BURGUNDY RESTAURANTS PRIVATE LIMITED,CHENNAI vs. DCIT, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Chennai dated 01.12.2016 relevant to the assessment year 2013-14. The only effective ground raised in the appeal of the assessee relates to confirmation of preliminary expenses.

Facts are, in brief, that the assessee filed its return of income for the assessment year 2013-14 on 29.09.2013 admitting a total current year loss of ₹.3,71,95,650/-. After following due process and considering various details, the Assessing Officer completed the assessment under section 143(3) of the Income Tax Act, 1961 [“Act” in short]. In the assessment order, the Assessing Officer has denied the claim of the assessee on the ground that the deduction under section 35D of the Act can be allowed only if the expenditure was incurred towards preparation of feasibility report, preparation of project report and conducting market surveyor any other survey necessary for the business of the assessee. As the expenditure claimed by the assessee was not in the nature prescribed under section 35D of the Act, the Assessing Officer disallowed the claim of preliminary expenses of ₹.1,52,13,360/- and added to the income of the assessee. In appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer.

On being aggrieved, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the expenses incurred by the assessee were amortized for a period of five years and the same may be allowed. Alternatively, the ld. Counsel for the assessee has submitted that the expenses incurred by the assessee were for the purpose of business of the assessee and it has to be allowed under section 37 of the Act.

On the other hand, the ld. DR supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee has claimed preliminary and pre-operative expenses incurred by the assessee. The Assessing Officer, by considering the provisions of section 35D of the Act, disallowed the claim of the assessee, which was confirmed by the ld. CIT(A).

So far as alternative plea raised by the ld. Counsel for the assessee is concerned, we find that it is a fact that the assessee has incurred the expenditure relating to the business of the assessee and due to certain circumstances, it has not able to start its business. However, the expenditure has been incurred to carry out the business. Therefore, the expenses incurred by the assessee are for the purpose of its business and it has to be allowed. However, the assessee has not filed any details in respect of the expenditure incurred neither before the Assessing Officer nor before the ld. CIT(A) or before the Tribunal. Therefore, we direct the assessee to file the details before the Assessing Officer. We also direct the Assessing Officer to consider the same and pass order as per our above observations. Thus, the ground raised by the assessee is allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes.