FANCY BUILDERS PRIVATE LIMITED,MUMBAI vs. ITO, 5(1)(4), MUMBAI

ITA 5171/MUM/2019Status: DisposedITAT Mumbai15 July 2022AY 2012-136 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that expenses incurred to protect a business asset are deductible as business expenses, even if no project was in progress. The mere fact that no business activity was carried out in the relevant year does not affect deductibility if the business is deemed to be continuing.

What were the facts?

The assessee, a developer and construction company, claimed business expenses totaling Rs. 28,51,339/-. The Assessing Officer disallowed these expenses, viewing them as capital in nature related to a plot of land and arguing no business activity was conducted. The CIT(A) upheld disallowance of Rs. 20,93,522/- as 'cost of inventories' and directed verification of Rs. 6,73,243/-.

What were the issues?

Whether expenses incurred for a plot of land, even without an ongoing project, are deductible business expenses. Whether a business is considered to be continuing for set-off purposes even if no activity occurred in a particular year.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 72(1)(i)

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Income Tax Appellate Tribunal, MUMBAI SMC BENCH, MUMBAI

Per Pramod Kumar VP

1.

By way of this appeal, the assessee-appellant has challenged the correctness of the order dated 14th June 2019, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2012-13. 2. Grievances raised by the appellant are as follows: I. The Ld. CIT(A) erred in confirming the disallowance of Rs. 20,93,522/ on account of following expenses holding that " the same as in the nature of "cost of inventories" which need to be capitalized." Sr. No Expenses Amount Rs. 1 Salary of the manager at site. 61,955 9 Professional charges paid to Advocate 4,53,060

The order continues below.

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