Motrex Automotive India Pvt. Ltd., CHENNAI V. ITO Corporate Ward 4(1), CHENNAI

ITA 2301/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1451 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 03-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAYA SRIRAM
• Keywords: Business expenditure; Revenue expenditure; Set aside
• Section: 208; 192; 13; 101

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! . , ! & BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2301/CHNY/2018 /ASSESSMENT YEAR: 2015-16 M/S.MOTREX AUTOMOTIVE INDIA- PVT. LTD., FLAT NO.2 & 3, VELLANTHANGAL VILLAGE, IRUNGATTUKOTTAI, SRIPERUMBUDUR, CHENNAI-602 105. [PAN: AAJCM 3791 N] VS. THE INCOME TAX OFFICER, CORPORATE WARD-4(1), CHENNAI-600 034. ( ( /APPELLANT) ( )*( /RESPONDENT) ( + / APPELLANT BY : MR.Y.SRIDHAR, CA & MR. VIJAYA SRIRAM, CA )*( + /RESPONDENT BY : MR. AR.V.SREENIVASAN, JCIT + /DATE OF HEARING : 10.06.2019 + /DATE OF PRONOUNCEMENT : 10.06.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI, IN ITA NO.44/17-18 DATED 23.05.2018 FOR THE AY 2015-16. 2. SHRI AR.V.SREENIVASAN, JCIT, REPRESENTED ON BEHA LF OF THE REVENUE AND SHRI Y.SRIDHAR, CA & SHRI VIJAYA SRIRAM, CA REP RESENTED ON BEHALF OF THE ASSESSEE. ITA NO.2301/CHNY/2018 :- 2 -: 3. IT WAS SUBMITTED BY THE LD.AR THAT THE ONLY ISSU E IN THE ASSESSEES APPEAL IS AGAINST THE ACTION OF THE LD.CIT(A) IN CO NFIRMING THE TREATMENT OF THE REVENUE EXPENDITURE CLAIMED TO THE EXTENT OF RS.48,72,391/- U/S.35D OF THE ACT. IT WAS A SUBMISSION THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ASSEMBLY OF CAR NAVIGATI NG SYSTEMS AND FITTINGS OF SUCH NAVIGATION SYSTEMS IN CARS. THE L D.AR PLACED WRITTEN SUBMISSIONS BEFORE US, WHICH ARE AS FOLLOWS: THE APPELLANT HAS CONTESTED THE ACTION OF THE ASSES SING OFFICER, IN ALLOWING THE EXPENSES (INCURRED AFTER THE DATE OF 'SET UP' OF TH E BUSINESS) UNDER SECTION 35D, INSTEAD OF ALLOWING IT FULLY IN THE PREVIOUS YEAR I N WHICH THE BUSINESS HAS BEEN 'SET UP'. 1. AT THE OUTSET, THE APPELLANT SUBMITS THAT FOR THE PURPOSES OF INCOME TAX ACT, PREVIOUS YEAR IS DEFINED IN SECTION 3 TO MEAN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR. THE PROV ISO TO THAT SECTION IS REPRODUCED BELOW FOR READY REFERENCE. 'PROVIDED THAT, IN THE CASE OF A BUSINESS OR PROFES SION NEWLY SET UP, OR A SOURCE OF INCOME NEWLY COMING INTO EXISTENCE, IN THE SAID FINANCIAL YEAR, THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNI NG WITH THE DATE OF SETTING UP OF THE BUSINESS OR PROFESSION OR, AS THE CASE MAY BE, THE DATE ON WHICH THE SOURCE OF INCOME NEWLY COMES INTO EXISTENCE AND ENDING WITH THE SAID FINANCIAL YEAR'. 1.1 IN THE CASE OF A NEWLY SET UP BUSINESS, THE DATE OF 'SETTING UP TO THE BUSINESS' IS TO BE CONSIDERED, FOR ALLOWABILITY OF REVENUE EX PENSES IN THE RESPECTIVE FINANCIAL YEAR, AND NOT THE DATE COMMENCEMENT OF BI LLING OR REALISATION OF REVENUE, AS WRONGLY CONSTRUED BY THE ASSESSING AUTH ORITIES. 1.2 THE MADRAS HIGH COURT IN ASCENDAS IT PARK CHENNAI L TD, VS DCIT, (MAY 2016) WHILE OVER RULING THE TRIBUNAL ORDER HAD OBSERVED TH AT SINCE INCOME TAX ACT DOES NOT DEFINE 'SET UP', ONE WOULD HAVE TO CONSTRU E THE DATE OF SETTING UP OF BUSINESS AS BEING THE INITIAL STAGE IN THE CHAIN OF EVENTS LEADING TO FULL FLEDGED OPERATIONS. THE HONOURABLE JURISDICTIONAL COURT IN THE SAME JUD GEMENT DIFFERENTIATED THIS FROM THE WORD 'PRELIMINARY EXPENSES' USED IN SECTIO N 35-D TO CONCLUDE THAT THE LATTER IS INCURRED AT A VERY NASCENT STAGE OF A CTIVITY, AND IS ASSOCIATED WITH AN EXPLORATORY EXERCISE TO FINALISE COMMENCEMENT OF BUSINESS. 2. THE APPELLANT SUBMITS THAT IT HAS 'SET UP' ITS BUSI NESS IN THE FINANCIAL YEAR 2014-15 (AY 2015-16). A CHRONOLOGICAL SEQUENCE OF EV ENTS IS PRESENTED IS A TABULAR FORM HEREIN BELOW, TO ESTABLISH THE SAME. S.NO. DATE EVENT PAPER BOOK PAGE 1 09.09.2014 MOU FOR LOGISTIC SERVICE 35 2 09.09.2014 APPOINTMENT OF MANAGING DIRECTOR BY PA RENT COMPANY 41 3 09.09.2014 DATE OF INCORPORATION 53 4 27.10.2014 BANK ACCOUNT OPENING DATE 69 ITA NO.2301/CHNY/2018 :- 3 -: 5 29.10.2014 DATE OF RECEIVING SUBSTANTIAL AMOUNT I N BANK TOWARDS SHARE CAPITAL 69 6 01.11.2014 RENT AGREEMENT EXECUTED 101 7 17.11.2014 APPOINTMENT OF EXECUTIVE ASSISTANT 117 8 20.11.2014 SERVICE TAX REGISTRATION CERTIFICATE O BTAINED 133 9 20.11.2014 COMMERCIAL TAXES REGISTRATION 123 10 21.11.2014 ASSET PURCHASE DATES 127 11 25.11.2014 IMPORT EXPORT CODE OBTAINED 137 12 20.03.2015 AUDITOR CERTIFICATE CERTIFYING SHARE CAPITAL INFLOW 139 13 27.03.2015 COMPANY SECRETARY CERTIFICATE CERTIFY ING SHARE ALLOTMENT 141 14 28.03.2015 FCGPR CERTIFICATE FILING WITH RBI FOR INFLOW OF FOREIGN EXCHANGE TOWARDS SHARE CAPITAL 3. THE APPELLANT SUBMITS THAT THE REVENUE AUTHORITIES HAVE PLACED THE APPELLANT IN THE SAME FOOTING AS A MANUFACTURING CO NCERN, FOR WHICH AVAILABILITY OF INFRASTRUCTURE AND MANUFACTURE OF A PRODUCT ARE PRECURSORS TO SETTING OF A BUSINESS. THE APPELLANT'S CASE RELATES TRADING, WHICH CAN BE DONE EVEN USING GOVERNMENT / PRIVATE WAREHOUSES AND THROUGH APPROVED TRADE MECHANISMS AS E-L SALES / HIGH SEAS SALES ETC. 4. THE APPELLANT SUBMITS THAT IT HAD ATTAINED A STATE OF 'HAVING SET UP THE BUSINESS' IN FINANCIAL YEAR 2014-15 BY PLACING THE FOLLOWING EVIDENCES. 