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TMI Blog2016 (4) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008. 4. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) erred in allowing the proportionate expenses claimed by the assessee ignoring the fact that the business of the assessee started in August, 2008. 5. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) erred in allowing the to set off and carry forward the business loss ignoring the fact that the business of the assessee did not start till August, 2008. 6. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored." 2. Brief facts giving rise to this appeal are that the assessee is engaged in the business of trading of lipids and excipients for pharma and cosmetic industry. The assessee had incorporated as a private company on July 18, 2007, as a wholly owned subsidiary of Gattefosse Holding, France. The assessee filed its original return of income by way of e-filing declaring total income at Rs. 71,29,048/-. The case of the assessee was selected for scrutiny. During the assessment proceeding, the AO observed that the assessee made its first sale on 8th August and, therefore, the business of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court held that , "Business" connotes a continuous course of activities. All the activities which go. to make up the business need not be started simultaneously in order that the business may commence. The business would commence when the activity which is first in point of time and which much necessarily preceded all other activities is started". (iii) Sarabhai Management Corp. Ltd. vs. CIT (1965) 102 ITR 25, "the Hon'ble Gujarat High Court has recognized that there may be interval between the setting up of the business and commencement of business and held that all expenses incurred during that interval would be a permissible deduction. The decision of Gujarat High Court was affirmed by the Apex Court which is reported in 192 ITR 151". By analyzing the above decisions by High Courts and Supreme Court the tests applied are as under: "Business is a continuous and systematic activity. There are many activities in conducting a 'business. All the activities will not have to be conducted at the same time or started simultaneously. Some activities or business starts earlier or some later. The business is set up when it is ready to commence." This means when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on March, 31, 2008 and could not actually import products prior to the said date. Ld. AR further contented that the assessee had set up the business and expenses were incurred wholly and exclusively for the purpose of carrying on business activities. After complying with the various statutory regulations, the first sale was made on August, 2008. Therefore, the CIT(A) after considering all the documents placed on record has deleted the disallowance so made by the AO. 5. We have heard rival contentions of the parties and perused the record carefully. We found that the CIT(A) while deleting the disallowance so made by the AO has considered all the documents placed by the assessee. On verification of the details so placed by the assessee, the CIT(A) found that the assessee had sent an introductory letters to various clients urging for the business and calling for their requirements of the product. The date of letter was August, 21, 2007, which can be taken as date of commencement of the business. The CIT(A) further held that all the earlier activities of the assessee before August, 21, 2007 were regulatory activities and first activity of the business actually started on August, 21,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto "service agreement"with its parent company and, therefore, the expenditure incurred between 1.4.2004 to 31.5.2004 should be capitalized. Tribunal, in its impugned order had also observed that the appellant assessee had entered into a lease agreement and had hired premises as its office, only on 15.6.2005. Commissioner of Income Tax (Appeals), however, had decided the issue/question in favour of the respondent assessee." 10.4. At para-7 of its order, the Hon'ble High Court observed that : "As per the case of the appellant-assessee, expenses incurred during the months of April and May, 2004, were on account of training given to the recruited employees. This is cler from the reply given by the appellant/assessee dated 14.11.2007. The issue which arises is, whether the business had been setup as on 1st April, 2004 or was it setup only on 1st June, 2004. There is a distinction between "setting up of business" and "commencement of business". 10.5. While deciding the issue, the Hon'ble High Court of Delhi elaborately discussed and considered the decision of the Hon'ble High Court of Bombay given in the case of Western India Vegetable Products Ltd. Vs CIT 26 itr 151 (Bom). Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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