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2016 (7) TMI 1082 - AT - Income TaxDeduction of expenditure incurred after setting up of the business disallowed - commencement of business - Held that - The authorities below have not adhered to the directions of the Tribunal to allow the assessee deduction of expenditure incurred after the date of setting up of business as opposed to date of commencement of business, i.e. 15.03.1995. We set aside the impugned orders of the learned CIT(A) dated 09.10.2010 and the AO dated 08.12.2008 on this issue and restore the matter to the file of the AO for de novo examination and adjudication for allowing the assessee deduction of expenditure incurred after the date of setting up of business, after affording the assessee adequate opportunity to bring on record all essential facts so that the date of setting up of business and expenses incurred can be determined. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Condonation of delay in filing the Cross Objection (CO) for A.Y. 1995-96. 2. Maintainability of the Cross Objection after dismissal of Revenue’s appeal. 3. Determination of the date of setting up of business for deduction of expenditure. Detailed Analysis: 1. Condonation of Delay in Filing the Cross Objection for A.Y. 1995-96: The assessee filed a petition for condonation of delay of 285 days in filing the CO, supported by an affidavit. The delay was attributed to the realization during a conference with Senior Counsel that the assessee was entitled to claim deductions from the date of setting up the business, not just from the date of commencement. The Tribunal considered the principles laid down by the Hon'ble Apex Court in the case of Collector, Land Acquisition vs. MST Katiji & Others (167 ITR 471) (SC), emphasizing that substantial justice should prevail over technical considerations. The Tribunal found that there was no malafide or intentional delay on the part of the assessee and condoned the delay, allowing the CO to be admitted for hearing and adjudication. 2. Maintainability of the Cross Objection After Dismissal of Revenue’s Appeal: The Revenue’s appeal was dismissed due to low tax effect, leading to an objection regarding the maintainability of the assessee’s CO. The Tribunal referred to Section 253(4) of the Income Tax Act and Rule 22 of the IT(AT) Rules, 1963, which state that a CO is treated as an appeal and survives even if the original appeal is dismissed or withdrawn. Judicial precedents, including Superintendent Engineer vs. B. Subba Reddy and ACIT vs. Kripa Chemicals (P) Ltd., supported this view. Consequently, the Tribunal held that the assessee’s CO was maintainable and rejected the Revenue’s preliminary objection. 3. Determination of the Date of Setting Up of Business for Deduction of Expenditure: The assessee contended that the business was set up on 08.11.1994, the date when the RBI granted a banking license, and sought deduction of expenses from this date. The authorities below had allowed deductions only from the date of commencement of business, i.e., 15.03.1995. The Tribunal referred to its earlier order in ITA Nos. 5272 to 5274/Mum/2001, which directed the AO to allow deductions from the date of setting up the business, not just from the date of commencement. The Tribunal found that the authorities had not adhered to these directions and set aside their orders. The matter was restored to the AO for fresh examination and determination of the date of setting up the business, allowing the assessee to present all relevant facts and evidence. Conclusion: The Tribunal condoned the delay in filing the CO, upheld its maintainability despite the dismissal of the Revenue’s appeal, and directed the AO to re-examine and determine the date of setting up the business for allowing the deduction of expenses. The assessee’s cross objections were treated as allowed for statistical purposes.
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