4.1 AVAILABILITY OF FINANCIAL RESOURCES. 4.2 APPOINTMENT OF PERSONNEL. 4.3 LEASING OF PLACE OF WORK. 4.4 OBTENTION OF STATUTORY REGISTRATIONS AND APPROVA LS. 4.1 AVAILABILITY OF FINANCIAL RESOURCES AN AMOUNT OF RS.1.22 CRORES HAS BEEN RECEIVED INTO BANK ACCOUNT AS SHARE CAPITAL AND NOTABLY RETAINED IN CURRENT ACCOUNT SIG NIFYING THE INTENTION OF THE APPELLANT KEEP HIMSELF IN A STATE OF READINESS FOR BUSINESS EXPENDITURE. (PAPER BOOK PAGE NO. 69) 4.2 APPOINTMENT OF PERSONNEL THE PARENT COMPANY HAD APPOINTED A MANAGING DIRECTO R ON 11 SEPTEMBER 2014, TO INITIATE THE INCORPORATION OF THE APPELLAN T COMPANY AND TO FURTHER TAKE ALL STEPS NECESSARY FOR SETTING UP AND RUNNING THE BUSINESS. HE HAS UNDERTAKEN A SET OF TASKS INCLUDING PRELIMINARY DISCUSSIONS WI TH SUPPLIERS & CUSTOMERS, APPOINTMENT OF SUPPORT STAFF, AND OBTENTION OF STAT UTORY APPROVALS. AN EXECUTIVE ASSISTANT HAS ALSO BEEN APPOINTED ON 17-1 1-2014. (PAPER BOOK PAGE NO. 41) (PAPER BOOK PAGE NO. 117) 4.3 LEASING OF PREMISES AS A COST OPTIMISATION PLAN IN THE INITIAL STAGES O F BUSINESS, THE APPELLANT HAD LEASED OUT A RESIDENTIAL CUM OFFICE PREMISES, FOR B EING USED TO RUN THE ACTIVITIES OF BUSINESS. (PAPER BOOK PAGE NO. 101) 4.4 OBTENTION OF STATUTORY APPROVALS THE APPELLANT HAS OBTAINED ALL THE NECESSARY STATUT ORY REGISTRATIONS AND APPROVALS NECESSARY THEREBY ESTABLISHING THE APPOIN TMENT OF THE STAGE OF 'SETTING UP OF BUSINESS'. 1. PAN CARD. (PAPER BOOK PAGE NO.67) ITA NO.2301/CHNY/2018 :- 4 -: 2. IMPORT EXPORT CODE ON 25-11-2014. (PAPER BOOK PA GE NO.137) 3. CST REGISTRATION ON 20-11-214. (PAPER BOOK PAGE NO.125) 4. TNVAT REGISTRATION ON 20-11-2014. (PAPER BOOK PA GE NO.123) 5. THE REVENUE AUTHORITIES HAD OVERTLY MISGUIDED THEMS ELVES INTO BELIEVING THAT BILLING AND INFLOW OF REVENUE IS MANDATORY TO SIGNAL THE COMMENCEMENT OF PREVIOUS YEAR, THEREBY FAILING TO DEMARCATE THE FINE LINE BETWEEN 'SETTING UP OF BUSINESS' AND 'COMMENCEMENT OF BUSINESS'. 6. THE ORDER OF THE LEARNED APPELLATE COMMISSIONER HAS RELIED ON THE OBSERVATION OF THE ASSESSING OFFICER WHICH FAILS DUE TO FOLLOWING REASONS: 6.1 THE LEARNED ASSESSING OFFICER HAS MENTIONED THAT IN PARA 23 OF JURISDICTIONAL COURT'S ORDER IN ASCENDAS IT PARK CASE (SUPRA). THE L EARNED A.O. HAS MISUNDERSTOOD TO THE OPENING SENTENCE IN THE ORDER S UGGESTING THE YARDSTICK TO BE ADOPTED IN DECIDING THE STATUS OF 'SET UP BUSINE SS'. THE HONOURABLE BENCH HAS CONCLUDED THE SAME PARAGRAPH ENDS BY LAYING EMP HASIS ON 'SET UP' OF BUSINESS FOR THE ALLOWABILITY, AND GONE A STEP AHEA D EQUATING IT TO COMMENCEMENT OF BUSINESS. THIS HAS ESCAPED THE PART IAL, BUT CRUCIAL ATTENTION OF THE REVENUE AUTHORITIES. 