Tax Tribunal grants relief on disallowed expenses, depreciation claims, and land conversion disallowance overturned
The Tribunal partly allowed the appeal for AY 2012-13, granting relief on disallowed business expenses and depreciation claims due to past allowance consistency. The appeal for AY 2013-14 and AY 2014-15 was fully allowed. The disallowance under section 43B for land conversion expenses was overturned, directing allowance on a payment basis.
Issues Involved:1. Disallowance of business expenses and depreciation claims.
2. Addition on account of violation of the provisions of section 43B of the Income Tax Act.
Summary:Issue 1: Disallowance of Business Expenses and Depreciation ClaimsThe assessee raised grounds against the disallowance of Rs. 55,72,136/- and Rs. 10,10,513/- representing business expenses and depreciation claims under section 32 of the Income Tax Act on the reasoning that the business was not set up and commenced. The assessee argued that their business was set up and ready to commence, supported by a Board of Directors resolution, a certificate of commencement of business, and an MOU with GSBTM of Gujarat Government.
The CIT(A) upheld the AO's decision, stating that the business had not commenced as various approvals were pending, and the expenses were capital in nature to be capitalized along with the project cost. The CIT(A) noted that mere possession of a certificate of commencement of business or constructing a compound wall does not constitute the commencement of business activities. The CIT(A) also dismissed the relevance of case laws cited by the assessee due to differing facts.
However, the Tribunal noted that similar expenses were allowed in earlier years, resulting in business losses. Applying the principle of consistency, the Tribunal set aside the CIT(A)'s findings, allowing the assessee's appeal on this ground.
Issue 2: Addition on Account of Violation of Section 43BThe AO found that the assessee claimed expenses for converting agricultural land to non-agricultural land, which were not paid before the due date of filing the return. The AO disallowed the expenses under section 43B, which was confirmed by the CIT(A), stating that such expenses were part of the land cost and had to be capitalized, not allowed as revenue expenditure.
The Tribunal, acknowledging the genuineness of the expenses, directed the AO to allow the expenses on a payment basis as per section 43B, thus allowing the assessee's appeal for statistical purposes.
For AY 2013-14 and AY 2014-15:The issues raised for AY 2013-14 and AY 2014-15 were identical to AY 2012-13. The Tribunal applied the same findings as for AY 2012-13, allowing the appeals for these years.
Conclusion:The appeal for AY 2012-13 was partly allowed for statistical purposes, while the appeals for AY 2013-14 and AY 2014-15 were fully allowed.
Order pronounced on 05/04/2023 at Ahmedabad.