Case Law Details
RBL Hotels Private Limited Vs ACIT (ITAT Chennai)
Conclusion: Expenditure incurred would be allowable as deduction, notwithstanding the fact that no business income was earned by the assessee.
Held: Assessee acquired a land and a partially constructed building for opening a hotel. Thereafter, assessee entered into a Hotel Operating Agreement with the Indian Hotels Company Ltd. Assessee claimed a set-off of the expenditure incurred by it as business expenditure for the relevant assessment year. AO held that assessee did not commence any business operations and that it did not earn any revenue from the said operations. Thus, AO ruled that the expenditure incurred by the assessee could not be allowed as revenue expenditure. It was held that in case the setting-up of business required different activities, the assessee would be said to have set-up its business from the date when one of the categories of its business was started. The ITAT added that it was not necessary that all categories of the assessee’s business activities must start simultaneously, or that the last stage of its business activity must start, before it could be said that the business of the assessee was set up. What was required to be considered was whether one of the essential activities for carrying on the business of an assessee as a whole was commenced or not. The business of an assessee could be said to have been set-up when the necessary infrastructure was acquired by it and when it started paying salaries and allowances. Thus, ITAT held that the assessee RBL Hotels had achieved the process of establishing the business and thus, the business expenditure claimed by it should be allowed as deduction.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. Aforesaid appeals by assessee for Assessment Years (AY) 2012- 13 & 2013-14 arises out of the common order of learned Commissioner of Income Tax (Appeals)-8, Chennai [CIT(A)] dated 09.11.2017 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3)r.w.s. 92CA(3) of the Act on 15.03.2016 for AY 2012-13 and order dated 31.03.2016 passed u/s 143(3) for AY 2013-14.
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