AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 621
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.... the Hon'ble Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. 328 ITR 81 (Bom)." The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-2(2) Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 22/02/2013 wherein the income of the assessee was assessed at Rs. 14.73 Lacs under normal provision after certain disallowance as against returned loss of Rs. 1452.51 Lacs filed by the assessee on 29/09/2009. The issue involved under appeal is allowability of expenses as claimed by the assessee during impugned AY. 2. From the letter of authority as placed on record by Ld. AR, it appears that the name of the assessee has been changed to L&T-MHPS Boilers Private Limited, which has not been brought to the notice of the bench by the respective representatives. Nevertheless, we proceed to adjudicate the issue on merits. 3.1 The assessee being resident corporate assessee stated to be engaged in the business of manufacturing of Super Critical Boilers reflected certain incomes aggregating to Rs. 68 Lacs in the credit side of profit and loss account and claimed an expenditure of Rs. 1467.24 Lacs against the same, the details of which has been extracted at Para No.4.1....
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....67 Miscellaneous. income Rs.20,000 Total Rs.68,00,592/- Expenses claimed Staff expenses Rs. 4,85,51,010 Sales, administration and other expenses Rs. 7,28,97,398 Preliminary expenses written off Rs. 74,00,000 Interest and Brokerage expenses Rs.1,16,775 Depreciation Rs.12,40,937 Amortisation of intangible assets Rs.1,65,18,637 Total Rs.14,67,24,757 According to AO appellant had offered the income under "income from other sources" and there was no income offered from any business activity. As appellant had failed to offer any income from business activity or started earning any income from business activities, then on this ground AO had disallowed the claim of business expenses of appellant of Rs. 14,67,24,457/-. Here this issue comes under the purview of Section 3 of the Income Tax Act which is provided as under: Section 3: For the purposes of this Act "Previous Year" means the financial year immediately preceding the assessment year: Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beg....
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....contract are Design and Engineering, Procurement & manufacture of components required, Erection of boiler at site and Commissioning of Boiler at site. Hence, mainly there are two activities, one is for bidding purpose and other is activity after receipt of the contract. Appellant had filed a data regarding participation in following tenders:- Name of the Customer Produce Date Bid/Request submission of Remark Andhra Pradesh Power Development Company Ltd. 2 x 800 MW Super Critical Boiler 04.03.2008 - Jaypee Nilgrie Super Thermal Power Project 2 x660MW Critical Boiler Super 15.01.2009 Contract awarded Videocon Group of company 2 x 800 MW Super Critical Boiler 21.08.2008 - Maharashtra State Power Company Limited, Koradi 3 x 660 MW Super Critical Boiler 26.06.2009 Contract awarded From the above data it is dear that the appellant had participated in bid for Andhra Pradesh Power Development Company. Ltd. on 4.3.2008 on which he submitted the bid, Jaypee Nilgrie Super Thermal Power Project bid was submitted on 15.1.2009, contract was also awarded to the appellant, regarding Videocon Group of company, appellant participated in the bid on 2....
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....y started the business but has also set up the business by bidding and obtaining contracts. Hence, in view of the Karnataka High Court decision in CIT & Anr Vs MFAR Construction Ltd.[48DTR(Kar) 360], the appellant is eligible for the business expenditure incurred during the assessment year as appellant's business setup as required u/s 3 of the I.T. Act. Hence AO's disallowance of business expenditure for Rs,14,67,24,757/- is deleted. This ground of appeal is allowed. The disallowance u/s 14A for Rs. 14.13 Lacs, as proposed by Ld. AO, was deleted by observing that the Share Capital of Rs. 50 Crores was much more than the investments of Rs. 23.02 Crores and therefore, no disallowance was called for in terms of judgment of Hon'ble Bombay High Court rendered in CIT Vs. Reliance Utilities Power Ltd. [313 ITR 340] & CIT Vs. HDFC Bank [366 ITR 505]. Aggrieved, the revenue is in further appeal before us. 5. The Ld. Departmental Representative [DR], Shri R.P.Meena, submitted that their mere participation in the bidding process would not entitle the assessee to claim deduction of expenditure since manufacturing facility was not ready for production during impugned AY. The same has....
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....iness has not taken place. The Hon'ble Bombay High Court in the landmark case of Western Indian Vegetables Products Ltd. v. CIT [1954] 26 ITR 151 aptly explained the distinction between concept of commencement and setting up of business and observed as under: "It seems to us, that the expression 'setting up' means, as is defined in the Oxford English Dictionary, to place on foot or to establish, and in contradistinction to 'commence'. The distinction is this that when a business is established and is ready to commence business then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. But there may be an interregnum, there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under section 10(2)" The ratio of the above decision has been followed by various courts of the country from time to time. The Hon'ble Delhi High Court in CIT v. L.G. Electronic (India) Ltd. [282 ITR 545] & CIT Vs Hughes Esco....