TMI Blog2012 (11) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... oss of (-) ₹ 9,91,62,820/-.The return was processed u/s. 143(1)(a) and the returned loss was accepted by the intimation dated 13-2-2002. A.O. thereafter reopened the assessment to ascertain correctness of the loss declared and issued notice u/s. 148 on 26-07-2005.The copy of the reasons recorded for issue of notice u/s. 148 was provided to the assessee. In response to the notice u/s. 148, assessee vide its letter dated 4-8-2005 submitted that the original return filed on 30-10-2005 may be treated as return in pursuance to notice u/s. 148 of the Act. During the course of re-assessment proceedings A.O. noticed that the traveling expenditure mentioned in paragraph 4 on page 3 has been claimed as Revenue expenditure though the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses, legal fees, copywriting and graphic design. He was of the view that the expenditure was in the nature of marketing survey whereby the assessee was trying to identify a suitable alliance with a Call Centre in USA. He was of the view that the expense incurred prior to the commencement cannot be allowed as Revenue expenditure. Further according to him the assessee got enduring benefit out of the initial marketing expenses and therefore, the expenditure cannot be treated and allowed as revenue expenditure. The A.O. relying on the decision of UCO Bank vs. CIT [1999] 240 ITR 355 (SC), Kedarnath Jute Mfg.Co. Ltd., vs. CIT [1971] 82 ITR 363 (SC) and other decisions held that the entire expenditure of ₹ 132.62 lacs cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clear from the assessment order as well as the submissions that it was fully in connection with market explorations though prior to commencement of production. But as claimed by the appellant, the business was set up with necessary office and other infrastructure and the permissions from the necessary authorities were all in place in April, 2001. The treatment in the books of accounts as deferred revenue expenditure cannot decide the issue even as observed by the A.O. in his order. The crucial aspect is whether the business was set up before commencing the market survey expenses. It is clear that the expenses incurred towards marketing survey were all outside the country especially in connection with the establishment of call center ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the assessee got enduring benefits of the same marketing expenses and the assessee itself has treated it as not to be of revenue expenditure in the books of accounts and amortized it over a period for which the benefits were expected to be accrued in future to the company. In view of these facts, Ld. D.R. submitted that CIT (A) has erred in treating the expenditure as Revenue expenditure. He therefore urged that the order of the A.O. be upheld. 7. On the other hand the Ld. A.R. submitted that the business of the assessee was set up in April, 2001.The assessee had received on 14-2- 2001 the approval for set up. The assessee was also granted approval to set up international call centre of BSNL by its letter dated 23-4-2001.The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal approval was granted by Ministry of Information Technology, to set up unit in Software Technology Park vide letter dated 14-2-2001. The assessee also received permission from BSNL Ltd. on 23-4-2001 for starting International Call Center. The Office of the Deputy Central Excise, Noida had granted licence for custom bonded warehouse on 13-4-2001. It had also imported the necessary machinery in March, 2001. The assessee had all the necessary infrastructure like building, electrical connection etc., in place by April. The Revenue has not brought any material on record to controvert the aforesaid facts. 9. In the case of Prem Conductors Pvt. Ltd. vs. CIT 108 ITR 651, the Hon ble Gujarat High Court relying on the decision of CIT vs. Sauras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide assessment order has stated that the expenses are in the nature of salaries, pay-roll, travel expenses, general office expenses and computer installation, office buildings, telephone rent etc. Revenue has no dispute with the nature of expenses. Its dispute is that since the business had not commenced, the expenditure is not allowable. Since we have already held above that the assessee had commenced business therefore the expenses which are of revenue nature are therefore allowable. 13. In view of the totality of facts we do not find any infirmity in the order of CIT (A). Thus we uphold the order of the CIT (A). Thus this ground of the Revenue is dismissed. 14. In the result, the appeal of the Revenue is dismissed. Order pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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