CIT v. Sarabhai Management Corpn. Ltd.

192 ITR 151Supreme Court of India1991#2556 most cited

What is CIT v. Sarabhai Management Corpn. Ltd. authority for?

Expenses incurred after a business has been set up but before its actual commencement are allowable as business deductions under section 37 of the Income-tax Act. The Supreme Court clarified that even expenses related to activities at a preparatory stage are admissible.

45

judgments rely on this decision, according to BharatTax’s citation analysis of 366,005 Indian tax judgments — from 2013 to 2025.

Also referred to as

CIT v. Sarabhai Management Corpn. Ltd. · 192 ITR 151 · section 37 · business set up · commencement of business · preparatory stage expenses · allowability of expenses · business deduction · pre-commencement expenses · section 143(3) · section 68 · section 133(6)

Sections most often in play

Section 133(6)Section 143(3)Section 56Section 68

Issues it is cited on

businesspersonsection 143(3)indianfacinterest

Judgments citing CIT v. Sarabhai Management Corpn. Ltd.

DCIT, New Delhi vs. M/S Dlf Homes Panchkula Pvt. Ltd., New Delhi

In the result appeal of the department is dismissed

ITA 4344/DEL/2012[2009-10]Status: DisposedITAT Delhi14 Oct 2015AY 2009-10

Bench: Sh. N. K. Saini, Am & Sh. C. M. Garg, Jm Ita No. 4344/Del/2012 : Asstt. Year : 2009-10 Dcit, Vs M/S Dlf Homes Panchkula Pvt. Ltd. Circle-10(1), 1-E, Naaz Cinema Complex, New Delhi Jhandewalan Extn., New Delhi (Appellant) (Respondent) Pan No. Aabch8735M Assessee By : Sh. R. S. Singvi, Ca Revenue By: Smt. Parwinder Kaur, Sr. Dr Date Of Hearing : 31.07.2015 Date Of Pronouncement : 14.10.2015 Order Per N.K. Saini, A.M. This Is An Appeal By The Department Against The Order Dated 24.05.2012 Of The Ld. Cit(A)-Xiii, New Delhi.

For Appellant: Sh. R. S. Singvi, CAFor Respondent: Smt. Parwinder Kaur, Sr. DR
Section 4Section 5A

…ess of the assessee had been set up as soon as it had acquired development rights in lands. Therefore, all the expenses incurred by the assessee after set up of its business were allowable. The reliance was placed on the following case laws: " CIT Vs Sarabhai 192 ITR 151 " Western India Vegetable Products Vs CIT 26 ITR 151 " Prem Vs CIT 108 ITR 654 8 DLF Homes Panchkula Pvt. Ltd. " CIT Vs Western India 199 ITR 777 " CIT Vs Piem Hotel 209 ITR 616 " CIT Vs L G Electronics (India) Ltd. (2006) 282 ITR 545 (Del) " CIT Vs Herbalife International India (P) Ltd. 297 ITR 303 (Del) " CIT Vs Sarabhai Management Corpn. Ltd.…

M/S. Matrix Infrastructure, New Delhi vs. ITO, New Delhi

In the result the appeal of the assessee is partly allowed and the appeal of the revenue is dismissed

ITA 5428/DEL/2010[2007-08]Status: DisposedITAT Delhi30 Sept 2015AY 2007-08

Bench: Sh. A. T. Varkey, Jm & Sh. O.P.Kant, Am

For Appellant: Dr. Rakesh Gupta, AdvFor Respondent: Sh. P. Dam Kanunjna, Sr. DR
Section 143(3)Section 40

…ere may be an interval between the setting up of the business and the commencement of the business. All expenses incurred during that interval are also permissible for deduction. In CIT Vs. Sarabhai Management Corporation Ltd. (1992) 102 CTR (SC) 164 : (1991) 192 ITR 151 (SC) the decision of Page No.11 ITA No.5428/Del./2010 ITA No.5548/Del./2010 the Gujarat High Court was affirmed and went a step ahead that even the activities at a preparatory stage is also admissible." 9.3 On plain reading of above findings of the Courts, it is clear that it is only after the business is set up, the expenses incurred in the busi…

Commissioner of Income Tax vs. Jubilant Offshore Drilling Pvt Ltd

The appeal is dismissed in limine

ITA/694/2014HC Delhi24 Nov 2014
Section 271(1)(c)

…nt of time and which must necessarily precede the other activities is started.” A similar view was taken in Sarabhai Management Corporation Ltd versus CIT [1976] 102 ITR 25 (Guj.), which was upheld by the Supreme Court vide its order reported in [1991] 192 ITR 151 (SC). 6. The respondent-assessee being conscious of the fact that revenue would be generated once the oil production commenced had capitalised the expenditure on oil exploration cost and the same was reflected as “capital work in progress” in the balance sheet. This was in accord with the principle of matching of revenue or earnings with t…

Carefour Wc&C India Private Limited vs. Deputy Commissioner of Income Tax

ITA/42/2014HC Delhi22 Sept 2014
Section 260ASection 28Section 43D

…mmovable property. There may be an interval between the setting up of the business and the commencement of the business. All expenses incurred during that interval are also permissible for deduction. In CIT v. Sarabhai Management Corporation Ltd., [1991] 192 ITR 151 (SC) the decision of the Gujarat High Court was affirmed and went a step ahead that even the activities at a preparatory stage is also admissible.” 11. On a reading of the above referred quotations, it is clear that it is only after the business is set up, that the expenses incurred in the business can be claimed as permissible deductio…

Commissioner of Income Tax vs. Samsung India Electronics Ltd

The appeal is dismissed with costs

ITA/131/2010HC Delhi09 Jul 2013
Section 260ASection 37

…al pronouncement of the Bombay High Court in Western India Vegetables Products Ltd. Vs. CIT, (1954) 26 ITR 151 and Supreme Court in CWT Vs. Ramaraju Surgical Cotton Mills Ltd., (1967) 63 ITR 478 (SC) and Sarabhhai Managment Corporation Ltd. Vs. CIT, (1991) 192 ITR 151, the same should be disallowed as expenditure. We may only note that the Assessing Officer did not go into the factual matrix applicable to the assessee‟s case to find out the date of setting up of business. He simply took the date 1st October, 1995 i.e. as the date of start of the actual commercial sale transactions as the relevant date.…