2011 (9) TMI 158 - HC - Income Tax

Deduction - Whether the Income Tax Appellate Tribunal was justified in holding that the assessee commenced its business on 1st March 2001 and consequently entitled to claim deduction of revenue expenses is the question raised in this appeal - Held that - the Income Tax Appellate Tribunal following the decision of this Court in the case of Commissioner of Income Tax V/s. Industrial Solvents & Chemicals Private Limited (1978 -TMI - 37466 - BOMBAY High Court) has held that since trial runs were carried out by the assessee from 1st March 2001, it must be held that the assessee has set up its business on 1st March 2001 - Decided against the revenue.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was justified in holding that the assessee commenced its business on 1st March 2001 and entitled to claim deduction of revenue expenses.

Analysis:
In the assessment year 2001-02, the assessee declared a loss by debiting revenue expenses incurred after 1st March 2001 in its profit and loss account. The assessing officer contended that since the assessee had not commenced its business operations during the previous year, the expenses should be treated as preoperational and capitalized. The Commissioner of Income Tax (Appeals) upheld this view, stating that the expenses were liable to be capitalized.

On further appeal, the Income Tax Appellate Tribunal referred to a previous court decision and found that as trial runs were conducted by the assessee from 1st March 2001, it was considered that the business was set up on that date. The Tribunal also noted that documents submitted by the assessee supported the establishment of the business on 1st March 2001. The Tribunal concluded that its decision was based on factual findings, and no substantial question of law arose from its order.

Therefore, the Tribunal's decision was upheld, and the appeal was dismissed with no order as to costs.