North Star Tech Park Pvt. Ltd., Gandhinagar V. The Income Tax Officer, Ward-3(3)(1), Ahmedabad

ITA 3514/AHD/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3925 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 27-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH PATHAK
• Assessee Lawyers: VYOMA RAV
• Keywords: Business income; Business expenditure; Question of law
• Section: 28

Judgement Text

, ,LK ,LK,LK ,LK- -- -,E ,E,E ,E- -- -LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD L LL LOZJH OZJH OZJH OZJH OLHE OLHE OLHE OLHE VGEN VGEN VGEN VGEN] YS[KK ] YS[KK ] YS[KK ] YS[KK LNL; ,OA LNL; ,OA LNL; ,OA LNL; ,OA EK/KQFERK EK/KQFERK EK/KQFERK EK/KQFERK JKW; JKW;JKW; JKW;] ] ] ] U;KF;D U;KF;D U;KF;D U;KF;D LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ITA NO.3514/AHD/2016 ( / ASSESSMENT YEAR : 2013-14) NORTH STAR TECH PARK PVT. LTD., 1, SHAYAM KUTIR KOBA GANDHINGAR HIGHWAY BHAT ROAD, GANDHINAGAR 382 428 / VS. ITO, WARD 3(3)(1), 4 TH FLOOR PRATAKSH KAR BHAVAN OPP. POLYTECHNIC, AMBAWADI, AHMEDABAD. ./ ./ PAN/GIR NO. : AACCN 7216 N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS. VYOMA RAV, A.R. / RESPONDENT BY : SHRI OM PRAKASH PATHAK, SR. D.R. / DATE OF HEARING 10/07/2018 !'# / DATE OF PRONOUNCEMENT 03/10/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, AHMEDABAD, VIDE APPEAL NO.CIT(A)-9/258/ITO WD.3(1)(1)/15-16 DATED 21.10.20 16 FOR THE ASSESSMENT YEAR (AY) 2013-14. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.705341/- BY NOT ALLOWING AS BUSINESS EXPENDITURE . ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 2 - IT SHOULD BE HELD ALLOWABLE AS BUSINESS EXPENDITUR E ON FACTS AS WELL AS LAW. 2. THE LD CIT(A) FAILED TO APPRECIATE THE JUDICIAL AUTHORITIES CITED BEFORE HIM THERE IS NO SPEAKING ORDER ON THIS ASPE CT. 3. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT LD CI T(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 7,05,341/- BY HO LDING THAT THESE ARE THE EXPENSES INCURRED PRIOR TO THE COMMENCEMENT OF COMMERCIAL OPERATION. 4. THE FACTS AS CALLED OUT FROM THE CASE ARE THAT T HE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE ACTIVITY OF PROVIDING SERVICES. THE ASSESSEE IN THE YEAR UNDER CONSIDERAT ION HAS SHOWN INCOME FROM INTEREST AND MISCELLANEOUS ACTIVITY FOR RS. 6, 85,650/- AND RS.1540/- RESPECTIVELY IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE IN ITS PROFIT AND LOSS HAS CLAIMED AN EXPENSE OF RS. 7,05,341/- ONLY. 4.1 THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED THAT THE ASSESSEE HAS NOT COMMENCED ITS COMMERCIAL OPERATION AS EVIDENT FROM ITS AUDITED FINANCIAL STATEMENT. THUS, THE AO WAS OF TH E VIEW THAT THE INCOME EARNED ON THE FIXED DEPOSIT BEFORE THE COMME NCEMENT OF COMMERCIAL OPERATION SHOULD BE TREATED AS INCOME FR OM OTHER SOURCES. SIMILARLY, THE AO ALSO OBSERVED THAT THE EXPENSES C LAIMED BY THE ASSESSEE PRIOR TO THE COMMENCEMENT OF ITS COMMERCIA L OPERATION CANNOT ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 3 - BE ALLOWED AS DEDUCTION. ACCORDINGLY, THE AO CALLED UPON THE ASSESSEE TO EXPLAIN THE FACTS AS DISCUSSED ABOVE. 