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TMI Blog2010 (5) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... o infirmity in the order of the CIT(Appeals) in allowing deduction of the expenditure in this case, the Departmental appeal stands dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ult in entering into what is called heads of agreement which would spell out the terms and conditions for implementation agreed to between the parties. It was also explained that the assessee carried out marketing activities by entering into memorandum of understanding with several authorities for the purpose of business. It was also explained that the assessee carried out commercial activities which includes entering into supply agreement with overseas LNG suppliers for supply of LNG. The explanation of the assessee is reproduced by the learned Commissioner of Income-tax (Appeals) at page 2 of the impugned order. The learned Commissioner of Income-tax (Appeals) considering the explanation of the assessee and the materials on record held that the expenses have to be allowed as business expenses under the head revenue and not to be capitalised. The Assessing Officer was accordingly directed and the appeal of the assessee was allowed. The findings of the learned Commissioner of Income-tax (Appeals) in paragraph 3.3 are reproduced as under : "3.3 From the written submission it is clear that as the appellant's area of operations was relating to marketing, expenses were mainly in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money was that it got the lease of a new building at a low rent. From the business point of view, therefore, the assessee got the benefit of reduced rent. The High Court had, therefore, rightly considered this as obtaining a business advantage. The expenditure was, therefore, to be treated as revenue expenditure". The learned Departmental representative relied upon the order of the Income-tax Appellate Tribunal, Delhi Bench in the case of Akzo Nobel Car Refinishes India (P.) Ltd. v. Dy. CIT [2008] 25 SOT 226 in which it was held "merely on basis of incorporation of a company, it cannot be concluded that business has been set up because carrying on business would require activities systematically and continuously". 5. On the other hand, learned counsel for the assessee reiterated the submissions made before the authorities below and submitted that the facts of the case have not been properly appreciated by the Assessing Officer. The assessee has not set up any business because the assessee is a trading concern dealing in sale and purchase of gases. In the trading activities set up is not necessary. He has submitted that the Assessing Officer was explained that the objective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed later on. Therefore the business of the assessee-company would also be deemed to be commenced as soon as the assessee-company started booking for the sale of the cars. However, we find that before the Assessing Officer the assessee never claimed that it has started book of the cars during the year under consideration. The fact whether the assessee started booking of the cars during the accounting year relevant to the assessment year under consideration and if it started, from which date, needs verification at the end of the Assessing Officer. We, therefore, set aside the order of the authorities below on this point and restore the matter back to the file of the Assessing Officer. We direct him to readjudicate the matter as per the above decision of the hon'ble jurisdictional High Court and allow deduction for the expenditure from the date when the business is commenced by the assessee, i.e., from the date when book of car is started." 6. Learned counsel for the assessee also referred to paper books 6 to 38 which are various memorandum of understandings and agreements for supply of the gases to the buyers entered into by the assessee as a seller. He has, therefore, submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f General Motors India Ltd. (supra) considering the decision of jurisdictional High Court in the case of Prem Conductors (P.) Ltd. (supra) held that the business of the assessee has commenced as soon as the assessee started securing orders for the goods to be produced later on. The Assessing Officer was accordingly directed to allow deduction for the expenditure from the date when booking of cars has started. Learned counsel for the assessee on the basis of the findings given by the learned Commissioner of Income-tax (Appeals) and the details filed in the paper book has been able to satisfy that the assessee has commenced its business activities during the year under consideration. The learned Commissioner of Income-tax (Appeals) was, therefore, justified in holding that even though no sale took place during the year the commencement of initial steps of the assessee's activities is not in doubt. The learned Commissioner of Income-tax (Appeals) was also justified in holding that the issue of gas distribution being a regulated activity, the assessee's claim is to be considered taking the objectives in view of the scope of the business. The learned Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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