M/s. Kopojis, Meerut V. CIT, Meerut

ITA 3224/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82058 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR PI YUSH CHAWLA; SILVIA RAJPAL
• Assessee Lawyers: YOGESH VERMA
• Keywords: Depreciation; Business expenditure
• Section: 143(3); 37(1); 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G. D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 3224 /DEL/2011 (ASSESSMENT YEAR: 2008 - 09) DCIT CIRCLE - 4(1), ROOM NO. 407, 4 TH FLOOR, C.R. BUILDING , IP ESTATE, NEW DELHI VS. JUBILANT OFFSHORE DRILLING PVT. LTD., 1517, 1TH FLOOR, DEVIKA TOWER, NEHRU PLACE, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH VERMA, CIT DR RESPOND ENT BY: PAWAN KUMAR, PIYUSH CHAWLA & MS. SILVIA RAJPAL, CA O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - VII, NEW DELHI DATED 20.04.2011, FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS: - 01. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 02. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 1,69,72,374/ - BEING THE PRE - OPERATIVE EXPENSES. 03. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 2,90,854/ - MADE U/S 35D BEING THE EXPENSES INCURRED FOR INCREASING TH E AUTHORIZED SHARE CAPITAL. PAGE NO. 2 3.1 THE LD CIT(A) IGNORED THE FINDING RECORDED BY THE ASSESSING OFFICER AND THE FACT THAT THE EXPENSE IN QUESTION IS CAPITAL IN NATURE AND IS NOW ALLOWABLE AS REVENUE EXPENSES. 04. THE CRAVES LEAVE TO ADD, TO ALTER, OR TO AMEN D ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 3. APROPOS GROUND NO. 2 AND 2.1 ; DELETION OF ADDITION OF RS. 1,69,72,374 / - MADE ON ACCOUNT OF PRE - OPERATIVE EXPENSES WHEN THE ASSESSEE HAD NOT STARTED ITS BUSINESS DURING THE RELEVANT Y EAR. 4. BOTH THE GROUNDS ARE TAKEN TOGETHER BECAUSE BOTH ARE INTER - CONNECTED. 5 . BRIEF STATED THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 WHICH IS ENGAGED INTER - ALIA IN THE BUSINESS OF EXPLORATION AND PRODUCTION OF OIL AND GAS. FOR THE ASSESSMENT YEAR 2008 - 09, THE APPELLANT FILED ITS RETURN OF INCOME DECLARING NIL INCOME AFTER SET - OFF OF BROUGHT FORWARD LOSSES AND DEPRECATION OF RS. 1,23,42,862/ - . THE RETURN OF INCOME WAS THEREAFTER PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1956 (HEREINAFTER THE ACT) . THE RETURN OF INCOME WAS SUBSEQUENTLY SELECTED FOR SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WHICH WAS COMPLETED ON 23.12.2010 DETERMINING THE TOTAL INCOME AT RS. 1,53,49,579/ - AFTER MAKING DISALLOWANCE IN RESPECT OF (I) PREOPERATIVE EXPENSES TO THE EXTENT OF RS. 1,69,72, 3 74/ - AND (II) ROC FEE TO THE EXTENT OF RS. 2,90,854/ - AND AFTER SET - OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION OF RS. 1,42,56,511/ - . 