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TMI Blog2015 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-company is engaged in the business of development and sale of software. It furnished its return of income on October 31, 2004 for the assessment year 2004-05 disclosing loss of Rs. 6,64,940. The said return of income was processed under section 143(1) of the Act. Thereafter the Assessing Officer issued a notice under section 148 of the Act recording the reasons that the assessee had debited expenditure of Rs. 24,82,147 without earning any business income. The assessee had earned interest income which was assessable under the head "Income from other sources". 3. During the course of assessment proceedings under section 147 of the Act, the assessee argued that the assessee-company employed software professional and paid salaries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to frame reassessment, thus confirming the action of the Assessing Officer. 4. The Commissioner of Income-tax (Appeals) further held at para 5.3.1 of his order, as follows : "5.3.1 I have carefully and dispassionately considered the facts and circumstances of the case. For allowing expenditure under section 37 of the Act such expenditure must be paid wholly and exclusively for the purpose of the appellants business and profession and further must not be capital expenditure, personal expenditure or an allowance of the character described in sections 30 to 36 of the Act. In this case the appellant has not disclosed any business receipts and no income has been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. Aggrieved the assessee is in appeal before us. 6. Learned counsel for the assessee Shri S. Rama Rao placed before us the background of the assessee and submitted that the assessee is in the business of development of software. The assessee in the process developed various technologies in the field of internet and software engineering i.e., the technology would increase the software productivity three fold and also can build up more complex graphical interfaces than exists today online. It also participated in various technology reviews conducted by the authorities. The Department of Navy of U. S. A. invited technology projects. The assessee participated in the said weapons PMAs and succeeded in passing the test. However, it could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148 for reopening the assessment which was confirmed as valid by the Commissioner of Income-tax (Appeals). It was submitted that the Assessing Officer was under the misconception in coming to the conclusion that, since there was no business receipts, the expenditure incurred on business is not allowable as a deduction ignoring the fact that the assessee had already commenced the business activity. It was further pointed out that the software is developed and the assessee made arrangements for selling the same in the market. The entire expenditure incurred is for the purpose of creating the stock-in- trade to be marketed or for advertising for marketing the same and is business expenditure. In this regard the assessee submitted that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee commenced business activity and the expenditure incurred is allowable as a deduction. 12. Learned counsel further highlighted that perusal of the profit and loss account for both years would clearly indicate that the expenditure is relatable to business activity and therefore, the same is allowable as a deduction. On the other hand, the learned Departmental representative supported the orders of the Assessing Officer and the learned Commissioner of Income-tax (Appeals). 13. We heard both parties. Reliance is placed on the decision of the Mumbai Bench of the Income-tax Appellate Tribunal in the case of Accor Radhakrishna Corporate Services P. Ltd. v. Joint CIT [2007] 13 SOT 652 (Mum). In the case of CIT (Asst.) v. Lafarge India Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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