M/s. ITV INTERACTIVE MEDIA PVT. LTD., MUMBAI V. CIT(A) - IX, MUMBAI

ITA 1109/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7767 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 06-01-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 15-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SRIVASTAVA
• Keywords: Depreciation; Reason to believe; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI. BEFORE SHRI SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMB ER AND SHRI V.D. RAO, JUDICIAL MEMBER. I.T.A. NO. 11 09/MUM/2006 ASSESSMENT YEAR : 2000-01. ITV INTERACTIVE MEDIA PRIVATE LIMITED, ASSTT. COMMISSIONER OF RAHEJA, 1 ST FLOOR, MAIN AVENUE, VS. INCOM E TAX-9(2), SANTACRUZ (WEST), MUMBAI. MUMBAI 400 054. PAN AAACI6958G APPELLANT RESPONDENT APPELLANT BY : SHRI NITESH JOSHI. RESPONDENT BY : SHRI AJAY KUMAR SRIVASTAVA. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-IX, MUMBAI DATED 19-12-20 05 FOR THE ASSESSMENT YEAR 2000-01. 2. FACTS IN BRIEF: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNIN G AND INTER- ACTING MUSIC CHANNEL ON CABLE T.V. ON THIS CHANNEL, THE CABLE T.V. VIEWER, CAN SELECT SONG, WHICH HE WANTS TO VIEW BY USING TELEPHONE. THE ASSESSEE CLAIMS THAT THE INFRASTRUCTURE REQUIRED TO RUN AND OPERATE THE CHANNEL, WAS COMPLETED DURING THE ASSESSMENT YEAR 2 000-01 AND THE ASSESSEE HAS INCURRED ADMINISTRATIVE AND OPERATIONA L EXPENSES ON THE DAY TO DAY RUNNING OF THE BUSINESS. THE ASSESSEE FILED THE RETURN OF INCOME 2 DECLARING A LOSS OF RS.31,31,230/-. THE RETURN WAS PROCESSED U/S 143(1) ON 19-01-2002. SUBSEQUENTLY, THE ASSESSMENT WAS REO PENED U/S 147 OF THE INCOME TAX ACT, BY ISSUING NOTICE U/S 148 WHICH WAS SERVED ON THE COMPANY ON 20 TH FEB., 2003. IN RESPONSE TO THIS NOTICE, THE ASSESS EE FILED FRESH RETURN, WHICH WAS THE SAME AS THE RETURN ORIG INALLY FILED. THE AO COMPLETED THE ASSESSMENT U/S 143(3) VIDE HIS ORDER DATED 03-12-2003, WHEREIN HE HAS HELD THAT THE ASSESSEE HAS NOT COMME NCED BUSINESS AND THE EXPENDITURE IN QUESTION CLAIMED BY THE ASSESSEE WAS NOT ALLOWABLE AS IT IS CAPITAL EXPENDITURE. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WITHOUT SUCCESS. FURTHER AGGRIEVED, THE ASSESSEE IS BEFORE US. 3. THE GROUNDS RAISED BY THE ASSESSEE ARE ON THE F OLLOWING ISSUES : A) WHETHER THE REOPENING IS BAD IN LAW. B) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CAN BE SAID THAT THE ASSESSEE HAD SET UP ITS BUSINESS DURING TH E IMPUGNED PREVIOUS YEAR AND WHETHER THE EXPENSES IN QUESTION WERE TO BE ALLOWED AS REVENUE EXPENSES C) WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM FOR DEPR ECIATION; AND D) WHETHER THE AO WAS