2015 (12) TMI 1015

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....iture incurred during the year amounting to Rs. 87,26,446/-. 3. The assessee is in the business of trading and merchandising of goods and services. Return for the year was electronically filed on 27.9.2008 disclosing loss of Rs. 87,26,445/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 4. On perusal of the annual account, the Assessing Officer found that the assessee has not started its business therefore the expenditure are not allowable. Vide questionnaire dated 5.4.2010, the assessee was confronted on this issue. In its reply vide letter dated 11.5.2010 the assessee stated that the expenditure is allowable because they are revenue expenditure incurred wh....

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....ss and the expenditures are allowable on setting up of business. The Ld. Counsel strongly relied upon the decision of the Hon'ble High Court of Delhi in the case of Omniglobe Information Tech India Pvt. Ltd. Vs CIT. It is the say of the Ld. Counsel that a business is said to be set up, the moment employees are recruited for the purpose of the business and therefore any expenditure incurred by the assessee after setting up of the business are allowable u/s. 37(1) of the Act. 9. Per contra, the Ld. Departmental Representative strongly supported the findings of the Revenue authorities. It is the say of the Ld. DR that the decision relied upon by the assessee and other related decisions are all relating to service industries and therefore sa....

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....o error in holding that the assessee had setup its business w.e.f. 1.6.2004 and not w.e.f. 1.4.2004, as held in the impugned order." 10.3. In that case, the Hon'ble High Court had to consider the following facts: " The Assessing officer as well as the Tribunal have held that the appellant assessee had commenced its operations only from 1.6.2004 i.e. the date on which the appellant assessee entered into "service agreement"with its parent company and, therefore, the expenditure incurred between 1.4.2004 to 31.5.2004 should be capitalized. Tribunal, in its impugned order had also observed that the appellant assessee had entered into a lease agreement and had hired premises as its office, only on 15.6.2005. Commissioner of Income Ta....

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....sessee purchased VSAT equipment, it should be said that the business has been setup. 10.7. A similar view was taken in the case of Whirlpool of India Ltd 318 ITR 347 wherein the Hon'ble High Court has observed that : "The business was set up when directors were appointed, staff, such as regional and branch managers were appointed and their salaries were paid. In other words, it can be said that at that time, the company was ready to commence business." 10.8. The Hon'ble High Court of Delhi has considered these decisions in the case of Omniglobe Information Tech India Pvt. Ltd.(supra) and at page-18 of its order, the Hon'ble High Court held as under: " In view of the aforesaid discussion, we do not think that the reas....