6 . THE LD DR TOOK OUR ATTE NTION TO ANNEXURE - I AT PAGE 36 OF THE PAPER BOOK WHICH SHOWS PARTICULARS OF DEPRECIATION ALLOWABLE AS PER THE ACT IN WHICH THE FOLLOWING PARTICULARS WERE ENUMERATED (I) FURNITURE & FIXTURES (II) COMPUTERS ( III ) BUILDINGS (TEMPORARY) ( I V) OFFICE EQUIPMENT (V) VEHICLE TO POINT OUT THAT THERE WAS NO COMMENCEMENT OF BUSINESS AND WONDERED AS TO WHAT WAS ON RECORD OF THE ASSESSEE TO SHOW THAT BUSINESS HAS COMMENCED TO CLAIM THE EXPENDITURE AND DEPRECIATION. THE LD DR SUBMITTED THAT THE ASSESSEE COMPANY HAVE NOT COMMENCED ITS PRODUCTION FOR THE PURPOSE OF COMMERCIAL TRANSACTION AND THEREFORE, THEN ONLY IT CAN BE SAID TO HAVE COMMENCE D ITS BUSINESS . ACCORDING TO THE LD DR, THIS COMPANY IS STILL IN ITS NASCENT STATE OF BUSINESS AND BY ANY STRETCH OF IMAGINATION CAN IT BE SAID TO HAVE COMMENCED ITS BUSINESS . AS PER HIM, THE COMPANY HAS ONLY CARRIED OUT PRELIMINARY EXPLORATION WORK PAGE NO. 3 THEREFORE, ASSESSING OFFICER WAS RIGHT TO HOLD THAT THE BUSINESS OF THE ASSESSEE COMPANY WAS NOT SET UP AND THEREFORE THE EXPENSES INCURRE D PRIOR TO SETTING UP OF A BUSINESS WAS NOT ALLOWABLE. ON THE OTHER HAND, THE LD AR SUBMITTED THAT FOR THE PRECEDING ASSESSMENT YEAR S 2006 - 07 AND 2007 - 08 , SCRUTINY ASSESSMENT WAS COMPLETED U/S 143( 3 ) OF THE ACT . AGAIN IN THE PREVIOUS ASSESSMENT YEAR 200 5 - 0 6 , WHICH WAS THE FIRST YEAR OF FILING OF THE RETURN OF INCOME BY THE ASSESSEE , T HE RETURN WAS PROCESS ED U/S 143(1) OF THE ACT IN WHICH NO SCRUTINY ASSESSMENT WAS DONE U/S 143(3) OF THE ACT , T HE ASSESSEES RETURNED INCOME WAS ACCEPTED BY THE ASSESSING OFFIC ER AND THIS VERY CLEARLY STRENGTHENS THE INFERENCE THAT THE CLAIM OF THE ASSESSEE REGARDING IDENTICAL EXPENDITURE WAS ALLOWED BY THE ASSESSING OFFICER IN THE PRECEDING ASSESSMENT YEARS. THEREFORE IT IS CONTENDED BY THE LD AR THAT IN THE ABSENCE OF ANY CHAN GE EITHER IN FACT OR IN LAW, PRINCIPLES OF CONSISTENCY ALONE CAN BE MADE A BASIS TO UPHOLD THE CLAIM OF THE ASSESSEE COMPANY. TO SUPPORT HIS SAID CONTENTION HE CITED THE FOLLOWING CITATION BEFORE US: - RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC), CI T VS. RAJEEV GRINDING MILLS (2005) 279 ITR 86 (DELHI), COMMISSIONER OF INCOME - TAX VS. NEO POLY PACK (P) LTD (2000) 245 ITR 492 (DEL), CWT VS. RKKR INTERNATIONAL (P) LTD (2005) 145 TAXMAN 322 (DELHI), APEX COURT IN UNION OF INDIA VS. SATISH PANNALAL SHAH (2 001) 249 ITR 221 (SC), BERGER PAINTS INDIA LTD. VS. CIT (2004) 266 ITR 99 (SC). 