RIGHT IN LEVYING INTEREST U/S 23 4B. 4. THE LEARNED COUNSEL FOR THE ASSESSEE MR. NITESH JOSHI SUBMITTED THAT THE REOPENING IN THIS CASE WAS BAD I N LAW FOR THE REASON THAT ALL THE FACTS WERE AVAILABLE BEFORE THE AO AND THE ASSESSEE HAD EARNED CERTAIN ADVERTISEMENT INCOME DURING THE YEAR BY ISSUING SCROLLING ADVERTISEMENTS AND THAT THE ASSESSEE HAD CLAIMED DE PRECIATION IN THE FIXED ASSET SCHEDULE AND ON THESE FACTS, THE AO, COULD NO T HAVE COME TO A VIEW THAT THERE IS ESCAPEMENT OF INCOME. HE VEHEMENTLY C ONTENDED THAT ON THE FACE OF IT, WHEN THE ASSESSEE HAD EARNED CERTAIN IN COME, THE AO, BY NO STRETCH OF IMAGINATION, COULD HAVE COME TO A PRIME FACIE VIEW, THAT INCOME HAS ESCAPED IN THIS CASE, FOR THE REASON THA T, THE ASSESSEE HAS NOT 3 COMMENCED BUSINESS. HE FURTHER CONTENDED THAT THE T ESTS LAID DOWN BY VARIOUS COURTS IS WHETHER THE BUSINESS HAS BEEN SET UP OR NOT AND NOT WHETHER THE BUSINESS HAS COMMENCED OR NOT. THUS HE SUBMITS THAT PRIMA FACIE THE AO HAS, ON AN ERRONEOUS VIEW, COME TO A C ONCLUSIONS THAT INCOME HAS ESCAPED ASSESSMENT. HE RELIED ON THE FOL LOWING CASE LAWS : I) DESAI BROTHERS VS. DCIT (ASSESSMENT) 240 ITR 121. II) ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. P. LTD. VS. DCIT (ASSESSMENT) AND ANOTHER 271 ITR 269. 5. ON THE ISSUE OF COMMENCEMENT OF BUSINESS, ON FA CTS, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAD IN FACT EARNED REVENUES BY WAY OF ADVERTISEMENT AND HAD ALSO COMMENCED BUSI NESS BY TELECASTING CERTAIN SONGS ON CABLE NET WORK. HE CONTENDED THAT THE TEST LAID DOWN BY VARIOUS COURTS IS WHETHER THE BUSINESS HAS BEEN SET UP OR NOT AND WHEREAS THE AO HAS GONE ON A WRONG PRESUMPTION THAT THE TES T IS WHETHER THE ASSESSEE HAD COMMENCED THE BUSINESS OR NOT. ON THE ISSUE AS TO WHAT IS THE TEST THAT HAS TO BE APPLIED, HE RELIED ON THE F OLLOWING CASE LAWS : I) WESTERN INDIA VEGETABLE PRODUCTS VS. CIT 26 ITR 15 1 (BOM.) II) CIT VS. KANORIA GENERAL DEALERS P. LTD. 159 ITR 524 (CAL.) III) CIT VS. SAURASHTRA CEMENT & CHEMICALS INDUSTRIES LT D. 91 ITR 170 (GUJ.) IV) HOTEL ALANKAR VS. CIT 133 ITR 866 (GUJ.) IV) CIT VS. ESPN SOFTWARE INDIA P. LTD. 301 ITR 368. HE SUBMITTED THAT ALL THE PROPOSITIONS LAID DOWN IN THESE CASES ARE THAT THERE CAN BE INTERVAL BETWEEN SET UP OF BUSINESS A ND COMMENCEMENT OF BUSINESS. HE DISTINGUISHED THE CASE LAWS RELIED UPO N BY THE AO AND SUBMITTED THAT IN THE CASE OF ADDITIONAL CIT VS. SO UTHERN STRUCTURAL LTD. 110 ITR 164, THE LANGUAGE USED WAS DIFFERENT AS IT WAS IN THE CONTEXT OF SECTION 80J AND REQUIREMENT WAS TO BEGIN MANUFACTU RE. SIMILARLY, HE SUBMITTED THAT IN THE CASE OF METROPOLITIAN SPRINGS PVT. LTD. VS. CIT 