TaxTMI 
TaxTMI 
2022 (7) TMI 325
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....shed. 1.2. That having regard to facts & circumstances of the case, ld. Pr. Commissioner of Income-tax has erred both on facts and in law in holding that the learned Assessing officer has passed the Assessment Order without making proper enquiries and without verifying submissions made by the appellant, although the Learned Assessing officer had made proper enquiries before passing the Assessment order. 1.3. That having regard to facts & circumstances of the case, ld. Pr. Commissioner of Income-tax has erred both on facts and in law in setting aside Assessment Order by ignoring the submissions of the Assessee company that business of Assessee company is duly setup during the year under consideration and that for claiming business expenses under section 28 to 43D earning of revenue is not a pre condition." 3. In this case, the ld. Pr.CIT gave a notice to the assessee and informed that the order passed by the Assessing Officer (AO) in this case was prima facie erroneous and prejudicial to the interests of the revenue, since the AO while framing the assessment order on 22.03.2016 had allowed an amount of Rs.2,85,00,224/- [which included depreciation of Rs. 2,77,16....
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....it. It is also noted that no increase in the inventory or start of production/sale have been shown in its balance sheet and so the claim that the assessee had put the assets under consideration to use for business is not correct. Further, even during the course of proceedings u/s 263, the assessee failed to produce any documentary evidence relating to its claim in this regard. 5. Thereafter, Pr.CIT referred to section 263 and Explanation 2 thereto. He further observed that examination of the assessment records of the assessee reveals that the Assessing Officer passed the order under consideration without conducting any enquiry about commencement of business and without verifying the submissions made by the assessee. The Assessing Officer has also not considered the applicability of the judgment of the Hon'ble Apex court in Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT 227 ITR 172, in which it has been held that business had not been commenced, the interest income would be assessable under the head 'Income from other sources'. That the assessment was completed without looking into the complete facts, resulting in loss to the revenue. That in the case of Malaba....
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....submitted as under :- "1.1 This is not a conventional technology purchase for purposes of manufacturing/ engineering. 1.2 The impugned agreement is for purchase of software in regard to "items of intellectual property" and was received in the form of "open source code" on the cloud on a platform similar to GitLab in the cloud. It was to be used on the cloud with the help of "Cloud Computing Tools". 1.3 GitLab is a web-based Git repository that provides free open and private repositories, issue-following capabilities, and wikis. It is a complete DevOps platform that enables professionals to perform all the tasks in a project - from project planning and source code management to monitoring and security. 1.4 These items of intellectual property have been described on PB page 84 to 85 - Exhibit" A". 1.4.1 These are of applications and do not need any certificate of being ready. 1.4.2 These are always available on the cloud and are messaging applications. 1.4.3 These are basically reached through open source code as supplied by the transferor and Cloud Computing Tools. 1.4.4 This open source code is deployed on the ....
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....ommencement of commercial operations, not directly attributable to Fixed asset are charged to Profit and Loss in the year in which such expense is incurred." This means expense related to Fixed asset is to be capitalized in the year of commencement of operations. v) As per Accounting policy of research and development, "development cost are expensed unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the company has intention and ability to' complete and use/sell the software and cost can be measured reliably". This means development cost is a capital expense if above mentioned conditions are met. The Assessee has paid development fees in February and March 2012, therefore you are requested to show cause under what circumstances the development expenses have been expensed off in just one month. vi) Service revenue is recognized on completion of provision of service, No revenue has been recognized, viii) No go live certificate for launch of platform has been furnished by the Assessee for the current assessment year vii) As per data available in public domain the Assessee i....
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....me Tax Act states-- "Previous year" defined. 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 beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year" 2.1 There is a distinction between setting up of business and commencement of commercial operations. It is not so that the business is said to be set up only when commercial operations start. It is a trite law business is set up when one of the activities in the basket of various activities has commenced. It cannot be said that the business is set up only when all the activities of business have completed. It is an accepted proposition of law that there can be a gap between setting-up of business and starting of commercial operations. 3. You have referred to Accounting policy of pre-operative expenses whic....
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....ize the software on the mobile platform for feature phone requirement & product features that Mobinteco desired suitable for Indian market. India was and still is a predominant feature phone market compared to Western, Chinese or South East Asian markets like Japan & Korea. (ii) build games to be hosted on the platform. Games consisting of those from: their own inventory in China localized for India, new games fr0IT!. ground up. The business was set up in December 2011. All expenses incurred thereafter were revenue expenditure. 5.3 As far as the company's operations are concerned the development cost which were incurred and expensed in the Profit & Loss account did not indicate any benefit of enduring nature because it is an ongoing business operation exercise in information technology industry to provide software for mobile platform which can enable the business to be carried out efficiently and effectively. No expenditure of capital nature can be said to have been incurred. It may however be noted that technology license fee amounting to Rs.22,17,35,396/- has been capitalized as intangible asset- and which has been put to use in January 2012. 6. The company ....
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....n have access to a users' personal data that is stored on the device. Apps have seen significant commercial success. For example, Apple's app store offers around half a million apps, and these have been downloaded 15 billion times. Other app stores are growing rapidly and many private companies are considering their own sales environments. 8.2.2 This app explosion has been facilitated by a powerful intermediary: the mobile platform. "mobile platform" which is based on any cloud-based storage or processing services associated with the operating system and the distribution mechanisms for purchasing and installing apps. These mobile platforms are important and powerful players in the new apps ecosystem. They provide a simple software stack with which applications can interact. 8.3 The company is in the business of preparing software stack to be placed on the mobile platforms. It facilitates the consumers to access this consumer apps and help in generally making the interface between the mobile operating devices and Smartphone to interface with the use of apps. Therefore the company set up business and start developing software for the mobile platforms. 9....
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....king inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; and (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. We find that none of the above clauses are applicable in this case. The case made out by the Pr.CIT that order is passed without making any enquiry and verification has been found to be totally unsustainable and incorrect by us. The order is also not in accordance with the direction or instruction of the Board. It is also not the case that order is rendered without considering any decision of Hon'ble jurisdictional High Court on the point involved. The decision of Hon'ble Supreme Court referred by the Pr.CIT in Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT 227 ITR 172 was in a different context. In the said case, it was held that when business has not been commenced the interest income would be assessab....