M/S VIDEO PLAZA Vs. I.T. OFFICER

JUDGEMENT

(1.) The subject matter of challenge in the appeal is a judgment and order dated 6th Aug., 2010 by which the learned Income Tax Appellate Tribunal "B" Bench, Kolkata in ITA No.2015/Kol./2009 pertaining to the Assessment Year 2006-07 concurring with the CIT(A) held that "expenditure towards bank charges of Rs.6,79,331.00 related to the new project i.e. restaurant cum hotel project is capital expenditure and would have to be capitalized as assessment year under consideration".

(2.) Challenging the aforesaid order, the assessee has come up in appeal. The appeal was admitted on 10th May, 2011 on the following question of law: "Whether the learned Tribunal below committed substantial error of law in treating the expenditure towards bank charges of Rs.6,79,331.00 as capital expenditure by totally overlooking the fact that it was for the expansion of the self same business where common books of account and common bank account are maintained by the assessee for the above expansion."

(3.) We have heard Mr. Sen, learned advocate appearing for the appellant/assessee. He drew our attention to a judgment in the case of Khimji Visram and Sons (Gujarat) Private Limited Vs. Commissioner of Income-Tax, reported in (1994) 209 ITR 993 [Guj.]. He drew our attention to a passage quoted by the Gujarat High Court from the judgment in the case of Western India Vegetable Products Ltd. Vs. C.I.T, which is as follows: "There is a clear distinction between a person commencing a business and a person setting up a business and for the purpose of the Indian Income-tax Act it is the setting up of the business and not the commencement of the business that is to be considered. It is only after the business is set up that the previous year of that business commences and any expense incurred prior to the setting up of a business would not be a permissible deduction. When a business is established and is ready to commence business, then it can be said of that business that it is set up; but before it is ready to commence business it is not set up. There may, however, be an interval between the setting up of the business and the commencement of the business and all expenses incurred during that interval would be a permissible deduction." (emphasis* supplied).