TMI Blog2014 (1) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... pect is only on it - the matter requires proper examination after admission of the additional evidences as being sought to be admitted, as the matter has necessarily to be decided in accordance with the law. The assessee, on whom the onus to establish its claims lie, would also be at liberty to raise any additional claim before the A.O. In view of the said decision, we do not consider it necessary to admit the assessee's additional ground, which becomes infructuous. - The matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. - IT Appeal No. 6859 (Mum.) of 2011 - - - Dated:- 23-8-2013 - SANJAY ARORA AND VIJAY PAL RAO, JJ. For the Appellant : Dr. K. Shivaram and Rahul Hakani. For the Respondent : T. Roumuan Paite. ORDER:- PER : Sanjay Arora This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-I, Mumbai ('CIT(A)' for short) dated 11.07.2011, dismissing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2007-08 vide order dated 25.11.2009. 2.1 We begin by stating the brief facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re charged to the operating statement for the year. Further, maintenance cost is incurred as investors are to be serviced in case of a request for change. 2.2 In view of the Assessing Officer (A.O.), the assessee was clearly in the process of setting up its business, the preparation of data base, for which expenditure had been incurred, being toward the same. The said process had been completed only during the following year. He drew support from the fact that even the furniture and fixture was in the process of installation as at the year-end and, accordingly, stood classified thereat as capital work-in-progress. Reliance was placed by him on the decision by the hon'ble jurisdictional High Court in the case of Western India Vegetable Products Ltd. v. CIT [1954] 26 ITR 151 (Bom.), also reproducing there-from. It has been explained that business can be said to be set-up only when it is ready to be commenced, so that before the business is ready to be commenced, it cannot be said to be set-up. How could the assessee claim setting up it's business when the furniture and fixture itself, forming an integral part of the start-up, is under installation? The said view by the hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to commence state. The revenue may or may not follow immediately thereafter, or there may a delay even in the actual commencement of the business for some reason, but that is immaterial, and all the expenditure incurred in the interregnum, i.e., after set-up and prior to the actual commencement of business, where not capital in nature, would be revenue expenditure, so that subject to the condition of being incurred for the purposes of business, deductible in terms of the provisions of the law. The capital expenditure incurred after the said date would largely be meted the same treatment as that incurred prior to the said date. 4.2 Coming to the facts of the present case, we find it to be, in the present state of affairs, factually indeterminate. The assessee-appellant is working on a project, the KYC project, and which would only be in pursuance to some agreement or understanding, with one or more entities, its customers. What is the critical stage or point of time when the project is or can be said to be complete, so that it is ready to be delivered or in an operable state, would need to be determined, and which can only be on the basis of hard facts and evidences. The matter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te only would need to be capitalized, and that is precisely what it means when the assessee refers to the relevant provision of AS-26. The maintenance expenditure, even as stated by the assessee, for regular changes or updating the information on record, would only be in the nature of maintenance expenditure, i.e., to keep the data base current and, thus, relevant, besides for its up-gradation, as (say) for adding more information, or creation of new records, as the customer base is subject to change over time, while deleting the records of the customers leaving the MF. Again, what needs also to be kept in mind is that there has to be a matching of the expenditure with the revenue, so that the relevant costs can be set off there-against. Needless to add that if a particular cost has no direct bearing on the revenue, but stands incurred all the same, the same would need to be written off in the year it is incurred. We can only, in the absence of clear facts, state the broad guidelines. 5. In view of the foregoing, we are of the clear view that the matter needs to be properly examined, which it has not been at any stage. No doubt the blame for the same falls clearly on the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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