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TMI Blog2023 (9) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee as capital in nature. 2. The facts relating to the issue are stated in brief. The assessee is engaged in the business of manufacture of Form fill and sealing machines, which are used in packaging FMCG and other similar products. During the course of scrutiny proceedings, the Assessing Officer noticed from the return of income filed that the assessee has claimed deduction of Rs. 89,07,340/- as any other sum allowable as deduction. In this regard, the Assessing Officer noticed following facts:- (a) that the assessee has, however, treated the above said expenditure as "deferred revenue expenditure" in the books of accounts and was amortising the same in five years. However, for the income tax purposes, the assessee claimed the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the view taken by the AO and accordingly confirmed the addition and hence the assessee has filed this appeal before the Tribunal. 5. The Learned AR submitted that the assessee is engaged in the business of manufacturing of machines. It has already set up its business and has commenced its operations. This is evident from the observations made by the AO himself in the assessment order, wherein he has observed that the direct expenses incurred by the assessee in manufacturing of machines have been classified as work in progress in Inventory. He submitted that the very fact of manufacture of machineries would show that the assessee has commenced its operations. He submitted that the assessee has claimed only indirect expenses as deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 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. 8. We noticed that the above said claim of Rs. 89.07 lakhs consisted of following expenses : Sr. No. Particulars Amount (Rs.) 1 Foreign Travelling Exp 3,367,797.00 2 Travelling Expenses 2,294,213.00 3 Exhibition Expenses 2,612,558.00 4 Marketing Expenses 202,532.00 5 Telephone Exp 430,240.00 Total Rs. 8,907,340.00 A Perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed. In this case, it is not the case of the AO that the above said expenses are not allowable under any of the provisions of the Act. 10. The tax authorities have also taken a view that the assessee has not shown any sales in the books of account. It is well settled proposition of law that, once the assessee has set up his business, all revenue expenses are allowable as deduction irrespective of the receipt of income. In support of this proposition, the Ld A.R brought to our attention the decision of Hon'ble Supreme Court rendered in the case of CIT Vs. Rajendra Prasad Mody (115 ITR 519). Accordingly, we reject the view taken by the tax authorities on this proposition. 11. In view of forgoing discussions, we are of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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