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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Joginder Singh,
सुनवाई क" तार"ख / Date of Hearing 29/08/2016 01/09/2016 आदेश क" तार"ख /Date of Order: आदेश / O R D E R The Revenue is aggrieved by the impugned order dated 24/02/2016 of the Ld. First Appellate Authority, Mumbai, allowing expenses to the assessee allegedly 2 M/s Devon Outsourcing Services Pvt. Ltd. without appreciating the fact that the assessee has not started its commercial activities for the period under consideration.
During hearing, the ld. DR, Shri A. Rajhand, defended the addition made by the Assessing Officer by contending that there is violation of Rule-46A of the Income Tax Rules, 1962 (hereinafter the rules) as the Ld. Assessing Officer was not provided opportunity by the Ld. Commissioner of Income Tax (Appeal), while granting relief to the assessee.
2.1. On the other hand, none was present for the assessee in spite of issuance of registered AD notice issued on 19/07/2016. The assessee neither presented itself nor moved adjournment petition. It seems that the assessee is not interested to pursue the appeal filed by the Revenue, therefore, I have no option but to proceed ex- parte, qua the assessee, and tend to dispose of this appeal on the basis of material available on record.
2.2. I have considered the submissions of Ld. DR and perused the material available on record. The facts, in brief, are that the assessee is in the business of providing IT/ITeS Services including business technology process outsourcing, computer technology, call centre operations and etc. The assessee declared loss of Rs.48,81,973/- in its return filed on 30/09/2012. The Assessing Officer determined the total income at nil, after 3 M/s Devon Outsourcing Services Pvt. Ltd. disallowing the claimed business loss on the ground that the assessee had not set up its business during the year under consideration. The ld. Assessing Officer also disallowed certain business expenditure, incurred by the assessee.
2.3. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the returned loss of Rs.48,81,937/- was partly allowed. The Revenue is aggrieved and is in appeal before this Tribunal.
2.4. Before adverting further, I am reproducing hereunder the details of expenses claimed/incurred by the assessee:-
Head Amount (Rs.) Employee Benefit Expenses • Salaries and Wages 35,04,798 • Bonus to employees 80,724 • Staff 26,569 Welfare Expenses Other Expenses • Audit 25,000 fees under Company Law • Other 1,75,252 expenses reimbursed • Rates & taxes 12,250 • Miscellaneous 12,52,758 expenses Total 50,77,351 While framing the assessment u/s 143(3) of the Act, the ld. Assessing Officer disallowed business expenditure of Rs.50,77,351/-, profession fees of Rs.8,55,489/-, 4 M/s Devon Outsourcing Services Pvt. Ltd. recruitment expenses of Rs.2,20,573/- and expenses u/s 40(a)(ia) of the Act. The assessee also relied upon following the decision with respect to date of setting up of business.
CIT vs E-Funds International India(2007) 162 taxman 1(Del.) CIT vs Whirlpool India Ltd. (2009) 318 ITR 347(Del.) Omniglobe Information Tech India Pvt. Ltd. vs CIT (TS- 526-HC-2014 (Del.)
It is noted that the Ld. Commissioner of Income Tax (Appeal), while coming to a particular conclusion has analyzed the aforesaid decisions and the decision of Omniglobe Information Tech India Pvt. Ltd. (supra) in detail. It is further noted that each and every disallowance, made by the Assessing Officer has been examined by the CIT(A). Admittedly, in service industry, the key parameters that are relevant for determining whether the assessee has set up the business or not or whether key operations employees were employed or not along with the basic infrastructure to commence business operation needs inspection. The totality of facts indicates that the expenses, incurred by the assessee, are with respect to payment of salaries, professional fees etc, which were required for running the business operation and are en-extricably linked to starting up of the business operation. It is also noted that wherever, the expenses 5 M/s Devon Outsourcing Services Pvt. Ltd. were found to be allowable had been allowed and wherever found to be not allowable were disallowed by the ld.CIT(A). There is unconroverted finding in para 6.3.3 of the impugned order that submissions of the assessee which were based on facts and supported with necessary evidence were examined by the Ld. Commissioner of Income Tax (Appeal), thus, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal). So far as, the argument of the ld. DR that there is violation of Rule 46A of the rules is concerned, I find that neither such ground has been raised by the Revenue nor any evidence was brought on record with respect to such violation, therefore, I find no merit in the argument of the ld. DR with respect to such violation. The stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed.
Finally, the appeal of the Revenue is dismissed.
This order was pronounced in the open in the presence of ld. DR at the conclusion of the hearing on 29/08/2015. (Joginder Singh) "या"यक सद"य / JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 01/09/2016 f{x~{tÜ? P.S /"नजी स"चव आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. ""यथ" / The Respondent.
6 M/s Devon Outsourcing Services Pvt. Ltd.