4.2 THE ASSESSEE IN COMPLIANCE TO IT SUBMITTED THAT IT HAS ALREADY SHOWN INTEREST INCOME ON THE FDR UNDER THE HEAD INC OME FROM OTHER SOURCES. THEREFORE, THERE IS NO QUESTION OF APPLYIN G THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF OF TUTICORIN ALKALI CHEMIC ALS AND FERTILIZERS LTD VS. CIT, REPORTED IN 93 TAX MAN 502. 4.3 THE ASSESSEE ALSO SUBMITTED THAT THE EXPENSES O F RS. 7,05,341/- HAS BEEN INCURRED ON THE TRAVELLING, SALARIES AND WAGES ETC. THUS, THE EXPENSES WERE INCURRED AFTER THE SETTING UP OF THE BUSINESS BUT BEFORE THE COMMENCEMENT OF THE COMMERCIAL OPERATION. ONCE, THE BUSINESS OF THE ASSESSEE HAS BEEN SET UP FOR COMMERCIAL OPERATION T HEN, IT IS ELIGIBLE FOR CLAIMING THE EXPENSES INCURRED FOR THE PURPOSE OF T HE BUSINESS. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE ORDE R OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT AND CHE MICAL INDUSTRIES LTD REPORTED IN 91 ITR 170. 4.4 THE ASSESSEE ALSO PLACED HIS RELIANCE ON THE OR DER OF HON'BLE ITAT, MUMBAI BENCH IN THE CASE OF DECCAN GOLDMINES LTD. VS. ACIT IN ITA NO. 7656/2010. ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 4 - 4.5 THE ASSESSEE ALSO SUBMITTED THAT AS PER ITS ACC OUNTING POLICY, THE INCOME SHALL BE RECOGNIZED ON ACCRUAL BASIS ONCE, T HE COMMERCIAL OPERATIONS IS COMMENCED. 4.6 HOWEVER, THE AO DISREGARDED THE CONTENTION OF T HE ASSESSEE BY OBSERVING THAT THE EXPENSES CAN BE CLAIMED ONLY ON THE COMMENCEMENT OF COMMERCIAL OPERATION. AS IN THE CASE ON HAND, T HE ASSESSEE HAS SPECIFIED IN ITS AUDIT REPORT THAT THE COMMERCIAL O PERATION HAS NOT YET BEEN COMMENCED. THEN, THERE IS NO QUESTION OF ALLO WING THE DEDUCTION OF EXPENDITURE. ACCORDINGLY, THE AO DISALLOWED THE EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED THE APPEAL TO LD.CI T(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT ITS B USINESS HAS BEEN SETUP AND THE EXPENSES HAVE BEEN INCURRED IN CONNECTION W ITH THE TRAVELLING, SALARY AND WAGES OF THE EMPLOYEES. 5.1 THE ASSESSEE ALSO SUBMITTED THAT COMMERCIAL ACT IVITY DOES NOT MEAN GENERATION OF FUND BUT IT DEPENDS UPON THE INT ENTION OF THE ASSESSEE TO CONDUCT ITS BUSINESS OPERATION FOR WHICH THE ASS ESSEE IS UNDER OBLIGATION TO INCUR ROUTINE BUSINESS EXPENSES. THUS , EVEN THE FUND HAS NOT BEEN GENERATED, IT CANNOT BE CONCLUDED THAT THE ASS ESSEE HAS NOT COMMENCED HIS COMMERCIAL OPERATION. ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 5 - HOWEVER, THE LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTE NTION, CASE LAW RELIED UPON AS WELL AS THE OBSERVATIONS MADE BY THE A.O. I N THE ASSESSMENT ORDER. IT IS OBSERVED FROM THE ORDER OF ASSESSMENT THAT THAT A.O. HAS MADE AN ADDITION OF RS.7,05,341/- ON ACCOUNT OF EXP ENSES DEBITED TO PROFIT & LOSS A/C. AND TREATING RS.6,87,190/- AS IN COME FROM OTHER SOURCES. IN THE ORDER OF ASSESSMENT IT HAS BEEN M ENTIONED BY THE A.O. THAT NO COMMERCIAL ACTIVITY WAS UNDERTAKEN BY THE A PPELLANT DURING THE YEAR UNDER ASSESSMENT. THE ONLY INCOME THAT THE APP ELLANT HAS SHOWN IS INCOME ON ACCOUNT OF INTEREST ON FIXED DEPOSIT OF R S.6,85,650/- AND OTHER INCOME OF RS.1,540/-. BASED ON THE AUDIT REPO RT, A.O. HAS OBSERVED THAT APPELLANT HAS NOT YET COMMENCED ITS C OMMERCIAL PRODUCTION. RELYING ON THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF TUTICORIN ALKALI FERTILIZERS LTD. 93 TAXMAN 502, A.O. DID NOT ALLOW BUSINESS EXPENSES AND CONSIDERED RS.6,87,190/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. DURING THE APPELLATE PRO CEEDINGS APPELLANT HAS RELIED UPON THE CONTENTION MADE BEFOR E THE A.O. IT IS NOTICED FROM THE DIRECTOR'S REPORT WHEREIN IT HAS B EEN CLEARLY MENTIONED THAT COMPANY HAS NOT CARRIED OUT ANY COMM ERCIAL ACTIVITY DURING THE YEAR. FURTHER AT NOTE NO.4 OF SIGNIFICAN T ACCOUNTING POLICIES, IT IS AGAIN REITERATED THAT THE COMPANY H AS NOT YET COMMENCED COMMERCIAL OPERATION AND UPON COMMENCEMENT, INCOME WILL BE RECOGNIZED ON ACCRUAL BASIS. APPELLANT HAS TRIED TO DISTINGUISH BETWEEN PERSONS INVOLVED IN COMMENCING OF BUSINESS AND PERSONS INVOLVED IN SETTING UP OF BUSINESS. ACCORDING TO THE APPELLANT, IT HAS SET UP ITS OWN BUSINESS AND THUS THE EXPENSES INCURRED FOR SETTING UP OF BUSINESS AMOUNTING TO RS.7,05,341/- WOULD BE PERMISSIBLE AS REVENUE EXPENSES. I DO NOT AGREE WITH THE CONTENTIONS OF THE APPELLANT. APPELLANT WOULD BE ELIGIBLE TO CLAIM REVENUE EXPENSES INCURRED FOR SET TING UP OF BUSINESS ONLY AFTER BUSINESS IS SET UP AND THE APPELLANT HAS NOT COMMENCED ITS OPERATIONS. THE DIRECTORS OF THE APPELLANT HAVE ADM ITTED IN AUDITOR'S REPORT THAT THERE IS NO COMMENCEMENT OF BUSINESS OR SETTING UP OF BUSINESS. IT IS OBSERVED FROM THE ORDER OF ASSESSME NT THAT A.O. HAS NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE APPELLANT PRIOR TO THE COMMENCEMENT/SET UP OF BUSINESS. THERE FORE, AGREEING WITH ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 6 - THE STAND TAKEN BY THE A.O. I HEREBY CONFIRM THE DI SALLOWANCE OF RS.7,05,341/-. 5.3 FURTHER, I ALSO HOLD THAT A.O. HAS CORRECTLY C ATEGORIZED INTEREST INCOME FROM THE FIXED DEPOSITS UNDER THE HEAD INCOM E FROM OTHER SOURCES. THUS, RS.6,87,190/- IS TREATED AS INCOME U NDER THE HEAD INCOME FROM OTHER SOURCES. THUS, GROUND NOS.2 & 3 RAISED B Y THE APPELLANT ARE HEREBY DISMISSED. 5.2 BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSE SSEE IS IN SECOND APPEAL BEFORE US. 6. THE LD. AR BEFORE US FILED A PAPER BOOK WHICH IS RUNNING FROM PAGES 1 TO 50 AND SUBMITTED THAT THE INTEREST INCOM E ON THE FDR HAS ALREADY BEEN OFFERED TO TAX UNDER THE HEAD INCOME F ROM OTHER SOURCES. THEREFORE, THE FINDING OF THE LOWER AUTHORITIES THA T INTEREST INCOME HAS BEEN OFFERED TO TAX UNDER THE HEAD BUSINESS INCOME IS ERRONEOUS. THE LD. AR REITERATED THE SUBMISSION AS MADE BEFORE THE LD. CIT(A). 