INCOME TAX ACT, 1961

Business expenditure - Allowability -Staff member expenses

Assessee incurred certain office expenses in relation to staff members which were disallowed by AO under section 37(1) on ground that project was still under way. Held:Considering facts that assessee was not a construction company. Completion of the construction at the project site could not be an indicator for the commencement of the business of the company. Construction on its own excepting that it gives the work to contractor to carry on the construction activity on the land it possessed and mere completion of construction could not be taken as commencement of the assessee's business. Where department viewed that assessee had not commenced the business. Thus, for purpose of development of the projects of construction, the assessee had to necessarily maintain regular staff members, on which it had been incurring expenses. The office expenses that had been incurred were clearly of revenue in nature. Hence, claim of assessee was allowed.

Income-tax Act, 1961, Section 37(1)

A.Y. :1992-93 and 1994-95
Decision: In favour of assessee.

CIT v. Club Resorts (P) Ltd.