2021 (3) TMI 991 - AT - Income Tax

ITAT Hyderabad: Business Expenditure Claim Upheld, Revenue Appeal Dismissed

The Appellate Tribunal ITAT Hyderabad upheld the CIT(A)'s decision to allow the appellant's expenditure claim, emphasizing the commencement of business ... Disallowance of Misc. activities and depreciation - DR contended that the Assessing Officer had rightly disallowed the assessee's foregoing twin claims for the reason that it had not started any commercial activity - HELD THAT:- The above contention carries no substance in our considered opinion. It has come on record in the CIT(A) order that the assessee's business activity had duly commenced as per the costs of the material consumed, employees benefit expenses, initial costs, administrative expenses and depreciation; respectively. The same have gone very much unrebutted from the Revenue side in its pleadings in Ground Nos. 1 & 2 as well as during the course of hearing. We thus quote hon'ble apex court's larger bench decision in CIT Vs. K.Y. Pillaiah & Sons [1966 (10) TMI 35 - SUPREME COURT] to express our completion agreement with the CIT(A) detailed discussion extracted in the preceding paragraph. The Revenue fails in its sole grievance therefore. Issues:- Disallowance of expenditure claim by the CIT(A)- Commencement of business activitiesAnalysis:1. The appeal before the Appellate Tribunal ITAT Hyderabad for the Assessment Year 2013-14 stemmed from the Commissioner of Income Tax (Appeals)-4, Hyderabad's order. The Revenue's grievance centered around the CIT(A) allegedly erring in reversing the disallowance of the assessee's expenditure claim totaling Rs. 3,55,44,472. This amount comprised expenses and depreciation related to various activities. The CIT(A) considered the appellant's business nature and activities, noting that the appellant had incurred expenses under different heads, indicating the establishment of the business. The CIT(A) highlighted that the absence of raised invoices did not negate the business commencement. The Tribunal found the Revenue's contention baseless, agreeing with the CIT(A)'s detailed analysis and citing a relevant apex court decision in support.2. The departmental representative argued that the Assessing Officer rightly disallowed the expenditure claims due to the absence of commercial activity initiation. However, the Tribunal disagreed, emphasizing that the CIT(A) had correctly assessed the situation. The Tribunal noted that the appellant had indeed commenced business activities, as evidenced by various expenditures incurred. The Revenue failed to counter this evidence effectively during the proceedings. By referencing the apex court's decision in CIT Vs. K.Y. Pillaiah & Sons, the Tribunal affirmed its alignment with the CIT(A)'s findings. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision regarding the allowance of the expenditure claim.3. In conclusion, the Appellate Tribunal ITAT Hyderabad upheld the CIT(A)'s decision to allow the appellant's expenditure claim, emphasizing the commencement of business activities based on the incurred expenses. The Tribunal found the Revenue's arguments unsubstantiated and dismissed the appeal, affirming the CIT(A)'s detailed analysis and decision.