Tribunal decision: Appeal partially allowed for Assessment Year 2018-19. Pre-operative expenses allowed, late TDS interest disallowed.

The Tribunal partially allowed the appeal challenging the Commissioner of Income Tax (Appeals) order for the Assessment Year 2018-19. It overturned the disallowance of pre-operative expenses but upheld the disallowance of interest paid on late TDS payment. The Tribunal deemed the pre-operative expenses as 'business expenses' and not 'pre-operative expenses', citing a relevant court decision. However, it agreed with the Commissioner's stance that the interest paid on late TDS payment was penal rather than compensatory, in line with a court precedent. The decision was rendered on 30.05.2023.

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Issues:
The appeal challenges the order of the Commissioner of Income Tax (Appeals) related to the Assessment Year 2018-19, specifically contesting the assessment order under section 143(3) of the Income Tax Act and the disallowance of operative expenses and interest paid on late TDS amount.

Disallowed Pre-operative Expenses:
The dispute revolves around the disallowance of pre-operative expenses totaling Rs.15,29,595. The Assessing Officer disallowed these expenses as they were incurred before the operation of the assessee firm, considering them not to be 'business expenses'. The Commissioner of Income Tax (Appeals) upheld this disallowance, citing precedents that expenses before the operation of a company are 'pre-operative expenses' and not 'business expenses'. However, the Authorized Representative argued that the expenses were 'revenue expenses' and not 'preoperative expenses', referencing a decision that contradicted the Commissioner's stance. The Tribunal found that the expenses were indeed 'business expenses' and not 'preoperative expenses', as there was no change in the business conducted by the firm after the name change. Relying on a relevant court decision, the Tribunal deleted the disallowed amount of Rs.15,29,595.

Interest Paid on Late Payment Disallowance:
Another point of contention was the disallowance of interest paid on late TDS payment amounting to Rs.12,980. The Assessing Officer disallowed this interest, considering it penal rather than compensatory. The Commissioner of Income Tax (Appeals) supported this disallowance, citing a court decision that deemed such interest as penal and not compensatory. The Tribunal, in line with the court decision, upheld the disallowance of this interest payment, dismissing the appeal on this ground.

Conclusion:
The Tribunal partially allowed the appeal, specifically overturning the disallowance of pre-operative expenses but upholding the disallowance of interest paid on late TDS payment. The decision was pronounced on 30.05.2023.

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