IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER &

SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No. 5924/MUM/2024 (A.Y. 2017-18)

Olive Bar & Kitchen Pvt. v/s. ACIT, Circle-13(1)(1), Ltd. Mumbai बनाम

14 Union Park, Palli Hill Maharashtra-400020 Tourist Hotel Pvt. Ltd, Palli Hill Road, Khar West, Mumbai-400052 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACO5346G ..

Appellant/ Respondent/

अपीलार्थी प्रतिवादी

ITA No. 6255/MUM/2024 (A.Y. 2017-18)

DCIT, Circle-13(1)(2), v/s. Olive Bar & Kitchen Pvt.

Mumbai Ltd.

बनाम R. No. 218, Aayakar 14 Union Park, Palli Hill Bhavan, M K Road, Tourist Hotel Pvt. Ltd, Mumbai, Palli Hill Road, Khar West, Maharashtra-400020 Mumbai-400052 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACO5346G ..

Appellant/ Respondent/

अपीलार्थी प्रतिवादी

Assessee by : Shri Mahesh Rajora Revenue by : Shri Mahesh Pmnani Date of Hearing 15.01.2025 Date of Pronouncement 22.01.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-

These cross appeals are filed by the assessee and the Revenue against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 30.09.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.

2. The assessee has raised following grounds of appeal:

“1. The Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi ['CIT(A)'] erred in confirming the disallowance of pre-operative expenses to the extent of Rs.44,10,304/- [out of total disallowance of Rs.2,09,67,669/- made by the AO] on the ground that the expenses are capital expenditure not deductible u's 37(1) of the Act.

The Appellant submits that the pre-operative expenses were incurred after setting up of its business and in the course of and for the purpose of carrying on its business activity and hence, the expenses incurred on expansion of its existing business are allowable as revenue expenditure u/s 37(1) of the Act.

The Appellant further submits that the expenses have not brought into existence any capital asset or enduring benefit and satisfy all the essential conditions of Section 37(1) of the Act; hence on the facts and circumstances of the case, disallowance of pre-operative expenses u/s 37(1) of the Act made by the AO shall be deleted.

2. The CIT(A) erred in confirming the action of AO in not granting the credit of TDS of Rs.11,02,610/- to the Appellant in respect of demerged restaurant business of Sussegado Bar & Kitchen (P) Ltd.

The Appellant submit that all income and expenses of restaurant business of demerged entity Sussegado Bar & Kitchen are accounted in the books of the Appellant and the AO shall be directed to allow the credit of TDS of demerged undertaking to the Appellant.”

3. The revenue has raised following grounds of appeal:

“1. On the facts and circumstances of the case and in law, the CIT(A) erred in restricting the addition to the tune of Rs. 44,10,304/- as against Rs. 2,09,67,669/- made by the AO in respect of pre-operative expenses without appreciating the fact that in the books of account of the assessee pre-operative expenses amounting Rs.2,09,67,669/- were shown under the head of Lease Hold Property/Capital WIP and reflected under Fixed Assets Schedule.

2. On the facts and circumstances of the case and in law, the CIT(A) did not appreciate the fact that the pre-operative expense is allowable only u/s 35D(1)(ii) of the Income Tax Act, 1961 to the extent mentioned therein and section 37(1) of the Income Tax Act also does not allow any capital expenditure.

3. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the disallowance made u/s. 36(1)(lit) towards interest of Rs. 1,37,07,281/- paid on loans without appreciating the fact that the onus vests with the assessee to establish that the advancing interest free loans to sister concerns falls within the purview of business activities within the meaning of secti