TMI Blog2015 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... . [2007 (8) TMI 485 - ITAT MUMBAI] - Decided in favour of assessee. - ITA Nos.551 & 552/Hyd/2013 - - - Dated:- 9-1-2015 - SHRI A. Shri P.M. Jagtap and Smt. Asha Vijayaraghavan, JJ. For the Appellant : Shri S. Rama Rao, Advocate For the Respondent : Shri Rajat Mitra, (DR) ORDER Smt. Asha Vijayaraghavan (Judicial Member).- Both these appeals are directed against the orders of the Commissioner of Income-tax (Appeals)-9, Mumbai (Camp at Hyderabad) dated February 12, 2013 relating to the assessment years 2004-05 and 2005-06. I. T. A. No. 551/Hyd/2013-assessment year 2004-05 2. Brief facts of the case are that the assessee-company is engaged in the business of development and sale of software. It furnished i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued by the authorised representative for the assessee that the Assessing Officer should have allowed the entire expenditure debited to the profit and loss account, because the assessee-company was not closed. It was also submitted that the assessee-company had debited the salary and other expenditure at ₹ 24,82,147 and was waiting for work orders, but as there was no business income and no business receipts, no income was offered to tax. The Commissioner of Income-tax (Appeals) after going through the orders of the Assessing Officer upheld that reopening under section 147 of the Act was valid and held that the Assessing Officer had assumed valid jurisdiction to frame reassessment, thus confirming the action of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is decided that the ends of justice would be met if the deduction under section 57(iii) of the Act is allowed at 25 per cent. of the expenditure of ₹ 24,82,147 debited in the appellants profit and loss account. In other words, the appellant shall get deduction of expenditure of ₹ 6,20,536 instead of ₹ 3 lakhs allowed by the Assessing Officer. Therefore, the appellant will get a further relief of ₹ 3,20,536. Interest under sections 234A and 234B to be levied as per law. Grounds of appeal No. 3, 4, 5 and 6 are partly allowed. 5. Thus, the Commissioner of Income-tax (Appeals) partly allowed the assessee's appeal. Aggrieved the assessee is in appeal before us. 6. Learned counsel for the assessee Shri S. Rama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and November 30, 2005 respectively for the assessment years 2004-05 and 2005-06. 8. Learned counsel pointed out that the Assessing Officer completed the assessment under section 143(3) for the assessment year 2005-06 and under section 147 for the assessment year 2004-05 and according to the Assessing Officer there was no business activity and the expenditure debited is not allowable. The Assessing Officer estimated the probable expenditure to be allowed at ₹ 3 lakhs for both the years and deducted the same from the income from other sources. 9. Learned counsel stated that he was not pressing the grounds against presumption of jurisdiction under section 148 for reopening the assessment which was confirmed as valid by the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity, purchase of stocks in trade would be setting up of business. 11. The hon'ble Supreme Court in the case of CIT v. Sarabhai Management Corporation Ltd. [1991] 192 ITR 151 (SC) had held that the business is said to have been commenced when it has set up and it is not necessary that it commenced activity of purchase or sale. In the said case, the apex court observed that when the assessee acquired immovable properties for let out on lease, such business is said to have been commenced when the property is made ready for use and actual receipt of rent is not essential. The assessee herein is ready with its produce and can market any time and therefore, the assessee commenced business activity and the expenditure incurred is allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is not carrying on any business. We therefore, approve the finding of the learned Commissioner of Income-tax (Appeals) to this extent. Following the ratio of the abovesaid decision, we are of the opinion that the Assessing Officer has erred in rejecting the business loss of the assessee admitted in the return of income. The Assessing Officer should have appreciated that there was business activity, though there was no revenue during the previous year under consideration. Hence, in our opinion the expenditure is relatable to the business activity and the same is allowable as a deduction. 14. In the result, the appeal in I. T. A. No. 551/Hyd/2013 is allowed. I. T. A. No. 552/Hyd/2013 15. The facts for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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