CIT v. Samsung India Electronics Ltd.

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The Tax Publishers2013 TaxPub(DT) 2111 (Del-HC) : (2013) 053 (I) ITCL 0455 : (2013) 356 ITR 0354 Income Tax Act, 1961 --Business expenditureAllowability Expenses incurred before commencement of commercial operations--Assessee, a joint venture company, was incorporated on 3-8-1995 and started its commercial operations on 1-10-1995. From 3-8-1995 till 30-9-1995, assessee incurred expenses for which deduction under section 37(1) was claimed. Assessing officer held that the expenses were incurred before actual business operations were started on 1-10-1995, hence, same were disallowable under section 37(1). According to Tribunal, assessee was entitled to claim and set off expenses under section 37(1) as necessary agreements were entered into, key personnel were recruited and assessee had started working on by using necessary infrastructure like office premises, office equipment and the assessee was ready to commence trading operation as on the date of incorporation i.e. 3-8-1995. *Held:* Rightly so, as the assessing officer and the first appellate authority did not specifically go into the factual matrix relating to and to ascertain the date of 'setting up' of business, though the order of the first appellate authority was more detailed and elaborate. Thus, there was nothing to controvert the facts as found and recorded in the impugned order of Tribunal. Income Tax Act, 1961 Section 37(1) In the Delhi High Court Sanjiv Khanna & Sanjeev Sachdeva J.J. CIT v. Samsung India Electronics Ltd. I.T.A. No. 131 of 2010 9 July, 2013 Appellant by : Suruchi Aggarwal, Senior Standing Counsel Respondent by : Satyen Sethi & Aria Trana Panda, Advocates JUDGMENT *Sanjiv Khanna J.* The Revenue by this appeal under section 260A of the Income Tax Act, 1961 challenges the findings recorded by the in the order 28-11-2008, that the assessee is entitled to claim and set off expenses of Rs. 34,95,606. It is submitted that the said expense are capital in nature as they are 'set up' expenses. The findings recorded by the Tribunal reads as under: '6. In view of the above, the business of the assessee could be said to have been set up on 3-9-1995, as prior to this necessary agreements had been entered into, key personnel had been recruited and the assessee-company had started working necessary infrastructure like office premises, office equipment, etc., and the assessee-company was ready to commence trading operation as on the date of incorporation, viz., 3-8-1995. Accordingly, the assessing officer is directed allow the revenue expenditure incurred after the setting up of business which was 3-9-1995, notwithstanding the fact that commercial operations started with effect from 1-10-1995. For the purpose of claiming expenditure incurred thereafter, as revenue expenditure, reliance are placed on the following decisions : SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2111 (Del-HC) : (2013) 053 (I) ITCL 0455 : (2013) 356 ITR 0354

Income Tax Act, 1961

--Business expenditureAllowability Expenses incurred before commencement of commercial operations--Assessee, a joint venture company, was incorporated on 3-8-1995 and started its commercial operations on 1-10-1995. From 3-8-1995 till 30-9-1995, assessee incurred expenses for which deduction under section 37(1) was claimed. Assessing officer held that the expenses were incurred before actual business operations were started on 1-10-1995, hence, same were disallowable under section 37(1). According to Tribunal, assessee was entitled to claim and set off expenses under section 37(1) as necessary agreements were entered into, key personnel were recruited and assessee had started working on by using necessary infrastructure like office premises, office equipment and the assessee was ready to commence trading operation as on the date of incorporation i.e. 3-8-1995. Held: Rightly so, as the assessing officer and the first appellate authority did not specifically go into the factual matrix relating to and to ascertain the date of 'setting up' of business, though the order of the first appellate authority was more detailed and elaborate. Thus, there was nothing to controvert the facts as found and recorded in the impugned order of Tribunal.

Income Tax Act, 1961 Section 37(1)

In the Delhi High Court

Sanjiv Khanna & Sanjeev Sachdeva J.J.

CIT v. Samsung India Electronics Ltd.

I.T.A. No. 131 of 2010

9 July, 2013

Appellant by : Suruchi Aggarwal, Senior Standing Counsel

Respondent by : Satyen Sethi & Aria Trana Panda, Advocates

JUDGMENT

Sanjiv Khanna J.

The Revenue by this appeal under section 260A of the Income Tax Act, 1961 challenges the findings recorded by the in the order 28-11-2008, that the assessee is entitled to claim and set off expenses of Rs. 34,95,606. It is submitted that the said expense are capital in nature as they are 'set up' expenses. The findings recorded by the Tribunal reads as under:

'6. In view of the above, the business of the assessee could be said to have been set up on 3-9-1995, as prior to this necessary agreements had been entered into, key personnel had been recruited and the assessee-company had started working necessary infrastructure like office premises, office equipment, etc., and the assessee-company was ready to commence trading operation as on the date of incorporation, viz., 3-8-1995. Accordingly, the assessing officer is directed allow the revenue expenditure incurred after the setting up of business which was 3-9-1995, notwithstanding the fact that commercial operations started with effect from 1-10-1995. For the purpose of claiming expenditure incurred thereafter, as revenue expenditure, reliance are placed on the following decisions :