6.2 THE ORDER OF THE LEARNED ASSESSING OFFICER REFERENCE TO A DISCLOSURE IN DIRECTORS REPORT IS MISCONSTRUED IN SO FAR AS THAT THESE ARE ROUTINE DISCLOSURES MADE IN COMMERCIAL CONTEXT COMMENCEMENT OF BUSINESS ACTIVITIES. THE REPORT MERELY MENTIONS 'BUSINESS ACTIVITIES ARE YET TO BE COMMENCED' AND DOES NOT DWELL INTO THE LEGALITIES ON WHETHER THE BUSINESS H AS BEEN SET UP OR NOT. (PAPER BOOK PAGE NO. 179) FURTHER THE DELHI HIGH COURT IN D HOOMKETU BUILDERS SET ASIDE THE CONTENTION OF DEPARTMENT WHICH RELIED ON COMMENTS IN TAX AUDIT REPORT REGARDING NON COMMENCEMENT OF BUSINESS, STAT ING THAT TO BE IRRELEVANT BECAUSE OF THE DISTINCTION BETWEEN THE COMMENCEMENT OF BUSINESS AND SETTING UP OF THE SAME. 6.3 THE ORDER MENTIONS THAT DIRECTOR SALARY COULD BE 'AN YTHING BUT TOWARDS COMMENCEMENT OF BUSINESS'. WHILE THIS COULD BE TRUE WITH RESPECT TO A DIRECTOR WHO HAS EQUITY STAKE IN A CLOSELY HELD COMPANY, IN THE APPELLANT'S CASE THE DIRECTOR IS AN EMPLOYEE APPOINTED UNDER CONTRACT AS A KEY MANAGEMENT PERSON (KMP) TO SET UP THE BUSINESS & RUN THE BUSINESS, AND IS NOT A PROMOTER. . 7. A READING OF PARA 7 OF THE ORDER OF THE LEARNED CIT (APPEALS) CLEARLY DEMONSTRATE THAT HE HAS UPHELD THE ORDER THE A.O. BAS ED ONLY ON FOLLOWING ASPECTS. A) THE TEST OF WHETHER BUSINESS OPERATIONS HAVE STARTED GETS ESTABLISHED ONLY WHEN INCOME IS EARNED. B) THE ASSESSEE HAS NOT GIVEN PROOF OF MANUFACTURING / TRADING ACTIVITY. C) DISCLOSURE IN DIRECTOR'S REPORT THAT NO BUSINESS ACTIVITIES WERE CONDUCTED. (PAPER BOOK PAGE NO. 13) WHILE EXISTENCE THE ABOVE ASPECTS PROVE SET UP OF B USINESS, THE COROLLARY IS NOT TRUE. IN OTHER WORDS A BUSINESS WHICH HAS BEEN 'SET UP' NEED NOT CARRY ALL THESE ATTRIBUTES. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE RELIED O N THE WISDOM BESTOWED THROUGH JUDGEMENTS OF THE VARIOUS HONOURABLE COURTS , INCLUDING JURISDICTIONAL COURT, TO CAREFULLY ASSESS WHETHER BUSINESS HAS BEE N SET UP, INSTEAD OF RELYING ON HIS OWN SURMISE ABOUT COMMENCEMENT OF BUSINESS A CTIVITY. 