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TMI Blog2021 (6) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... rangements to start the business from the date of introducing the capital on 15.9.2010 and took the premises for operation of its business from 10.10.2010. Key management personnel were also appointed on 2.11.2010. Import/Export license was obtained on 23.11.201. First Purchase Order was placed on YEC Japan in order to purchase goods on 6.10.2010 0 and VAT registration was obtained on 24.12.2010. All these things suggest that the assessee was ready to start its business and in our opinion, it is not necessary or mandatory to obtain registration so as to say that the company has set up its business. Based on the reason of not obtaining VAT certificate, it will not lead to conclusion that business was not set up, though purchase of goods would amount to commencement of business under the said Act, there are various activities to be commenced to carry the activities by the assessee. All the activities are integral part of business of assessee and they are continued activities. When the first steps are taken by the assessee, business is said to be set up, based on which commencement of purchase and sales activities will start. In view of these facts, we are of the opinion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without giving the basis of computation of TP adjustment in the final assessment order. Grounds Relating to Transfer Pricing 5. The lower authorities have erred in: a. Rejecting Resale Price Method as the most appropriate method on unjustified grounds; b. Rejecting comparables selected and TP documentation of the Appellant on unjustified grounds; c. Selecting Transactional Net Margin Method as the most appropriate method which is inappropriate in the facts and circumstances of the case; 6. Assuming without admitting that Transaction Net Margin Method is to be selected as the most appropriate method, the lower authorities have erred in: a. adopting inappropriate filters in the process of selecting comparables; b. Adopting a profit level indicator of Operating profit/ Operating cost without appreciating that the operating cost consists purchases from AE; c. Considering foreign exchange gain or loss as non-operating in nature; d. Adopting companies as comparables even though they are not comparable in respect of functions performed, risks assumed, assets utilized, size, turnover, unusual business circumstances, high margins, etc., e. Rejecting K Dh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee claimed ₹ 5,71,804 as preliminary expenditure incurred towards ROC fees for authorised share capital. This was considered as capital expenditure by the AO in view of the judgment of the Supreme Court in the case of Punjab State Industrial Development Corporation, 225 ITR 792 (SC) and Brooke Bond India, 225 ITR 798 (SC) . According to the AO, this expenditure is not in the nature covered u/s. 35D of the Act. Against this, the assessee is in appeal before us. 5. The ld. AR relied on the judgment of Hon ble jurisdictional High Court in the case of CIT v. Buhler India Ltd. , 20 taxamann.com 191 (Karnataka) wherein it was held that deduction u/s. 35 is allowable in respect of fees paid to ROC and expenses on public subscription shares. It was submitted by the ld. DR that the judgment relied on by the assessee s counsel relates to AY 1969 where at that time there was no section 35D in the statute book which was introduced w.e.f. 1.4.1971 by Taxation Laws (Amendment) Act, 1970. Being so, once section 35D is introduced, fee paid to ROC before its commencement for registering company under the provisions of the Companies Act, 1956 is eligible for deduction u/s. 35D of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business consists of continuous course of activities, for commencement of business all the activities which go to make up the business need not be started simultaneously. As soon as an activity which is the essential activity in the course of carrying on the business is started, the business must be said to have commenced. Further, he relied on the judgment of the Hon ble Delhi High Court in the case of Carefour WC C India (P.) Ltd., 53 taxmann.com 289 (Del) wherein it was held as follows:- The present assessee was engaged and incorporated for carrying on trading activities in different commodities. The word 'trade' even though not defined in the Act is used to denote operations of a commercial character by which a trader provides to customer for reward, some kind of goods or services. In other words, when the trader starts providing such goods and services, the business is said to have commenced but the same may not hold good for set up of a business, which is a stage before the commencement. To set up a business, the following activities become relevant: - 'Preparation of a business plan; establishment of a business premises; research into the likely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and in our opinion, it is not necessary or mandatory to obtain registration so as to say that the company has set up its business. Based on the reason of not obtaining VAT certificate, it will not lead to conclusion that business was not set up, though purchase of goods would amount to commencement of business under the said Act, there are various activities to be commenced to carry the activities by the assessee. All the activities are integral part of business of assessee and they are continued activities. When the first steps are taken by the assessee, business is said to be set up, based on which commencement of purchase and sales activities will start. In view of these facts, we are of the opinion that the business is said to be commenced from the date of placing purchase order i.e., on 6.10.2010 and all expenditure incurred from this date i.e., 6.10.2010 to be considered as business expenditure and to be allowed accordingly. This ground of assessee is partly allowed. 12. Ground No.11 reads as under:- 11. The learned AO has erred in not granting the benefit under section 35D on legal expenditure incurred for incorporation which was inadvertently not claimed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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