9911796707
TMI Blog2012 (12) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the activities of the show business. iii) That the appellant craves leave to add, alter, amend, substitute, withdraw and / or vary any grounds of appeal at or before the time of hearing. 3. The grounds raised in the Revenue's appeal read as under:- i) On the facts and circumstances of the case and in law, the order of the Ld. Commissioner of Income Tax (A) is wrong, perverse, illegal and against the provisions of law which is liable to be set aside. ii) On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (A) has erred in deleting the addition on account of pre-operative expenses. iii) On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (A) has erred in holding the date of set up of business of the assessee company on 1.1.2003 as against the same determined by the Assessing Officer on 7.3.2003. iv) The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 4. In this case Assessing Officer referred to the note of the assessee regarding nature of business activity of the company as under:- "The assessee company was incorporated on 08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the expenditure were wholly and exclusively for the purpose of business and the same was fully allowable u/s. 37 of the I.T. Act. From this Assessing Officer inferred that assessee has admitted that the lopsided ratio is related basically to launch the business. Assessing Officer further observed that assessee has admitted that such heavy expenditure was incurred to basically kick-start the business. Meaning thereby, benefit of enduring nature is embedded in the cause. Assessing Officer further took the commencement of business on 07.3.2003 and proceeded to make various disallowances on proportionate basis. 4.4 As regards professional and consultancy expenses, Assessing Officer noted that the said expenditure comprised mainly of consultancy fees which was at Rs. 78,49,303/-. The assessee also filed copies of agreements with some of the Consultants namely Ms. Kajal Aijaz (consultancy fees Rs. 26,00,000/-), Sh. Anupam Joglekar (consultancy fees Rs. 11,25,000/-) and Sh. Rajiv Sekhri (consultancy fees Rs. 10,79,000/-). As regards the payment of Rs. 26,00,000/- to Ms. Kajal Aijaz, Assessing Officer treated the same as capital in nature and disallowed while computing the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment at a total loss of Rs. 2,04,50,778/-. 5. Before the Ld. Commissioner of Income Tax (A) assessee submitted that once the business of a person is set up, all the expenditure incurred thereafter, which are otherwise of revenue nature should be allowed to an assessee. Assessee further submitted that its business was set from 1.4.2002, that is when it appointed the consultants for the purpose of business, because this was the first step in setting up the business. It was further submitted that 7.3.2003 was the actual date when public was allowed to watch a movie in the theatre. It was submitted by the assessee that 7.3.2003 can be the date of the commencement of the business, but not the date for setting up of the business which according to the assessee was set up from 1.4.2002 when the consultants etc. were appointed. It was further submitted that Assessing Officer was having an erroneous understanding and he proceeded to judge the whole issue from the angle of "commencement of the business" which is not the mandate of the law and he should have decided the issue based on the date of "setup of the business". In this regard, assessee placed reliance upon the following case l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the following case laws:- i) C.I.T. vs. Herbalife International Ind. (297 ITR 303 (Delhi) ii) C.I.T. vs. Club Resorts Pvt. Ltd. (287 ITR 552) (Mad.) iii) C.I.T. vs. E. Funds International India (162 Taxmann 1) (Delhi) iv) Whirlpool of India Ltd. vs. JCIT (19 SOT 593) (Delhi) 5.3 Considering the above, Ld. Commissioner of Income Tax (A) held as under:- "I have carefully examined the order of the AO, and the written and oral arguments of the A.R. of the appellant. From the ratio of the decision relied upon by the appellant it is now an established legal proposition that revenue expenses incurred after the setting up of business and prior to its commencement are an allowable expense. It is observed from the assessment order the AO has proceeded on the concept of commencement of the business and accordingly has adopted 07.03.03 as the date of commencement of the business and there by has impliedly has taken this very date as set up of the business. The approach of the AO is thus not in accordance with the decisions relied upon the appellant. At the same time, the arguments of the A.R. that 01.04.02 should be taken as the date of set up of the business when some consultants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on 7.3.2003. 8. In the cross appeal assessee has submitted that the date of set up of the business was in the beginning of the year as the assessee appointed consultants w.e.f. 1.4.2002 which should be taken as date on which the business was set up. 9. We find that in the assessment order the Assessing Officer has proceeded on the concept of commencement of the business and accordingly has adopted 7.3.2003 as the date of commencement of the business and thereby has impliedly taken this very date as set up of the business. We agree with the Ld. Commissioner of Income Tax (A) that this approach of the Assessing Officer is not in accordance with the decision relied upon by the assessee. At the same time, the assessee's plea that 1.4.2002 should be taken as the date of set up of the business when some consultants were appointed by the assessee is also not correct approach, as mere appointment of consultants, in itself does not mean anything in assessee's line of business. In this regard, Ld. Commissioner of Income Tax (A) observed that there are host of other activities which are required to be undertaken / performed before the business can be stated to have actually been set up i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
