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TMI Blog2019 (12) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... venue expenditure a sum of ₹ 10,16,666. These are expenses incurred for setting up a dealership unit at Kannur. We have perused the details of the expenses, which are placed in the paper book filed by the assessee. Expenditure claimed are bank charges, bonus, commission paid, salary and wages, staff welfare expenses, etc. These expenses are clearly incurred for setting up a new unit and cannot be stated that it is an expenditure incurred for extension of existing unit. The new premises were taken on lease and new agreements were signed. The expenditure incurred is for setting up of a new business, cannot be allowed as a revenue expenditure. Interest attributed to the funds diverted to sister-concern - HELD THAT:- It is clear that no funds were diverted to sister concern during the relevant assessment year. No addition / disallowance was made on this account in the earlier assessment years or in the subsequent assessment years. Moreover, we find that M/s.Pothen Pothen Automobiles Private Limited (sister concern) is an authorized distributor for three wheeler spare parts from Trichur to Kasargode. Since the assessee is dealing in Ape three wheelers, it receives spare par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed vide order dated 14.12.2009 determining the total income at ₹ 33,75,536. The Assessing Officer in completing the assessment, made the following additions to the total income:- (i) Disallowance of subvention expenditure of ₹ 5,00,000. (ii) Disallowance of expenditure incurred for setting up of Ape Four Wheeler Unit of ₹ 10,16,666. (iii) Interest attributed to the funds diverted to sisterconcern amounting to ₹ 3,21,000. 5. Aggrieved by the additions made by the Assessing Officer, the assessee preferred appeal to the first appellate authority. The CIT(A) partly allowed the appeal of the assessee. The CIT(A) reduced the addition of subvention expenses to ₹ 3 lakh from ₹ 5 lakh made by the Assessing Officer. As regards the other two additions, the CIT(A) confirmed the view taken by the Assessing Officer. 6. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. We shall adjudicate the issues raised as under: Subvention expenses : 7. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich income is returned, the expenditure is not allowable and hence disallowed. 8.1 Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal to the first appellate authority. The CIT(A) confirmed the view taken by the Assessing Officer. The relevant finding of the CIT(A) reads as follow:- 6.2 I have considered the submission of the appellant. A new unit has apparently been set up by the appellant for starting its four wheeler dealership. Dealership agreement is dated 08.06.2007 which pertains to A.Y.2008-09. The appellant has also relied upon the decision of DHL Express (I) (P) Ltd. v. ACIT (2009) 124 TTJ 108 (Mum.). The facts of the two cases relied upon by the appellant are clearly distinguishable from the appellant s case. In the case of DHL, the Hon ble High Court concluded that setting up date and commencement date of the business were distinct in the case of assessee there. In Ralli Wolf Ltd. case, the assessee had incurred expenses regarding purchases in the relevant previous year, therefore, it was held that trading had started. However, in the case before me, the appellant has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid, salary and wages, staff welfare expenses, etc. These expenses are clearly incurred for setting up a new unit and cannot be stated that it is an expenditure incurred for extension of existing unit. The new premises were taken on lease and new agreements were signed. The expenditure incurred is for setting up of a new business, cannot be allowed as a revenue expenditure. Accordingly, we confirm the view taken by the Assessing Officer, which was confirmed by the CIT(A). It is ordered accordingly. 8.5 Therefore, ground No.3 raised by the assessee is rejected. Diversion of funds to sister concern : 9. The Assessing Officer had attributed interest at the rate of 12.5% on advances made to the sister concern. The amount outstanding from sister concern as on 31.03.2007 was ₹ 25,68,085. Accordingly, a sum of ₹ 3,21,000 was added as income from other sources by the Assessing Officer. 9.1 Aggrieved, the assessee raised this issue before the CIT(A). The CIT(A) confirmed the view taken by the Assessing Officer. The relevant finding of the CIT(A) reads as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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