Case Law Details
Vil Media (P) Ltd. Vs DCIT (ITAT Hyderabad)
AO has disallowed the administrative expenses, like, stores and consumables, power and fuel, insurance, rates and taxes, commission, distribution expenses, net work, leased line charges, telecast and uplinking charges, costumes and cosmetic charges and miscellaneous expenditure to the extent of Rs. 65,25,508/-. AO has disallowed the above said expenditure as there is no business income in the current AY which is under consideration, but, she has not disputed the genuineness of the expenditure. Further, we notice that CIT(A) in her findings held that assessee has not set up its business, but it had applied for change of its main objects as well as approval for setting up the business of news channel. She observed that mere application is not enough, but, it has to show that the requisite approval had been received before it can be said that business was set up, as there is nothing on record to suggest that the same had happened during the PY under consideration. Therefore, she rejected the plea of the assessee. We are not in agreement with the observation of the CIT(A) just because assessee has not got approval before the end of the current AY, it cannot be said that the assessee has not set up its business. In our view, assessee company was already incorporated in 2000 and it has modified its objects and taken steps to get the approval from the Ministry of I&B. These are all mere approvals required for commencement of the revenue for the business. However, it has to have infrastructure in order to put in place all the facilities as soon as approvals are granted. As we observed earlier, assessee has taken up a place to set up all the above business as well as recruited about 30 employees to carry out the above objects. In that process, it has installed, power, basic machinery, internet, leased line, uplinking and administrative activities, such as collection of news etc. It clearly indicates that assessee has made basic infrastructure in order to commence its business. Further, we notice that AO has confirmed that assessee has shown income in subsequent AY i.e. AY 2013-14. It does indicate that assessee has received relevant approvals and commenced its business activities in the subsequent AY. Further, it indicates that without basic set up or infrastructure assessee would not have achieved running its activities in subsequent AY itself. Therefore, in our view, assessee has set up its business and commenced its operation in the subsequent AY i.e. 2013-14.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against the order of CIT(A) – 6, Hyderabad, dated, 06/01/2017 for AY 2012-13.
2. Brief facts of the case are, the assessee is a company engaged in the business of distribution or dissemination of news through various Networks/Media and has filed return of income for the AY 2012-13 on 29/09/2012 declaring loss of Rs. 2,0186,462/-. Subsequently, assessee filed revised return of income on 10/10/2012 declaring loss of Rs. 86,80,480/-, which was processed u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’). Subsequently, notices u/s 143(2) and 143(1) were issued and served on the assessee. During the course of assessment proceedings, it was noticed that assessee has claimed various expenses and has declared meagre business income in the relevant AY. When the same was asked as to why expenses shall not be disallowed, the assessee submitted the following submissions, which are reproduced below:
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