132 4 ITR 893, THE BOMBAY HIGH COURT WAS DECIDING THE ISS UE WHETHER THE ASSESSEE STARTED MANUFACTURE OR NOT. HE SUBMITS THA T THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CWT VS. RAMARA JU SURGICAL COTTON MILLS LTD. 63 ITR 478 IS IN FAVOUR OF THE AS SESSEE. ON A QUERY FROM THE BENCH WHETHER IT IS THE CASE OF THE ASSESS EE THAT THE BUSINESS WAS SET UP AS ON 01-04-1999, THE LEARNED COUNSEL MR. NI TESH JOSHI SUBMITTED THAT ONE OF THE OPTION IS THAT THE TRIBUNAL HAS TO SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DETERMINE THE DATE AS ON WHICH TH E BUSINESS WAS SET UP. 6. ON THE ISSUE OF LEVY OF INTEREST U/S 234B, MR. NITESH JOSHI INITIALLY ADVANCED ELABORATE ARGUMENTS BUT LATER SU BMITTED THAT IN VIEW OF THE SMALLNESS OF THE AMOUNT, HE DOES NOT PRESS THE ISSUE. HE SUBMITTED THAT BOTH THE DEVELOPMENT EXPENDITURE AND DEPRECIAT ION HAVE TO BE ALLOWED TO THE ASSESSEE. 7. THE LEARNED DR, SHRI AJAY KUMAR SRIVASTAVA, ON THE OTHER HAND, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND S UBMITTED THAT THE ASSESSEE IN THE NOTES OF ACCOUNT HAS CLEARLY STATED THAT THE EXPENDITURE IN QUESTION WAS INCURRED DURING THE PRE-COMMENCEMENT P ERIOD. HE DREW THE ATTENTION OF THE BENCH TO NOTES ON ACCOUNTS. HE SUB MITTED THAT WHEN THE ASSESSEE HIMSELF RECORDS THAT THE EXPENDITURE PERTA INS TO PRE- COMMENCEMENT PERIOD, THE AO, ON PERUSAL OF HIS ACCO UNTS, CAN BE SAID TO HAVE COME TO A PRIMA FACIE OPINION THAT THE ASSESSE E HAS NOT COMMENCED THE BUSINESS, BUT HAD CLAIMED CERTAIN EXPENDITURE A ND DEPRECIATION AND THAT ON THIS FACTUAL MATRIX, IT CAN BE SAID THAT TH E AO WAS RIGHT IN COMING TO A PRIMA FACIE CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. HE SUBMITTED THAT WHEN THE AO RECORDS REASONS FOR REOP ENING, HE SHOULD TAKE ONLY A PRIMA FACIE VIEW, AND NOT A VIEW BASED ON A LONG DRAWN INVESTIGATION. HE RELIED ON THE DECISION OF GUJARA T HIGH COURT REPORTED IN 5 236 ITR 832. HE SUBMITTED THAT WHILE RECORDING THE REASONS FOR REOPENING, THE AO NEED NOT ASCERTAIN THE FACTS BY W AY OF LEGAL EVIDENCE AND A REASONABLE VIEW IS SUFFICIENT. FOR THIS PROPO SITION THAT PRIMA FACIE BELIEF OF THE AO IS SUFFICIENT FOR REOPENING THE AS SESSMENT, HE RELIED ON THE FOLLOWING CASE LAWS : I) S. NARAYANAPPA AND OTHERS 63 ITR 219 (SC) II) RAYMOND WOOLLEN MILLS LTD. VS. ITO 236 ITR 34 (SC) III) PHOOL CHAND BAJRANG LAL VS. ITO 203 ITR 456 (SC) 8. ON THE ISSUE OF COMMENCEMENT OF BUSINESS AND SE T UP, THE LEARNED DR SUBMITS THAT THE ASSESSEE IS CONNECTED T O HATHWAY WHICH IS A CABLE NETWORK AND JUST BECAUSE HATHWAY HAS A INFRA STRUCTURE IN PLACE, IT CANNOT BE SAID THAT THE ASSESSEE HAD COMMENCED BUSI NESS. HE RELIED ON THE ORDER OF THE AO AS WELL AS THE CIT(APPEALS) AN D PRAYED THAT THE SAME BE UPHELD. 9. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL O F THE ORDERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED, WE HOLD AS FOLLOWS. 10. IN THE AUDITED ACCOUNTS THE ASSESSEE HAS CLEAR LY STATED IN THE NOTES TO ACCOUNT THAT THE EXPENDITURE IN QUESTION P ERTAINS TO PRE- COMMENCEMENT PERIOD. EVEN IN THE PROFIT AND LOSS AC COUNT THE INCOME FROM OPERATIONS IS SHOWN AS NIL AND THE EXPENDITURE CLAIMED IS ONLY ON ACCOUNT OF AUDIT FEES, BANK CHARGES AND LEGAL CHARG ES. THE DEVELOPMENT COST IN QUESTION WERE CONSIDERED AS CAPITAL EXPENDI TURE. A PERUSAL OF THESE AUDITED STATEMENT OF ACCOUNTS, LED THE AO TO BELIEVE, THAT CERTAIN INCOME HAS ESCAPED ASSESSMENT AND HE HAS GIVEN A NO TICE FOR REOPENING. WE FIND THAT THE VIEW OF THE AO IS A POSSIBLE PRIMA FACIE VIEW, WHICH IS 6 BASED ON THE STATEMENT OF ACCOUNTS AND AUDITED ACC OUNTS FILED BY THE ASSESSEE. IT CANNOT BE SAID THAT THIS VIEW WOULD NO T HAVE BEEN TAKEN BY ANY REASONABLE PERSON. IN FACT THIS VIEW IS TAKEN B Y THE ASSESSEE HIMSELF IN ITS ANNUAL ACCOUNTS AND THE AUDITORS HAVE APPROV ED THE SAME. IT IS WELL SETTLED THAT, AT THE TIME OF REOPENING, THE AO NEED S TO TAKE A PRIMA FACIE VIEW, AND NEED NOT INDULGE IN INVESTIGATION OF FACT S OR OBTAINING LEGAL EVIDENCE. IT IS WELL SETTLED THAT THE ADJUDICATING AUTHORITY DOES NOT HAVE THE JURISDICTION TO GO INTO THE SUFFICIENCY OF THE REASONS. THE ORIGINAL RETURN IN THIS CASE WAS PROCESSED U/S 143(1) AND IT CANNOT BE SAID THAT THE AO HAS TAKEN A CONSIDERED VIEW. THE REOPENING IN QU ESTION WAS WELL WITHIN THE FOUR YEARS. THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS 291 ITR 500 CONSIDERED THIS I SSUE. APPLYING THE PROPOSITIONS LAID DOWN IN THAT JUDGMENT TO THE FACT ON HAND, WE ARE OF THE CONSIDERED OPINION THAT THE REOPENING IS VALID. 11. COMING TO THE DECISION RELIED UPON BY THE LEAR NED COUNSEL FOR THE ASSESSEE IN THE CASE OF DESAI BROTHERS (SUP RA), THE FACTS ARE DIFFERENT IN THAT CASE, THE REASONING ADOPTED BY TH E AO WAS FOUND DEFECTIVE FOR THE REASON THAT, NO INFERENCE OF ESCA PEMENT OF INCOME FROM ASSESSMENT COULD BE DRAWN. SIMILARLY, IN THE CASE O F ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. P. LTD. (SUPRA) THE FACTS ARE DIFFERENT. THE COURT HAD FOUND THAT SECTION 147 WAS AMENDED WI TH EFFECT FROM 01- 04-1988 AND THAT THIS AMENDMENT WAS NOT APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR ON THE FACTS OF THE CASE. IT ALSO C AME TO A CONCLUSION THAT THERE WAS NO MATERIAL FOR THE AO TO HAVE REASON TO BELIEVE THAT THE AGREEMENT TO SELL HAD BEEN ENTERED INTO IN THE YEAR 1990-91. IN THE CASE ON HAND THE AO HAD THE NECESSARY INFORMATION IN THE AUDITED ACCOUNTS ITSELF. THUS WE AGREE WITH THE LEARNED DR AND ON TH E FACTS AND 7 CIRCUMSTANCES OF THE CASE, WE UPHOLD THE REOPENING AND DISMISS THIS GROUND OF THE ASSESSEE. 