ACIT, CIRCLE-20(2), NEW DELHI V. RHC IT SOLUTIONS PVT. LTD., NEW DELHI

ITA 2416/DEL/2019

AI Insights

The case involves the Revenue's appeal against the order of the CIT(A) which had deleted the disallowance of finance costs and depreciation expenses claimed by RHC IT Solutions Pvt Ltd for the assessment year 2015-16. The primary contention was whether the assessee's business had commenced during the year, as it had not recognized any revenue. The CIT(A) had previously ruled in favor of the assessee, referencing a similar decision for the assessment year 2014-15. The tribunal, referencing a prior ITAT decision for the assessee's case in 2012-13, agreed that the business had commenced and dismissed the Revenue's appeal regarding the disallowance of finance costs and depreciation. However, the matter of the extent of other expenses disallowance was left open for further adjudication in a related appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360768 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2015-2016
• Other Referred Cases: ITA No. 2755/Del/2017
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. DUBEY
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

"Page 1 of 6 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘F’ BENCH, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2416/DEL/2019 [A.Y 2015-16] The A.C.I.T Vs. RHC IT Solutions Pvt Ltd Circle - 20(2) G-16,D-3, Prious Platinum New Delhi Saket, New Delhi PAN: AAECR 4314 B (Appellant) Respondent) Assessee By : None Department By : Shri V.K. Dubey, Sr. DR Date of Hearing : 07.05.2025 Date of Pronouncement : 23.05.2025 ORDER PER NAVEEN CHANDRA, AM :- This appeal by the Revenue is directed against the order of the ld. CIT(A)- 07, New Delhi dated 21.01.2019 for A.Y 2015-16. ITA No. 2416 /DEL/2019 RHC IT Solutions [A.Y 2015-16] 2. The grounds raised by the Revenue read as under: 1. \"Whether the Ld. CIT(A) has erred in law and on the facts case, in deleting the disallowance of Rs. 2,10,44,717/- on account of finance cost and depreciation of Rs. 6,90,799/- made by the AO without consideration the fact that assessee company had not commenced its business operations during the year at all. 2. Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law to restrict the expenses to 20% from 50% made by AO without giving any justification. 3. The appellant craves to be allowed to add any fresh ground(s) of appeal and/or delete or amend any of the ground(s) of appeal.” 3. Facts in brief are that the assessee-company is engaged in the business of development of software. The assessee company e-filed its original return of income for A.Υ. 2015-16 on 30.11.2015 declaring loss of Rs. 4,00,44,189/-. The case was selected for scrutiny assessment under CASS and statutory notice u/s 143(2) of the Income-tax Act, 1961 [the Act, for short] was issued on 11.04.2016. 4. The Assessing Officer, during the course of assessment proceedings, held that the assessee company has not started its business operations during the year at all and has not recognized any revenue ITA No. 2416 /DEL/2019 RHC IT Solutions [A.Y 2015-16] during the period under consideration. Even in the past years from AY 2011-12 to AY 2014-15, the business was not commenced. The AO disallowed maximum expenses except required for day to day running of the company and assessed the income u/s 143(3) at 29,37,380/-. 7. Aggrieved, the assessee went in appeal before the ld. CIT(A). Following the decision of his predecessor in AY 2014-15, the CIT(A) held that just because assessee has not recognized any revenue during the year, does not mean that its business has not commenced and deleted the addition made on account of finance cost and depreciation. The CIT(A) further restricted the disallowance of other expenses to 20% from 50% made by the AO. 8. Now the aggrieved Revenue is in appeal before us. 9. Before us, none appeared on behalf of the assessee. However, we find that the assessee has filed written submissions. We decided to adjudicate the appeal with the assistance of the ld. DR. We have heard the ld. DR at length and perused the written submissions furnished on record. ITA No. 2416 /DEL/2019 RHC IT Solutions [A.Y 2015-16] 10. In the written submissions, the assessee has furnished a copy of the Hon’ble ITAT in the assessee’s own case for assessment year 2012- 13. We find that the coordinate bench of ITAT in ITA No. 2755/Del/2017 for assessment year 2012–13 vide order dated 31.12. 2019 has held that: “merely because the assessee went on acquiring more assets including computers, laptops, software, biometric attendance system, etc, recruiting additional employees and consultants and also acquiring software tools required for the software development, it cannot be said that till such time the business has not set unlike in any other industry where the installation of the plant and machinery, the production will go on, in software industry new requirements of clients necessitates the acquisition of new software tools and hiring of the employees with such new programming skills”. The ITAT further held that assessee has set up its business as on 31.1.2012 and is entitled to claim the business expense. 11. Respectfully following the above ITAT order, we hold that as the assessee business has commenced as on 30.1.2012 and therefore there is no question of raising the issue of commencement of business in the impugned assessment year for disallowance of expenses. In view of the same, disallowance of expense on finance cost and depreciation is held ITA No. 2416 /DEL/2019 RHC IT Solutions [A.Y 2015-16] as invalid and AO is directed to delete the said addition. Ground No. 1 of the Revenue is dismissed. 12. With respect to the ground No. 2 regarding restriction of the disallowance of expenses to 20% from 50%, the same is to be adjudicated along with appeal filed by the assessee in ITA no 2725/Del/2019 as the issues are common. The ground no 2 is therefore is left open. 13. In the result, appeal of Revenue in ITA No. 2416/DEL/2019 is dismissed. Order pronounced in open court on 23.05.2025. Sd/- Sd/- [SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 23rd MAY, 2025. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi ITA No. 2416 /DEL/2019 RHC IT Solutions [A.Y 2015-16] Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "