2018 (10) TMI 797 - AT - Income Tax

Disallowance of pre-operative expenditure - busniss not set up - Held that - We find nothing on record which controvert the findings of both the lower authorities. The pre-operative expenditure could not be allowed to the assessee since it has been noted that the business was not set up by the assessee during impugned AY. Therefore, we find nothing perverse in the findings of lower authorities.

Summary

Issues:
1. Disallowance of expenditure for Assessment Year 2010-11.
2. Change in the name of the assessee from HR Café India P. Ltd. to JSM Corporation Private Limited.
3. Disallowance of pre-operative expenses claimed by the assessee.

Issue 1: Disallowance of Expenditure for AY 2010-11
The appeal by the assessee contested the order of the Ld. Commissioner of Income-Tax (Appeals) confirming the disallowance of expenditure amounting to ?192.30 Lacs. The assessment for the impugned AY was framed by the Ld. Assistant Commissioner of Income Tax, wherein the income of the assessee was determined after certain disallowances as against the returned income by the assessee. Despite the absence of the assessee and no valid adjournment application, the Tribunal proceeded to dispose of the appeal based on the material available on record and after hearing the Departmental Representative who justified the additions/disallowances made by the lower authorities.

Issue 2: Change in Name of Assessee
The name of the assessee had changed from HR Café India P. Ltd. to JSM Corporation Private Limited, but this change was not intimated nor supported by any evidence. The Tribunal, left with no option due to the absence of the assessee, proceeded to decide the matter based on the available records and the arguments presented by the Departmental Representative.

Issue 3: Disallowance of Pre-operative Expenses
The assessee, engaged in the business of Restaurant & Hospitality Services, claimed certain pre-operative expenses in its computation of income for the AY in question. The Ld. AO disallowed these expenses, treating them as preoperative expenditure. The Ld. CIT (A) confirmed this disallowance after considering the factual matrix and the method followed by the assessee in its books of accounts. The Tribunal upheld the decision of the lower authorities, stating that the pre-operative expenditure could not be allowed as the business was not set up during the impugned AY. The Tribunal found no reason to overturn the findings of the lower authorities and dismissed the appeal.

In conclusion, the Tribunal upheld the disallowance of the expenditure claimed by the assessee for AY 2010-11, considering the nature of the expenses and the fact that the business was not established during that year. The Tribunal also noted the change in the name of the assessee but proceeded with the judgment based on the available records and arguments presented.