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE COMMERCIAL ACTIVITY OF THE ASSESSEE HAS NOT COMMENCED DURING T HE YEAR UNDER CONSIDERATION. 7.1 THE LD. DR ALSO SUBMITTED THAT THE ASSESSEE CAN CLAIM THE DEDUCTION ONCE THE SOURCE OF INCOME COMES INTO EXIS TENCE AS PER THE PROVISO 2 OF SECTION 3 OF THE ACT. THE LD. DR VEHEM ENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 7 - 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN INSTANT CASE RELA TES TO WHETHER THE ASSESSEE HAS COMMENCED ITS BUSINESS COMMERCIALLY OR NOT. AS PER THE AO THE BUSINESS DID NOT COMMENCE DURING THE PREVIOU S YEAR, THEREFORE, NO EXPENSE INCURRED BY THE ASSESSEE CAN BE ALLOWED IN THE YEAR UNDER CONSIDERATION. THE VIEW TAKEN BY THE AO WAS SUBSEQ UENTLY CONFIRMED BY THE LD. CIT(A). FROM THE PRECEDING DISCUSSION, WE FIND THAT THE BUSINESS OF THE ASSESSEE WAS SETUP DURING THE YEAR UNDER CONSIDERATION. THIS SUBMISSION OF THE ASSESSEE HAS NOT BEEN CHALLE NGED BY ANY OF THE LOWER AUTHORITY. THEREFORE, WE CAN DRAW A CONCLUSI ON THAT THE BUSINESS OF THE ASSESSEE WAS SETUP IN THE YEAR UNDER CONSIDE RATION MEANING THEREBY, IT WAS READY FOR COMMERCIAL OPERATION. WE ALSO NOTE THAT IN THE IMMEDIATE SUCCEEDING ASSESSMENT YEAR THE ASSESSEE H AS SHOWN IN ITS BOOKS OF ACCOUNTS THE INCOME FROM THE BUSINESS. THE REFORE, WE HOLD THAT THE BUSINESS OF THE ASSESSEE WAS SET UP DURING THE YEAR. ACCORDINGLY THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION OF THE EXPENSES INCURRED BY IT DURING THE YEAR UNDER CONSIDERATION. 8.1 IN THIS REGARD, WE PLACED OUR RELIANCE ON THE O RDER OF MUMBAI TRIBUNAL IN THE CASE OF RELIANCE GEMS AND JEWELS LT D. IN ITA NO. 3855/ MUM/ 2013, WHEREIN IT WAS HELD AS UNDER: 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO TH E RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHOR ITIES BELOW IN THE LIGHT OF THE DOCUMENTARY EVIDENCES BROUGHT ON RECOR D IN THE FORM OF A PAPER BOOK. ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 8 - 10.1. IT WOULD BE APPROPRIATE IN THIS REGARD TO REF ER 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 A ND NOT WITH REFERENCE TO THE DATE OF COMMENCEMENT. SEC. 28 OF THE ACT POS TULATES THAT PROFIT AND GAINS OF BUSINESS OR PROFESSION CARRIED OUT AT ANY TIME DURING THE PREVIOUS YEAR, SHALL BE TAXED UNDER THE HEAD PROFI TS AND GAINS OF BUSINESS OR PROFESSION. 10.2. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS RECRUITED EMPLOYEES FOR THE PURPOSE OF ITS BUSINESS AND AS PER THE DETA ILS 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 MERCH ANDISING OF DIAMONDS/GOLD/JEWELLERIES. 