TMI Blog2019 (6) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... the business activities are yet to be commenced. It has also mentioned that the Directors are confident to commence the business activities soon. Page No.181 is the extract of the annual return for the year ended 31.03.2015 under the Companies Act. The turnover of the assessee company has been shown at NIL. Page No.193 is the statement of P L A/c for the year ended 31.03.2015. The Revenue is shown at NIL. The Excise Duty (products which have dealt with by the assessee being an excisable product) is shown at NIL. Other income being interest income shown at Page No.129. Salaries are shown at 13,51,285/-. Staff welfare is shown at ₹ 1,61,308/-. There were no details about number of employees. The assessee is dealing with M/s.Hyundai Motor India Ltd., and the salary payment is to only one employee being the Director. The decision the case of Ascendas is not applicable in the assessee s case as the primary requirement of funds and the certificate for inflow has been received only on 28.03.2015 and nothing has been shown to prove commencement of business. Thus, clearly nothing has been shown that the assessee has started any business activity during the relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealisation of revenue, as wrongly construed by the Assessing authorities. 1.2 The Madras High Court in Ascendas IT Park Chennai Ltd, Vs DCIT, (May 2016) while over ruling the Tribunal Order had observed that since Income Tax Act does not define set up , one would have to construe the date of setting up of business as being the initial stage in the chain of events leading to full fledged operations. The Honourable Jurisdictional Court in the same Judgement differentiated this from the word Preliminary Expenses used in Section 35-D to conclude that the latter is incurred at a very nascent stage of activity, and is associated with an exploratory exercise to finalise commencement of business. 2. The Appellant submits that it has set up its business in the Financial Year 2014-15 (AY 2015-16). A Chronological sequence of events is presented is a tabular form herein below, to establish the same. S.No. Date Event Paper Book Page 1 09.09.2014 MOU for Logistic Service 35 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of Personnel. 4.3 Leasing of place of work. 4.4 Obtention of statutory registrations and approvals. 4.1 Availability of Financial Resources An amount of ₹ 1.22 crores has been received into bank account as share capital and notably retained in current account signifying the intention of the Appellant keep himself in a state of readiness for business expenditure. (Paper Book Page No. 69) 4.2 Appointment of Personnel The parent Company had appointed a Managing Director on 11 September 2014, to initiate the incorporation of the Appellant Company and to further take all steps necessary for setting up and running the business. He has undertaken a set of tasks including preliminary discussions with suppliers customers, appointment of support staff, and obtention of statutory approvals. An executive assistant has also been appointed on 17-11-2014. (Paper Book Page No. 41) (Paper Book Page No. 117) 4.3 Leasing of Premises As a cost optimisation plan in the initial stages of business, the Appellant had leased out a residential cum office premises, for being used to run the activities of business. (Paper Book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s case the Director is an employee appointed under contract as a Key Management Person (KMP) to set up the business run the business, and is not a promoter. . 7. A reading of Para 7 of the Order of the Learned CIT (Appeals) clearly demonstrate that he has upheld the Order the A.O. based only on following aspects. a) The test of whether business operations have started gets established only when income is earned. b) The Assessee has not given proof of manufacturing / trading activity. c) Disclosure in Director's report that no business activities were conducted. (Paper Book Page No. 13) While existence the above aspects prove set up of business, the corollary is not true. In other words a business which has been set up NEED NOT carry all these attributes. The Learned Assessing Officer ought to have relied on the wisdom bestowed through Judgements of the various Honourable Courts, including Jurisdictional Court, to carefully assess whether business has been set up, instead of relying on his own surmise about commencement of business activity. 8. The Order of the Learned Appellate Authority in Para 8 (Paper Book Page No. 15) has conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately succeeding assessment year. 9.6 The Delhi High Court in CIT Vs Arcane Developers (P) Ltd. upheld the ratio that setting up business takes place when business is ready and FIRST steps are taken. 9.7 In the case of Dhoomketu Builders the Delhi High Court has categorically emphasised the need to distinguish between commencement of business and setting up of business while ruling in favour of the Assessee. 9.8 The Delhi ITAT in the case of JCdecaux Advertising India (P) Ltd. articulated three stages in business operation Viz. (i) Setting up (ii) Post setting up before commencement (iii) Commencement and thereafter, while holding that in the case of a trader, setting up of a business means the stage up to which place of business is acquired and things necessary to start trading are done. 9.9 Besides this there are several Judgements some of which is given below, supporting the contentions of the Appellant. 1. CIT Vs Sarabhai Management Corporation (1991) 192 ITR 151 (SC). 2. CIT Vs Whirlporl India Ltd (2009) 318 ITR 347. 3. CIT Vs ESPN Software India (P) Ltd., (2008) 301 ITR 368 (Delhi). 4. CIT Vs Sauer Danfoss (P) Ltd. (2012) 208 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egorically admitted that the year ended 31.03.2015 is the first year of operation of the assessee company and the business activities are yet to be commenced. It has also mentioned that the Directors are confident to commence the business activities soon. Page No.181 is the extract of the annual return for the year ended 31.03.2015 under the Companies Act. The turnover of the assessee company has been shown at NIL. Page No.193 is the statement of P L A/c for the year ended 31.03.2015. The Revenue is shown at NIL. The Excise Duty (products which have dealt with by the assessee being an excisable product) is shown at NIL. Other income being interest income shown at Page No.129. Salaries are shown at 13,51,285/-. Staff welfare is shown at ₹ 1,61,308/-. There were no details about number of employees. The assessee is dealing with M/s.Hyundai Motor India Ltd., and the salary payment is to only one employee being the Director. The decision the case of Ascendas is not applicable in the assessee s case as the primary requirement of funds and the certificate for inflow has been received only on 28.03.2015 and nothing has been shown to prove commencement of business. Thus, clearly n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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