TMI Blog2022 (9) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... r with the direct evidence or with the circumstantial evidence that its business was set up in the accounting period. Whatever has been pointed out, i.e., incorporation of the assessee and appointment of the director are concerned, we are of the view that these two factors are not sufficient to record a finding that business has been set up. In the case in hand, it is emerging from the record that the assessee has merely carrying out the fit-out work during the relevant previous year - it is also clear that during the relevant previous year, the assessee is not ready for running the service of Studio and the assessee was not ready and, in a position, to commence its activities. The assessee had also not taken the premises on rent and had not completed the setting up of the facilities for running the studio. Therefore, the assessee was not in a position to solicit customers till the end of May 2009 before the start of Leave and License Agreement 05/06/2009. We have no hesitation to hold that the business had not been set up during the previous year relevant to Assessment Year 2009-10. Further, in our opinion, disallowance made by the A.O which has been confirmed by CIT(A) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, on facts and in law the CIT(A) erred in not directing the AO to capitalize the expenditure of Rs 52,25,161/- and allow benefit of depreciation ?allowance on same. . 3. Brief facts of the case are that the return of income filed declaring income of Rs. 21,03,02,529/- which was processed u/s 143(1) of the Act, subsequently, selected for scrutiny and notices were issued. The assessment proceedings have been initiated against the assessee and the assessee has participated through its representative. The assessment order came to be passed on 17/12/2012 against the assessee by disallowing the claim of Rs. 52,25,161/- made by the assessee as business expenditure. 4. Aggrieved by the assessment order dated 17/12/2012, the assessee has preferred an Appeal before the CIT(A). The Ld.CIT (A) vide order dated 29/01/2014 dismissed the Appeal of the assessee by confirming the order of the Ld. A.O. 5. Aggrieved by the order dated 29/01/2020, the assessee has preferred the present Appeal on the grounds mentioned above. 6. The Ld. Counsel for the assessee vehemently submitted that, the Ld.CIT(A) has erred in holding that the business of the assessee was not set up during the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evision ltd, read with Letter of Novation (LON) dated 11.12.2008 transferring all the rights and liabilities of N'DTV related to LOI to NDTV Studios Ltd., It can be seen that the 7th and 8th floor of Tower 1 of One of Indiabulls Centre was to be handed over by the licensor i.e. Indiabulls to licensee i.e. the Assessee for fit out works on or before 01.05.2008 or the actual date of handover for fit out. The said date is specified as fit out commencement date . Clause 2.1 also says that the building in which the premise is situated is under construction. Fit out period was for 5 months from fit out commencement date . The cl, 2.3 2.4 LOI also says that License Commencement Date shall be from the date of occupancy and license fee, car parking fee, maintenance fee shall be paid from the date of occupancy. From the balance sheet it is evident the fit out works, building of studios and production facilities carried out by the assessee was under progress during the relevant previous year. In the balance sheet expenses of Rs. 6.25 crores on fit out works have been shown under capital work in progress. In the P L account only interest income of Rs. 21.55 crores and foreign exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year . Previous year means the financial year immediately preceding the assessment year. The proviso appended to this section further contemplates that in case of a business newly set up in the said financial year the previous year shall be the period beginning with the date of setting up of the business. The expression set up has not been defined anywhere in the Act. But as it is understood in the common parlance and considered by the 1TAT in Hindustan Diamond Co. (P.) Ltd. s case (supra), if an assessee is in a position to deliver the goods means that business is set up. Actual delivery is immaterial. For example if a person wants to carry on the business of transportation the moment he has purchased the vehicle for transporting the goods and arranged the space, then it would indicate that business has been set up, it is immaterial whether he actually transported goods or not. in the present case, the only evidence brought on record by the assessee for demonstrating setting up of the business is that assessee has been incorporating. Its director came to India on 9-12- 1997. Had it got order it would have delivered the goods. To our mind, this proposition is not accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the staff had to be trained with the systems. The assessee had not taken premises on rent and, therefore, installation of computer therein had not been done. Therefore, the assessee was not in a position to solicit customer till the end of May, 2004. The advances were received from the parent company but these were used for training the personnel and paying salaries and incidental charges, necessary for setting up the business. Thus, in a nutshell, it is held that a business is set up when it reaches a stage where it is in a position to procure business and not before. However, the expenditure becomes deductible from such stage irrespective of the date of actual receipt of the business. Therefore, it is held that the business had not been set up till the end of May, 2004. Accordingly, the assessee is not entitled to deduction of these expenses. It is held accordingly. The above decisions are squarely applicable to the facts of the present case. Even In the instant case, there is nothing on record which can suggest the potentiality and capability of the assessee to deliver the facilities available in a studio, in the period under consideration. 15. Further the decisions Hotel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No.4 without prejudice to the Grounds No. 1 to 3, contending that the Ld.CIT(A) has committed an error not directing the A.O to capitalize the expenditure and allow the benefit of depreciation allowances on the same. As per the balance sheet of the Assessee, it hadSuo-Moto capitalized the item of expenditure Rs. 6.25 crores as capital work in progress for bringing fixed assets into existence. The remaining expenses that were not capitalized by the Assessee were debited in the P L Account. 18. Further, the assessee has not filed any particular before the Authorities bellow to substantiate that the expense debited in the P L account are incurred for bringing fixed asset into existences. Therefore, the submission of the Ld. Counsel for the assessee that,Ld.CIT(A) has committed an error not directing the A.O to capitalize the expenditure and allow benefit of depreciation allowances on the same is not sustainable. For the above said discussions we do not find merit in the Assessee s Grounds of Appeal No.4. Accordingly, Assessee s the Grounds of Appeal No.4 is dismissed. 19. In the result, the Appeal filed by the assessee is dismissed. Order pronounced in the open court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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