Brief Facts of the case-
- The Revenue is aggrieved by the order of the Income Tax Appellate Tribunal (‘ITAT’).
- The assessee was incorporated in April, 2005 to carry on the business of out of home advertisement, consisting of street furniture, bill boards and transportation.
- It was awarded its first contract by New Delhi Municipal Corporation (NDMC) in March 2006 for construction of 197 Bus Queue Shelters (BQSs) on Build-Operate Transfer (BOT) basis.
- In terms of the contract, the assessee was required to undertake preliminary investigations, study, design, finance, construct, operate and maintain BQSs at its own cost. In consideration, the assessee was allowed to commercially exploit the space allotted in these BQSs by displaying advertisements for a period of 15 years.
- The assessee claimed an expenditure of Rs. 3,17,91,180/- incurred on advertisement. However, the same was disallowed by the AO on the ground that the business of the assessee had not commenced. On appeal, the CIT (Appeals) confirmed the order of the AO. Then it went to ITAT which pronounced a favorable ruling.
Contention of the revenue
The business would commence when the BQSs would be ready for providing space for advertisement, being the very reason for which the assessee company entered into an agreement with the NDMC.
Observations by ITAT
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