12. COMING TO GROUND NOS. 2 AND 3, WE FIND THAT IT IS A SETTLED PROPOSITION OF LAW THAT THE TEST SHOULD BE WHETHER THE ASSESSEE HAS SET UP BUSINESS OR NOT AND THAT COMMENCEMENT OF BUSINESS I S NOT THE REQUIREMENT OF LAW. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESPN SOFTWARE INDIA P. LTD. (SUPRA) HAS HELD AS FOL LOWS : A BUSINESS IS NOTHING MORE THAN A CONTINUOUS COUR SE OF ACTIVITIES AND FOR COMMENCEMENT OF BUSINESS ALL THE ACTIVITIES WHICH GO TO MAKE UP THE BUSINESS NEED NOT BE STARTE D 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. A FINDING REGARDING THE DATE WHEN A BUSINESS WAS SET UP IS A FINDING OF FAC T. UNDER SECTION 3 OF THE INCOME-TAX ACT, 1961, IT IS THE SETTING UP OF THE BUSINESS AND NOT THE COMMENCEM ENT OF THE BUSINESS THAT IS TO BE CONSIDERED. A BUSINESS IS CO MMENCED AS SOON AS AN ESSENTIAL ACTIVITY OF THAT BUSINESS IS STARTE D. THUS, A BUSINESS COMMENCES WITH THE FIRST PURCHASE OF STOCK-IN-TRADE , AND THE DATE WHEN THE FIRST SALE IS MADE IS IMMATERIAL. SIMILARL Y, A MANUFACTURER HAS TO UNDERTAKE SEVERAL ACTIVITIES IN ORDER TO BRI NG TO PRODUCE FINISHED GOODS AND HE COMMENCES HIS BUSINESS AS SOO N AS HE UNDERTAKES THE FIRST OF SUCH ACTIVITIES. CIT V. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. [1973] 91 ITR 170 (GUJ.) FOLLOWED. 13. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF HOTEL ALANKAR (SUPRA) HELD THAT WHEN A BUSINESS IS ESTABL ISHED AND IS READY TO COMMENCE BUSINESS THEN IT CAN BE SAID OF THAT BUSI NESS THAT IT IS SET UP. THE WORDS READY TO COMMENCE WOULD NOT NECESSARILY MEAN THAT ALL THE 8 INTEGRATED ACTIVITIES ARE FULLY CARRIED OUT AND/OR WHOLLY COMPLETED. IT HELD AS FOLLOWS : HELD, (I) THAT HOTEL BUSINESS NECESSARILY COMPRIS ED VARIEGATED ACTIVITIES COMMENCING FROM THE STAGE OF ACQUISITION OF A PROPER AND SUITABLE BUILDING, MAKING IT MORE SUITAB LE AND CONVENIENT FOR THE HOTEL BUSINESS, PURCHASING LINEN , CUTLERY, FURNITURE, ETC., APPOINTING THE STAFF AS MANAGERS, BEARERS, COOKS, ETC., AND ULTIMATELY REACHING THE STAGE OF RECEIVIN G CUSTOMERS. IT WOULD BE DE HORS THE COMMERCIAL SENSE TO ASSERT THA T IT WAS ONLY WHEN ONE REACHED THE STAGE OF RECEIVING CUSTOMERS T HAT ONE COULD BE SAID TO HAVE SET UP A HOTEL BUSINESS. THE TRIBUN AL WAS NOT, THEREFORE, JUSTIFIED IN REACHING THE CONCLUSION THA T THE ASSESSEE HAD NOT SET UP ITS BUSINESS TILL FEBRUARY, 1968. (II) ON THE FACTS, THAT AS THE LIST OF REPAIRS WHI CH HAD BEEN PROVIDED BEFORE THE TRIBUNAL CLEARLY INDICATED THAT THERE WERE NO MAJOR STRUCTURAL CHANGES EXCEPT INSTALLATION OF LIF TS, MAKING THE BUILDING MORE VENTILATED, ETC., THE EXPENSES WERE O F A REVENUE NATURE. 14. APPLYING THE TESTS LAID DOWN IN THESE JUDGMEN TS TO THE FACTS OF THE CASE, WE HAVE NO HESITATION IN COMING TO A C ONCLUSION THAT THE REVENUE AUTHORITIES HAVE ERRED IN APPLYING THE TEST OF COMMENCEMENT OF BUSINESS, INSTEAD OF APPLYING THE TEST OF WHETHER T HE ASSESSEE HAS SET UP ITS BUSINESS OR NOT. THE SCHEDULE OF FIXED ASSETS SHOW THAT THE ASSESSEE HAD ACQUIRED PLANT AND MACHINERY DURING THE YEAR AND IT HAS ALSO DISPOSED OF SOME PLANT AND MACHINERY AND HAS CLAIMED DEPRECIATI ON IN ITS AUDITED ACCOUNTS. FURTHER IT CAN BE SEEN THAT THE UNDISPUTE D FACT IS THAT THE ASSESSEE HAD EARNED ADVERTISEMENT INCOME OF RS.1,45 ,000/- DURING THE YEAR. IT HAD INCURRED ADVERTISEMENT EXPENDITURE OF RS.14,000/- AS WELL AS 9 LIVE COVERAGE EXPENSES OF RS.19,000/-. THUS, IN OUR CONSIDERED VIEW, IT CAN BE INFERRED, BASED ON THE FACTS AND CIRCUMSTANC ES OF THE CASE THAT THE ASSESSEE HAD SET UP BUSINESS DURING THE ASSESSMENT YEAR 2000-01, AS OTHERWISE, IT WOULD NOT HAVE BEEN POSSIBLE FOR THE ASSESSEE TO TELECAST SCROLLING ADVERTISEMENT AND EARN REVENUES THEREFRO M. THOUGH WE COME TO A CONCLUSION THAT THE BUSINESS HAS BEEN SET UP D URING THIS YEAR, WE ARE UNABLE TO SPECIFY THE DATE ON WHICH THE BUSINESS CA N BE SAID TO HAVE BEEN SET UP FOR THE REASON THAT THE REQUIRED DETAILS HAV E NOT BEEN PROVIDED BY THE ASSESSEE NOR EXAMINED BY ANY OF THE REVENUE AUT HORITIES. THUS WE SET ASIDE THE ISSUE TO THE FILE OF THE AO TO ASCERTAIN THE EXACT DATE OF SET UP OF BUSINESS AND TO TREAT THE EXPENDITURE INCURRED THER EAFTER AS REVENUE EXPENDITURE. THE EXPENDITURE INCURRED PRIOR TO SET UP OF BUSINESS SHALL BE CONSIDERED AS CAPITAL EXPENDITURE. BASED ON THESE D ECISIONS AS TO THE DATE OF SETTING UP OF BUSINESS, DEPRECIATION CLAIM OF TH E ASSESSEE HAS TO BE ADJUDICATED AFRESH. THUS WE SET ASIDE THE ISSUE IN GROUND NOS. 2 AND 3 TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 15. IN THE RESULT, GROUND NO. 2 AND 3 ARE ALLOWED FOR STATISTICAL PURPOSES. 16. COMING TO GROUND NO. 4, THE SAME IS DISMISSED AS NOT PRESSED. 10 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED IN PART. ORDER PRONOUNCED ON THIS 15 TH DAY OF FEBRUARY, 2010. SD/- SD/- (V.D. RAO) (J. SUDHAKARY REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 15 TH FEBRUARY, 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, I-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI.