TMI Blog2016 (4) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee had already commenced its business activities from A.Y. 2008-09, therefore, the assessee should be allowed carry forward of the expenditure from the assessment year under consideration - Decided in favour of assessee - ITA No.333/Mum/2013 - - - Dated:- 4-3-2016 - SHRI B.R.BASKARAN, AM SHRI SANDEEP GOSAIN, JM For The Revenue : Smt. Anu K. Aggarwal For The Assessee : Ms. Sonalee Godbole PER SANDEEP GOSAIN,(JM) The appeal filed by the revenue is directed against the order dated 15-10-2012, passed by the CIT(A)-21, Mumbai, for the assessment year 2009-2010, on the following grounds :- 1. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) erred in holding that the business of the of the assessee was set up during the year ended 31.03.2008. 2. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in not considering the fact that the first sale of the assessee was concluded in August, 2008 and hence August, 2008 should have been taken as the date of commencement of business. 3. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) erred in holding that the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between a person commencing a business and a person setting up a business and for the purposes of the Indian Income-tax Act the setting up of the business and not the commencement of the business that is to be considered. It is only after the business is set up that the previous year of the business commences and any expense incurred prior to the setting up of a business would not be a permissible deduction. When a business is established and is ready to commence business then it can be said of that business that it is set up but before it is ready to commence business it is 'not set up. There may however be an interval between the setting up of the business and the commencement of the business and all expenses incurred during that interval would be permissible deductions , (i) Prem Conductors Pvt. Ltd. vs. CIT (1977) 108 ITR 654 (Guj.), It was held that the test to be applied is as to when a business man would regard a business as being commenced and the approach must be from a common sense point of view. In case of the activity of securing orders before commencement of actual production, it was held that the business had commenced though the actual production has not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. 3.1 The A.O. in his order has not allowed assessee to carry forward the business loss as the business was not commenced during the A.Y.2008-09. Since earlier I held that business had commenced from A.Y.2008-09, the A.O. may allow carry forward of the expenditure from this assessment year. This ground of appeal is allowed. Now, the revenue is in appeal before us against the aforesaid findings of CIT(A) with the grounds mentioned above. 3. Ld. DR before us submitted that the assessee has made its first sale in end of Aug 2008 and accordingly the business of the assessee is considered to be commenced from said period and the assessee could not furnish the details of expenses pertaining to employee cost, administrative expenses and finance cost, therefore, the AO rightly disallowed the same. It was also the contention of ld. DR that there was no business activity of the assessee in previous year, therefore, the AO disallowed the loss of ₹ 11,59,064/- carried forward from previous year to be set off against the current year income, which is just and proper. Hence, the CIT(A) has wrongly allowed the claim of the assessee. 4. On the other hand, ld. AR conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28 of the Act postulates that profit and gains of business or profession carried out at any time during the previous year, shall be taxed under the head profits and gains of business or profession. 10.2. The undisputed fact is that the assessee has recruited employees for the purpose of its business and as per the details exhibited at page-10 of the Paper Book about 16 employees are for the job of quality assurance. The assessee is in the business of Merchandising of diamonds/gold/jewelleries. Undisputedly, this line of business requires expertise who have proficiency in understanding the carats of diamonds and related jewellery, without such recruitment, it would be a futile exercise to commence the business. 10.3. The Hon ble High Court of Delhi in the case of Omniglobe Information Tech India Pvt. Ltd. in Income Tax appeal No. 257 of 2012 had the occasion to consider the following substantial question of law: Did the Tribunal fall into error in holding that the assessee had setup its business w.e.f. 1.6.2004 and not w.e.f. 1.4.2004, as held in the impugned order. 10.3. In that case, the Hon ble High Court had to consider the following facts: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, it can be said that at that time, the company was ready to commence business. 10.8. The Hon ble High Court of Delhi has considered these decisions in the case of Omniglobe Information Tech India Pvt. Ltd.(supra) and at page-18 of its order, the Hon ble High Court held as under: In view of the aforesaid discussion, we do not think that the reasoning given by the Tribunal and the AO shows that the business of the appellant-assessee had not been setup. The business of the appellant had been setup as the appellantassessee had acquired the necessary infrastructure from their sister concern, M/s. Agilis, and had also started making payment of salary and wages. This training was given by professional experts under the supervision and control of the appellantassessee. The moment the said operations were commenced, the business had been setup and the subsequent rendering of service to third parties would be at a later date when the actual services were rendered to the parent/holding company. 11. After considering the facts of the case in hand in the light of the decisions referred to hereinabove, in our considered opinion, upon recruitment of employees, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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