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TMI Blog2023 (3) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... gement Project at Sector 65 Gurgaon. 1.1 The Learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in by not considering the fact that the business of the appellant company was setup in the Financial Year 2015-16 when the appellant had entered into a collaboration agreement to develop land in Faridabad and had also entered into agreement for acting as "Development Manager" of Real Estate Management Project at Sector 65 Gurgaon." 3. In this case, AO noted that assessee company was incorporated on 12.01.2015 for the purpose of acquiring, constructing, developing and leasing/sale of real estate properties in India or abroad. AO noted that the year under consideration, is almost the first year of business of the assessee company; during the year under consideration, the assessee has not received any revenue from the business activity of the assessee company but claimed expenditure related to business i.e. Employee Benefits Expenses of Rs.2,06,95,136/-, Finance Cost of Rs.46,713/-, depreciation of Rs.33,43,023/- & Other Expense of Rs.2,77,93,814/- and claiming, business loss of Rs.4,06,96,408/-; that here is no direct nexus between income and expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is in appeal before us. We have heard both the parties and perused the records. 8. Ld. Counsel of the assessee submitted that during the year under consideration, assessee company had two main project activities and the details of which were duly given to the AO. However, AO ignored the same. He further submitted that in subsequent year, assessee did generate sufficient income. Hence, he submitted that expenditure is allowable as business was set up. He submitted that there is a distinction of setting up a business or commencement of commercial operations and it cannot be said that the business is said to be set up only when commercial operations is started. For this, he placed reliance on several case laws. He inter alia referred to following judicial precedents :- " Jurisdictional High Court in the case of Maruti Insurance broking Private Limited 127 taxmann.com 685 (Del) (PB 180- 185) Held, yes - Whether business does not conform to 'cold start' doctrine and in most cases, there is gap between time a person or entity is ready to do business and when business is conducted and during this period, expenses are incurred towards keeping business primed up and these e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of business, hence no disallowance should have been done. He submitted that assessee had incurred various expenses relating to business operations i.e. the activities related to the two projects viz. TDR Project and REAM Project. He submitted that assessee company had appointed staff, incurred legal expenses, marketing expenses, legal & professional expenses etc. all related to the setting up and commencement of the projects. 9. Per contra, ld. DR of the Revenue relied upon the orders of authorities below. 10. Upon careful consideration, we note that AO has duly accepted that this is almost the first year of the assessee company. AO was duly informed about the fact that assessee has undertaken two main projects activities and the details of which has been reproduced herein above. Despite that, authorities below have disallowed the assessee's expenditure/business loss during the year on the ground that no income has been earned during the year. In this regard, Hon'ble jurisdictional High Court in the case of Maruti Insurance Broking Private Limited 127 taxmann.com 685 (Del.) has duly held as under:- "Held, yes - Whether business does not conform to 'cold start' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee; that further, it is contended that the payment has not been debited in the P&L account; that the payment was directly taken to the balance sheet and shown as asset; that therefore, it is not hit by provisions of TDS and cannot be added back to income; that the AO did not accept the logic of statutory payment made to HUDA as local authority; that the AO relied on judgment of the Hon'ble Supreme Court in the case of Noida vs CIT, civil appeal no. 15613 of 2017 order dated 02.07.2018 in which it was held that the development authorities are not classified as 'local authorities' under section 10 (20) of the Act; that further, the AO has quoted CBDT OM dated 23.12.2017 in which it is clearly mentioned that the developer making the payment of EDC to HUDA is subject to TDS provisions; that the OM also mentions that HUDA may resort to the provision for exemption from TDS as mentioned in exceptions of section 194 of the IT Act. After the conclusion, AO made the addition. 16. However, the ld. CIT (A) allowed the assessee's appeal by holding as under :- " From the order and submission of the appellant, it is clear that no such exemption has been claimed by the Authority. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and perused the records. We note that the ld. CIT (A) has already allowed the assessee's appeal on the reasoning mentioned herein above. We refer to Hon'ble jurisdictional High Court decision in the case of BPTP Ltd. vs. PCIT 113 taxmann.com 587 wherein it is held that EDC are in the nature of statutory fees. Apart from that, ld. Counsel of the assessee has placed reliance on the following case laws :- (i) M/s. Perfect Constech Pvt. Ltd. v. Addnl. CIT (ITA No.6907/Del/2019) PB 134 to 137 (136) Para 5.0 (ii) Spaze Tower Pvt. Ltd. v. JCIT (ITA No.5842/Del/2019) PB 138 to 143 (140-141) (Letter from Director Town & Country Planning considered) (iii) M/s. Sarv Estate Pvt. Ltd. v. JCIT (ITA No.5337 & 5338/De1/2019) PB 116 to 128 (123) (iv) Satya Developers Pvt. Ltd. v. JCIT (ITA Nos. 6301 & 6302/Del/2019) PB 144 to 148 (148) (Letter from Director Town & Country Planning considered) (v) Shiv Sai Infrastructure (P) Ltd. v. ACIT (ITA No. 5713/Del/2019) PB 110 to 115 (110, 115) (vi) Signature Builders Pvt. Ltd. v. Add. CIT (ITA Nos.5735/Del/2019) PB 129 to 133 (132, 133) (vii) Tulip Infratech Private Limited v. Addl. CIT (ITA No.6734/Del/2019) PB 98 to 109 (103-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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