TMI Blog2019 (4) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... erved earlier, assessee has taken up a place to set up all the above business as well as recruited about 30 employees to carry out the above objects. In that process, it has installed, power, basic machinery, internet, leased line, uplinking and administrative activities, such as collection of news etc. Assessee has made basic infrastructure in order to commence its business. AO has confirmed that assessee has shown income in subsequent AY i.e. AY 2013-14. It does indicate that assessee has received relevant approvals and commenced its business activities in the subsequent AY. Further, it indicates that without basic set up or infrastructure assessee would not have achieved running its activities in subsequent AY itself. Therefore, in our view, assessee has set up its business and commenced its operation in the subsequent AY i.e. 2013-14. Assessee has already set up its business and is eligible to claim basic administrative expenditure as business expenditure in the AY under consideration. - Decided in favour of assessee - ITA No. 537/Hyd/2017 - - - Dated:- 18-4-2019 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory payments and depreciation on basic infrastructure, as the assessee has shown income in the AY 2013-14 and proposed to expand its line activities into running news channels, AO accepted the allowability of certain basic expenditure. Accordingly, he disallowed the following expenditure: (Amt. in Rs.) 1 Stores Consumables 1,86,773 2 Power and Fuel 4,28,137 3 Repairs to Buildings 33,825 4 Repairs to Machinery 5,637 5 Insurance 2,00,618 6 Rates Taxes 17,27,277 7 Travelling Conveyance 2,40,393 8 Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up the operations and had started incurring expenditure towards rent, salary and other maintenance expenses for running the business. It was submitted that the main activity of the company was to engage in business of distribution or dissemination of news and to involve in all satellite up linking and down linking activities required to run a television channel. In connection with it, 30 employees were employed. Placing reliance on decisions of various High Courts, viz., Western India Vegetable Products Ltd., vs. CIT 26 ITR 151 (Bom), CIT vs. Saurashtra Cement Chemical Industries Ltd. 91 ITR 170 (Guj) it was submitted that all the activities which went to make up the business need not be started simultaneously in order that the business may commence. The business would commence when activity which was first in point of time and which must necessarily precede other activity was started. Also placing reliance on the decision of CIT vs. Hughes Escorts Communications Ltd. (311 ITR 253) (Del.) it was submitted that the assessee in that case was engaged in the business of satellite communication system. As soon as the purchase order for the said equipment was placed, it was' held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax is not justified in sustaining the disallowance of expenditure of ₹ 65,25,508/- incurred by the appellant-company in the course of its business of running a news channel on television. 5. The Hon'ble Commissioner of Income Tax should have seen that the appellant company has already set up its business of running a news channel when It has entered into agreements for uplinking and downlinking the data, as it has already made an application to the Ministry of Information Broadcasting for uplinking the news channel- V6 and as it has completed the other formalities connected thereto. 6. The Hon'ble Commissioner of Income Tax should have seen that the appellant company has complied with all the formalities in setting up of business and therefore, the Hon'ble Commissioner of Income Tax should have seen that the business of the appellant-company was set up and that the appellant-company is entitled to claim the expenditure incurred in the course of the business. 7. Alternatively, it is claimed that the Hon'ble Commissioner of Income Tax should have seen that the disallowance of expenditure of ₹ 65,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial stages and accordingly, all expenses incurred on setting up of business but prior to the commencement of the business were held as allowable as revenue expenses. 7.2 Further, he relied on the decision of the Hon ble Gujarat High Court in the case of CIT Vs. Saurashtra Cement Chemical Industries Ltd., 91 ITR 170 (Guj.), as per which, the Hon ble Court held that 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 must necessarily provide other activity is started and it connotes a continuous course of activities. 8. On the other hand, ld. DR, besides relying on the CIT(A) s order, submitted that no doubt assessee has modified the objects and entered into MCPC agreement with Tata Communications Ltd., however, she brought to our notice page 85 of the paper book, as per which, subject to clearance/approvals from Ministry of I B obtained by the Broadcaster and the term clearly indicates that from the date of such approval from the I B Ministry, the services shall commence within the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust because assessee has not got approval before the end of the current AY, it cannot be said that the assessee has not set up its business. In our view, assessee company was already incorporated in 2000 and it has modified its objects and taken steps to get the approval from the Ministry of I B. These are all mere approvals required for commencement of the revenue for the business. However, it has to have infrastructure in order to put in place all the facilities as soon as approvals are granted. As we observed earlier, assessee has taken up a place to set up all the above business as well as recruited about 30 employees to carry out the above objects. In that process, it has installed, power, basic machinery, internet, leased line, uplinking and administrative activities, such as collection of news etc. It clearly indicates that assessee has made basic infrastructure in order to commence its business. Further, we notice that AO has confirmed that assessee has shown income in subsequent AY i.e. AY 2013-14. It does indicate that assessee has received relevant approvals and commenced its business activities in the subsequent AY. Further, it indicates that without basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... started. That would be set up only when the plant and machinery was installed, the manufacture of cement started and an organisation for sale of manufactured cement was established. But, business is nothing more than a continuous course of activities and 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 must necessarily precede the other activities is started. The argument of the Revenue seeks to confound the commencement of a business with the establishment of the business as a whole and carrying on of all the activities of the business. This confusion is the result of a loose description of business of the assessee as business of manufacture and sale of cement. The Revenue says that when the business is of manufacture and sale of cement, how can the assessee be said to have commenced the business when manufacture has not started? This argument suffers from the fault of over-simplification and ignores the true nature of the activities which constitute the business of the assessee. As soon as an activity, which is an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nut oil mill and was in a position to crush groundnuts and produce oil. But prior to this there was a period when the business could be said to have been set up and the company was ready to commence business, and in the view of the Tribunal one of the main factors was the purchase of raw materials from which an inference could be drawn that the company had set up its business; but that is not the only factor that the Tribunal has taken into consideration. The Court is not concerned with the sufficiency of evidence on a reference. It is only if there is no evidence which would justify the decision of the Tribunal that a question of law would arise which would invoke the advisory jurisdiction of the Court which after all is a very limited jurisdiction. Relying on the above ratios, we hold that the assessee has already set up its business and is eligible to claim basic administrative expenditure as business expenditure in the AY under consideration. Accordingly, grounds raised by the assessee on this issue are allowed. 10. In the result, appeal of the assessee is partly allowed. Pronounced in the open court on 18th April, 2019. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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