certificate for commencement of the business. Thus, mere passing some resolution authorizing the directors to obtain the certificate of commencement of business itself does not establish that the business of the appellant company has been commenced. If was nothing but a decision of the Board, which was recorded for its further implementations. In fact it was the preliminary stage completed by the Board of Directors to proceed further and to complete the legal formalities for faking the certificate of commencement from the registrar of companies. Thus, this resolution does not satisfy the condition. 2.10 The appellant further relied upon the certificate of the commencement of the business as one of the evidence for set up of the business. Again, this was the precondition legally required before starting of the commencement of the business, and there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s overheads directly attributable to the development of biotechnology park are capitalised as part of capital work in progress. Pending finalization of agreements and certain other approvals, no substantial development in relation to the project has taken place during the year. Consequently, the expenses incurred during the year are charged to P L Account. From (he above remarks of the auditor's if is clearly evident that the commencement of the business activities have never taken at all. 2.13. The appellant has relied upon the judgment in the case of Preimus Investment and Finance Limited delivered by ITAT, Mumbai. However, the facts of that case are totally different from the facts of the case. In the aforesaid cited case, the main issue was in respect of the interest income to be assessed under the head of 'Income from Other Source1 or 'Income from Business', which is not the issue in the instant case. Further, with regard to allowability of the expenditures for retaining the status of the company, certain expenditures were held to be wholly and exclusively for the purpose of making and earning the Income. However, in the instant case, the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,10,513/-. The appellant's stand was that the business of the company has been set up and hence all the expenses including depreciation be allowed as revenue expenditure u/s. 37(1) of the ,T, Act, 1961. 3.4. Since, in the preceding ground, the issue of the commencement / set up has been elaborately discussed and found that no commencement ot business has taken place. Since, there was no business activities became operational. In view of the facts, the claim of depreciation and preliminary expenses cannot be allowed as such. It is needless to mention that, depreciation u/s, 32 of the !. T. Act, can only be allowed when the assets have been put to use for the purpose of business in the year under consideration, but in this case, the appellant has failed to establish that the same has been done so. Thus, these are the pre-operative expenses and are disallowed as revenue expenditures. Thus, the AOs stand on this regard is confirmed and the ground of appeal is accordingly dismissed. 6. Being aggrieved by the order of the ld.CIT(A), the assessee is in appeal before me. 7. The Ld. AR before me filed a paper book running from pages 1 to 123 and contended that similar ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded u/s 43B of the Act. As the expense was not by the assessee before the due date of filing the return of income, the disallowed the same and added to the total income of the assessee. 12. Aggrieved assessee preferred an appeal before the Ld.CIT(A), who confirmed the order of the AO by observing as under: 5.4, Having considered the facts and submission, that in the Ground No.l, the issue with regard to the disallowance of other expenses of Rs.55,72,316/- has already been confirmed which included this amount of Rs.44,44,000/- in respect of NA Tax etc. Since these were the conversion charges in the nature of duty / cess / fees payable to the government undertaking i.e. GIDC, hence the same tolls under the 43B clause (a) of I, T. Act and hence the disallowance of the same warrants invoking the provisions of section 43B of I. T, Act. Even otherwise also these expenditures were part of the land cost and has to be capitalized along with the same. Thus, those can never be allowed as revenue expenditure u/s. 37(1) of the I. T. Act, but the capital expenditure, therefore, the appellant's claim of such expenditures in the P L Account as revenue expenditure is not correct. Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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