TMI Blog2014 (5) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness has commenced - business is a continuous course of activities and it has been variously held that for commencement of business all the activities which go to make up the business need not be started simultaneously. The assessee is engaged in the business of software development in the field of information technology, there is no such finding - No specific date has been considered to be the date on which considering the material on record the business can be said to have commenced - it is necessary for the assessee to lead the specific evidence in support of the arguments that the essential activity has started evidenced by some document on a specific date - The issue has not been considered in the proper perspective and only gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60/- which was selected for scrutiny after issuance of notice u/s 143(2). The nature of the assessee s business as noted by the AO in para-2 is that the assessee was engaged in the business of software development in the field of information technology. The AO considering the reply of the assessee in response to query raised for furnishing the details for both the Units i.e STPI Unit-1 2 disallowed pre-operative expenses of Unit-2 claimed by the assessee vide para 4 at pages 2 to 5. The AO observed that whereas for Unit-1 income right from April 2006 to March 2007 was shown for Unit-2 income of Rs41,16,000/- was shown only in the month of March 2007. These facts are tabulated at pages 2 3 of the assessment order. The AO further took n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee could make sale from Unit-II only on 31.03.2007 of two bills of Rs.36,00,000/- and Rs.5,16,000/- in which the sale has been made to Tek Travel Pvt. Ltd. and Unsource Information Technologies Pvt. Ltd. respectively. Therefore, the commencements of business of the assessee of second Unit can only be considered to have taken place on 31.03.2007. Thus, it is finally concluded that the assessee failed to prove the genuineness of claim of expenses of Unit-II till the business on that Unit started and hence, the same are concluded to be pre-operative expenses in nature and hence, these are allowed to be capitalized. Therefore, the disallowance of Rs.53,11,973/- is made and is added to the total income of the assessee. Penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 2006 and started working on the project in hand and the entire epxenses are allowable since the business was commenced and sales were made. 13. The AR relied on the various case laws as mentioned in the written submissions. 14. The expenditure is incurred for the development of software for the two said companies as per their requirement. The expenditure incurred was offset with the income of rS.41,16,000/- which is not disputed by the AO. It cannot be said that the business is not commenced before 31/3/2007. The assessee has been incurring expenditure since April, 2006. The AO has made some general remarks that the expenditure is pre-operative in nature. The expenditure cannot be considered a pre-operative expenditure. Even if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdictional High Court in the case of CIT vs ESPN Software India Pvt. Ltd. (2009) 184 Taxmann 452(Del.) and CIT vs Electron India (2001) 118 Taxmann 190 (Mad.). 5.1. In reply Ld. Sr. Dr stated that the copies of the agreement are not available with the department and there is no reference thereto before the AO. Further it was submitted that no such claim was made before the AO heavy reliance was placed thereon. 6. We have heard the rival submissions and perused the material available on record. In the peculiar facts and circumstances it is seen from the reproduction of the assessment order it is seen that there is no reference to any agreement entered into by the assessee it is further seen that the CIT(A) though has made reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable on record. In the facts of the present case the assessee who is stated to be engaged in the business of software development in the field of information technology, there is no such finding. No specific date has been considered to be the date on which considering the material on record the business can be said to have commenced. Needless to say that it is necessary for the assessee to lead this specific evidence in support of the arguments that the essential activity has started evidenced by some document on a specific date. The issue has not been considered in the proper perspective and only general argument has been advanced which has been accepted that business commended in April 2006. No effort has been made to point out that on w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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