7. THE LD AR TOOK OUR ATTENTION TO PAGE 10 OF THE PAPER BOOK, WHEREIN, A PERUSAL OF THE ASSESSEES BALANCE SHEET AS ON 31.03.2008, REVEALS THAT UNDER THE HEADING APPLICATION O F FUND, CAPITAL WORK IN PROGRESS, SCHEDULE 5, EXPLORATION COST HAS BEEN SHOWN IN SCHEDULE V AND AN AMOUNT OF RS. 2,58,15,33,859 / - (RS. 258 CRORES) IS REFLECTED AS EXPENDITURE ; THIS WAS POINTED OUT BY THE LD AR TO BUTTRESS THE FACT THAT THE ASSESSEE COMPANY HAS ALREADY INCURRED HUGE EXPENDITURE FOR EXPLORATION COST FOR THEIR BUSINESS AND PRODUCTION OF OIL AND GAS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD AND HAS GONE THROUGH THE JUDGMENTS REFERRED BY THE RESPECTIVE PARTIES. IT IS A WELL SETTLED LAW THAT IN THE ABSENCE OF ANY CHANGE EITHER IN FACT OR IN LAW, PRINCIPLES OF CONSISTENCY ITSELF CAN BE MADE A BASIS TO UPHOLD THE CLAIM OF THE ASSESSEE COMPANY. IT HAS BEEN OBSERVED BY THE APEX COURT IN RADHASOAMI SATSANG (SUPRA) THAT THOUGH THE PRINCIPLES OF RES - PAGE NO. 4 JUDICATA DO NOT APPLY TO INCOME - TAX PROCEEDINGS, PARTICULARLY WHEN EACH ASSESSMENT YEAR IS AN INDEPENDENT UNIT, BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. SIMILAR VIEW HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. RAJEEV GRINDING MILLS (2005) 279 ITR 86 (DELHI). SIMILAR VIEW WAS EXPRESSED BY THE APEX COURT IN UNION OF INDIA VS. SATISH PANNALAL SHAH (2001) 249 ITR 221 (SC). WE NOTE THAT IN THE FIRST YEAR FILING OF THE RETURN OF INCOME OF THE ASSESSEE, IN THE AS SESSMENT YEAR 2005 - 06, THE RETURN WAS PROCESSED U/S 143)1) OF THE ACT AND NO SCRUTINY ASSESSMENT WAS DONE U/S 143(3) OF THE ACT. THE RETURN OF INCOME WAS THEREFORE ACCEPTED BY THE ASSESSING OFFICER. THEREAFTER, WE FIND THAT THE ASSESSEES RETURNED INCOME W AS ACCEPTED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. IN THE SAID CIRCUMSTANCES CIT(A) IS CORRECT TO HAVE FOUND THAT THE CLAIM REGARDING THE IDENTICAL EXPENSES WAS ALLOWED B Y THE ASSESSING OFFICER IN THE PRECEDING YEAR. THESE FACTS COULD NOT DISPUTED BY THE LD DR FOR THE REVENUE. 9. IT WAS ALSO RIGHTLY TAKEN NOTE BY THE LD CIT(A) THAT THE BUSINESS ACTIVITY OF THE ASSESSEE CONSISTS OF THREE STAGES: - THE FIRST STAGE RELATES TO THE EXPLORATION; THE SECOND STAGE ACTIVITY RELATES TO THE DEVELOPMENT; AND THE THIRD STAGE RELATES TO THE COMMERCIAL PRODUCTION. THE FIRST IN POINT OF TIME LAYS THE FOUNDATION FOR THE SECOND ACTIVITY AND THE SECOND ACTIVITY WHEN COMPLETED LAYS THE FOUNDAT ION FOR THE THIRD ACTIVITY. IT IS TO BE NOTED THAT THE APPELLANT IS IN THE BUSINESS OF EXPLORATION, PRODUCTION AND DEALING IN MINERALS, OILS, GAS AND OTHER RELATED BY - PRODUCTS OF OIL AND GAS IN INDIA OR ELSEWHERE. IT IS ALSO TO BE NOTED THAT THE THREE ACTI VITIES COMBINED TOGETHER CONSTITUTED THE BUSINESS OF THE ASSESSEE. EACH ONE OF THE ACTIVITIES WAS AS MUCH ESSENTIAL FOR THE PURPOSE OF CARRYING OUT BUSINESS OF THE ASSESSEE. EACH ONE OF THE ACTIVITY CONSTITUTES AN INTEGRAL PART OF THE BUSINESS OF THE ASSES SEE. THE BUSINESS CONSISTED OF A CONTINUOUS PROCESS OF THESE THREE ACTIVITIES AND WHEN THE FIRST ACTIVITY WAS STARTED WITH A VIEW TO EMBARKING UPON THE SECOND AND THEN THE THIRD ACTIVITIES, IT PAGE NO. 5 CLEARLY AMOUNTED TO COMMENCEMENT OF THE BUSINESS. BUSINESS IS N OTHING MORE THAN A CONTINUOUS COURSE OF ACTIVITIES AND ALL THE ACTIVITIES WHICH GO TO MAKE UP THE BUSINESS NEED NOT BE STARTED SIMULTANEOUSLY IN ORDER THAT THE BUSINESS MAY COMMENCE. THE BUSINESS WOULD COMMENCE WHEN THE ACTIVITY WHICH IS FIRST IN POINT OF TIME AND WHICH MUST NECESSARILY PRECEDES THE OTHER ACTIVITIES IS STARTED AS HELD BY HONBLE JUSTICE P. N. BHAGWATI IN THE CASE OF CIT VS. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. 91 ITR 170 (GUJRAT HIGH COURT). THE SAID DECISION OF THE HONBLE GUJRA T HIGH COURT WAS ALSO AFFIRMED BY THE APEX COURT IN THE CASE OF CIT VS. SARABHAI MANAGEMENT CORPORATION LTD. (1992) 102 CTR (SC) 164 AND THE SAID DECISION HAS RECENTLY BEEN FOLLOWED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CIT VS. ASPENTECH INDI A (P) LTD. 187 TAXMANN 25 (DELHI). 10. IN THE INSTANT CASE WE FIND THAT ONE OF THE ESSENTIAL ACTIVITY NAMELY LICENSE/ RIGHT TO EXPLORE THE BLOCKS HAS BEEN GRANTED AND EXPLORATION OF BLOCKS HAS ALREADY BEEN STARTED WITHOUT WHICH NO PRODUCTION CAN TAKE PLACE . HENCE BUSINESS HAD COMMENCED AT THE STAGE WHEN LICENCE TO EXPLORE THE RESPECTIVE BLOCKS WAS GRA N TED BY THE GOVT. OF INDIA TO ASSESSEE COMPANY . 11. IT IS TO BE NOTED THAT THE EXPLORATION ACTIVITIES COMMENCED AFTER PROSPECTING, BIDDING AND ASSIGNMENT OF RIGHTS TO EXPLORE WERE GRANTED TO THE ASSESSEE BY THE GOVT. OF INDIA FOR DIFFERENT BLOCKS. HENCE, THE EXPENDITURE INCURRED AFTER COMMENCEMENT OF BUSINESS SHOULD BE ALLOWED AS BUSINESS EXPENDITURE IRRESPECTIVE OF THE FACT THAT THE ACTUAL COMMERCIAL PRODUCTI ON HAS NOT BEEN COMMENCED. CONSIDERING THE NATURE, DURATION AND COST OF THE BUSINESS OF THE APPELLANT , THE LD CIT(A) HAS RIGHTLY MADE A FINDING THAT THE ASSESSEE HAVE COMMENCED ITS BUSINESS , WHEN THE APPELLANT HAS CARRIED THE FIRST ACTIVITY BEING ASSIGNMEN T OF THE RIGHT TO EXPLORE THE BLOCK AWARDED IN THE NEW EXPLORATION AND LICENSING POLICY (NELP) AND COMMENCEMENT OF EXPLORATION ACTIVITIES THEREAFTER INCURR ED AN EXPENSE OF MORE THAN RS. 258 CRORES. THUS THE LD CIT(A) REASONS THAT THE EXPENDITURE INCURRED F OR CARRYING ON ANY OF THESE INCLUDING THE FIRST ACTIVITY IS ALSO DEDUCTIBLE IN COMPUTING THE PROFITS AND GAINS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR WHEN THE ACTIVITY IS UNDERTAKEN. PAGE NO. 6 12. A PERUSAL OF THE TABLE DEPICTING THE EXPENSES CLAIMED BY T HE ASSESSEE WHICH IS REFLECTED IN PAGE 12 OF THE LD CIT(A) ORDER SHOWS THAT NONE OF