TMI Blog2010 (4) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... UPS - Held thst:- As per the decision of Hon’ble Delhi High Court in the case of CIT v. BSES Rajdhani Power Ltd. [2010 -TMI - 78240 - DELHI HIGH COURT],in which higher rate of depreciation was allowed on printers and scanners - If peripherals such as printers, scanners and servers etc. form integral part of the computer system, we have no hesitation in holding that UPS is also an integral part of the computer system, entitled for deduction of depreciation at the rate of 60 per cent - Tribunal held that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system - In fact, the computer accessories and peripherals cannot be used without the computer - Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60 per cent. - 3465 (DELHI) OF 2009 - - - Dated:- 29-4-2010 - I.P. BANSAL, K.G. BANSAL, JJ. K. Ravi Ramachandaran for the Appellant. Anil Bhalla for the Respondent. ORDER K.G. Bansal Accountant Member. The facts of the case are that the assessee-company filed its return on 30-10-2005 declaring total income of Rs. 27,600. This return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sant with systems. In other words, the business can be started only after the employees have been fully trained in their work. The period of April, 2004 and May, 2004 was used for imparting training. Thereafter, the assessee entered into the service agreement. The premises were also taken on rent thereafter. Therefore, it is a case where there was no management or premises available with the assessee for carrying out the business in these two months. Accordingly, it is agitated that the expenses had been incurred prior to setting up of the business, which cannot be deducted in computing the income. 2.2 In reply, the learned counsel for the assessee referred to the findings of the learned CIT(A), furnished on page Nos. 22 to 25 of the impugned order. It appears that the agreement to use the premises of a sister concern for imparting training was not there before the Assessing Officer, which was filed as an additional evidence before the learned CIT(A). The remand report of the Assessing Officer was also obtained. The learned CIT(A) is of the view that the agreement is only one piece of evidence to show that the business had commenced in the month of April, 2004. There are other ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed its claim because in his opinion the assessee had not commenced its business during the relevant accounting period. On appeal, the assessee submitted that it had started operations from the 'hotel right from the date of incorporation and later on, from the residence cum-office of the managing director. It further explained that it had taken sales offices in Delhi, Mumbai and Bangalore on lease for three years and Chennai Sales Office for two years, and had also invested small amounts for leasehold improvements, office equipment, furniture, computer equipment, etc., in each sales office and, therefore, expenses incurred by it were to be allowed. The Commissioner (Appeals), however, disallowed the assessee's claim." The Tribunal inter alia considered the decision of Hon ble Delhi High Court in the case of CIT v. ESPN Software (India) (P.) Ltd. [2008] 301 ITR 368/[2009] 184 Taxman 152, to the effect that the assessee had obtained a license for providing ESPN Services and appointed distributors. On these facts, the learned CIT(A) rightly held that the business had been set up, a decision confirmed by Hon ble Delhi High. However, no such fact is available in the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional evidence before the CIT(A) and even this was neither objected to nor controverted by the Revenue." 4.2 Further, he relied on the decision of Hon ble Madras High Court in the case of CIT v. Club Resorts (P.) Ltd. [2006] 287 ITR 552. The facts are that the assessee had been carrying on the business of promoting time-share unit at places of tourists interest and marketing such units. The system of accounting had been that all receipts were accumulated towards the sale of time-share cottage under current liabilities. The expenditure on construction was carried as capital work-in-progress under current assets. As and when a cottage was ready for occupation, the direct expenditure on construction was taken as cost to the debit of profit and loss account and receipts as the sale price and taken to the credit of profit and loss account. The cottage retained for use by the assessee in hotel industry was shown as an asset and depreciation was claimed. Note No. 9 to the accounts stated that no amount had been accounted for sales, since the project was still under way. Relying on this note, the Assessing Officer disallowed the loss. The Hon ble Court allowed the claim of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, USA. It also applied to Reserve Bank of India for approval to receive foreign exchange loan against future activities. In the months of November, 1995 and January, 1996, the assessee-company paid salary to staff and employees through Kalvinator of India Limited and Expo Machinery Limited. The bank account was opened in the name of the company on 1-2-1996. The assessee claimed that the business had been set up in November, 1995, while the Assessing Officer held that the business was set up on 1-2-1996 when the bank account was opened. The Tribunal came to the conclusion that in the case of a company engaged in rendering financial services, it is possible to say that the business is set up when the directors are appointed, staff at regional and branch level is appointed and their salaries are paid, computers are acquired and installed and the company is ready to commence business. Therefore, it was held that the business was set up on 1-11-1995, by which date the company was ready and in a position to commence its business. This finding was upheld by the Hon ble Court with the following observations:- "Counsel for the Revenue has relied upon the decision in the case of CWT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 995 and installation was completed on 15-3-1995. Therefore, the business was set up on 15-3-1995. The Hon ble Court held that the business had been set up on 28-7-1994, when the purchase order was placed. The application to the DOT and receipt of signals were consequential stages. The expenditure incurred after setting up of the business is allowable as revenue expenditure even if it has been incurred prior to the commencement of business. For the sake of ready reference, the relevant portion of the judgment is reproduced overleaf:- "Turning the facts of the present case, it is clear that the business of the assessee involved different activities in which the first step was the purchase of the VSAT equipment. There was no question of assessee having to place a purchase order with M/s. Hughes Network Systems, USA, for a purpose other than that of its business. The said purchase order was placed on 28th July, 1994. The application to DOT for licence and the receipt of the satellite signals were the consequential stages. The signals were to be received after the VSAT equipment was installed in the premises of the customer. In the circumstances, we are of the view that the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re acquired and installed. According to us, this is the stage when the business can be said to have been set up. While applying the ratio of this case, it can be said that the assessee company commenced its business in June, 2004 when it got into the position of rendering service after training the staff, acquiring its own office and entering into agreement with the parent company. However, it has also to be ascertained as to when it set up the business. The facts of the case of Club Resorts (P.) Ltd. (supra) are distinguishable as the activity was totally different. However, it has been held that the first stage is the setting up of one or more operating offices from which the sales personnel were sent to solicit consumers, which had already started. The second stage was the massive publicity campaign, which had already been started. The assessee had also acquired land and started construction. Therefore, both the authorities below had given concurrent finding that the assessee had commenced business. Therefore, the first stage of setting of the business is to set up one or more operating offices from which sales personnel can be sent to solicit customers. The assessee in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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