ITO, New Delhi V. M/s. Berger Impex India(P) Ltd., Mumbai

ITA 4019/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58560 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.4019/DEL/2010 ASSESSMENT YEAR : 2007-08 ITO, WARD 2 (4), ROOM NO.381, CR BUILDING, NEW DELHI. VS. BERGER IMPEX INDIA (P) LTD., 9, ITASLIAN COMPOUND, ITT BHATI, GOREGAON MULUND, LINK ROAD, GOREGAON EAST, MUMBAI. PAN : AADCB0255A (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MRS. ANUSHA KHURANA, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 14 TH JUNE, 2010 FOR ASSESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDER OF THE LD. CIT (A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISION OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DIRECTING THE A.O. TO ALLOW THE LOSSES CLAIMED BY THE ASSESSEE AT RS.12,28,782/- IGNORING THE FACT THAT THERE WAS NO BUSIN ESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION AND ACCORD INGLY THE PREOPERATIVE EXPENSES ARE NOT ALLOWABLE. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. ITA NO.4019/DEL/2010 2 2. THE NOTICE OF HEARING WAS SENT TO THE ASSESSEE, HOWEVE R, NONE WAS PRESENT ON THE FIXED DATE OF HEARING. THEREFORE, WE PROCEEDED TO DECIDED THE PRESENT APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DR. 3. IN THE RETURN OF INCOME FILED, THE ASSESSEE COMPUTED THE LOSS OF ` 12,28,782/-. FROM THE PERUSAL OF THE BALANCE SHEET, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED LOSS AMOUNT ING TO ` 12,28,782/- DURING THE YEAR. THE ASSESSEE COMPANY WAS I NCORPORATED IN JANUARY, 2007. HOWEVER, NO SALE AND PURCHASES WERE ENTERED INTO BY THE ASSESSEE. IN THE ABSENCE OF SALE AND PURCHASE, THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO BUSINESS ACTIVITY AND THERE WAS NO BUSINESS INCOME. THEREFORE, THE EXPENSES INCURRED BY TH E ASSESSEE ARE PRE-OPERATIVE IN NATURE AND LOSS CLAIMED BY THE A SSESSEE CANNOT BE ALLOWED. THEREFORE, HE DISALLOWED THE LOSS AND COMPUT ED THE INCOME OF THE ASSESSEE AT NIL. THE DISALLOWANCE OF LOSS WAS AGITAT ED IN AN APPEAL FILED BEFORE THE CIT (A). IT WAS SUBMITTED THA T THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF KITCHE N WARE ITEMS. THE FIRST FINANCIAL STATEMENT WAS PREPARED FOR THE YEA R ENDED ON 31 ST MARCH, 2007. THE COMPANY HAD STARTED BUSINESS ACTIVITY FOR TRADING OF KITCHEN WARES IN CHENNAI AND INCURRED EXPENSES AND DEP RECIATION AMOUNTING TO ` 12,28,782/-. IT WAS SUBMITTED THAT DUR ING THE RELEVANT FINANCIAL YEAR THE ASSESSEE HAS DONE THE FOLLOWING BUSINE SS ACTIVITIES:- I) EMPLOYED STAFF FOR THE BUSINESS W.E.F. 15.02.07 AND PAID RS.4,08,387/- DURING THE PERIOD. II) TAKE AN OFFICE/BUSINESS PREMISES AT FOLLOWING ADDRESS BY ENTERING LEAVE & LICENSE AGREEMENT WITH MR. ANAND SU RANA AND PAID RENT OF RS.64,421/- FOR THE BUSINESS PREMISES. (ELECTRICITY AND TELEPHONE EXP INCLUDED). ITA NO.4019/DEL/2010 3 III) PURCHASED COMPUTER AND AIR CONDITIONER OF RS.6,2 5,727/- FOR PROPER EXECUTION OF THE WORK. IV) TAKEN LOAN FROM M/S BERGNER HK LTD. FOR CAPITAL INVESTMENT RELATED TO THE BUSINESS. V) ADVANCE FOR ACQUISITION OF LAND TO SMT. PARVATI D ANJI GALA & SMT. MONGIBEN CHAPSI GALA RS.12,50,000/- EACH. VI) SET UP OTHER INFRASTRUCTURE REQUIRED FOR SETTING UP THE BUSINESS. 4. REFERRING TO THESE ACTIVITIES, IT WAS SUBMITTED THAT THE ASSESSEE COULD NOT MAKE ANY PURCHASE OR SALE, BUT, IT HAS ENTER ED INTO DIALOGUE WITH THE POTENTIAL PARTIES/CLIENTS AND FROM THESE EFFO RTS THE ASSESSEE COULD GET THE ORDER AND MANAGED TO START PURCHASE AND SALES FROM JULY, 2007 AND DUE TO THESE EFFORTS ONLY THE COMPANY MANAGE D TO GET SALES OF ` 3.12 CRORE IN FINANCIAL YEAR 2007-08 AND ` 6.9 7 CRORE IN FINANCIAL YEAR 2008-09. THE COPIES OF FINANCIAL STATEMENTS OF B OTH THESE YEARS WERE FILED AND RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- I) COMMISSIONER OF INCOME TAX VS. ESPN SOFTWARE INDIA (P) LTD. (2008) 218 CTR (DEL) 427, (2008) 301 ITR 368 II) COMMISSIONER OF INCOME TAX VS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (1973) 91 ITR 170 (GUJ). 