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 O F OMNIGLOBE INFORMATION TECH INDIA PVT. LTD. IN INCOME TAX APPE AL NO. 257 OF 2012 HAD THE OCCASION TO CONSIDER THE FOLLOWING SUBSTANT IAL QUESTION OF LAW: DID THE TRIBUNAL FALL INTO ERROR IN HOLDING THAT T HE 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. HTTP://WWW.ITATONLINE.ORG 5 ITA. NO.3855/M/2013 10.3. IN THAT CASE, THE HONBLE HIGH COURT HAD TO CONSIDER THE FOLLOWING FACTS: THE ASSESSING OF FICER AS WELL AS THE TRIBUNAL HAVE HELD THAT THE APPELLANT ASSESSEE HAD COMMENCED ITS OPERATIONS ONLY FROM 1.6.2004 I.E. TH E DATE ON WHICH THE APPELLANT ASSESSEE ENTERED INTO SERVICE AGREEMENTWITH ITS PARENT COMPANY AND, THEREFORE, T HE EXPENDITURE INCURRED BETWEEN 1.4.2004 TO 31.5.2004 SHOULD BE CAPITALIZED. TRIBUNAL, IN ITS IMPUGNED ORDER HAD AL SO OBSERVED THAT THE APPELLANT ASSESSEE HAD ENTERED INTO A LEAS E 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 RESPONDENT ASSE SSEE. 10.4. AT PARA-7 OF ITS ORDER, THE HONBLE HIGH COUR T OBSERVED THAT : AS PER THE CASE OF THE APPELLANT-ASSESSEE, EXPENSE S INCURRED DURING THE MONTHS OF APRIL AND MAY, 2004, WERE ON A CCOUNT OF ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 9 - TRAINING GIVEN TO THE RECRUITED EMPLOYEES. THIS IS CLER FROM THE REPLY GIVEN BY THE APPELLANT/ASSESSEE DATED 14.11.2 007. THE ISSUE WHICH ARISES IS, WHETHER THE BUSINESS HAD BEE N SETUP AS ON 1ST APRIL, 2004 OR WAS IT SETUP ONLY ON 1ST JUNE, 2 004. THERE IS A DISTINCTION BETWEEN SETTING UP OF BUSINESS AND COMMENCEMENT OF BUSINESS. 10.5. WHILE DECIDING THE ISSUE, THE HONBLE HIGH CO URT OF DELHI ELABORATELY DISCUSSED AND CONSIDERED THE DECISION O F THE HONBLE HIGH COURT OF BOMBAY GIVEN IN THE CASE OF WESTERN INDIA VEGETABLE PRODUCTS LTD. VS CIT 26 ITR 151 (BOM). FURTHER RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF CIT VS E-FUNDS INTERNATIONA L INDIA (2007) 162 TAXMAN 01 (DEL) WHEREIN ALSO THE ISSUE CONSIDERED W AS WHETHER THE BUSINESS WAS SETUP THE MOMENT THE ASSESSEE EMPLOYED 30-40 EMPLOYEES. THIS CLAIM WAS ACCEPTED BY THE HONBLE HIGH COURT O F DELHI AFTER NOTICING THAT THE ASSESSEE HAD CERTAIN INFRASTRUCTU RE FACILITIES AT THE RELEVANT TIME. 10.6. ONCE AGAIN THE HONBLE HIGH COURT OF DELHI HA D AN OCCASION TO CONSIDER A SIMILAR ISSUE IN THE CASE OF CIT VS HUGH ES ESCORTS HTTP://WWW.ITATONLINE.ORG 6 ITA. NO.3855/M/2013 COM MUNICATIONS LTD (2009) 311 ITR 253 (DELHI) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE MOMENT THE ASSESSEE PURCHASED VSAT EQUIPME NT, IT SHOULD BE SAID THAT THE BUSINESS HAS BEEN SETUP. 10.7. A SIMILAR VIEW WAS TAKEN IN THE CASE OF WHIRL POOL 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 THE IR SALARIES WERE PAID. IN OTHER WORDS, IT CAN BE SAID THAT AT THAT T IME, THE COMPANY WAS READY TO COMMENCE BUSINESS. 10.8. THE HONBLE HIGH COURT OF DELHI HAS CONSIDERE D THESE DECISIONS IN THE CASE OF OMNIGLOBE INFORMATION TECH INDIA PVT . LTD.(SUPRA) AND AT PAGE-18 OF ITS ORDER, THE HONBLE HIGH COURT HELD A S UNDER: IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT THINK THAT T HE REASONING GIVEN BY THE TRIBUNAL AND THE AO SHOWS THAT THE BUSINESS OF THE APPELLANT- ASSESSEE HAD NOT BEEN SETUP. THE BUSINESS OF THE AP PELLANT HAD BEEN SETUP AS THE APPELLANT ASSESSEE HAD ACQUIRED THE NE CESSARY ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 10 - INFRASTRUCTURE FROM THEIR SISTER CONCERN, M/S. AGIL IS, AND HAD ALSO STARTED MAKING PAYMENT OF SALARY AND WAGES. THIS TR AINING WAS GIVEN BY PROFESSIONAL EXPERTS UNDER THE SUPERVISION AND CONT ROL OF THE APPELLANT ASSESSEE. THE MOMENT THE SAID OPERATIONS WERE COMME NCED, THE BUSINESS HAD BEEN SETUP AND THE SUBSEQUENT RENDERIN G OF SERVICE TO THIRD PARTIES WOULD BE AT A LATER DATE WHEN THE ACT UAL SERVICES WERE RENDERED TO THE PARENT/HOLDING COMPANY. 11. AFTER CONSIDERING THE FACTS OF THE CASE IN HAND IN THE LIGHT OF THE DECISIONS REFERRED TO HEREINABOVE, IN OUR CONSIDERE D OPINION, UPON RECRUITMENT OF EMPLOYEES, THE FACTUM THAT EXPENDITU RE UNDER THE DIFFERENT HEADS, AS NOTICED ABOVE AT PARA-7 WAS INC URRED IS INDICATIVE THAT BUSINESS WAS SET UP. HTTP://WWW.ITATONLINE.ORG 7 ITA. NO.3855/M/2013 11.1. THEREFORE IN OUR UNDERSTANDING OF THE LAW, THE CLAIM OF THE EXPENDITURE IS ALLOWABLE. WE, ACCORDIN GLY, SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF EXPENDITURE OF RS. 87,26,446/-. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8.2 WE ALSO EXTEND OUR RELIANCE ON THE JUDGEMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. L.G. ELECTRONIC I NDIA LTD. IN 149 TAXMAN 166, WHEREIN IT WAS HELD AS UNDER:- 9. THERE IS NO DOUBT THAT THE DATE OF SETTING UP A BU SINESS AND THE DATE OF ITS COMMENCEMENT COULD BE TWO SEPARATE DATES. SE CTION 3(1) OF THE ACT, AS IT STOOD AT THE RELEVANT TIME (AND EVEN AS IT STANDS TODAY) HAS REFERENCE TO THE DATE OF SETTING UP THE BUSINESS. T HE CIT(A) AND THE TRIBUNAL MERELY RELIED ON THE EXPLICIT LANGUAGE OF THE SECTION TO COME TO THE CONCLUSION THAT THE VIEW OF THE ASSESSING OFFIC ER WAS INCORRECT. THIS BEING THE CLEAR POSITION, WE DO NOT FIND ANY INFIRM ITY IN THE IMPUGNED ORDER NOR DOES IT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 8.3 IN THE CASE IN HAND, WE NOTE THAT THE ASSESSEE HAS RECRUITED THE EMPLOYEES AND INCURRED THE SALARY EXPENSES THEREFOR E, THE RATIO LAID DOWN IN THE PRECEDING ORDERS ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE IN ITA NO.3514AHD/2016 NORTH STAR TECH PARK PVT. LTD. VS. ITO ASST.YEAR 2013-14 - 11 - HAND. THEREFORE, RESPECTFULLY FOLLOWING THE SAME W E REVERSE THE ORDER OF AUTHORITIES BELOW. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 03/10/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 03/10/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-9, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD