TMI Blog2010 (2) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... come to a conclusion that the business has been set up during this year, we are unable to specify the date on which the business can be said to have been set up for the reason that the required details have not been provided by the assessee nor examined by any of the revenue authorities. Thus we set aside the issue to the file of the AO to ascertain the exact date of set up of business and to treat the expenditure incurred thereafter as revenue expenditure. - ITA No. 1109/Mum/2006 - - - Dated:- 15-2-2010 - J. Sudhakar Reddy, V.D. Rao, JJ. Nitesh Joshi for the Appellant Ajay Kumar Srivastava for the Respondent ORDER J. Sudhakar Reddy: This is an appeal filed by the assessee directed against the order of the CIT(Appeals)-IX, Mumbai dated 19-12-2005 for the assessment year 2000-01. 2. Facts in brief: The assessee is engaged in the business of running and interacting music channel on Cable T.V. On this channel, the cable T.V. viewer, can select song, which he wants to view by using telephone. The assessee claims that the infrastructure required to run and operate the channel, was completed during the assessment year 2000-01 and the assessee has i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e laws: i) Desai Brothers vs. DCIT (Assessment) 240 ITR 121. ii) Zuari Estate Development and Investment Co. P. Ltd.vs. DCIT (Assessment) and another 271 ITR 269. 5. On the issue of commencement of business, on facts, the learned counsel submitted that the assessee had in fact earned revenues by way of advertisement and had also commenced business by telecasting certain songs on cable net work. He contended that the test laid down by various courts is whether the business has been set up or not and whereas the AO has gone on a wrong presumption that the test is whether the assessee had commenced the business or not. On the issue as to what is the test that has to be applied, he relied on the following case laws: i) Western India Vegetable Products vs. CIT 26 ITR 151 (Bom.) ii) CIT vs. Kanoria General Dealers P. Ltd. 159 ITR 524 (Cal.) iii) CIT vs. Saurashtra Cement and Chemicals Industries Ltd. 91 ITR 170 (Guj.) iv) Hotel Alankar vs. CIT 133 ITR 866 (Guj.) iv) CIT vs. ESPN Software India P. Ltd. 301 ITR 368. He submitted that all the propositions laid down in these cases are that there can be interval between set up of business and commencement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that prima facie belief of the AO is sufficient for reopening the assessment, he relied on the following case laws: i) S. Narayanappa and Others 63 ITR 219 (SC) ii) Raymond Woollen Mills Ltd. vs. ITO 236 ITR 34 (SC) iii) Phool Chand Bajrang Lal vs. ITO 203 ITR 456 (SC) 8. On the issue of commencement of business and set up, the learned DR submits that the assessee is connected to Hathway which is a cable network and just because Hathway has a infrastructure in place, it cannot be said that the assessee had commenced business. He relied on the order of the AO as well as the CIT(Appeals) and prayed that the same be upheld. 9. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the orders on record and the orders of the authorities below as well as the case laws cited, we hold as follows. 10. In the audited accounts the assessee has clearly stated in the notes to account that the expenditure in question pertains to precommencement period. Even in the profit and loss account the income from operations is shown as Nil and the expenditure claimed is only on account of audit fees, bank charges and le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be whether the assessee has set up business or not and that commencement of business is not the requirement of law. The Hon'ble Delhi High Court in the case of CIT vs. ESPN Software India P. Ltd. (supra) has held as follows: "A business is nothing more than a continuous course of activities and for commencement of business all the activities which go to make up the business need not be started simultaneously. As soon as an activity which is the essential activity in the course of carrying on the business is started, the business must be said to have commenced. A finding regarding the date when a business was set up is a finding of fact. Under section 3 of the Income-tax Act, 1961, it is the "setting up" of the business and not the "commencement" of the business that is to be considered. A business is commenced as soon as an essential activity of that business is started. Thus, a business commences with the first purchase of stock-in-trade, and the date when the first sale is made is immaterial. Similarly, a manufacturer has to undertake several activities in order to bring to produce finished goods and he commences his business as soon as he undertakes the first of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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