M/s. Right Track Admizzionz Campuz Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6263/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6956 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 04-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANCHAL KHANDELWAL
• Assessee Lawyers: S SRINIVASAN

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 6263/DEL/2014 ASSTT. YR: 2011-12 RIGHT TRACK ADMIZZIONZ VS. INCOME TAX OFFICER, CAMPUZ PVT. LTD., WARD-15(3), NEW DELHI. 301, 302, 302 & 305 GURU AMARDASS BHAWAN, 78 NEHRU PLACE, NEW DELHI-110019. PAN: AAFCR 0457 C ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI S. SRINIVASAN CA RESPONDENT BY : MS. ANCHAL KHANDELWAL SR. DR DATE OF HEARING : 04/07/2016. DATE OF ORDER : 08/07/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 1.09.2014, PASSED BY THE LD. CIT(A)-XVIII, NEW DELHI, RELATING TO A. Y. 2011-12. 2. GROUND OF APPEAL, RAISED BY THE ASSESSEE IN ITS APPEAL, ARE AS UNDER: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT RESPECTFULLY SUBMITS THAT: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED - 2 B) IN DISALLOWING A SUM OF RS. 29,72,282/- BEING TH E EXPENDITURE INCURRED AFTER COMMENCEMENT OF THE BUSI NESS ESPECIALLY WHEN I) THE DETAILS OF EXPENSES INCURRED WERE SUBMITTED; II) THE EXPENSES HAVE BEEN INCURRED DURING THE COUR SE OF THE BUSINESS AND HAVE BEEN INCURRED WERE ALL REVENUE IN NATURE 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN CONCLUDING THAT THE AMOUNT OF RS. 29,72,282/- IS NOT REVENUE IN NATURE ONLY BECAUSE IN THE NOTES TO ACCOUNTS IT WAS MENTIONED THAT THE 'COMPANY WAS IN THE PROCESS OF SETTING UP OF A BUSINESS AND HAS NOT PROVIDED ANY CONSULTAN CY SERVICES' AND NOT CONSIDERING THE FACTS AND DOCUMENTS PRODUCE D BEFORE HIM. 3. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTAN CES OF THE CASE. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 22,28,073/-. THE AO NOTICED THAT ASSESSEE COMPANY WAS INCORPORATED ON 1.12.2010 TO P ROVIDE CAREER COUNSELING SERVICES TO STUDENTS AND ALSO IN PROVIDI NG CONSULTANCY AND ADVISORY SERVICES TO INSTITUTIONS AND OTHER GOVERNM ENT BODIES IN THE EDUCATION SECTOR. HE NOTED FROM THE P&L A/C THAT AS SESSEE COMPANY WAS IN RECEIPT OF INTEREST INCOME ONLY AND NO BUSINESS ACT IVITY HAD BEEN 3 RECORDED. THE AO FURTHER NOTICED FROM THE NOTES TO ACCOUNT THAT IT WAS STATED THEREIN THAT DURING THE PERIOD COVERED BY THE FINAN CIALS, THE COMPANY WAS IN THE PROCESS OF SETTING UP OF THE BUSINESS AND HAD N OT PROVIDED ANY CONSULTANCY SERVICES. HE, THEREFORE, CONCLUDED THAT COMPANY HAD NOT YET STARTED ITS BUSINESS ACTIVITIES AND WAS UNDER PROCE SS OF SETTING UP OF BUSINESS. AFTER CONSIDERING THE DETAILED REPLY OF ASSESSEE, R EPRODUCED AT PAGES 2 TO 4 OF HIS ORDER, THE AO DISALLOWED THE ASSESSEES CLAI M OF EXPENSES AND MADE ADDITION OF RS. 29,72,282/-. IN APPEAL, LD. CIT(A) CONFIRMED THE ADDITION. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 4. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE ITSELF HAD EXCLUDED PRRELIMINARY EXPENSES CLAIMED IN THE P&L A /C. LD. COUNSEL REFERRED TO SCHEDULE I, SIGNIFICANT ACCOUNTING POLI CIES AND NOTES TO ACCOUNT, CONTAINED AT PAGE 74, WHEREIN, INTER ALIA, IT IS ST ATED AS UNDER: CONSULTANCY INCOME: REVENUE IS RECOGNIZED AS AND W HEN THE SERVICES ARE RENDERED. DURING THE PERIOD COVERED BY THE FINANCIALS, THE COMPANY WAS IN THE PROCESS OF SETTI NG UP OF THE BUSINESS AND HAS NOT PROVIDED ANY CONSULTANCY SERVI CES . 5. LD. COUNSEL POINTED OUT THAT WITH REFERENCE TO T HESE NOTES ONLY THE AO CONCLUDED THAT ASSESSEES BUSINESS HAD NOT SET UP. LD. COUNSEL POINTED OUT THAT ASSESSEE HAD TAKEN THE OFFICE ON RENT ON 1.2.2 011 AND ON THAT DATE THE BUSINESS GOT SET UP BECAUSE THE NATURE OF THE ASSES SEES BUSINESS WAS OF 4 IMPARTING CONSULTANCY SERVICES. IN THIS REGARD LD. COUNSEL REFERRED TO PAGE 4 OF CIT(A)S ORDER, WHEREIN, INTER ALIA, IT IS STATE D THAT FINALIZING OF OFFICE SPACE AND SIGNING OF LEASE AGREEMENT FOR DELHI AND CHENNAI. THE DELHI OFFICE WAS TAKEN ON RENT W.E.F. 01.02.2011 AND CHEN NAI OFFICE W.E.F. 25.02.2011. HE, THEREFORE, SUBMITTED THAT EXPENSES INCURRED AFTER 1.2.2011 FOR DELHI OFFICE SHOULD HAVE BEEN ALLOWED. 6. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE NATURE OF ACTIV ITIES UNDERTAKEN BY ASSESSEE ARE NOT DISPUTED. FOR IMPARTING CONSULTANC Y SERVICES, THE FIRST STEP, WHICH IS NECESSARY FOR COMMENCEMENT OF ASSESSEES B USINESS, IS TO HAVE AN OFFICE, WHICH, AS PER ASSESSEE, WAS TAKEN ON 1.2.20 11. I AM IN AGREEMENT WITH THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT THE DATE OF SETTING UP OF BUSINESS IS TO BE THE DATE OF ENTERING INTO LEAS E AGREEMENT FOR OFFICE. LD. COUNSEL WAS REQUIRED TO PRODUCE THE LEASE-DEED. HOW EVER, THE SAME WAS NOT AVAILABLE WITH HIM AND, THEREFORE, I RESTORE THE MA TTER TO THE FILE OF AO FOR THE LIMITED PURPOSE OF THE VERIFICATION OF DATE OF ENTERING INTO LEASE AGREEMENT AND IF THE LEASE WAS ENTERED INTO ON 1.2. 2011, AS CLAIMED BY ASSESSEE, THEN ALL THE EXPENSES INCURRED THEREAFTER HAVE TO BE ALLOWED. 5 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 08/07/2016. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 08/07/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.