TaxTMI 
TaxTMI 
2007 (4) TMI 386
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....ed CIT (Appeals) has erred in law and on facts in holding that the business of hotel Hans Coco Palms, (Sun N Beach) at Puri recommenced on 25th December, 2000 on wholly erroneous, illegal and untenable grounds. 2. On the facts and in the circumstances of the case, the authorities below failed to appreciate that the business had commenced on 16th September, 2000 and as such, only the expenses for the period up to 15-9-2000 amounting to Rs. 5,20,472 should have been treated as capital expenditure. 3. On the facts and in the circumstances of the case, the learned CIT (Appeals) has failed to appreciate the strenuous contention of the assessee that the Assessing Officer having treated the receipts from operation of hotel Sun N Beach (Hans ....
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.... 25th December, 2000, which happened to be Christmas Day when it became fully operational. During the course of scrutiny assessment, the Assessing Officer observed that as per the audit report furnished along with the return there was a comment of the auditor to the effect that project of modernization of the hotel substantially completed on 25th December, 2000. The Assessing Officer, therefore, proposed to disallow the expenditure incurred prior to 25-12-2000, being pre-commencement expenditure. The Assessing Officer also inclined to disallow the claim of depreciation, on the plea that assets were used for less than 180 days. In response to the Assessing Officer's query, the assessee filed a detail of expenditure indicating that hotel was ....
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....nt, in respect of sales affected from 16th September, 2000 till 25th December, 2000, and submitted that business was commenced w.e.f. 16-9-2000, there was no reason for treating the expenditure incurred after 16-9-2000, as pre-operative expenses. 4. On the other hand, learned DR submitted that prior to formal opening of the hotel on 25-12-2000, it cannot be said that hotel had commenced its business, therefore, lower authorities were perfectly justified in disallowing the expenditure incurred prior to 25-12-2000. 5. We have considered the rival contentions, carefully gone through the orders of the authorities below. We have also deliberated on the case laws cited by the learned AR and learned DR during the course of hearing before us ....
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....ready to commence business, then it can be said that business is set up, but before it is ready to commence business, there may be interval between a business which is set up and a business which is commenced. All the revenue expenditure incurred after set up of the business but before commencement of the business are permissible deduction, while computing the income under the head "Income from business and profession". Thus, a business can be said to have commenced as soon as it is being set up. In the instant case not only the assessee was already in hotel and the hotel building was already in existence, after renovation, the hotel rooms were let out w.e.f. 16th September, 2000, thus, the same were also put for commercial use, there is no....