CONDE NAST (I) P.LTD, MUMBAI V. DCIT (1), MUMBAI

ITA 1820/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83673 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SE PARATE
• Keywords: Depreciation; Corroborative evidences; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; ,OA ,OA ,OA ,OA JH JH JH JH UJSUNZ DQEKJ FCYYS;K UJSUNZ DQEKJ FCYYS;K UJSUNZ DQEKJ FCYYS;K UJSUNZ DQEKJ FCYYS;K] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO.1820/MUM/2013 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2008-09 CONDE NAST (INDIA) PVT. LTD., 2ND FLOOR, DARABSHAW HOUSE, SHOORJI VALLABHDAS MARG, BALLARD ESTATE, MUMBAI-01 VS.` THE DEPUTY COMMISSIONER OF INCOME TAX 3(1), 6 TH FLOOR, ROOM NO. 607, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN:- AACCB9075H APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.01.2013 OF CIT(A)| FOR THE A.Y. 2008-09. THE ASSESSEE HAS R AISED FOLLOWING GROUNDS IN THIS APPEAL:- THE FOLLOWING GROUNDS OF APPEAL ARE DISTINCT AND SE PARATE AND WITHOUT PREJUDICE TO EACH OTHER: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN C ONFIRMING DISALLOWANCE OF RS. 1 , 68,43,384 IN RESPECT OF REVENUE EXPENDITURE INCURRE D DURING THE PERIOD 1 APRIL 2007 TO 26 MAY 2007 MADE BY THE LEARNED ASSESSING OFFICE R ('AO') ON THE GROUND THAT THE BUSINESS OF THE APPELLANT WAS NOT SET UP DURING THE SAID PERIOD. FURTHER, THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN ENHANCING THE DISALLOWANCE BY RS. 5,43 , 82 , 149 BY TREATING 1 OCTOBER 2007 AS THE DATE OF SETTING UP O F THE BUSINESS OF THE APPELLANT AS AGAINST 27 MAY 2007 DETERMINED BY THE L EARNED AO. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN T REATING 1 OCTOBER 2007 AS THE DATE ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI PRAKASH KOTADIA AND SHRI PAWAN SHARMA REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SHRI A.C. TEJPAL DATE OF HEARING 02.09.2014 DATE OF PRONOUNCEMENT 05.09.2014 CONDE NAST (INDIA) PVT. LTD. 2 | P A G E OF SETTING UP OF THE BUSINESS OF THE APPELLANT AS A GAINST 20 NOVEMBER 2006 DETERMINED BY THE APPELLANT. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FOLLOWING: I. SECTION 3 OF THE INCOME-TAX ACT , 1961 ('THE ACT') DOES NOT DEAL WITH DATE OF BEGINNING OF SETTING UP OF BUSINESS AND DATE OF COM PLETION OF SETTING UP OF BUSINESS. SECTION 3 OF THE ACT ONLY DEALS WITH DATE OF SETTING UP OF BUSINESS. II . IT IS A FAIRLY SETTLED LEGAL POSITION THAT FOR THE PURPOSE OF SECTION 3 OF THE ACT, THE DATE OF SETTING UP OF THE BUSINESS IS TO BE CONSIDE RED AND NOT THE DATE OF COMMENCEMENT OF THE BUSINESS. THE DATE OF SETTING U P OF BUSINESS IS THE DATE WHEN THE BUSINESS IS READY TO COMMENCE. BUSINESS 'R EADY TO COMMENCE' DOES NOT MEAN THAT ALL THE INTEGRATED ACTIVITIES ARE FULLY C ARRIED OUT AND/OR FULLY COMPLETED AS HELD BY VARIOUS COURTS. THERE MAY BE AN INTERVAL BETWEEN THE SETTING UP OF THE BUSINESS AND THE COMMENCEMENT THEREOF AND ALL EXPEN SES INCURRED DURING THE INTERVAL SHOULD BE PERMISSIBLE DEDUCTIONS . III . ON 1 OCTOBER 2007, THE FIRST ISSUE OF APPELLANT'S M AGAZINE WAS LAUNCHED IN THE MARKET AND BY THIS DATE , ALL THE INTEGRATED ACTIVITIES WERE FULLY COMPLETED . IV . THE APPELLANT HAD UNDERTAKEN VARIOUS ESSENTIAL ACTI VITIES FOR SETTING UP OF THE BUSINESS TILL 26 MAY 2007. 3. WITHOUT PREJUDICE TO GROUND NO. 1 AND 2, THE LEA RNED CIT(A) HAS ERRED IN LAW AND FACTS IN NOT APPRECIATING THE FACT THAT THE LEARNED AO HAS ADJUDICATED THE DATE OF SETTING UP OF BUSINESS OF THE APPELLANT AS 27 MAY 2 007 DULY CONSIDERING THE FACTUAL SUBMISSIONS FILED BY THE APPELLANT AND VARIOUS JUDI CIAL PRONOUNCEMENTS 2. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND A DJUDICATION IS WHETHER THE AUTHORITIES BELOW ARE JUSTIFIED IN DISALLOWANCE OF E XPENSES INCURRED DURING THE PERIOD FROM 01.04.2007 TO 1.10.2007 ON THE GROUND THA T THE BUSINESS OF THE ASSESSEE WAS NOT SET UP DURING THE SAID PERIOD. THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PUBLICATION OF TOP END LIFESTYLE MAGAZINES IN INDIA. THE FASHION MAGAZINE PUBLISHED BY THE ASSESSEE UNDER THE BRAND NAME VOGUE IN INDIA. THE FIRST EDITION OF THE SAID MAGAZINE WAS PUBLISHED IN TH E MONTH OF SEPTEMBER, 2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y. 2007-08, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BUSINESS LOSS AND UNA BSORBED DEPRECIATION ON THE GROUND THAT THE ASSESSEES BUSINESS WAS NOT SET UP B Y 31 ST MARCH 2007. SIMILARLY FOR THE A.Y. UNDER CONSIDERATION, THE ASSESSING OFFIC ER HAS DISALLOWED THE CLAIM OF EXPENSES ON THE GROUND THAT THE BUSINESS OF THE ASS ESSEE WAS CONSIDERED TO BE SET UP ON 27.05.2007 I.E. THE DATE OF RECEIPT OF DUMM Y/TRIAL PRINT FROM THE PRESS. CONDE NAST (INDIA) PVT. LTD. 3 | P A G E 3. ON APPEAL, CIT(A) HELD THAT THE DATE OF SETTING U P OF THE BUSINESS IS 01-10- 2007 AS IT WAS HELD FOR THE A.Y. 2007-08, ACCORDINGL Y THE CLAIM OF EXPENSES WAS DISALLOWED. 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT FOR THE A.Y. 2007- 08, THE TRIBUNAL HAS CONSIDERED THE ISSUE OF DATE OF S ETTING UP OF THE BUSINESS OF THE ASSESSEE AND DECIDED THE SAME IN FAVOUR OF THE AS SESSEE VIDE ORDER DATED 9- 11-2013 IN ITA NO. 1819/MUM/2013. THUS THE LD. AUTH ORIZED REPRESENTATIVE HAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORD ERS OF AUTHORITIES BELOW. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL PERUSAL OF THE RECORD, WE NOTE THAT BOTH ASSESSING OFFICER AND CIT(A) HAVE DECIDED THE ISSUE BY FOLLOWING THE ORDERS FOR THE A.Y. 2007-08. CIT(A) HA S CONSIDERED THE CASE OF THE ASSESSEE AND HELD THAT THE DATE OF SETTING UP OF THE BUSINESS WAS HELD TO BE 1.10.2007 FOR THE A.Y. 2007-08 IN PARA 5 AND 6 OF T HE IMPUGNED ORDER AS UNDER:- 5 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSI DERED AND IN VIEW OF THE FINDINGS OF THE APPEAL ORDER FOR ASSESSMENT YEAR 2007-08, TH E DATE OF SETTING UP OF THE BUSINESS IS HELD TO BE 01.10.2007. 6. THE APPELLANT VIDE LETTER DATED 25.01.2013 SUBMI TTED THAT THE EXPENDITURE FROM 27.05.2007 TO 30.09.2007 OF RS. 5,43,82,149/- WAS I NCURRED. THE APPELLANT SUBMITTED COPY OF THE LETTER DATED 24.11.2010 FILED BEFORE THE DCIT, CIRCLE-3(1) IN WHICH MONTH WISE DETAILS OF EXPENDITURE WAS SUBMITT ED TO THE ASSESSING OFFICER AND THE AMOUNT OF RS. 5,43,82,149/- ARE AS PER THE DETA ILS OF EXPENDITURE SUBMITTED BEFORE THE ASSESSING OFFICER. 6. WE FIND THAT FOR THE A.Y. 2007-08, THE TRIBUNAL H AS DECIDED THIS ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE IN PARA 9 AND 10 AS UNDER :- 9. AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS AND THE RATIO OF DECISION DISCUSSED ABOVE, I FOUND THAT SIMILAR FACTS ARE INVOLVED IN THE PRESENT CASE ALSO. THE MOOT QUESTION AS TO WHETHER ANY CONDE NAST (INDIA) PVT. LTD. 4 | P A G E ACTIVITY HAS BEEN STARTED TO PUBLISH THE MAGAZINE O R NOT. AFTER GOING THROUGH THE CHART AND VARIOUS DETAILS ALONG WITH SUPPORTING EVIDENCE, IT IS AMPLY PROVED THAT MAJOR ACTIVITY HAS STARTED DURING THE YEAR UNDER CONSIDERATION. SOME ORDERS HAVE BEEN PLACED, PHOTOGRAPHER IS ENGAGED, SOME TECHNICAL STAFFS WERE ALSO EMPLOYED, BUSINESS PREMI SES HAS BEEN TAKEN FROM WHERE ALL THESE ACTIVITIES ARE CONDUCTED. EVEN TRIAL PRODUCTION WAS ALSO STARTED FROM ALL THESE FACTS, IT IS SEEN THAT THE ASSESSEE HAS STARTED ITS ACTIVITY FOR PUBLISHIN G ITS MAGAZINES. THE QUESTION IS NOT GENERATING OF REVENUE, THE QUESTION COMES FOR CONSIDERATION AS TO WHETHER ANY ACTIVITY HAS BEEN STARTED OR NOT. IN THE CASE OF HSBC SECURITIES INDIA HOLDINGS PVT. LTD . (SUPRA), THE TRIBUNAL FOUND THAT THERE WAS ACQUISITION OF PREMISES ON RENT, COMPUTERS WERE PUR CHASED DURING THE RELEVANT YEAR, APPOINTMENT OF SENIOR EXECUTIVES INCLUDING THE CHIEF EXECUTIVE OFFICER WAS COMPLETED BY JANUARY, 1995 AND ADVANCE WAS PAID TO MR. MANOJ MURARKA AND MRS. AGAR WAL FOR ACQUIRING THE STOCK EXCHANGE CARD. THE ASSESSEE FILED AN APPLICATION FORM WITH THE STO CK EXCHANGE FOR MEMBERSHIP. AFTER TAKING INTO CONSIDERATION ALL THESE ACTIVITIES, THE TRIBUNAL FO UND THAT THE BUSINESS OF THE ASSESSEE HAS BEEN SET UP. THEREFORE, THE EXPENSES INCURRED BY THE ASSESSE E SHOULD BE ALLOWED. 10. IN THE CASE IN HAND, ALL THE FACTORS INVOLVED A RE ON BETTER FOOTING AS IN THIS CASE ALSO THE TRIAL ISSUE WAS DONE, PAYMENT TO THE PHOTOGRAPHER WAS MAD E, RAW MATERIAL WAS ALSO PURCHASED, ALL EXECUTIVE REQUIRED TO PUBLISH THE MAGAZINES WERE EM PLOYED, OFFICE PREMISES WAS OCCUPIED. THERE ARE VARIOUS OTHER CORRESPONDENCE BETWEEN THE EDITOR IAL OF THE ASSESSEE AND OTHER CUSTOMERS, WHO WANT TO WORK WITH THE ASSESSEE FOR THE PURPOSE OF P UBLISHING THE MAGAZINES NAMED VOGUE. FROM ALL THESE ACTS OF THE ASSESSEE, IT CAN BE EASILY SA ID THAT THE BUSINESS OF THE ASSESSEE WAS SET UP. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE ARE ALLOWABLE. HOWEVER, SINCE THE NATURE OF EXPENDITURE WAS NOT EXAMINED AND WHETHER THESE EXPE NSES ARE ALLOWABLE OR NOT WAS NOT EXAMINED BY THE AO AS THE AO FOUND THAT THE BUSINESS WAS NOT SET UP, THEREFORE, THE EXPENDITURES WERE NOT ALLOWABLE. THEREFORE, TO THIS LIMITED PURPOSE THE M ATTER IS REMANDED BACK TO THE FILE OF THE AO TO EXAMINE THE GENUINENESS OF THE EXPENDITURE AND THEN ALLOW THEM AS PER PROVISION OF LAW. I ORDER ACCORDINGLY 7. SINCE THE BUSINESS WAS CONSIDERED TO BE SET UP IN THE F.Y. 2006-07, THEREFORE, FOR THE A.Y. UNDER CONSIDERATION, THIS IS SUE STANDS COVERED BY THE EARLIER ORDER OF THIS TRIBUNAL AND ACCORDINGLY THE CL AIM OF THE ASSESSEE IS DIRECTED TO BE ALLOWED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 05-9- 2014 SD/- SD/- (N.K. BILLAIYA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 05-9 -2014 SKS SR. P.S, CONDE NAST (INDIA) PVT. LTD. 5 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI