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2016 (11) TMI 970 - DELHI HIGH COURT

2016 (11) TMI 970 - DELHI HIGH COURT - TMI - Allowance of expenditure - set up of business - Held that:- Although the obtaining of license is on a slightly higher plain, the fact remains that in this case, there is nothing on record to say that the Memorandum of Association of the assessee company prevented it from earning the income that it did. It is not merely the earning of the income, but also the nature of expenditure incurred which is determinative at least in the facts of this case. The .....

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as unexceptionable. - Loss claim - whether the loss could have been allowed at all having regard to the fact that it was claimed in the revised return and not in the original return? - Held that:- The revised return was filed within the time prescribed. In fact, the revised return was finally taken up for assessment.; the orders too were passed on it. In the circumstances, the very purpose of filing a revised return and making a provision thereof would be defeated if the Revenue’s primary co .....

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ct, 1961 [hereafter the Act ], the Revenue is aggrieved by the order of the Income Tax Appellate Tribunal (ITAT). The assessee was formed in April 2007 with the objective of carrying on business of hire purchase, financing, factoring and leasing of automotive vehicles. Concededly, the assessee had applied for a license as a Non Banking Financial Company (NBFC) which it obtained on 09.04.2008. For AY 2008-09, its assessment declared an income of ₹ 2,84,56,074/-; later, the assessee filed a .....

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f was disallowed. 2. The CIT(A), after elaborately discussing all the facts, including the nature of activity and the expenditure incurred by the assessee for the period involved, reversed the AO s decision and held that the loss was a business loss and that interest income was also business income. On the basis of these findings, income was allowed to be adjusted under Section 71 of the Act. The CIT(A) also reversed the AO s findings with respect to commencement of business. The Income Tax Appe .....

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in fact obtained on 09.04.2008. Therefore, all income derived and expenditure incurred for the period between incorporation of the assessee in April 2007 and the grant of license in April 2008 were income from other sources and other forms of expenditure and have to be so treated. It was also submitted that the benefit of Section 71, therefore, could not be claimed by the assessee in the circumstances of this case. 3. The CIT(A) in the first appellate order discussed the following essential fac .....

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th all kinds of automotive vehicles. This company is a closely held company with 32,000,000 equity shares being held by Bussan Automotive Singapore Pte. Ltd, 13,000,000 equity shares being held by AXIS bank Ltd. and the balance 5,000,000 equity share, being by Yamaha Motors Asia Pte. Ltd. During the relevant assessment year, the appellant company raised the share capital of ₹ 50,00,00,000/- and deposited in the bank accounts with the schedule banks in India. Subsequently, this amount was u .....

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under took the job of analyzing the market scenario, testing and implementation for the loan finance system, processing of vendors etc. The appellant company further filed applications to statutory bodies for licenses and obtained the licenses/registration Nos. from various regulatory authorities such as Provident Fund, Income tax, Shop and Establishment etc. The appellant company also submitted its application before the RBI for grant of licence to start its activity as non banking finance comp .....

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urred on the purchases of office equipments worth of ₹ 15,62,894/-, computers of ₹ 62,22,308, software of ₹ 1,79,80,247/-, furniture and fixtures of ₹ 3,54,836/- and vehicles of ₹ 26,97,892/-. Even the AO has not disputed the genuineness of these expenditures 4. The CIT(A) also noted that the expenditure towards salaries, wages etc. were to the tune of ₹ 1,87,35,439/- and that administrative and other expenses were to the tune of ₹ 3,42,24,191/-. It was .....

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proved that some business activity had taken place during the relevant time. In this context, the CIT(A) took note of Whirlpool (supra) which affirmed the ITAT s judgment. In that case, the availing of a foreign loan and FIPB approval was put forth by the Revenue as the defining moment or point in time when the business is said to have commenced. The Court concluded that those formalities were not statutory and even without foreign loan and equity participation, the assessee could carry out bus .....

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