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Income Tax Officer Versus Fisher Scientific India P. Limited.

2016 (4) TMI 735 - ITAT AHMEDABAD

Allowability of deduction - commencement of business - Held that:- There is enough material on record to indicate that the business has actually commenced in 2008-09. Learned CIT(A) has categorically given findings on that aspect and learned Departmental Representative has not been able to controvert the same. The mere fact that the assessee had received advance for work cannot lead to the conclusion that the business had commenced. In any event, this advance was received from a group entity and .....

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r : Shiva Sevak For the Respondent : Sanjay R Shah ORDER Per Pramod Kumar, AM 1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 24th October, 2011, passed by the ld. CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year 2008-09. 2. Grievances raised by the Assessing Officer are as follows "1. The Ld. CIT(A) has erred in law and on facts in directing the Assessin .....

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aring interest income on deposits amounting to ₹ 58,539/- under the head "income from other sources". The stand of the assessee was that since the assessee has not commenced its business during the relevant period, computation of income under the head "profit and gains" from business was not necessary. In the course of the scrutiny assessment proceedings, the Assessing Officer noted that the assessee has claimed foreign exchange loss of ₹ 13,49,874/- on account of .....

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may be correct, so far as accounting practice is concerned, but no deduction can be allowed, for the purpose of computing his profit under the Income Tax Act for contingent liability. The Assessing Officer further noted that the assessee has incurred a loss of ₹ 1,33,97,654/- which pertained to salary and other expenses relating to business "evidencing that business of the assessee has commenced although no income has been booked". The Assessing Office was of the view that this .....

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58,539/- (ii) Loss from Business Add: Rs.1,33,97,654/- Disallowance as discussed above Rs.13,49,875/- Net Loss from Business Rs.1,20,47,779/- 5. Income assessed u/s. 143(3) of the I.T. Act, 1961. Issue Demand Notice and Challan, Accordingly." 4. Aggrieved by the stand so taken, the assessee carried the matter in appeal before the learned CIT(A). 5. As regards the first point i.e. commencement of business, the learned CIT(A) was of the view that the commercial activities had not commenced in .....

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mence the service activity within stipulated period unless it is extended by appropriate authority. The appellant had sought extension to start commercial activities initially up to December 31, 2008 and later on up to April 30, 2009 which was duly granted by the Development Commissioner. Had the appellant already commenced the service activity, there would have not been any necessity to seek such extension, 4.7. The company inaugurated its facility in November 2008 and commenced commercial acti .....

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arned by it. The Annual Performance Report for the Financial Year 2008-09 clearly mentions that Financial Year 2008-09 (i.e. Assessment Year 2009-10) is the first year of operations. 4.10. The evidences adduced by the appellant in support of its claim clearly indicates that the appellant did not carry out any commercial activities in FY 2007- 08. Further, the AO has only relied upon accounting treatment to construe that the appellant commenced provision of services without any corroborative evid .....

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nting treatment of charging certain expense to Profit & Loss Account was in order to comply with accounting standards and therefore it cannot be interpreted to mean that the appellant provided any services. 4.11. The contention of the appellant that its business has not commenced during the year gets support from its audited annual accounts, letter of extension by Development Commissioner of Kandla Special Economic Zone, the newspaper clippings, Annual Performance Report, etc. and these evid .....

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f service is physical revenue generating activity and receipt of advance does not indicate that services were actually provided. 4.13. The services can be provided and business can be said to have commenced when the basic facilities required for providing service (in case of appellant) is ready. The evidences produced by the appellant does indicate that the facilities were not ready to commence provision of service by March 2008 or even November 2008 when the facility was inaugurated. Without th .....

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