ITO, New Delhi V. M/s. Team Pasona India Company Ltd., New Delhi

ITA 4567/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91325 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 26-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARUN SEEM
• Assessee Lawyers: GAUTAM CHOPRA
• Keywords: Business expenditure; Carry forward of business losses
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 4567 /DEL/201 0 ASSESSMENT YEAR: 2007 - 08 INCOME TAX OFFICER VS. M/S TEAM PASONA INDIAN COMPANY WARD 16(2), NEW DELHI LTD., 122 - 123, NEW MANGLA PURI, MANDI ROAD, NEW DELHI (PAN: AACCT5963E ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TARUN SEEM, SR.DR RESPONDENT BY: SH. GAUTAM CHOPRA, ADV. DATE OF HEARING: 26.06.2015 DATE OF PRONOUNCEMENT: 17.07.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS IS AN APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007 - 08 AGAINST THE ORDER OF LEARNED CIT(A), DT. 06.08.2010, RAISING THE FOLLOWING GROUNDS OF APPEAL: THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW BY DELETING DISALLOWANCE OF EXPENSES OF RS. 5 2,32,647/ - MADE BY THE AO, IGNORING THAT: I. THE EXPENSES CLAIMED WERE NOT LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. II. THAT COMMENCEMENT OF BUSINESS CERTIFICATE WAS ISSUED TO THE ASSESSEE BY THE ROC ON 10 TH JANUARY, 2007 AND THE EXPENSES HAD BEEN INCURRED BEFORE THIS DATE. III. THE EXPENDITURE CLAIMED ARE IN THE NATURE OF PRE - OPERATING EXPENSES AND IT IS WELL SETTLED THAT ANY EXPENDITURE INCURRED PRIOR TO THE DATE OF SETTING UP OR COMMENCEMENT OF A BUSINESS IS NOT ALLOWABLE. 2 2. BR IEF FACTS OF THE CASE ARE THAT THE RESPONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF PROVIDING HUMAN RESOURCES. FOR THE ASSESSMENT YEAR 2007 - 08, IT HAS FILED RETURN OF INCOME ON 30.1 0.2007 DISCLOSING LOSS OF RS. 52,32,647/ - . AGAINST THE SAID RETURN OF INCOME, T HE ASSESSMENT WAS COMPLETED AT NIL INCOME VIDE ORDER DATED 29 TH DECEMBER, 2009 PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) DENYING TO CARRY FOR WARD THE BUSINESS LOSSES ON THE GROUND THAT THE RESPONDENT ASSESSEE HAD NOT COMMENCED THE BUSINESS ACTIVITY. AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(A) WHO VIDE ORDER DATED 6 TH AUGUST, 2010, ALLOWED THE CLAIM OF THE ASSESSEE COMPANY BY HOLDING TH AT THE ASSESSING OFFICER HAD NOT DOUBTED ON THE GENUINENESS OF THE EXPENDITURE JUST BECAUSE NO SALES ARE THERE , IT CANNOT BE CONCLUDED THAT THE ASSESSEE HAD COMMENCED BUSINESS AND THEREFORE ALLOWED THE ENTIRE BUSINESS EXPENDITURE. BEING AGGRIEVED, THE REVE NUE IS BEFORE US WITH THE PRESENT APPEAL. 3. BEFORE US, THE LEARNED SR. DR VEHEMENTLY ARGUED THAT IN THE ABSENCE OF COMMENCEMENT OF THE BUSINESS NO EXPENDITURE IS ALLOWABLE AND THEREFORE THE ORDER OF LEARNED CIT(A) ALLOWING THE BUSINESS LOSSES SHOULD BE QUASHED. 4. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE RESPONDENT ASSESSEE IS ONLY ENGAGED IN THE BUSINESS OF PROVIDING HUMAN RESOURCES AND THEREFORE IRRESPECTIVE OF THE FACT WHETHER THERE IS REVENUE GENERATED OR NOT THE EXPENSES INCURRED SHOULD BE ALLOWED AS A DEDUCTION. THEREFORE, HE SUPPORTED THE ORDER OF CIT(A). 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE ISSUE IN APPEAL RELATES TO THE DETERMINATION AND CARRY FORWARD OF BUSINESS LOSSES OF RS. 52,32, 647/ - . T HE FACT TO BE NOTED IS THAT THE ASSESSING OFFICER HAD NOT DOUBTE D THE GENUINENESS OF THE EXPENDITURE INCURRED. HE WAS ONLY OF THE OPINION THAT THE EXPENDITURE INCURRED CANNOT BE ALLOWED TO BE CARRY FORWARD FOR SIMPLE REASON THAT THE ASSESSEE COMPANY HAD NOT COMMENCED THE BUSINESS ACTIVITY. BUT THE ASSESSING OFFICER HAD FAILED TO CONSIDER THE PRINCIPLE THAT THE ASSESSEE IS ENTITLED TO DEDUCTIONS, THE MOMENT THE BUSINESS IS DEEMED TO BE SET UP WITH ITS ESTABLISHMENT OR SET ON FOOT. THERE MAY BE INTERREGNUM BETWEEN THE SETTING UP OF A BUSINESS AND ITS ACTUAL COMMENCEMENT A ND THE ACCOUNTING YEAR WOULD BEGIN ON THE DATE THE BUSINESS IS SET UP AND NOT WHEN IT IS ACTUALLY COMMENCED. THE EXPENSES INCURRED DURING THE GAP OF SETTING UP OF BUSINESS AND COMMENCEMENT OF BUSINESS ARE ALLOWABLE AS DEDUCTION AS HELD BY THE HON BLE SUPRE ME COURT IN THE CASE OF CWT VS. RAMRAJ U SURGICAL COTTON MILLS LTD. , 63 ITR 478 AND CIT VS. SARABHAI MANAGEMENT CORPORATION LTD. , 192 ITR 151. EVEN THE HON BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. SPONGE IRON INDIA LTD., 201 ITR 770 OBSERVED THA T THE BUSINESS IS DEEMED TO BE SET UP WHEN IT IS READY TO COMMENCE THE BUSINESS. APPLYING THE SAME PRINCIPLE TO THE FACTS OF THE CASE , ADMITTEDLY THE RESPONDENT ASSESSEE COMPANY IS IN THE BUSINESS OF ONLY PROVIDING HUMAN RESOURCES THEREFORE WHEN THE ASSESS EE COMPANY ESTABLISHED OFFICES AND OTHER INFRASTRUCTURE IT IS DEEMED THAT THE BUSINESS HAS BEEN SET UP AND THEREFORE THE EXPENDITURE INCURRED FROM THE 4 DATE OF SETTING UP OF BUSINESS ARE ALLOWABLE AS DEDUCTION. ACCORDING LY , WE DO NOT FIND ANY FLAW IN THE RE ASONING OF THE CIT(A). THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISSED THE GROUNDS OF APPEAL FILED BY THE REVENUE. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THE DECISION IS PRONOUNC ED IN THE OPEN COURT ON 1 7 T H JULY , 2015. S D / - S D / - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 T H JULY , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI