TaxTMI 
TaxTMI 
2019 (1) TMI 1934
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....m other sources." The assessee filed cross-objections on the following grounds:- "1. That on the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) - 18 ['Ld. CIT (Appeals)'] erred in confirming the disallowance of legal and professional expense amounting to Rs. 10,816,167/- on the contention that such expenditure was directly attributable to the project related work and hence needs to be capitalised. 2. That on the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming disallowance of community welfare expense amounting to Rs. 1,232,994/ - on the contention that such expenditure was directly attributable to the project related work and hence needs to be capitalised. 3. That on the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming disallowance of salary expense amounting to Rs. 10,825,404/ - on the contention that such expenditure was directly attributable to the project related work and hence needs to be capitalised. 4. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the hearing of t....
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.... the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the hearing of this appeal." 2. There is a delay of 4 days in filing the appeal for Assessment Year 2013-14, by the revenue. After perusing the petition for condonation, we are convinced that the revenue was prevented by sufficient cause from filing this appeal on time. Hence the delay is condoned and appeal admitted. 3. The assessee is a company with an object of carrying on business of providing mining services for prospecting, exploring, operating and working on mines and quarries. The common issue that arises in both the revenue appeals is whether the assessee has set up its business or not. The Assessing Officer was of the view that the assessee has not commenced its business operations. He observed that the assessee has no turnover and has also not held any inventories during the year. Hence he disallowed the expenditure incurred on the ground that it partakes the character of capital expenditure as these were incurred prior to setting up of business. Consequentially, he did not allow intra-head set off of losses. On appeal, the ld. First Appellate Authority....
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....Rs. 1,08,25,404/- out of salary expenses, are held to the capital in nature related to the setting up of the project. Under the circumstances, A.O. is directed to allow other expenses and treat only Rs. 2,28,74,565/- as capital in nature, related to NTPC project. 3.1. We find no infirmity in this order. The submissions of the ld. D/R, that the assessee could have claimed deduction u/s 35D of the Act, is not correct. The assessee is engaged in the business of providing mining services and assisting the mine owners to excavate material. Hence, it is in a service industry and is not mining minerals from its own mines for subsequent sales but only provides service in this regard. It had taken an office on rent at Kolkata, admeasuring 12420 Sq.ft. and further a project office at Hazirabad for effective executing of the project operations. It employs 30 persons for running its business of rendering services and the employees under its pay rolls included geologists, mining engineers and also general managers and project directors etc. The Hon'ble Delhi High Court in the case of CIT v. Samsung India Electronics Ltd. 2013 37 taxmann.com 239 (Del. HC.), approved the following finds of ....
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....before recording the said findings examined the case law on the subject and has referred to the contentions of the parties on the said issue which have been recorded para 3 onwards. The assessee company was set up to carry on its business of manufacturing and trading in consumer durables. The date of commencement of business was certified as 9th August, 1995, though the date of incorporation was 3rd August, 1995. Tribunal has referred to various facts as to what was required to be done before the first actual sale invoice to a customer was issued. It included recruitment of employees, their training and establishment of showrooms by taking places on rent etc. Advertisements had also been issued and in fact M/s Reasonable Computer Solutions Private Ltd., the joint venture partner on 25th July, 1995 had appointed M/s Mudra Diversified Limited as their Public Relations Consultant for the period 15th August, 1995 onwards. 6A. In Western India Vegetables Products Ltd (supra) Bombay High Court has examined the concept and noticed the difference between "commencement" and "setting up" of a business and, inter alia, observed as under:- "The important question that has got....
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....ces when the first of such activities is taken. 8. In view of the facts found by the tribunal, we do not think that any substantial question of law arises for consideration. Pragmatic and practical view has to be taken. We also record that the Assessing Officer and the first appellate authority did not specifically go into the factual matrix relating to and to ascertain the date of "setting up" of business, though order of the first appellate authority is more detailed and elaborate. Thus, there is nothing to controvert the facts as found and recorded in the impugned order. In view of the factual finding of the Tribunal, Revenue cannot succeed." 4. In the case on hand, the assessee has already set up the basic infrastructure required, in the form of an office having employees with necessary skills. It also obtained a contract from NTPC. On these facts, we uphold the finding of the ld. CIT(A) that the assessee has setup its business. In the result, this issue is adjudicated in favour of the assessee. 5. Ground No. 2, is on the issue of intra head set off. 5.1. We find that this issue has been rightly decided by the ld. CIT(A). He held as follows:- "Assesse....