DCIT, Circle - 8(1), Kolkata , Kolkata V. M/s. Magma ITL Finance Limited , Kolkata

ITA 243/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6112 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C MONDAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, AM] I.T.A. NO. 243/KOL/2018 ASSESSMENT YEAR: 2008-09 DCIT CIRCLE 8(1) KOLKATA............................................................APPELLANT P-7, CHOWRINGHEE SQUARE, 5 TH FLOOR, KOLKATA 700 069. M/S. MAGMA ITL FINANCE LTD.......................RESPONDENT 24, PARK STREET, MAGMA HOUSE, KOLKATA 700 016. [PAN: AAFCM 2742 R] APPEARANCES BY: SHRI D.C. MONDAL, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. SHRI RAVI TULSIYAN, FCA APPEARING ON BEHALF OF THE ASSESSEE DATE OF CONCLUDING THE HEARING : MAY 29, 2018 DATE OF PRONOUNCING THE ORDER : JULY 06 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) 5, KOLKATA DATED 15.11.2017 AND THE SOLITARY GROUND RAISED THEREIN BY THE REVENUE READS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 27,10,565/- ON ACCOUNT OF PROFESSIONAL FEE, RS. 18,58,000/- ON ACCOUNT OF PRELIMINARY EXPENSES, RS. 34,146/- ON ACCOUNT OF TRAVELLING EXPENSES AND RS. 2,02,922/- ON ACCOUNT OF AUDITORS REMUNERATION WHEREAS THE ASSESSEE COMPANY HAD NOT COMMENCED ANY COMMERCIAL OR BUSINESS OPERATIONS DURING THE RELEVANT PREVIOUS YEAR ENDING ON 31.03.2008 AND ALSO NOT SHOWN ANY BUSINESS INCOME. 2. THE ASSESSEE IN THE PRESENT CASE IS A FINANCE COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 04.07.2008 DECLARING A LOSS OF RS. 24,65,679/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 01.11.2007 TO CARRY ON THE BUSINESS OF 2 I.T.A. NO. 243/KOL/2018 ASSESSMENT YEAR: 2008-09 M/S. MAGMA ITL FINANCE LTD. FINANCE. HE NOTICED THAT THE ASSESSEE COMPANY HOWEVER HAD NOT COMMENCED ANY COMMERCIAL OR BUSINESS OPERATIONS DURING THE YEAR UNDER CONSIDERATION. HE, THEREFORE, DISALLOWED THE FOLLOWING EXPENSES CLAIMED BY THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 10.12.2010: PROFESSIONAL FEE RS. 27,10,565/- PRELIMINARY EXPENSES RS. 18,58,000/- TRAVELLING EXPENSES RS. 34,146/- AUDITORS REMUNERATION RS. 2,02,922/- 3. AGAINST THE ORDER PASSED BY THE AO UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) FOUND THAT THE ASSESSEE COMPANY HAD OBTAINED CERTIFICATE OF COMMENCEMENT OF BUSINESS FROM THE REGISTRAR OF COMPANIES DURING THE YEAR UNDER CONSIDERATION ON 19.03.2008. HE ALSO FOUND THAT AN APPROVAL WAS ALSO OBTAINED BY THE ASSESSEE COMPANY FROM RBI AS NBFC UNDER RBI ACT, 1934 SUBJECT TO FULFILMENT OF CERTAIN CONDITIONS. HE ACCORDINGLY HELD THAT THE BUSINESS OF THE ASSESSEE COMPANY OF FINANCE WAS SET UP IN THE YEAR UNDER CONSIDERATION AND BY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF WESTERN INDIA VEGETABLE PRODUCTS LTD. VS CIT 26 ITR 151, SUPREME COURT IN THE CASE OF CWT VS RAMARAJU SURGICAL COTTON MILLS LTD. 63 ITR 478, GUJARAT HIGH COURT IN THE CASE OF CIT VS SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. 91 ITR 170 AND MADHYA PRADESH HIGH COURT IN THE CASE OF PRECISION ELECTRICALS & ELECTRONICS PVT. LTD. VS CIT 176 ITR 453, HE HELD THAT ALL THE EXPENSES CLAIMED BY THE ASSESSEE COMPANY AFTER THE SETTING UP OF THE BUSINESS 3 I.T.A. NO. 243/KOL/2018 ASSESSMENT YEAR: 2008-09 M/S. MAGMA ITL FINANCE LTD. BUT BEFORE THE COMMENCEMENT OF THE BUSINESS WERE ALLOWABLE AS DEDUCTION. HE ACCORDINGLY DELETED THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY HELD BY THE LD. CIT(A) BY RELYING ON THE VARIOUS JUDICIAL PRONOUNCEMENTS DISCUSSED IN HIS IMPUGNED ORDER, WHAT IS RELEVANT FOR THE PURPOSE OF ALLOWING DEDUCTION ON ACCOUNT REVENUE EXPENSES CLAIMED BY THE ASSESSEE IS THE SETTING UP OF BUSINESS AND NOT THE COMMENCEMENT OF THE BUSINESS. ONCE THE BUSINESS IS SET UP, THE ASSESSEE BECOMES ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF REVENUE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS EVEN IF THE ACTUAL COMMENCEMENT OF BUSINESS MAY TAKE SOME TIME AND THIS PROPOSITION PROPOUNDED IN THE VARIOUS JUDICIAL PRONOUNCEMENT RELIED UPON BY THE LD. CIT(A) IS NOT DISPUTED EVEN BY THE LEARNED DR. HE HOWEVER HAS CONTENDED THAT THE CASE OF SETTING UP OF BUSINESS WAS MADE OUT BY THE ASSESSEE BY FURNISHING THE RELEVANT DETAILS AND DOCUMENTS FOR THE FIRST TIME BEFORE THE LD. CIT(A) AND THE A.O., THEREFORE, DID NOT GET ANY OPPORTUNITY TO EXAMINE THE SAME. SINCE THIS POSITION IS CLEARLY EVIDENT FROM THE RESPECTIVE ORDERS OF THE AUTHORITIES BELOW, I FIND MERIT IN THE CONTENTION OF THE LEARNED DR. ACCORDINGLY, THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. TO DECIDE THE SAME AFRESH FOR VERIFYING THE CLAIM OF THE 4 I.T.A. NO. 243/KOL/2018 ASSESSMENT YEAR: 2008-09 M/S. MAGMA ITL FINANCE LTD. ASSESSEE OF HAVING SET UP THE BUSINESS OF FINANCING DURING THE YEAR UNDER CONSIDERATION FROM THE RELEVANT RECORD. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JULY, 2018. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 06/07/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. MAGMA ITL FINANCE LIMITED, 24, PARK STREET, MAGMA HOUSE, KOLKATA 700 016. 2. DCIT CIRCLE 8(1), P-7, CHOWRINGHEE SQUARE, 5 TH FLOOR, KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA