TMI Blog2023 (3) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... imed in P L account. Since the assessee s claim that expenses were not debited to P L account is correct, ld. CIT (A) held that there is no question of disallowance of expenses. We find that other case laws in this regard relied upon by the assessee also support the proposition that no TDS is required to be deducted on payments made to HUDA for EDC. - Decided against revenue. - ITA No. 195/Del./2020 ITA No. 608/Del./2020 - - - Dated:- 24-3-2023 - SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER And MS. ASTHA CHANDRA , JUDICIAL MEMBER For the Assessee : Shri Anil Bhalla, CA For the Revenue : Shri P. Praveen Sidharth, CIT DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These appeals by the assessee and Revenue are arising out of the order of ld. CIT (A)-2, New Delhi pertaining to AY 2016-17. ASSESSEE S APPEAL (ITA NO.195/DEL/2020) 2. The grounds of appeal taken by the assessee read as under :- 1. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of learned Assessing Officer in disallowing business loss of Rs.4,58,06,150/- alleging that appellant has not undertaken any business activity during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 65, Gurgaon. This was a new business set up. The Company put up a administrative infrastructure for acting as Development Manager for a building project which was to include conceptualization, construction and leasing/licensing of the said Project in accordance with the Business Plan. 4.2.1. It may be noted that once the business is set up, it is not a requirement that there should be income. Proposition for setting lip and case laws are given in para - 5. 4.2.2. Proposition that no income is necessary and case laws are given in para - 6. 4.3. Further the assessee has appointed staff and incurred legal expenses for agreements and marketing expenses. The detail of Salary and Bonus expenses as allocated to Profit Loss Account and Capitalized to inventory is enclosed at Page 15. Salary Bonus pertaining to Faridabad Land Project has been Capitalized as cost of inventory. 4.4. The detail of Legal Professional expenses, Advertisement expenses and Business support expenses are enclosed at Page 16 to 18. The same are allowable as revenue expenditure as business of the assessee company was set up. 5. However, the AO was not satisfied. Since no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional High Court in the case of Samsung India Electronics [2013] 37 taxmann.com 239 held that 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. Thus, the claim of assessee was to be allowed as business expenditure. 8.1 He further placed reliance upon case laws for the proposition that income is not must for allowing an expenditure for a particular year. For this also, he referred to several case laws :- E. Funds International India -162 Taxman 1 (Del) (No Income) The company was in the business of developing software and amongst other things it had employed as many as 30 to 40 persons in relevant previous year who were required to provide the necessary input for developing software and acquired premises and utilities. It was noted that the company was in business of software development which is not an overnight exercise. The business was held to be set up and expenses thereafter to be allowed. Dhoomketu Builders Development (P) Ltd. 34 taxmann.com 18 (Del HC) IT : Acts of applying for participation in tender, borrowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us in the form of paper book. 13. In the background of aforesaid discussions and judicial precedents, we are of the opinion that the authorities below have erred in disallowing the assessee s business loss and the same needs to be allowed. We order accordingly. REVENUE S APPEAL (ITA NO.608/DEL/2020 14. The Revenue has taken the following grounds of appeal :- 1. On the facts and circumstances of the case, whether the Ld. CIT (A) was correct in deleting the addition u/s 40(a)(ia) while the payment to the HUDA has been added in the inventory which is part of closing stock only and Roctal through Profit Loss account. 2. On the facts and circumstances of the case, whether the ld. CIT (A) was correct in allowing the appeal of the assessee when it has been established that payment made by the assessee company HUDA squarely falls within the definition of Chapter XVII-B of the IT Act, 1961. 15. Brief facts of the case are that this ground is directed against addition of Rs.1,32,792,000/- u/s 40(a)(ia) being 30% of Rs.44,26,40,000/- paid to HUDA Government of Haryana as External Development Charges (EDC); that when show caused by the AO, the assessee repli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may support or grounds decided against him The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. As a first proposition before CIT(A) In the present case assessee had argued before CIT(A) that provisions of Section 201 of the Act does not apply to External development charges (statutory dues) paid to HUDA now know as HSVP. Therefore, the provisions of Section 40(a)(ia) of the Act do not apply in the instant case. As a second proposition before CIT(A) Alternatively, it was argued in the second proposition that disallowance u/ s 40(a)(ia) of the Act can only be applied to an expense claimed during the year. As External development charges were not debited to Profit Loss Account and thus not claimed as expense, disallowance u/ s 40(a)(ia) of the Act could not be applied and no disallowance could be made. Learned CIT(A) decided the ground in assessee's favour but on the basis of alternate second proposition that as the impugned amount was not claimed as an expense the provision of Section 40(a)(ia) of the Act do not apply. Learned CIT(A) should have also a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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