9911796707
TMI Blog2022 (3) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the A.O. was justified in disallowing the claim of loss. 2. The assessee has also filed an additional ground stating that the return of income filed by the assessee was selected for limited scrutiny for verifying "Minimum Alternate Tax (MAT) liability mismatch", but the AO has proceeded to examine the issue of "date of setting up of business", which was not within the scope of limited scrutiny and hence, the impugned assessment order is bad in law. At the time of hearing, we enquired Ld. A.R. as to whether the assessee has inspected the assessment record in order to find out the availability of approval, if any, obtained by A.O. from Principal CIT for converting the limited scrutiny into complete scrutiny? The Ld. A.R. fairly admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is engaged in the business of providing information technology application management support and BPO services to M/s. E Land Group companies. During the year under consideration, the assessee incurred the expenditure to the tune of Rs. 18,78,529/-. The assessee claimed that it has already set up the business during the year under consideration and accordingly claimed the above said loss under the head "Income from business" and also claimed that it should be carried forward to next year. 5. The A.O. noticed that the assessee did not commence business during the year under consideration. He noticed that the assessee has entered into a Service agreement with a group company named M/s. K. Swiss Inc. for providing service with effective fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al revenue of around $500,000 USD. We will be making significant investments in attracting right talent nurturing them to meet the technology skills and expertise needed to lead the accelerated growth planned for next 5 years." Accordingly, the Ld. CIT(A) took the view that the business of the assessee is commencing from April 1st, 2015 only. Prior to that date, the assessee has recruited only 2 employees only, even though it is required select 25 team members. Accordingly, the Ld. CIT(A) took the view that the assessee has not created the required technological capability to start the support services during the year under consideration. Accordingly, he took the view that the assessee was not fully ready to start the services and hence it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. He submitted that the expenses incurred after setting up of business is allowable as deduction, even though the actual commencement may take place on a subsequent date. The Ld. A.R. placed his reliance on various case laws in support of his contentions. He further submitted that the decision rendered by Hon'ble Delhi High Court in the case of Omniglobe Information Tech India P Ltd (supra) is squarely applicable to the facts of the present case and hence the Ld. CIT(A) was not justified in observing that the said decision is distinguishable. 8. The Ld. D.R., on the contrary, submitted that there is no dispute that the expenses incurred after setting up of business is allowable as deduction. He submitted that the very fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deduction under sec. 10(2)." 10. Hence the answer to the question as to whether the assessee has set up its business or not would depend upon the facts prevailing in each of the case. We notice that, in the instant case, the Ld. A.R. has shown to us that the assessee has taken a premises on rent, employed few employees, purchased certain assets. In the case of Omniglobe Information Tech India P Ltd (supra), the Hon'ble Delhi High Court was considering the question of "setting up" of business in the context of a BPO Service industry. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cruitment of employees, depending upon the nature and type of work it is getting, which is essential to determine the skill set required for executing the said work. 12. We notice that the Ld. CIT(A) has referred to the service agreement entered in the succeeding year by the assessee, wherein the management has visualized requirement of 25 technical employees. Since the assessee has not recruited that much number of employees, the Ld. CIT(A) has taken the view that the assessee is still in the process of setting up of business. In our view, the directors have stated in the Directors' report that the nature of work required to be performed under the agreement entered with its AE would require 25 employees. In the instant case, in our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