THE EXPENSES MENTIONED THEREIN ARE OF PERSONAL IN NATURE; AND THE SAID EXPENSES ARE OF REVENUE IN NATURE. EVEN OTHERWISE, THE ASSESSEE HAS CAPITALIZED ALL THE EXPLORATION C OST AND THE SAME HAVE BEEN REFLECTED AS CAPITAL WORK FOR PROGRESS IN THE BALANCE - SHEET . THE ASSESSEE HAS ONLY CLAIMED DEDUCTION OF THE EXPENSES WHICH HAVE BEEN INCURRED FOR DAY TO DAY OPERATION OF THE BUSINESS WHICH ARE ELIGIBLE FOR DEDUCTION U/S 37(1) O F THE ACT . SINCE THE ASSESSEE HAS CLAIMED DEDUCTION ONLY IN RELATION TO THE EXPENDITURE OF REVENUE IN NATURE IN THE PROFIT AND LOSS ACCOUNT, WE FIND NO INFIRMITY IN THE REASONED ORDER OF THE LD CIT(A) , THEREFORE, WE CONFIRM THE FINDING OF THE LD CIT(A) ON THIS GROUND AND DISMISS THE SAID GROUND OF APPEAL OF THE REVENUE. 13 . APROPOS GROUND NO. 3 & 3.1 DELETION OF THE ADDITION OF RS. 2,90,854/ - MADE U/S 35D BEING EXPENSES INCURRED FOR INCREASING THE AUTHORIZED SHARE CAPITAL. 14 . BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 WHICH IS ENGAGED INTER - ALIA IN THE BUSINESS OF EXPLORATION AND PRODUCTION OF OIL AND GAS. FOR THE ASSESSMENT YEAR 2008 - 09, THE APPELLANT FILED ITS RETUR N OF INCOME DECLARING NIL INCOME AFTER SET - OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION OF RS. 1,23,42,862/ - . THE RETURN OF INCOME WAS THEREAFTER PROCESSED U/S 143(1) OF THE ACT. THE RETURN OF INCOME WAS SUBSEQUENTLY SELECTED FOR SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT , WHICH WAS COMPLETED ON 23.12.2010 DETERMINING THE TOTAL INCOME AT RS. 1,53,49,579/ - AFTER MAKING DISALLOWANCE IN RESPECT OF FEE TO THE EXTENT OF RS. 2,90,854/ - MADE U/S 35D BEING INCURRED FOR INCREASING THE AUTHORIZED SHARE CAPITAL. AGGR IEVED BY THE SAID ADDITION, THE ASSESSEE FILED AN APPEAL BEFORE THE LD CIT(A), WHO WAS PLEASED TO DELETE THE SAID ADDITION. AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE ASSESSEE IS BEFORE US. 15 . ACCORDING TO THE LD DR THE ASSESSEE CLAIMED DEDUCTION U /S 35D AMOUNTING TO RS. 2,90,854/ - FOR INCREASING THE AUTHORIZED SHARE CAPITAL, WHICH WAS RIGHT LY NOT ALLOWED BY THE ASSESSING OFFICER. ACCORDING TO THE LD DR A S PER THE PROVISION OF SECTION 29 OF THE ACT, THE INCOME REFERRED TO IN SECTION 28 SHALL BE COMP UTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 30 TO 43D OF THE ACT . A PRECONDITION THAT SHOULD BE PAGE NO. 7 SATISFIED IN ORDER FOR AN INCOME TO BE CHARGED U/S 28 I.E. THE ASSESSEE SHOULD HAVE CARRIED ON AT ANY TIME, BUSINESS OR PROFESSION DURING THE PR EVIOUS YEAR OF THE ASSESSMENT YEAR. IN THE INSTANCE CASE, ACCORDING TO THE LD DR, SINCE, THE ASSESSING OFFICER HAS CATEGORICALLY HELD THAT THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS, THE SAID PRECONDITION IS NOT