TaxTMI 
TaxTMI 
2021 (4) TMI 277
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. In order to adjudicate upon the questions of law framed above, it would be necessary to sketch out the broad contours of the case. 4.1. These questions of law concern the assessment year [in short 'AY'] 2010-2011. The assessee had filed its return on 27.09.2010, wherein it had declared a loss of Rs. 7,83,71,011/-. The return filed by the assessee was processed under Section 143(1) of the Income Tax Act, 1961 (in short 'the Act'). Unfortunately, for the assessee, its case was picked up for scrutiny and accordingly, notice under Section 143(2) of the Act was issued. 4.2. Consequent thereto, an assessment order was framed on 19.03.2014 under Section 143(3) of the Act. The said assessment order determined a loss of Rs. 3,66,79,080/-. 4.3. Pertinently, while framing the assessment under Section 143(3) of the Act, the assessing officer made additions concerning the following: (i) Pre-operative expenses amounting to Rs. 3,50,51,978/-. (ii) Advertising expenses amounting to Rs. 60,39,950/-. 4.4. The assessee, being aggrieved by the order dated 19.03.2014 passed under Section 143(3) of the Act, preferred an appeal with the Commissioner of Income Tax (Appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appears on behalf of the assessee, submitted that there is a difference between the setting-up of business and commencement of business; as long as the assessee is ready to carry on business and there are facts and circumstances obtaining in a case, which point in this direction, then, it can be safely concluded that the business has been set-up and, therefore, any expenses incurred would have to be allowed as a deduction. 6.1 In support of this plea, reliance was placed on the remand report filed by the AO before the CIT(A). Based on the contents of this report, it was sought to be demonstrated that several steps have been taken by the assessee to set-up the business in the previous AYs, which included placing orders in the domestic market. The emphasis was laid on the fact that there was no prohibition in the assessee carrying on its trading activity in the domestic market and therefore, the argument advanced on behalf of the revenue that the goods in which the assessee dealt in were also obtained from its holding company albeit on or after 29.10.2009 had no relevance in the given circumstances. 6.2 In support of this plea, reliance was placed on the following judgments: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Middle of the year Date of first local purchase 27 Nov., 08 Sales 4 Dec., 08 & 26 March 09 Date of Customer Orders received from Dawar International electronics Pvt. Ltd. 2 Jan., 09 & 22 Jan., 09 Date of various purchase orders raised on miele & Cie KG 18 March 2009 18 May, 09 & 14 July 09 Date of agreement with R&P Management Communications Pvt. Ltd. 1 Aug., 09 Date of invoice raised by Miele & Cie KG pursuant to purchase order dated 18 March 2009 5 Aug., 09 Date of import of products for demonstration purposes from Miele & Cie Kg. 19 Aug., 09 Date of receipt of consignment from Miele & Cie KG against invoice dated 5 August 2009 22 Sept., 09 Distribution of product catalogues/information brochures for soliciting customer orders Throughout the year Date of launch of Experience Centre for dissemination and advertisement, publicity and marketing of products to potential customers (wrongly treated as commencement of business by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of business. The fact that the assessee had executed lease deeds for its premises, engaged senior employees, carried out local purchase, and sales could not have been possible had it not set-up its business. 7.7 Therefore, on facts, in our view, the judgments cited by Mr. Chandra are distinguishable. The fact that the assessee had set-up an experience centre in the FY 2009-2010, which was another mode or platform for selling its goods, cannot have us hold that the assessee had not set-up its business in the previous AY. Therefore, the stated absence of the assessee on an online platform, in our view, is non-sequitur in the fact situation obtaining in the instant case. 8. Insofar as the second issue is concerned, which relates to the advertising expenditure, the submissions made on behalf of the revenue by Mr. Chandra, lacked conviction. Although, Mr. Chandra, did draw our attention to the AO's view qua the issue, which was, that the advertising expenditure had been incurred to build a brand, i.e., goodwill and therefore, should not be allowed as a deduction, it does not impress us. There is nothing on record to show that the expenditure incurred by the assessee, towards ....