TaxTMI 
TaxTMI 
2018 (9) TMI 621
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....en prescribed by the statue and held as a reasonable method by 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 again....
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....3,497 Profit from Sale of investment Rs. 2,42,178 Profit from sale of asset Rs.5,167 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....
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....ubmission of technical and commercial bid, evaluation by customers of bids submitted by the EPC contractors, awarding of contract and activities involved after receipt of the 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....
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....ontract pertained to this assessment year. When we examine the total activities of business of the appellant, there are 2 major activities, submission of bid and manufacture of the item after the contract was awarded to him. Already appellant had carried the activity of bidding and getting contracts. This itself shows appellant has not only 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....
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....time, in number of decisions have opined that setting-up of the business is the time when an entity is in a position to render services to its customers. If the entire infrastructure is put in place to commence business then it can safely be concluded that the business has been set-up notwithstanding the fact that the actual commencement of the business 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 ....