Income Tax Appellate Tribunal - Mumbai
Regus Business Centre (Delhi) P. Ltd, ... vs Department Of Income Tax on 31 August, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND
SHRI SANJAY ARORA, ACCOUNTANT MEMBER
ITA No. 7836/Mum/2011
Assessment Year: 2008-09
ACIT-10(1) Regus Business Centre
455, 4th Floor, (Delhi) Pvt. Ltd.
Aayakar Bhavan, Vs. Level 2 Raheja Centre Point,
Mumbai 400 020 2nd CST Road, Santacruz (E),
Mumbai 98
PAN:- AADCR 7781 H
(Appellant) (Respondent)
Assessee by : Shri K.K. Ved
Revenue by : Shri Love Kumar
Date of hearing : 01.06.2015
Date of Order : 31.08.2015
ORDER
Per Sanjay Arora, AM:
This is an appeal by the Revenue directed against the order of the Commissioner of Income-Tax (Appeals)-21 Mumbai, ('CIT(A)' for short) dated 10.08.2011, partly allowing the assessee's appeal contesting its assessment u/s 143(3)(ii) of the Income Tax Act 1961 ('the Act' hereinafter) for the A.Y. 2008-09, vide order dated 14.12.2010.
2. Upon the arguments for on behalf of the assessee, submitted it was by the Ld. Authorized Representative (AR), the assessee's counsel, taking leave of the court to proceed on an out of turn basis, that it was necessary to highlight an aspect of the matter, drawing our attention to the assessee's letter to the Assessing Officer (AO) dated 04.11.2010, i.e., that the assessee company was incorporated only on 15.11.2007, as clearly evidenced by the Certificate of Incorporation of even date issued by the Assistant Registrar of Companies, and which should also enclosed along 2 ITA No. 7836/Mum/2011 (A.Y. 2008-09) ACIT vs. Regus Business Centre (Delhi) Pvt. Ltd.
with said letter as Annexure 4 thereto. The sole issue, he would continue, arising in the instant case is as to the date of commencement of business by the assessee company, which is to establish and operate or otherwise deal in business centre and activities related thereto. While the Assessing Officer, on the basis of the material furnished, came to the conclusion that the assessee's business commenced only on 15.10.2007, the ld. CIT(A), as the first appellate authority, was of the view that the said date was 15.08.2007. All the relevant expenditure (including depreciation) and income up to the said date, i.e., the date of the commencement of business, was agreeably to be capitalized. The company having itself incorporated only on 15.11.2007, the impugned order could not be, he fairly conceded, be approved of, and which infirmity, though to a different extent, inflicts the assessment order as well. This aspects seems to have escape the attention of both the authorities below. The matter accordingly would required to be restored back to the file of the AO. The ld. DR confirmed the same, so that the forgoing represents the common contention of both the parties.
3. We have heard the parties, and perused the material on record. The information of the date of incorporation of the company, i.e., 15.11.2007, though not irrelevant, cannot be said to be determinative of the matter. This is as business requires human agency for its setting up and which could, therefore, be without the company being incorporated. What is relevant is whether the said human agency was working for an on behalf of the propose company, or for another. As it appears, this being not an issue, in-as-much as the working from a date prior to the date of registration, be it 15.08.2007 or 15.10.2007, or any other date for that matter, was only for the proposed company. This would in fact require ratification and adoption by the company on being incorporated, i.e., where it claims to have set up the business. Else, in the alternative, it could only be said to have assumed or taken over a running business. What would rather, therefore, in our view, be material is the treatment of the income during the pre-commencement (of business) period. The same could be capitalized only where the same arises from an activity which is necessary and incident to the setting up of the business, else not. Reference in this context may be made to the decision in the case of Tuticorin Alkali Chemicals vs. CIT [1997] 227 ITR (SC);
3 ITA No. 7836/Mum/2011 (A.Y. 2008-09)ACIT vs. Regus Business Centre (Delhi) Pvt. Ltd.
Bokaro Steel Ltd. [1999] 236 ITR 315 (SC). Again, the date of incorporation may also be relevant where some necessary approvals, sanctions, permissions, etc. have to be taken in the name of the company. The matter is accordingly set aside and restored back to the file of the Assessing Officer for a de novo adjudication, by, inter alia, determining the date of commencement of business as well as the treatment of the expenditure relatable to the income up to the said date. The Assessing Officer, apart from allowing a reasonable opportunity to the assessee to state its case before him, shall also seek to address aspects that found favour with the ld. CIT(A), issuing definite finding of fact by drawing proper inferences. We decide accordingly.
4. In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 31.08.2015.
Sd/- Sd/-
D. Manmohan Sanjay Arora
(Vice President) (Accountant Member)
Mumbai, Dated: 31.08.2015
*Srivastava
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR "D" Bench
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.