TaxTMI 
TaxTMI 
2023 (6) TMI 732
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....come was filed at loss of Rs. 1,18,79,282/-. The case was selected for scrutiny under CASS and Ld. AO observed that as company has made additions in fixed assets for purchase of vehicle, computer software, furniture and other office equipment but not made in any investment for purchase of plant and machinery and in the profit and loss account. The assessee has shown interest income. Accordingly, Ld. AO concluded that company has not begin its business operation and it is still incorporation process. Accordingly, made disallowances of group commission, business promotion vehicle running expenses and R & D expenses to the extent of Rs. 12,25,073/- was done and the loss was reduced to 10,654,210/-. 3. In appeal before Ld. CIT(A) while upholding the observations and findings of ld. AO that assessee company has not commenced business during the year under consideration and addition was enhanced with following relevant findings in para no. 9 to 17 of the CIT order reproduced as under : "9. The Ld. AO having determined that the appellant did not commence its business during the year could not have allowed the carry forward of unabsorbed business losses. An assessee can incur business l....
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....e appellant has gross receipts of Rs. 17,04,184/- being the interest earned on deposits and the exchange rate fluctuations income, the same is to be taxed in terms of the law laid down by Hon'ble Apex Court in the case of "Tuticorin Alkali Chemicals & Fertilizers Pvt. Ltd. Vs. Commissioner of Income Tax, (1997) 141 CTR 387 SC subject to the provisions of Section 57(iii) of I.T. Act, 1961 and the losses claimed as business loss was to be disallowed not admissible to be carried forward. As the appellant has not done the same in the return of income and as the Ld. AO also failed to correctly apply the provision of law to the case of the appellant, the notice u/s 251(2) of I.T. Act, 1961 read with the provisions of Section 251 (1 )(a) of I.T. Act, 1961 were issued to the appellant asking it to show cause vide a receipt of Rs. 17,04,184/- should not be treated as income from other sources and subjected to tax and the loss claimed as business loss should not be disallowed to be carried forward as business loss. The Ld. Counsel for the appellant accepted the said notices in the course of the hearing itself. 14. The Ld. Counsel for the appellant contested the same on merits holding that ....
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....ion on account of vehicle running expenses of Rs. 3,33,976/- (d). Addition on account of Research and development Expenses of Rs. 1,24,855/- Total Rs. 12,25,073/- 5. On the facts and in the circumstances of the case the Ld. Gif (A) erred in giving incorrect finding of fact that the vendors from whom the assessee purchased goods were "business partner" of the assessee company. 6. On the facts and circumstances of the case Ld. CIT(A) has erred in not exercising power u/s 131 or u/s 133(6) of the Act on the ground that appellant should have produced the entries of purchases recorded in the books of A/c of the third parties, despite the fact that the purchase orders placed on the vendors and confirmations were duly submitted to him. 7. CIT(A) had erred in treating Foreign Exchange Gain as 'Gross Receipt' of Appellant Company even without giving any notice to the assessee. 8. On the facts and circumstances of the case Ld. CIT (A) erred in initiating penalty proceeding under section 271(l)(c) of the Act. 9. The appellant craves leave to amend, alter or add fresh grounds of appeal during the course of proceedings before your good self. 5. Heard and perused the....
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.... the question cannot be sufficiently answered. 8.1 It appears that Ld. Tax Authorities below have fallen in error in construing the nature of business of the assessee company. In this context, the license agreement available at page no. 129 to 142 of the paper book shows that the very purpose of establishing the subsidiary in the form of assessee was to procure and having manufactured and assembled within India and neighboring countries and selling world wide certain accessories developed by HAC for installation on such Honda products. Thus, the nature of business activity of the assessee did not require immediate installation of any plant and machinery. 9. At the same time, the evidence on record makes it apparent that assessee initiated the process of negotiations for the procurement of the parts from various vendors. The confirmation of business activity given by V Access India Pvt. Ltd. available at page no. 262 to 266 being part of the submissions made before Ld. CIT(A), establish that the assessee company had placed the purchase order on 21.03.2013 for supply of certain car covers and car floor mats which were appearing under the head WIP as part of closing stock in the boo....