SATISFIED AND CONSEQUENTLY THE COMPUTATION MACHINERY FAILS IN THE INSTANT CASE, AND THEREFORE THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED RS. 2,90,854/ - AND HELD THAT THE SAID EXPENSE AS CAPITAL IN NATURE. ON THE OTHER HAND, THE LD AR SUBMITTED THAT THE RETURN SUBMITTED BY THE ASSESSEE WAS ACCEPTE D BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 WHICH WAS COMPLETED AFTER SCRUTINY U/S 143(3) OF THE ACT. SO IT CAN BE CONCLUDED THAT THE CLAIM REGARDING PRELIMINARY EXPENSES/ IDENTICAL EXPENSES WERE ALLOWED BY THE ASSESSING OFFICER AS REVENUE EXPENSE IN THE PRECEDING ASSESSMENT YEARS ; AND SINCE THERE IS NO CHANGE EITHER IN FACT OR IN LAW, BASED ON THE PRINCIPLES OF CONSISTENCY THE ASSESSING OFFICER SHOULD HAVE UPHELD THE CLAIM OF THE ASSESSEE COMPANY. MOREOVER IT IS A FACT THAT THE ASSESSEE COMPANY HAS COMMENCED ITS BUSINESS AND THEREFORE THE BASIS OF DISALLOWANCE BY THE ASSESSING OFFICER ON THE GROUND THAT IT HAS NOT COMMENCED ITS BUSINESS IS ITSELF IS FACTUALLY ON A WRONG FOOTING THEREFORE IT IS NOT TENABLE IN THE EYES OF LAW. THER EFORE ACCORDING TO THE LD AR THIS DISALLOWANCE WAS CORRECT LY DELETED BY THE LD CIT(A) AND THE SAID ORDER OF THE LD CIT(A) NEED NOT BE INTERFERED BY US . 16 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. 17 . WE FIND THAT THE PREDECESSORS OF THE ASSESSING OFFICER, HAS CONSECUTIVELY HELD IN THE PREVIOUS ASSESSMENT YEARS, WHICH WERE COMPLETED U/S 143(3) THAT THE ASSESSEE COMPANY HAS COMMENCED ITS BUSINESS AND MOREOVER WE HAVE ALREADY CONFIRMED THE FINDING OF THE LD CIT(A) THAT THE ASSESSEE COMPA NY HAS ALREADY COMMENCED EXPLORATION ACTIVITIES ON THE BLOCKS AWARDED TO IT IN THE RELEVANT ASSESSMENT YEAR WHICH WAS ADJUDICATED BY US IN GROUND NO 2 SUPRA . 18 . IN THE LIGHT OF THE SAID FINDING AND THE FACT THAT IN THE PRECEDING YEARS TOO THE SAID CLAIM OF THE ASSESSEE COMPANY WAS ALLOWED BY THE ASSESSING OFFICER ; AND SINCE THERE IS NO MATERIAL ON RECORD TO SUGGEST OR SUPPORT ANY CHANGE IN THE CHARACTER OR NATURE OF THE SAID EXPENSE INCURRED BY THE ASSESSEE COMPANY , WE DO NOT FIND ANY PAGE NO. 8 INFIRMITY IN THE ORD ER OF THE LD CIT(A) DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S 35D OF THE ACT IN RESPECT OF EXPENSES OF RS. 2,90,854/ - INCURRED FOR INCREASING THE AUTHORIZED SHARE CAPITAL. 19 . GROUND NO.1 AND 4 ARE GENERAL IN NATURE AND THEREFORE DISMISSE D. 20. IN THE RESULT THE APPEAL PREFERRED BY THE REVENUE IS DISMISSED AND THE ORDER PASSED BY THE LD CIT(A) IS CONFIRMED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 .01.2014. - SD/ - - SD/ - ( G. D. AGARWAL) (A. T. VARKEY) HONBLE VICE PRESIDENT JUDICIAL MEMBER DATED 14 /01/2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI