TMI Blog2023 (9) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has started manufacturing of packaging machines would show that the business of the assessee has been set up and even commenced. It is well settled proposition of law that the revenue expenses incurred after the setting up of the business is allowable as deduction, even if the business has not commenced. Hence, the view taken by the learned CIT(A) that pre-commencement expenses are not allowable as revenue expenditure cannot be sustained. A Perusal of the said expenditure would show that all the expenses have been incurred in the normal course of carrying on business in order to capture the market. Hence, in our view, these expenditures cannot be considered as capital in nature. Further, we are of the view that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view taken by the tax authorities on this proposition. Thus we are of the view that the learned CIT(A) was not justified in confirming the disallowance made by the Assessing Officer. Decided in favour of assessee. - SHRI B.R. BASKARAN (AM) SHRI RAHUL CHAUDHARY (JM) For the Assessee by Shri Rakesh Sukharia For the Department by Ms. Naina Krishnakumar ORDER PER B.R.BASKARAN (AM) :- The assessee has filed this appeal challenging the order dated 7.2.2023 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2015-16. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition of Rs. 89.07 lakhs made by the Assessing Officer by treating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- incurred by the assessee consisted of exhibition expenses, foreign local travelling, telephone calls etc., and these expenses have resulted in building up a benefit of intangible nature that may accrue in future. Accordingly the Assessing Officer took the view that the above said expenditure is capital in nature and accordingly disallowed the claim of Rs. 89,07,340/-. However, the AO allowed depreciation @ 25% thereon. Accordingly the Assessing Officer computed the net disallowance of Rs. 66,80,050/-. 4. The learned CIT(A) observed that these expenses can at best be treated as pre-commencement expenses made by the company in order to explore the market abroad. Accordingly he held that these expenses cannot be allowed as revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts, which is placed at page No. 36 of the paper book, the assessee has stated that it has started manufacturing of packaging machines. The said notice extracted below :- During the previous year company was started manufacturing of Packaging Machine and has completed 95 % of machine named Vilay-110, during the current year company stand manufacture another machine named Vilay Compact-119, which also under process of development and it has completed around 30%, which is now ready to sell in the market. Hence all the expenses related to manufacturing of machine like Raw materials, salaries, Market related expenses are treated as part of Manufacturing cost and transfer to semi finished goods. The fact that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in holding that these expenditure would create an asset of intangible nature in future and further, the AO has taken this view only on surmises and conjectures without any basis. 9. Next point is whether the assessee is entitled to claim expenses fully for income tax purposes, when it has treated the same as deferred revenue expenditure in the books of accounts. It is well settled proposition of law that the entries made in the books of account are not relevant for the purpose of computing total income. In support of the above proposition, learned AR placed his reliance on the decision rendered by Hon'ble Calcutta High Court in the case of CIT Vs. Berger Paints (India) Ltd. (2002) 254 ITR 503 (Cal) and also the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
