2012 (1) TMI 388 - AT - Income Tax

Appellate Tribunal Upholds CIT (A) Decision on Business Losses

ITO, Ward 2 (4), New Delhi Versus Berger Impex India (P) Ltd.

ITO, Ward 2 (4), New Delhi Versus Berger Impex India (P) Ltd. - TMI Issues involved: Appeal against order passed by CIT (A) for Assessment Year 2007-08 regarding disallowance of claimed losses due to absence of business activity.Summary:Issue 1: Absence of business activityThe Assessing Officer disallowed the loss claimed by the assessee of Rs. 12,28,782 as there was no business activity during the year. The assessee contended that it had engaged in various business activities such as employing staff, acquiring office premises, purchasing equipment, and setting up infrastructure, even though no sales or purchases were made. The assessee argued that setting up a business, not just commencing it, should allow for the claimed expenditure. The CIT (A) agreed with the assessee, stating that the business had commenced based on the activities undertaken, and allowed the loss claim. The department appealed against this decision.Issue 2: Decision of the Appellate TribunalThe Appellate Tribunal upheld the decision of the CIT (A) and dismissed the department's appeal. The Tribunal noted that the assessee had taken concrete steps towards setting up the business, such as employing staff, leasing premises, and creating infrastructure. The Tribunal found no fault in the CIT (A)'s decision to allow the loss claim, as the activities undertaken by the assessee indicated the commencement of the business, even without immediate sales or purchases. The Tribunal concluded that the assessee was entitled to the benefit of carry forward of business loss and depreciation, as per the Income-tax Act requirements.In conclusion, the Appellate Tribunal affirmed the decision of the CIT (A) and dismissed the department's appeal, stating that the assessee's actions demonstrated the commencement of business activities, justifying the allowance of the claimed losses.