Case Law Details
Vijay Flexible Containers Private Limited Vs DCIT (ITAT Mumbai)
Introduction: The case of Vijay Flexible Containers Pvt. Ltd. vs. DCIT, heard by ITAT Mumbai, addresses the deduction of revenue expenses for start-up businesses before actual business commencement. The dispute revolves around the categorization of expenses and their treatment for tax purposes.
Analysis: The appellant, Vijay Flexible Containers Pvt. Ltd., challenged the decision of CIT(A) regarding the treatment of certain expenses claimed as deductions. The Assessing Officer treated these expenses as capital in nature, leading to an addition of Rs. 89.07 lakhs. The dispute hinges on whether these expenses can be considered revenue deductions, especially when the business had not yet commenced operations.
The business in question is engaged in the manufacturing of packaging machines. While the CIT(A) and Assessing Officer contended that the expenses were of a pre-commencement nature, the appellant argued that since manufacturing had already started, the business was operational. The tribunal noted that the business had indeed commenced as evidenced by the manufacturing activity.
The tribunal further analyzed the nature of the expenses, which included foreign travel, exhibition, marketing, and telephone expenses. It concluded that these expenses were incurred in the ordinary course of business to capture the market and were not capital in nature.
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