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2022 (9) TMI 491 - AT - Income TaxDisallowance of business expenses - business of the assessee was not set up during the previous year - HELD THAT:- As fit out works related to building of Studio and production facilities was under progress during the relevant previous year and the premises area occupied only after completion of fit out work i.e. from 05/06/2009 which can be corroborated with the Leave and License Agreement with India Bulls. Thus, in any stretch of imagination the assessee was not in a position to procure business and delivery its service prior to June, 2009. The identical issue has come up for consideration before the coordinate bench of this Tribunal in the case of DCIT v. Akzo Nobel Car Refinishes India (P.) Ltd. [2008 (8) TMI 604 - ITAT DELHI]merely on the basis of incorporation of a company it cannot be concluded that business was set up. As observedearlier carrying on a business is a regular and systematic activity. Nothing that sort of facts or circumstances could be brought before us - assessee failed to demonstrate either with the direct evidence or with the circumstantial evidence that its business was set up in the accounting period. Whatever has been pointed out, i.e., incorporation of the assessee and appointment of the director are concerned, we are of the view that these two factors are not sufficient to record a finding that business has been set up. In the case in hand, it is emerging from the record that the assessee has merely carrying out the fit-out work during the relevant previous year - it is also clear that during the relevant previous year, the assessee is not ready for running the service of Studio and the assessee was not ready and, in a position, to commence its activities. The assessee had also not taken the premises on rent and had not completed the setting up of the facilities for running the studio. Therefore, the assessee was not in a position to solicit customers till the end of May 2009 before the start of Leave and License Agreement 05/06/2009. We have no hesitation to hold that the business had not been set up during the previous year relevant to Assessment Year 2009-10. Further, in our opinion, disallowance made by the A.O which has been confirmed by CIT(A) is in order and we do not find any error or legal infirmity the approach of the Lower Authorities. Accordingly, we dismiss the Assessee’s ground of appeal. CIT-A directing the A.O to capitalize the expenditure and allow the benefit of depreciation allowances on the same - HELD THAT:- As per the balance sheet of the Assessee, it hadSuo-Moto capitalized the item of expenditure Rs. 6.25 crores as capital work in progress for bringing fixed assets into existence. The remaining expenses that were not capitalized by the Assessee were debited in the P & L Account. Assessee has not filed any particular before the Authorities bellow to substantiate that the expense debited in the P &L account are incurred for bringing fixed asset into existences. Therefore, the submission of assessee that CIT(A) has committed an error not directing the A.O to capitalize the expenditure and allow benefit of depreciation allowances on the same is not sustainable. For the above said discussions we do not find merit in the Assessee’s Grounds of Appeal No.4.
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