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TMI Blog2014 (5) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the genuineness of expenses of Rs.53,11,973/- claimed in respect of the concerned unit. (ii) That in the facts and circumstances of the case, the business of the concerned unit can only be considered to have commenced on 31.03.20007 and the expenses of Rs.53,11,973/- claimed to have been incurred before that date are in the nature of preoperative expenses which cannot be claimed as revenue expenditure but have to be capitalized." 2. The assessee has come in C.O. in support of the impugned order. The relevant facts of the case are that the assessee declared an income of Rs.6,56,060/- which was selected for scrutiny after issuance of notice u/s 143(2). The nature of the assessee's business as noted by the AO in para-2 is that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. The AR also tried to explain that the construction and establishment work was continuing in the Unit-II though the first sale on the same could finally take place on 31st March, 2007, therefore, it was claimed that the above mentioned expenses shown to have been related with Unit-II were genuine and the same should be allowed to be claimed. But this contention of the AR cannot be accepted because the expenses related to pre operative period can only be capitalized and can not be claimed against the profit. From the details furnished by the assessee it has been ascertained that the assessee could make sale from Unit-II only on 31.03.2007 of two bills of Rs.36,00,000/- and Rs.5,16,000/- in which the sale has been made to Tek Travel Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are development contracts with two parties viz. M/S Tek Travel Pvt. Ltd. & M/s Usource Information Technologies Pvt. Ltd. and raised sale bills on 31/3/2007 for Rs.36,00,000/- and 5,16,000/- (totaling to Rs.41,16,000/-) respectively. The assessee has been incurring expenses on these development projects from 1/4/2006. The AO treated the entire expenses of Rs.53,11,973/- as pre operative expenses on the ground that the Unit-II has commenced its business activity only on 31/3/2007. 12.3 The main contention of the AR is that the business was commenced in Unit-II from April, 2006 and started working on the project in hand and the entire epxenses are allowable since the business was commenced and sales were made. 13. The AR relied on the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence from April 2006 as such the expenses claimed had wrongly been considered to be pre-operative expenses. It was his submission that infact the assessee had entered into software development contacts with the Tek Travel Pvt. Ltd. and Unsource Information Technologies Pvt. Ltd. and raised bills as per the agreement only in the month of March 2007 however expenses had been incurred on these development projects right from 1/4/2006. Reliance was placed on the submission advanced before the authorities and heavy reliance was placed upon the judgement of the Jurisdictional High Court in the case of CIT vs ESPN Software India Pvt. Ltd. (2009) 184 Taxmann 452(Del.) and CIT vs Electron India (2001) 118 Taxmann 190 (Mad.). 5.1. In reply Ld. Sr. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to bring the business to the state where it can produce the goods a business can be said to have commenced as soon as he undertakes first of such activities. Similarly a business for a trade can be said to have commenced with purchase of stock in trade and place for storage and selling the same. In the facts of the case relied upon before the CIT(A) the fact of acquiring a license on a specific date for distribution by company via satellite has been held to be the date on which the business had commenced. The findings on this specific fact was available on record. In the facts of the present case the assessee who is stated to be engaged in the business of software development in the field of information technology, there is no such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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