ACIT, New Delhi V. M/s. GMS Motors Pvt. Ltd., New Delhi

ITA 3530/DEL/2012

• Counselvise Citation: 353020114 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: SANJEEV KAPOOR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.3530/DEL/2012 ASSESSMENT YEAR : 2007-08 ACIT, CIRCLE-12(1), NEW DELHI. VS. GMS MOTORS PVT. LTD., IE/5, JHANDEWALAN EXTENSION, NEW DELHI. PAN : AACCS2879L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJEEV KAPOOR, CA DEPARTMENT BY : SHRI SATPAL SINGH, SR.DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT (A) ON 25.4.2012 IN RELATION TO THE ASSESSMENT YEAR 2007-08. ITA NO.3530/DEL/2012 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF EXPENSES OF ` 56,80,117/- MADE BY THE AO ON ACCOUNT OF NON-COMMENCEMENT OF BUSINESS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEDUCTION FOR A SUM OF ` 56.80 LAC TOWARDS FI NANCIAL CHARGES AND STAFF AND ADMINISTRATIVE CHARGES. THE AO OBSERVED THAT THE BUSINESS WAS NOT SET UP AND, HENCE, DEDUCTION WAS NOT PERMISSIBLE. HE, THEREFORE, MADE DISALLOWANCE OF ` 56.80 LAC. THE LD. CIT (A) DELETE D THE DISALLOWANCE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING T HE RELEVANT MATERIAL ON RECORD, WE FIND IT AS AN UNDISPU TED FACT THAT THE ASSESSEE SET UP ITS SALE-CUM-SERVICE CENTRE DURI NG THE YEAR BY TAKING SOME PREMISES ON RENT. MANPOWER WA S HIRED WHO WERE PAID SALARY BY MEANS OF CHEQUE. THE ASSESSEE ALSO OBTAINED REQUIRED REGISTRATION UNDER MAHARASHTRA VAT ACT, 2002 AND CENTRAL SALES-TAX ACT, 1956. THE ASESSEE ALSO DEPOSITED CERTAIN AMOUNT WITH MAHINDRA & ITA NO.3530/DEL/2012 3 MAHINDRA LTD., WHOSE VEHICLES WERE TO BE SOLD BY IT. APART FROM THAT, SALES OF SOME SPARE PARTS HAD ALSO TAKEN PLAC E. THE AO DISALLOWED SUCH EXPENSES SIMPLY ON THE GROUND THA T SINCE THE SALE OF CARS DID NOT TAKE PLACE DURING THE Y EAR, THE BUSINESS WAS NOT SET UP AND HENCE DEDUCTION OF EXPENSES WAS NOT PERMISSIBLE. 5. SECTION 3 DEFINES PREVIOUS YEAR, INTER ALIA , TO MEAN IN THE CASE OF A BUSINESS OR PROFESSION NEWLY SET UP, BEING T HE PREVIOUS YEAR BEGINNING WITH THE DATE OF SETTING UP O F THE BUSINESS AND ENDING WITH THE FINANCIAL YEAR IN WHICH SU CH BUSINESS IS SET UP. WHEN WE CONSIDER SECTION 5 IN JUXTAPOSITION TO SECTION 3, IT BECOMES EVIDENT THAT TO TAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS RESIDENT INCLUDES ALL INCOME FROM WHATEVER SOURCES DERIVED WHIC H, INTER ALIA , ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN INDIA DURING SUCH YEAR. THE TERM PREVIOUS YE AR HAS OBVIOUSLY RELATIONSHIP WITH THE SETTING UP OF THE BUSIN ESS AND NOT WITH THE COMMENCEMENT OF THE BUSINESS. ITA NO.3530/DEL/2012 4 6. THE HONBLE SUPREME COURT IN CIT VS. RAMARAJU SURGICAL COTTON MILLS LTD. [(1967) 63 ITR 478 (SC)] HAS HELD THAT BUSINESS IS SET UP WHEN IT IS READY TO DISCHARGE THE FUNCT IONS FOR WHICH IT IS BEING SET UP. THE HONBLE JURISDICTIO NAL HIGH COURT IN CIT VS. SAMSUNG INDIA ELECTRONICS LTD. [(2012) 356 ITR 354 (DEL)] HAS HELD THAT THE BUSINESS COMMENCES ON DOING FIRST ACTIVITY LIKE PURCHASE OF RAW MATERIALS, E TC. 7. WHEN WE CONSIDER THE AMBIT OF SETTING UP OF THE BUSINESS IN THE LIGHT OF THE ABOVE NOTED JUDGMENTS OF THE HONBLE SUPREME COURT AND THAT OF THE HONBLE JURISD ICTIONAL HIGH COURT, IT BECOMES APPARENT THAT ANY INCOME ARISI NG AFTER THE DATE OF SETTING UP OF THE BUSINESS IS CHARGEA BLE TO TAX AND, SIMILARLY, ANY EXPENDITURE INCURRED AFTER T HE SETTING UP OF THE BUSINESS IS DEDUCTIBLE SUBJECT TO OTHER RELEVA NT PROVISIONS. THE ACTIVITIES CARRIED OUT BY THE ASSESSEE, AS NOTICED ABOVE, AMPLY DEMONSTRATE THAT ITS BUSINESS WAS SET UP THOUGH SALE OF VEHICLES DID NOT TAKE PLACE DURING THE YEAR. IN THAT VIEW OF THE MATTER, WE ARE SATISFIED THAT ALL THE ITA NO.3530/DEL/2012 5 REVENUE EXPENSES INCURRED BY THE ASSESSEE AFTER SETTING U P OF THE BUSINESS ARE DEDUCTIBLE. IT IS NOT THE CASE OF THE AO THAT SUCH EXPENSES ARE EITHER NON-GENUINE OR OF CAPITA L NATURE. IN THAT VIEW OF THE MATTER, WE UPHOLD THE V IEW TAKEN BY THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 06.08.201 4. SD/- SD/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED,06 TH AUGUST, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.