ACIT 10(1), MUMBAI V. GATTEFOSSE INDIA P. LD, MUMBAI

ITA 333/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3684 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 02-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2013
• Court: TRIBUNAL
• Department Lawyers: ANU K AGGARWAL
• Assessee Lawyers: SONALEE GODBOLE
• Keywords: Question of law; Wholly owned subsidiary

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI B.R.BASKARAN , AM & SHRI SANDEEP GOSAIN , JM ./ ITA NO. 333 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 9 - 2010 ) DCIT - 10(1), MUMBAI - 20 VS. M/S GATTEFOSSE INDIA PVT. LTD., LEVEL 12, REGUS BUSINESS CENTRE PVT. LTD., 294 CST ROAD, NEAR MUMBAI UNIVERSITY, KALINA SANTACRUZ(E), MUMBAI - 98 ./ ./ PAN/GIR NO. : A ACCG 9182 F ( / APPELLANT ) .. ( / R ESPONDENT ) /REVENUE BY : SMT. ANU K. AGGARWAL /ASSESSEE BY : MS. SONALEE GODBOLE / DATE OF HEARING : 02 / 1 2 /2015 / DATE OF PRONOUNCEMENT 04/03 201 6 / O R D E R P ER SANDEEP GOSAIN,(JM) THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15 - 10 - 2012 , PASSED BY THE CIT (A) - 21 , MUMBAI , FOR THE ASSESSMENT YEAR 200 9 - 20 10 , ON THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE BUSINESS OF THE OF THE ASSESSEE WAS SET UP DURING THE YEAR ENDED 31.03.2008 . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE FI RST SALE OF THE ASSESSEE WAS CONCLUDED IN AUGUST, 2008 AND HENCE AUGUST, 2008 SHOULD HAVE BEEN TAKEN AS THE DATE OF COMMENCEMENT OF BUSINESS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE BUSINES S OF THE ASSESSEE STARTED ON 21.08.2007, IGNORING THE FACT THAT THE FIRST SALE WAS CONCLUDED IN AUGUST, 2008. ITA NO. 333 /1 3 2 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN ALLOWING THE PROPORTIONATE EXPENSES CLAIMED BY THE ASSE SSEE IGNORING THE FACT THAT THE BUSINESS OF THE ASSESSEE STARTED IN AUGUST, 2008. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) ERRED IN ALLOWING THE TO SET OFF AND CARRY FORWARD THE BUSINESS LOS S IGNORING THE FACT THAT THE BUSINESS OF THE ASSESSEE DID NOT START TILL AUGUST, 2008. 6. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF TRADING OF LIPIDS AND EXCIPIENTS FOR PHARMA AND COSMETIC INDUSTRY. THE ASSESSEE HAD INCORPORATED AS A PRIVATE COMPANY ON JULY 18, 2007 , AS A WHOLLY OWNED SUBSIDIARY OF GATTEFOSSE HOLDING, FRANCE. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME BY WAY OF E - FILING DECLARING TOTAL INCOME AT RS. 71,29,048/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY . DURING THE ASSESSMENT PROCEEDING, THE AO OBSERVED THAT THE ASSESSEE MADE ITS FIRST SALE ON 8 TH AUGUST AND, THEREFORE , THE BUSINESS OF THE ASSESSEE WAS CONSIDERED TO BE COMMENCED FROM 8 TH AUGUST ONLY. ACCORDINGLY, T HE AO FRAMED THE ASSESSMENT DISALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE AS THE ASSESSEE HAD NOT COMMENCED ITS BUSINESS TILL 8 TH AUGUST, 2008. IN APPEA L, THE CIT(A) ALLOWED THE GRIEVANCE OF THE ASSESSEE AFTER OBSERVING AS UNDER : - 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE APPELLANT AND ALSO PAPERS FILED DURING THE COURSE OF APPELLATE PROCEEDINGS. THE ISSUE HERE TO BE DECIDED IS WHEN IS THE BUSINESS SET UP. SEC. 3 OF THE INCOME - TAX ACT PROVIDES AS UNDER: ITA NO. 333 /1 3 3 'SEC. 3 - HERE IN THE PROVISION) PREVIOUS YEAR COMMENCES FOR THE BUSINESS OR PROVISION WHEN IT IS SET UP OR WHEN NEW INCOME COMES INTO EXISTENCE.' NOW WE HAVE TO FURTHER DECIDE ON WHICH IS THE DATE OF SET UP OF THE BUSINESS. VARIOUS TESTS WERE APPLIED BY THE HIGH COURTS AND SUPREME COURT REGARDING THE ISSUE OF SET UP AND COMMENCEMENT OF BUSINESS. THE TESTS APPLIED BY THE COURTS ARE AS UNDER : (I) WESTERN INDIA VEGETABLE PRODUCTS L TD. VS. CIT 26 ITR 151 : 'THERE IS A CLEAR DISTINCTION BETWEEN A PERSON COMMENCING A BUSINESS AND A PERSON SETTING UP A BUSINESS AND FOR THE PURPOSES OF THE INDIAN INCOME - TAX ACT THE SETTING UP OF THE BUSINESS AND NOT THE COMMENCEMENT OF THE BUSINESS THAT IS TO BE CONSIDERED. IT IS ONLY AFTER THE BUSINESS IS SET UP THAT THE PREVIOUS YEAR OF THE BUSINESS COMMENCES AND ANY EXPENSE INCURRED PRIOR TO THE SETTING UP OF A BUSINESS WOULD NOT BE A PERMISSIBLE DEDUCTION. WHEN A BUSINESS IS ESTABLISHED AND IS READY T O COMMENCE BUSINESS THEN IT CAN BE SAID OF THAT BUSINESS THAT IT IS SET UP BUT BEFORE IT IS READY TO COMMENCE BUSINESS IT IS 'NOT SET UP. THERE MAY HOWEVER BE AN INTERVAL BETWEEN THE SETTING UP OF THE BUSINESS AND THE COMMENCEMENT OF THE BUSINESS AND ALL EXPENSES INCURRED DURING THAT INTERVAL WOULD BE PERMISSIBLE DEDUCTIONS', (I) PREM CONDUCTORS PVT. LTD. VS. CIT (1977) 108 ITR 654 (GUJ.), 'IT WAS HELD THAT THE TEST TO BE APPLIED IS AS TO WHEN A BUSINESS MAN WOULD REGARD A BUSINESS AS BEING COMMENCED AND THE APPROACH MUST BE FROM A COMMON SENSE POINT OF VIEW. IN CASE OF THE ACTIVITY OF SECURING ORDERS BEFORE COMMENCEMENT OF ACTUAL PRODUCTION, IT WAS HELD THAT THE BUSINESS HAD COMMENCED THOUGH THE ACTUAL PRODUCTION HAS NOT STARTED. HENCE THE EXPENSES WERE ALLOWED AS BUSINESS LOSS'. (II) CIT VS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES 91 ITR 1 70 'THE GUJARAT HIGH COURT HELD THAT , 'BUSINESS' CONNOTES A CONTINUOUS COURSE OF ACTIVITIES. ALL THE ACTIVITIES WHICH GO. TO MAKE UP THE BUSINESS NEED NOT BE STARTE D SIMULTANEOUSLY IN ORDER THAT THE BUSINESS MAY COMMENCE. THE BUSINESS WOULD COMMENCE WHEN THE ACTIVITY WHICH IS FIRST IN POINT OF TIME AND WHICH MUCH NECESSARILY PRECEDED ALL OTHER ACTIVITIES IS STARTED'. (III) SARABHAI MANAGEMENT CORP. LTD. VS. CIT (19 65) 102 ITR 25, 'THE HON'BLE GUJARAT HIGH COURT HAS RECOGNIZED THAT THERE MAY BE INTERVAL BETWEEN THE SETTING UP OF THE BUSINESS AND COMMENCEMENT OF BUSINESS AND HELD THAT ALL EXPENSES INCURRED DURING THAT INTERVAL WOULD BE A PERMISSIBLE DEDUCTION. THE DEC ISION OF GUJARAT HIGH COURT WAS AFFIRMED BY THE APEX COURT WHICH IS REPORTED IN 192 ITR 151'. BY ANALYZING THE ABOVE DECISIONS BY HIGH COURTS AND SU PREME COURT THE TESTS APPLIED ARE AS UNDER: ITA NO. 333 /1 3 4 'BUSINESS IS A CONTINUOUS AND SYSTEMATIC ACTIVITY. THERE ARE MANY ACTIVITIES IN CONDUCTING A 'BUSINESS. ALL THE ACTIVITIES WILL NOT HAVE TO BE CONDUCTED AT THE SAME TIME OR STARTED SIMULTANEOUSLY. SOME ACTIVITIES OR BUSINESS STARTS EARLIER OR SOME LATER. THE BUSINESS IS SET UP WHEN IT IS READY TO COMMENCE.' THIS MEANS WHEN THE FIRST ACTIVITY OF THE BUSINESS IS STARTED THEN IT CAN BE TAKEN AS BUSINESS IS SET UP BY APPLYING THE ABOVE TESTS. ON VERIFICATION OF THE DETAILS FILED IT WAS FOUND THAT IN THE PAPER BOOK ON PAGE 40 ASSESSEE HAD SENT AN INTRODUCTORY LETTERS T O VARIOUS CLIENTS URGING FOR THE BUSINESS AND CALLING FOR THEIR REQUIREMENTS OF THE PRODUCT. THE DATE OF LETTER WAS AUGUST 21, 2007. THIS CAN BE TAKEN AS DATE OF COMMENCEMENT OF THE BUSINESS. ALL THE EARLIER ACTIVITIES BEFORE AUGUST 21, 2007 APPEARS TO BE REGULATORY ACTIVITIES AND FIRST ACTIVITY OF THE BUSINESS ACTUALLY STARTED ON AUGUST 21, 2007 IN THE A.Y.2008 - 09. SINCE BUSINESS ALREADY SET UP AND COMMENCED IN A.Y.2008 - 09, THE DISALLOWANCE OF EXPENDITURE UPTO 8TH AUGUST, 2008 IS NOT CALLED FOR, HENCE, A.O 'S ADDITION IS DELETED. THIS GROUND OF APPEAL IS ALLOWED . 3. THE 5TH GROUND OF APPEAL IS THAT THE A.O. ERRED IN HOLDING THAT BROUGHT FORWARD BUSINESS LOSS OF THE IMMEDIATE PRECEDING PREVIOUS YEAR IS NOT ELIGIBLE FOR SET OFF AGAINST THE BUSINESS PROFIT O F' THE YEAR UNDER CONSIDERATION. 3.1 THE A.O. IN HIS ORDER HAS NOT ALLOWED ASSESSEE TO CARRY FORWARD THE BUSINESS LOSS AS THE BUSINESS WAS NOT COMMENCED DURING THE A.Y.2008 - 09. SINCE EARLIER I HELD THAT BUSINESS HAD COMMENCED FROM A.Y.2008 - 09, THE A.O. M AY ALLOW CARRY FORWARD OF THE EXPENDITURE FROM THIS ASSESSMENT YEAR. THIS GROUND OF APPEAL IS ALLOWED. NOW, THE REVENUE IS IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF CIT(A) WITH THE GROUNDS MENTIONED ABOVE. 3. LD. DR BEFORE US SUBMITTED THAT T HE ASSESSEE HAS MADE ITS FIRST SALE IN END OF AUG2008 AND ACCORDINGLY THE BUSINESS OF THE ASSESSEE IS CONSIDERED TO BE COMMENCED FROM SAID PERIOD AND THE ASSESSEE COULD NOT FURNISH THE DETAILS OF EXPENSES PERTAINING TO EMPLOYEE COST, ADMINISTRATIVE EXPENS ES AND FINANCE COST, THEREFORE, THE AO RIGHTLY DISALLOWED THE SAME. IT WAS ALSO THE CONTENTION OF LD. DR THAT THERE WAS NO BUSINESS ACTIVITY OF THE ASSESSEE IN PREVIOUS YEAR, THEREFORE, THE AO ITA NO. 333 /1 3 5 DISALLOWED THE LOSS OF RS.11,59,064/ - CARRIED FORWARD FROM PREV IOUS YEAR TO BE SET OFF AGAINST THE CURRENT YEAR INCOME, WHICH IS JUST AND PROPER. HENCE, THE CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE. 4. ON THE OTHER HAND, LD. AR CONTENDED THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE OF LIPIDS AND EXC IPIENTS FOR PHARMA AND COSMETIC INDUSTRY. THE ASSESSEE COMPANY OBTAINED THEIR IMPORT - EXPORT CODE ON MARCH, 31, 2008 AND COULD NOT ACTUALLY IMPORT PRODUCTS PRIOR TO THE SAID DATE. LD. AR FURTHER CONTENTED THAT THE ASSESSEE HAD SET UP THE BUSINESS AND EXPENS ES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF CARRYING ON BUSINESS ACTIVITIES. AFTER COMPLYING WITH THE VARIOUS STATUTORY REGULATIONS, THE FIRST SALE WAS MADE ON AUGUST, 2008. THEREFORE, THE CIT(A) AFTER CONSIDERING ALL THE DOCUMENTS PLACED ON RECORD HAS DELETED THE DISALLOWANCE SO MADE BY THE AO. 5. WE HAVE HEARD RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE RECORD CAREFULLY. WE FOUND THAT THE CIT(A) WHILE DELETING THE DISALLOWANCE SO MADE BY THE AO HAS CONSIDERED ALL THE DOCUMENTS PLACED BY THE ASSESSEE. ON VERIFICATION OF THE DETAILS SO PLACED BY THE ASSESSEE, THE CIT(A) FOUND THAT THE ASSESSEE HAD SENT AN INTRODUCTORY LETTERS TO VARIOUS CLIENTS URGING FOR THE BUSINESS AND CALLING FOR THEIR REQUIREMENTS OF THE PRODUCT. THE DATE OF LETTER WAS AUGUST, 21, 2007, WHICH CAN BE TAKEN AS DATE OF COMMENCEMENT OF THE BUSINESS. THE CIT(A) FURTHER HELD THAT ALL THE EARLIER ACTIVITIES OF THE ASSESSEE BEFORE AUGUST, 21, 2007 WERE REGULATORY ACTIVITIES AND FIRST ACTIVITY OF THE BUSINESS ACTUALLY STARTED ON AUGUST, 21,2007 IN THE A.Y.2008 - 09. FROM THE ABOVE FINDINGS OF THE ITA NO. 333 /1 3 6 CIT(A) WE FOUND THAT THE BUSINESS OF THE ASSESSEE WAS ALREADY SET UP AND COMMENCED IN ASSESSMENT YEAR 2008 - 09, THEREFORE, NO DISALLOWANCE OF EXPENDITURE UPTO 8 TH AUGUST, 2008 IS WARRANT ED. LD. AR PLACED AN ORDER OF THE TRIBUNAL IN THE CASE OF RELIANCE GEMS & JEWELS LTD., ITA NO.3855/MUM/2013, ORDER DATED 28 - 10 - 2015, WHEREIN SIMILAR DISALLOWANCE WAS DELETED IN FAVOUR OF THE ASSESSEE AFTER RELYING VARIOUS JUDICIAL PRONOUNCEMENTS . THE RELEV ANT OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER : - 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE FORM O F A PAPER BOOK. 10.1. IT WOULD BE APPROPRIATE IN THIS REGARD TO REFER TO THE PROVISO TO SEC. 3 OF THE ACT, WHICH REFERS TO AND DEFINES THE TERM, PREVIOUS YEAR IN RELATION TO NEWLY SETUP BUSINESS OR PROFESSION AND NOT WITH REFERENCE TO THE DATE OF COMME NCEMENT. SEC. 28 OF THE ACT POSTULATES THAT PROFIT AND GAINS OF BUSINESS OR PROFESSION CARRIED OUT AT ANY TIME DURING THE PREVIOUS YEAR, SHALL BE TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 10.2. THE UNDISPUTED FACT IS THAT THE AS SESSEE HAS RECRUITED EMPLOYEES FOR THE PURPOSE OF ITS BUSINESS AND AS PER THE DETAILS EXHIBITED AT PAGE - 10 OF THE PAPER BOOK ABOUT 16 EMPLOYEES ARE FOR THE JOB OF QUALITY ASSURANCE. THE ASSESSEE IS IN THE BUSINESS OF MERCHANDISING OF DIAMONDS/GOLD/JEWELLER IES. UNDISPUTEDLY, THIS LINE OF BUSINESS REQUIRES EXPERTISE WHO HAVE PROFICIENCY IN UNDERSTANDING THE CARATS OF DIAMONDS AND RELATED JEWELLERY, WITHOUT SUCH RECRUITMENT, IT WOULD BE A FUTILE EXERCISE TO COMMENCE THE BUSINESS. 10.3. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF OMNIGLOBE INFORMATION TECH INDIA PVT. LTD. IN INCOME TAX APPEAL NO. 257 OF 2012 HAD THE OCCASION TO CONSIDER THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: DID THE TRIBUNAL FALL INTO ERROR IN HOLDING THAT THE ASSESSEE HAD SETUP ITS BUSINESS W.E.F. 1.6.2004 AND NOT W.E.F. 1.4.2004, AS HELD IN THE IMPUGNED ORDER. ITA NO. 333 /1 3 7 10.3. IN THAT CASE, THE HONBLE HIGH COURT HAD TO CONSIDER THE FOLLOWING FACTS: THE ASSESSING OFFICER AS WELL AS THE TRIBUNAL HAVE HELD THAT THE APPELLANT ASSESSEE HAD COMMENCED ITS OPERATIONS ONLY FROM 1.6.2004 I.E. THE DATE ON WHICH THE APPELLANT ASSESSEE ENTERED INTO SERVICE AGREEMENTWITH ITS PARENT COMPANY AND, THEREFORE, THE EXPENDITURE INCURRED BETWEEN 1.4.2004 TO 31.5.2004 SHOULD BE CAPITALIZED. TRIBUNAL, IN ITS IMPUGNED ORDER HAD ALSO OBSERVED THAT THE APPELLANT ASSESSEE HAD ENTERED INTO A LEASE AGREEMENT AND HAD HIRED PREMISES AS ITS OFFICE, ONLY ON 15.6.2005. COMMISSIONER OF INCOME TAX (APPEALS), HOWEVER, HAD DECIDED THE ISSUE/QUESTION IN FAVOUR OF THE RESPOND ENT ASSESSEE. 10.4. AT PARA - 7 OF ITS ORDER, THE HONBLE HIGH COURT OBSERVED THAT : AS PER THE CASE OF THE APPELLANT - ASSESSEE, EXPENSES INCURRED DURING THE MONTHS OF APRIL AND MAY, 2004, WERE ON ACCOUNT OF TRAINING GIVEN TO THE RECRUITED EMPLOYEES. TH IS IS CLER FROM THE REPLY GIVEN BY THE APPELLANT/ASSESSEE DATED 14.11.2007. THE ISSUE WHICH ARISES IS, WHETHER THE BUSINESS HAD BEEN SETUP AS ON 1ST APRIL, 2004 OR WAS IT SETUP ONLY ON 1ST JUNE, 2004. THERE IS A DISTINCTION BETWEEN SETTING UP OF BUSINESS AND COMMENCEMENT OF BUSINESS. 10.5. WHILE DECIDING THE ISSUE, THE HONBLE HIGH COURT OF DELHI ELABORATELY DISCUSSED AND CONSIDERED THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY GIVEN IN THE CASE OF WESTERN INDIA VEGETABLE PRODUCTS LTD. VS CIT 26 IT R 151 (BOM). FURTHER RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF CIT VS E - FUNDS INTERNATIONAL INDIA (2007) 162 TAXMAN 01 (DEL) WHEREIN ALSO THE ISSUE CONSIDERED WAS WHETHER THE BUSINESS WAS SETUP THE MOMENT THE ASSESSEE EMPLOYED 30 - 40 EMPLOYEES. THI S CLAIM WAS ACCEPTED BY THE HONBLE HIGH COURT OF DELHI AFTER NOTICING THAT THE ASSESSEE HAD CERTAIN INFRASTRUCTURE FACILITIES AT THE RELEVANT TIME. 10.6. ONCE AGAIN THE HONBLE HIGH COURT OF DELHI HAD AN OCCASION TO CONSIDER A SIMILAR ISSUE IN THE CASE OF CIT VS HUGHES ESCORTS COMMUNICATIONS LTD (2009) 311 ITR 253 (DELHI) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE MOMENT THE ASSESSEE PURCHASED VSAT EQUIPMENT, IT SHOULD BE SAID THAT THE BUSINESS HAS BEEN SETUP. 10.7. A SIMILAR VIEW WAS TAKEN IN TH E CASE OF WHIRLPOOL OF INDIA LTD 318 ITR 347 WHEREIN THE HONBLE HIGH COURT HAS OBSERVED THAT : THE BUSINESS WAS SET UP WHEN DIRECTORS WERE APPOINTED, STAFF, SUCH AS REGIONAL AND BRANCH MANAGERS WERE APPOINTED AND THEIR SALARIES WERE PAID. IN OTHER WORDS, IT CAN BE SAID THAT AT THAT TIME, THE COMPANY WAS READY TO COMMENCE BUSINESS. 10.8. THE HONBLE HIGH COURT OF DELHI HAS CONSIDERED THESE DECISIONS IN THE CASE OF OMNIGLOBE INFORMATION TECH INDIA PVT. ITA NO. 333 /1 3 8 LTD.(SUPRA) AND AT PAGE - 18 OF ITS ORDER, THE HONBLE HIGH COURT HELD AS UNDER: IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT THINK THAT THE REASONING GIVEN BY THE TRIBUNAL AND THE AO SHOWS THAT THE BUSINESS OF THE APPELLANT - ASSESSEE HAD NOT BEEN SETUP. THE BUSINESS OF THE APPELLANT HAD BEEN SETUP AS TH E APPELLANTASSESSEE HAD ACQUIRED THE NECESSARY INFRASTRUCTURE FROM THEIR SISTER CONCERN, M/S. AGILIS, AND HAD ALSO STARTED MAKING PAYMENT OF SALARY AND WAGES. THIS TRAINING WAS GIVEN BY PROFESSIONAL EXPERTS UNDER THE SUPERVISION AND CONTROL OF THE APPELLAN TASSESSEE. THE MOMENT THE SAID OPERATIONS WERE COMMENCED, THE BUSINESS HAD BEEN SETUP AND THE SUBSEQUENT RENDERING OF SERVICE TO THIRD PARTIES WOULD BE AT A LATER DATE WHEN THE ACTUAL SERVICES WERE RENDERED TO THE PARENT/HOLDING COMPANY. 11. AFTER CONSI DERING THE FACTS OF THE CASE IN HAND IN THE LIGHT OF THE DECISIONS REFERRED TO HEREINABOVE, IN OUR CONSIDERED OPINION, UPON RECRUITMENT OF EMPLOYEES, THE FACTUM THAT EXPENDITURE UNDER THE DIFFERENT HEADS, AS NOTICED ABOVE AT PARA - 7 WAS INCURRED IS INDICATI VE THAT BUSINESS WAS SET UP. 11.1. THEREFORE IN OUR UNDERSTANDING OF THE LAW, THE CLAIM OF THE EXPENDITURE IS ALLOWABLE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF EXPENDITURE OF RS. 87,26,446/ - . FROM THE ABOVE OBSERVATIONS OF THE COORDINATE BENCH OF THE TRIBUNAL AS WELL AS FROM THE FINDINGS OF THE CIT(A), WE SEE NO REASON TO INTERFERE IN THE FINDINGS OF THE CIT(A) IN THIS REGARD. 6. THE REVENUE HAS ALSO RAISED A GROUND THAT THE BUSINESS OF THE ASSESSE E DID NOT START TILL AUGUST, 2008, THEREFORE, THE SET OFF AND CARRY FORWARD THE BUSINESS LOSS CANNOT BE ALLOWED. 7. IN REGARD TO THE ABOVE GROUND OF THE REVENUE, WE FOUND FROM THE FINDINGS OF THE CIT(A) THAT THE ASSESSEE HAD ALREADY COMMENCED ITS BUSINESS ACTIVITIES FROM A.Y. 2008 - 09, THEREFORE, THE ASSESSEE SHOULD BE ALLOWED CARRY FORWARD OF THE EXPENDITURE FROM THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, WE FIND NO REASON TO DEVIATE FROM THE FINDINGS OF THE CIT(A) IN THIS REGARD. ITA NO. 333 /1 3 9 8 . IN THE RES ULT, APPEAL OF REVENUE IS DISMISSED O RDER PRONOUNCED IN THE OPEN COURT ON THIS 04/03 / 201 6 . SD/ - ( B.R.BASKARAN ) SD/ - ( SANDEEP GOSAIN ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED 04/03 /2016 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : . / BY OR DER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//