8. THE ORDER OF THE LEARNED APPELLATE AUTHORITY IN PARA 8 (PAPER BOOK PAGE NO. 15) HAS CONCLUDED THAT THE EXPENSES BEING LEGITIMATE OUGHT TO BE AVAILABLE FOR BEING SET OFF AGAINST FUTURE INCOMES. THE DEPAR TMENT HAS THUS CONCLUDED THE NATURE OF EXPENSES TO BE REVENUE IN NATURE. IN AS MUCH AS THESE EXPENSES ARE ALLOWED TO BE WRITTEN OFF OVER PERIOD OF TIME IN THE ORDER, IT ITA NO.2301/CHNY/2018 :- 5 -: SERVES NO PURPOSE TO FORCE THE APPELLANT TO DEFER T HE CLAIM OVER A PERIOD OF TIME AS MENTIONED IN THE ORDER. THE WHOLE EXERCISE I S TOTALLY REVENUE NEUTRAL UNDER A GOING CONCERN CONCEPT. 9. THE APPELLANT FURTHER SUBMITS THE OBSERVATIONS IN T HE FOLLOWING JUDGEMENTS WHICH SUPPORTS THE CONTENTION OF THE APPELLANT. 9.1 IN ASCENDAS IT PARK CHENNAI LTD, PARA 21 OF THE ORDE R, THE HONOURABLE JURISDICTIONAL COURT OBSERVED THAT ONE WOULD HAVE T O CONSTRUE THE DATE OF SETTING UP OF BUSINESS AS BEING THE INITIAL STAGE I N THE CHAIN OF EVENTS LEADING TO FULL FLEDGED BUSINESS OPERATIONS. IN PARA 25 OF THE SAME JUDGEMENT, THE ASSESSEE HAVING TRAVERSED BEYOND STAGE OF EXPLORATO RY ACTIVITY WAS IN FACT ENGAGED IN ACTIVITY THAT WAS INTEGRAL TO PROFIT EAR NING APPARATUS. 9.2 IN CIT VS AXIS EQUITY ITA APPEAL NO. 1204 OF 2014, THE BOMBAY HIGH COURT ALIGNED WITH ITS EARLIER DECISION IN THE CASE OF WE STERN INDIA VEGETABLE PRODUCTS LTD. WHEREIN IT WAS HELD THAT BUSINESS IS SAID TO H AVE BEEN SET UP WHEN IT IS ESTABLISHED AND READY TO COMMENCE, AND THAT ALL EXP ENSES INCURRED DURING THE INTERREGNUM BETWEEN SETTING UP OF BUSINESS AND COMM ENCEMENT OF BUSINESS WOULD BE PERMISSIBLE DEDUCTIONS. 9.3 THE DELHI HIGH COURT JUDGEMENT IN THE CASE OF CAREF OUR WC & C INDIA (P) LTD. IN A CASE IDENTICAL TO THE APPELLANT ((I.E) A TRADIN G ENTITY) HAD NOTED THE SEQUENCE OF KEY EVENTS LIKE EMPLOYMENT OF KEY PERSO NS, OPENING OF BANK ACCOUNT, INCURRING OF ROUTINE BUSINESS EXPENSE, DIS CUSSIONS WITH CUSTOMERS ETC. CONSTITUTED 'SETTING UP OF BUSINESS' THOUGH ACTUAL SALE AND PURCHASE HAPPENED IN THE SUBSEQUENT YEAR. 9.4 IN AN IDENTICAL CASE OF TRADING ACTIVITY IN THE CAS E OF SAMSUNG INDIA ELECTRONICS, THE DELHI HIGH COURT HELD THAT THE EXPRESSION SETTI NG UP MEANS, AS DEFINED IN OXFORD DICTIONARY, TO PLACE ON FOOT OR ESTABLISH, A ND IS IN CONTRADISTINCTION TO 'COMMENCE'. 9.5 IN THE RECENT CASE OF NORTH STAR TECH PARK PVT. LTD ., THE ITAT, AHMEDABAD IN IT ORDER ON 3 RD OCTOBER 2018 CONCLUDED IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS RECRUITED EMPLOYEES, AND THE ASSE SSEE HAS REALISED INCOME IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR. 9.6 THE DELHI HIGH COURT IN CIT VS ARCANE DEVELOPERS (P ) LTD. UPHELD THE RATIO THAT SETTING UP BUSINESS TAKES PLACE WHEN BUSINESS IS RE ADY AND FIRST STEPS ARE TAKEN. 9.7 IN THE CASE OF DHOOMKETU BUILDERS THE DE LHI HIGH COURT HAS CATEGORICALLY EMPHASISED THE NEED TO DISTINGUISH BE TWEEN COMMENCEMENT OF BUSINESS AND SETTING UP OF BUSINESS WHILE RULING IN FAVOUR OF THE ASSESSEE. 9.8 THE DELHI ITAT IN THE CASE OF JCDECAUX ADVERTISING INDIA (P) LTD. ARTICULATED THREE STAGES IN BUSINESS OPERATION VIZ. (I) SETTING UP (II) POST SETTING UP BEFORE COMMENCEMENT (III) COMMENCEMENT AND THEREAFTER, WHIL E HOLDING THAT IN THE CASE OF A TRADER, SETTING UP OF A BUSINESS MEANS TH E STAGE UP TO WHICH PLACE OF BUSINESS IS ACQUIRED AND THINGS NECESSARY TO START TRADING ARE DONE. 9.9 BESIDES THIS THERE ARE SEVERAL JUDGEMENTS SOME OF W HICH IS GIVEN BELOW, SUPPORTING THE CONTENTIONS OF THE APPELLANT. 1. CIT VS SARABHAI MANAGEMENT CORPORATION (1991) 192 ITR 151 (SC). 2. CIT VS WHIRLPORL INDIA LTD (2009) 318 ITR 347. 3. CIT VS ESPN SOFTWARE INDIA (P) LTD., (2008) 301 IT R 368 (DELHI). 4. CIT VS SAUER DANFOSS (P) LTD. (2012) 208 TAXMANN 5 0 (DELHI). 5. CIT VS FRANCO TOSI INGEGNARIA (2000) 241 ITR 168 (MADRAS). 6. CIT VS ASPENTECH INDIA (P) LTD. (2010) 187 TAXMANN 25 (DELHI). ITA NO.2301/CHNY/2018 :- 6 -: FOR ALL THE ABOVE REASONS, THE APPELLANT PRAYS THAT THE HONOURABLE TRIBUNAL MAY BE PLEASED TO PASS AN ORDER AS DEEMED APPROPRIATE ON T HE MERITS OF THE CASE. 4. IT WAS A SUBMISSION THAT THE ASSESSEE COMPANY WA S INCORPORATED ON 19.09.2014 AND THE ASSESSEE HAD INCURRED EXPENDITUR E TO THE EXTENT OF RS.15,12,593/- TOWARDS EMPLOYEE BENEFIT EXPENSES AND RS.32,24,751/- TOWARDS OTHER EXPENSES, TOTALING TO RS.47,37,344/ -. IT WAS A SUBMISSION THAT ON THE GROUND THAT THE DIRECTORS REPORT FOR T HE FINANCIAL YEAR 2014- 15 SHOWED THAT THE BUSINESS ACTIVITIES OF THE ASSES SEE COMPANY WERE YET TO START, THE AO HAD DISALLOWED THE ASSESSEES CLAI M OF REVENUE EXPENDITURE. IT WAS A SUBMISSION THAT IN VIEW OF T HE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF M/S.ASCENDAS IT P ARK CHENNAI LTD., REFERRED TO SUPRA, THE ASSESSEES CLAIM IS LIABLE T O BE ALLOWED. HERE, IT MUST BE MENTIONED THAT VARIOUS OTHER CASE LAWS HAVE BEEN QUOTED BY THE ASSESSEE IN ITS WRITTEN SUBMISSIONS, BUT NONE OF TH EM WERE DISCUSSED DURING THE COURSE OF THE HEARING. 5. IN REPLY, THE LD.DR SUBMITTED THAT BEFORE THE AO ALSO THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF M/S.ASCENDAS IT PARK CHENNAI LTD., HAD BEEN CITED AND THE SAME HAD BEEN DISTINGUISHED CLEARLY IN PAGE NOS.4 & 5 OF THE ASSESSMENT ORDER. IT WAS A FURTHER SUBM ISSION THAT THE ASSESSEE HAS NOT PRODUCED ANY PROOF OF HAVING DOING ANY SPECIFIC BUSINESS ACTIVITY DURING THE RELEVANT ASSESSMENT YEAR. ITA