5. IT WAS SUBMITTED THAT THE LOSS CLAIMED BY THE ASSESSEE SH OULD BE ALLOWED AS THE ACTIVITIES CARRIED ON BY THE ASSESSEE DUR ING THE YEAR AMOUNTS TO SETTING UP OF BUSINESS AND AS PER REQUIREMENTS OF THE INCOME-TAX ACT, WHAT IS NECESSARY FOR CLAIMING THE EXP ENDITURE IS SETTING UP OF BUSINESS AND NOT THE COMMENCEMENT OF THE BUSINESS. ENTERING INTO SALE AND PURCHASE IS NOT THE CRITERIA FO R ALLOWABILITY OF AN EXPENDITURE. THE BUSINESS IS NOTHING MORE THAN A CONTI NUOUS COURSE OF ACTIVITY AND FOR THE COMMENCEMENT OF THE BUSINESS, ALL THE ACTIVITIES WHICH GO TO MAKE UP THE BUSINESS NEED NOT BE STARTED SIM ULTANEOUSLY ITA NO.4019/DEL/2010 4 AND, THUS, IT WAS PLEADED THAT HAVING REGARD TO THE FACTS OF THE CASE THE LOSS CLAIMED BY THE ASSESSEE SHOULD BE ALLOWED. 6. LEARNED CIT (A) AFTER CONSIDERING ALL THESE SUBMISSIO NS HAS OBSERVED THAT THE ASSESSEE HAD STARTED EFFORTS AND OTHER A CTIVITIES FOR ITS TRADE THOUGH THERE IS NO PURCHASE AND SALE DURING T HE INITIAL PERIOD. THE ASSESSEE HAD GIVEN EMPLOYMENT TO SEVEN PERSONS FOR MAR KETING ACTIVITIES AND HAS SET UP INFRASTRUCTURE FOR RUNNING TH E BUSINESS AT CHENNAI. THE SHOP RENT, ELECTRICITY BILL AND TELEPHO NE BILLS HAVE BEEN PAID AND ON THESE FACTS IT CANNOT BE DENIED THAT THE ASSESSEE HAD COMMENCED THE BUSINESS. IN THE TRADE ACTIVITY THERE I S NO PRE- OPERATIVE PERIOD AS THE SAME IS REQUIRED IN MANUFACTUR ING ACTIVITY AND, THUS, HE HAS HELD THAT THE ASSESSEE IS ENTITLED TO HAVE TH E BENEFIT OF CARRY FORWARD OF BUSINESS LOSS AND DEPRECIATION AND DIRE CTED THE ASSESSING OFFICER TO ALLOW THE LOSS CLAIMED BY THE ASSESSEE. IN THIS MANNER, THE ISSUE HAS BEEN DECIDED BY THE CIT (A) IN F AVOUR OF THE ASSESSEE. THE DEPARTMENT IS AGGRIEVED BY SUCH FINDINGS RE CORDED BY THE CIT (A) AND HAS RAISED THE AFOREMENTIONED GROUNDS OF APPEAL. 7. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE DID NOT ENTER INTO SALES AND PURCHASE, THEREF ORE, IT WAS RIGHTLY HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE IS N OT ENTITLED FOR BUSINESS LOSS. SHE SUBMITTED THAT LEARNED CIT (A) HA S WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE AND HIS ORDER SHOULD BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE L EARNED DR. WE HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY THE CIT (A). THE FACTS STATED IN THE ORDER O F THE CIT (A) ARE NOT CONTROVERTED BY THE REVENUE. LEARNED CIT (A) H AS RECORDED A FINDING THAT THE ASSESSEE HAD EMPLOYED THE STAFF FOR CAR RYING OUT ITS ITA NO.4019/DEL/2010 5 ACTIVITIES. THE ASSESSEE HAS ALSO ENTERED INTO LEASE AGREE MENT AND IS PAYING RENT AND OTHER INFRASTRUCTURE HAS ALSO BEEN CRE ATED FOR SETTING UP OF THE BUSINESS. A FINDING HAS BEEN RECORDED BY LEA RNED CIT (A) THAT THE BUSINESS OF THE ASSESSEE WAS SET UP. NO CONTRARY M ATERIAL HAS BEEN BROUGHT ON RECORD TO ASSAIL THOSE FINDINGS OF THE LEARNED CIT (A). THEREFORE, HAVING REGARD TO ALL THESE FACTS, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) VIDE WHICH THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER HAS BEEN DELETED. WE DECLINE TO INTERFERE. 9. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 27.01.20 12. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 27.01.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES