ITO Vs Omni Globeinformation Technologies India (P) Ltd. (ITAT Delhi)- Business is set up when it reaches a stage where it is in a position to procure business and not before. However, the expenditure becomes deductible from such stage, irrespective of the date of actual receipt of the business. The assessee-company had been incorporated on 19 March 2004 for carrying out the business of the BPO. It incurred the expenditure of Rs 59,24,809 under various heads in the months of April and May, 2004. Although the staff had been recruited, it was not ready to render services as the staff had to be trained with the systems.
The assessee had not taken premises on rent and, therefore, installation of computers therein had not been done. Therefore, the assessee was not in a position to solicit customers till the end of May, 2004. The advances were received from the parent company, but these were used for training the personnel and paying salaries and incidental charges necessary for setting up the business. Therefore, it was held that the business had not been set up till the end of May, 2004. Accordingly, it was held that the assessee is not entitled to a deduction on these expenses.
Depreciation — Computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60%.
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