NO.2301/CHNY/2018 :- 7 -: 6. ON A SPECIFIC QUERY FROM THE BENCH, WHAT IS THE NATURE OF ACTIVITY OF THE ASSESSEE, IT WAS SUBMITTED THAT THE ASSESSEE IM PORTS THE NAVIGATION EQUIPMENTS AND SUPPLY IT TO ORIGINAL EQUIPMENT MANU FACTURERS (IN SHORT OEMS) WHEN ASKED, THE LD.AR AS TO THE DATE OF THE FIRST IMPORT TO WHICH THE LD.AR SUBMITTED THAT THE FIRST IMPORT WAS IN JU NE, 2016 AND THE FIRST SALE WAS IN JULY, 2015. IT WAS A SUBMISSION THAT T HE MANAGING DIRECTOR APPOINTED WAS AN EMPLOYEE AND WAS NOT A SHAREHOLDER . 7. WE HAVE ALSO PERUSED THE P&L A/C, BALANCE SHEET OF THE ASSESSEE COMPANY FOR THE YEAR ENDED 31.03.2015 WHICH WAS SHO WN IN PAGE NOS.179 TO 223 OF THE PAPER BOOK. THE DIRECTORS RE PORT WAS AT PAGE NO.179. IN THE DIRECTORS REPORT, UNDER THE HIGHLIG HTS OF PERFORMANCE, IT HAS BEEN CATEGORICALLY ADMITTED THAT THE YEAR ENDED 31.03.2015 IS THE FIRST YEAR OF OPERATION OF THE ASSESSEE COMPANY AND THE BUSINESS ACTIVITIES ARE YET TO BE COMMENCED. IT HAS ALSO MENTIONED THA T THE DIRECTORS ARE CONFIDENT TO COMMENCE THE BUSINESS ACTIVITIES SOON. PAGE NO.181 IS THE EXTRACT OF THE ANNUAL RETURN FOR THE YEAR ENDED 31. 03.2015 UNDER THE COMPANIES ACT. THE TURNOVER OF THE ASSESSEE COMPAN Y HAS BEEN SHOWN AT NIL. PAGE NO.193 IS THE STATEMENT OF P&L A/C FOR THE YEAR ENDED 31.03.2015. THE REVENUE IS SHOWN AT NIL. THE EXCI SE DUTY (PRODUCTS WHICH HAVE DEALT WITH BY THE ASSESSEE BEING AN EXCI SABLE PRODUCT) IS SHOWN AT NIL. OTHER INCOME BEING INTEREST INCOME S HOWN AT PAGE NO.129. SALARIES ARE SHOWN AT 13,51,285/-. STAFF WELFARE I S SHOWN AT RS.1,61,308/-. THERE WERE NO DETAILS ABOUT NUMBER OF EMPLOYEES. THE ITA NO.2301/CHNY/2018 :- 8 -: ASSESSEE IS DEALING WITH M/S.HYUNDAI MOTOR INDIA LT D., AND THE SALARY PAYMENT IS TO ONLY ONE EMPLOYEE BEING THE DIRECTOR. THE DECISION THE CASE OF ASCENDAS IS NOT APPLICABLE IN THE ASSESSEE S CASE AS THE PRIMARY REQUIREMENT OF FUNDS AND THE CERTIFICATE FOR INFLOW HAS BEEN RECEIVED ONLY ON 28.03.2015 AND NOTHING HAS BEEN SHOWN TO PROVE C OMMENCEMENT OF BUSINESS. THUS, CLEARLY NOTHING HAS BEEN SHOWN THA T THE ASSESSEE HAS STARTED ANY BUSINESS ACTIVITY DURING THE RELEVANT A SSESSMENT YEAR. THIS BEING SO, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE LD.CIT(A) AND CONSEQUENTLY, UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF JUNE, 2019, IN CHENNAI. SD/- SD/- ( . ) ( S. JAYARAMAN ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 2 /DATED: 10 TH JUNE, 2019. TLN + )34 54 /COPY TO: 1. ( /APPELLANT 4. 6 /CIT 2. )*( /RESPONDENT 5. 4 ) /DR 3. 6 ( ) /CIT(A) 6. /GF