DCIT, New Delhi V. M/s. Emirates Shipping Agencies (India) Pvt. Ltd, New Delhi

ITA 2340/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3460 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Revenue expenditure

Judgement Text

ITA NO. 2340/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2340/DEL/2010 A.Y. : 2006-07 DCIT, CIRCLE 11(1), NEW DELHI, C.R. BLDG., NEW DELHI 110 002 VS. M/S EMIRATES SHIPPING AGENCIES (INDIA) PVT. LTD., 232-B, FIRST FLOOR, PHASE-3, OKHLA INDUSTRIAL ESTATE, DELHI 110 0020 (PAN/GIR NO. : AABCE5632L) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. SATISH AGARWAL, CA DEPARTMENT BY : SH. ROHIT GARG, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 12.3.2 010 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT ON THE FACTS AND CIRCU MSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN DELETING THE DISALLOWANCE THE EXPENDITURE OF ` 47,6 6,950/-. 3. IN THIS CASE, THE ASSESSEE IS A WHOLLY OWNED SU BSIDIARY OF EMIRATES SHIPPING LINE FZE AND WORKING AS AN AGENT I N INDIA TO OPERATE THEIR BUSINESS IN INDIA. ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE HAS SHOWN A LOSS OF ` 47,66,950/-. FURTHER, ASSESSING OFFICER OBS ERVED THAT ASSESSEE ITA NO. 2340/DEL/2010 2 HAS NOT SHOWN ANY OPERATIVE INCOME. HENCE, ASSESS ING OFFICER OPINED THAT BUSINESS OF THE ASSESSEE HAS NOT COMMENC ED. HENCE, ASSESSING OFFICER HELD THAT ASSESSEE HAS INCURRED EXPENSES OF ` 25,21,777/- ON STAFF COST AND ` 21,53,227/- ON ADMIN ISTRATIVE AND OTHER EXPENSES. HE CONCLUDED THAT ASSESSEE HAS NOT SHOWN ANY RECEIPT OR OPERATIVE INCOME DURING THE YEAR. HENCE, THE BUSIN ESS OF THE ASSESSEE HAS NOT COMMENCED AND THE COMPANY WAS FORME D JUST ONE MONTH PRIOR TO END OF THE FINANCIAL YEAR. HENCE, A SSESSING OFFICER HELD THAT EXPENSES CLAIMED BY THE ASSESSEE ARE PRIO R TO COMMENCEMENT OF THE BUSINESS WHICH REQUIRES TO BE C APITALIZED. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUE AND HELD AS UNDER:- AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSMENT ORDER AND SUBMISSION MADE BY THE APPELLAN T FOLLOWING POINTS ARE NOTICED:- (I) THE APPELLANT HAS SET UP THE BUSINESS OF AGENCY AND RECRUITED 24 EMPLOYEES AT DELHI, CHENNAI AND MUMBAI. (II) THE APPELLANT HAS PUT IN PLACE THE INFRASTRUCTURE I N THE FORM OF OFFICES, COMMUNICATION AND PERSONNEL TO DELIVER SHIPPING AGENCY SERVICES AND IT WAS IN THE SATE OF READINESS TO CARRY ON THE BUSINESS. (III) THE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. HUGH ES ESCORTS COMMUNICATION LTD. 213 CTR 45 (DEL) AND C.I.T. VS. WHIRLPOOL OF INDIA LTD. 28 DTR 164 ARE DIRECTLY APPLICABLE IN THE APPELLANTS CASE. ITA NO. 2340/DEL/2010 3 THEREFORE, THE APPELLANT HAS SET UP HIS BUSINESS AN D IN VIEW OF THE DELHI HIGH COURT DECISION AS MENTIONED ABO VE THE EXPENDITURE INCURRED AFTER THE BUSINESS WAS SET UP DESERVES TO BE ALLOWED AS REVENUE EXPENDITURE. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSING OFFICER HAS TAKEN THE GROUND T HAT SINCE THE ASSESSEE HAS NOT SHOWN ANY INCOME, THE EXPENSES CAN NOT BE ALLOWED. THIS IN OUR OPINION IS NOT CORRECT LAW, BECAUSE ALL THE EXPENDITURE INCURRED AFTER THE BUSINESS HAS BEEN SET UP, NEED TO BE ALLOWED IRRESPECTIVE OF THE FACT THAT WHETHER INCOME HAS BE EN EARNED OR NOT. IN THIS CASE, WE NOTE THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT GIVEN A DETAILED FINDING AS TO THE PERIOD OF EXPENSES AS TO WHETHER THE EXPENDITURE WAS INCURRED AFTER THE BUSI NESS HAS BEEN SET UP OR NOT. IN THE ASSESSEES PAPER BOOK ALSO, WE FIND THAT THE PERIOD OF EXPENDITURE HAS NOT BEEN DETAILED AND PROVIDED. HENCE, IN OUR OPINION, THIS MATTER NEEDS TO BE SET ASIDE TO THE F ILES OF THE ASSESSING OFFICER, TO ENABLE HIM TO EXAMINE THE PERIOD IN WHICH THE IMPUGNED EXPENDITURE WAS INCURRED, IF THE SAME WERE INCURRED AFTER THE BUSINESS HAS BEEN SET UP, THE SAME HAS TO BE ALLOWED. ACCO RDINGLY, THIS ISSUE STANDS REMITTED TO THE FILES OF THE ASSESSING OFFICE R WITH THE ABOVE SAID DIRECTIONS. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. ITA NO. 2340/DEL/2010 4 7. IN THE RESULT, THE APPEAL FILED BY THE REVENU E STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/7/2011, UP ON CONCLUSION OF HEARING. SD/- SD/- [ [[ [C.L. SETHI C.L. SETHI C.L. SETHI C.L. SETHI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 29/7/2011 SRB COPY FORWARDED COPY FORWARDED COPY FORWARDED COPY FORWARDED TO: TO: TO: TO: - -- - 1. APPELLANT 2. RESPONDENT 3.CIT 4.CIT (A) 5. DR, IT AT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES