2014 (12) TMI 64

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....ssessment order, but it is difficult to appreciate and accept the logic and reasoning of the Assessing Officer to hold that the business of the assessee had not been set up and, therefore, expenditure of Rs. 1,69,72,374/- should be treated as pre-operative expenses. The said expenditure was accordingly disallowed and income as returned was enhanced by Rs. 1,69,72,374/-. The Assessing Officer further directed initiation of penalty for concealment under Section 271(1)(c) of the Income Tax Act, 1961 (Act, for short) for the said disallowance. 3. In our opinion, the Commissioner of Income Tax (Appeals) rightly deleted the said disallowance after observing that the business of the assessee had been set up and the expenditure incurred was busi....

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....nt order itself refers to the judgment of the Andhra Pradesh High Court in CIT versus Sponge Iron India Ltd. (1993) 201 ITR 770 (AP) that for commencement of business all activities which go on to make business need not be started simultaneously. As soon as an activity which is an essential activity in the course of carrying on the business is started, the business must be said to have commenced, yet the Assessing Officer failed to apply the said ratio. The Gujarat High Court in CIT versus Saurashtra Cement and Chemicals Industries Ltd [1973] 91 ITR 170 (Guj.) held, "... business is nothing more than a continuous course of activities and all the activities which go on to make up the business need not be started simultaneously in order th....

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....  6 Bank charges and Guarantee 1,08,13,329     Commission     Total (B)     1,08,13,329 Depreciation claimed       7 Depreciation claimed 26,65,819   Total (C)     26,65,819         Operating expenses disallowed (A)+(B)+(C)=(D) 1,69,72,374 " 8. Noticeably, the respondent assessee had themselves added back the Registrar of Companies' filing fee of Rs. 20,80,000/- and had applied/claimed the said expense under Section 35D of the Act. The depreciation of Rs. 26,65,819/- had also been added back by the respondent assessee. This factual position was ignored in the assess....