TMI Blog2019 (1) TMI 1934X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from other sources - Decided against revenue. - I.T.A No. 2163, 485/Kol/2016, C.O. No. 01/Kol/2017, C.O. No. 53/Kol/2018 - - - Dated:- 9-1-2019 - Sri J. Sudhakar Reddy, Accountant Member Sri Aby T. Varkey, Judicial Member Shri S.K. Aggarwal, A/R, appeared on behalf of the assessee. Shri Sankar Halder, Addl.CIT, Sr. D/R, appearing on behalf of the Revenue. ORDER Per J. Sudhakar Reddy, AM :- ITA No. 2163/Kol/2016, is an appeal filed by the revenue directed against the order of the Learned Commissioner of Income Tax (Appeals)-18, Kolkata, (hereinafter the ld.CIT(A) ), passed u/s. 250 of the Income Tax Act, 1961 (the Act ), dt. 19/08/2016, for the Assessment Year 2012-13, on the following grounds:- Ground no. 1: This ground of appeal is related to the claim for deduction against the expenses incurred by the assessee company during the F.Y. 2011-12. Ground no. 2: This ground of appeal is related to adjustment of Carry forward business loss with current year income from other sources. The assessee filed cross-objections on the following grounds:- 1. That on the facts and circumstances of the case, the Ld. Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such expenditure was directly attributable to the project related work and hence needs to be capitalised. 3. That on the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming disallowance of environmental expenses amounting to INR 636,758 on the contention that such expenditure was directly attributable to the project related work and hence needs to be capitalised. 4. That on the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming disallowance of project expenses amounting to INR 15,00,000 on the contention that such expenditure was directly attributable to the project related work and hence needs to be capitalised. 5. That on the facts and circumstances of the case, the Ld. CIT (Appeals) erred in confirming disallowance of salary expense amounting to ₹ 1,86,52,900 on the contention that such expenditure was directly attributable to the project related work and hence needs to be capitalised. 6. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the hearing of this appeal. 2. There is a delay of 4 days in filing the appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance for executing the project. If appellant wants to claim revenue expenditure then on the basis of principle of matching revenue, appellant should also offer Income out of ₹ 56,00,00,000/-. However this has not been done. Hence all expenses related to the project should be capitalized. Assessee can take the benefit of these capitalized expenses in future when the project becomes operational. Perusal of the Profit Loss A/c and the subsequent details submitted by the appellant shows that the following expenses are exclusively related to the project awarded by the NTPC : 2. Out of the community welfare expenses of ₹ 14,09,708/- it has been seen that ₹ 12,32,994/- has been spent in around the area where mining project was to start. 3. Following persons were recruited exclusively for the project: In view of the above discussion ₹ 1,08,16,167/- out of legal and professional expenses, ₹ 12,32,994/- out of community welfare expenses and ₹ 1,08,25,404/- out of salary expenses, are held to the capital in nature related to the setting up of the project. Under the circumstances, A.O. is directed to allow other expenses and treat o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot necessarily enable it to commence business. Legal requirements like registration under the sales tax etc was required and the assessee had to prove before the Assessing Officer that commercial operations could have been commenced before 1st October, 1995. No such fact was recorded by the Assessing Officer. 5. We have already referred to para 6 of the order passed by the tribunal which records the findings of facts ascertained by the tribunal. We have also noted the heads under which expenses have been claimed. The tribunal in the same order had examined the claim of the assessee, whether expenditure amounting to ₹ 18,56,903/- incurred by M/s Reasonable Computer Solutions Pvt. Ltd. and reimbursed by the assessee, could be allowed as revenue expenditure. The said claim was disallowed and the assessee has accepted the said decision. 6. We have examined the factual findings recorded by the tribunal in para 6. The same cannot be categorized as perverse. The tribunal before recording the said findings examined the case law on the subject and has referred to the contentions of the parties on the said issue which have been recorded para 3 onwards. The assessee company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under section 10(2). 7. The aforesaid distinction is relevant when we examine and refers to the definition of 'previous year'. Following the said judgment, in the case of CIT v. L.G. Electronics (India) Ltd. [2006] 282 ITR 545/[2005] 149 Taxman 166 (Delhi), it has been observed that the date of setting up of business and date of commencement of business may be two separate dates. This decision in the case of L.G. Electronics(supra) has been followed in CIT v. ESPN Software India (P.) Ltd. [2008] 301 ITR 368/[2009] 184 Taxman 452 (Delhi) wherein it has been held that a business will commence with the first purchase of stock-in-trade and the date on which the first sale is made is immaterial. Similarly, for manufacturing, several activities in order to bring or produce finished products have to be undertaken, but business commences when the first of such activities is taken. 8. In view of the facts found by the tribunal, we do not think that any substantial question of law arises for consideration. Pragmatic and practical view has to be taken. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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