2009 (9) TMI 928

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..... 2.53 crores. 2. We may note at the outset that this expenditure included salary paid to the employees in the sum of Rs. 1.72 crores, travelling cost of Rs. 30.61 lakhs and administrative and other operating expenses to the tune of Rs. 39.65 lakhs. 3. Perusal of the assessment order passed by the Assessing Officer would reveal that the main consideration by which the Assessing Officer was swayed was that against the aforesaid huge expenses incurred by the assessee, he hardly generated any revenue. On this basis, he opined that the said expenses could not be justified and allowable as revenue expenditure. It is clear from the aforesaid order of the Assessing Officer that the Assessing Officer had not doubted that the expenditure was, in fa .....

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..... t such orders, being incidental to the business activities, would be regarded as for the purpose of business and not for setting up of the business. The CIT(A) also recorded the reasons, on the basis of which it arrived at the finding that the business had, in fact, started. As to when the activity is deemed to be undertaken as part of business activity and the expenses incurred are to be allowed as business expenses, the CIT(A) referred to and relied upon the judgment of the Gujarat High Court in the case of CIT v. Saurashtra Cement & Chemical Industries Ltd. [1973] 91 ITR 170 and that of the Calcutta High Court in Tetron Commercial Ltd. v. CIT [2003] 261 ITR 422. Referring to Saurashtra Cement & Chemical Industries Ltd.'s case (supra .....

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..... t even the activities at a preparatory stage is also admissible." (p. 789) 6. Taking note of the aforesaid facts and also referring to the judgment of the Supreme Court in CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 and of this Court in CIT v. L.G. Electronic (India) Ltd. [2006] 282 ITR 545 , the Tribunal made the following pertinent observations while confirming the finding of fact that the business activities of the assessee had, in fact, commenced :- "6. We have duly considered the rival contentions and gone through the record carefully. From the perusal of the asst. order it reveals that Ld. Assessing Officer has disallowed the expenses claimed by the assessee for the reason that it has not shown resultant income in the accountin .....

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