Commissioner of Income Tax vs INFO Vergix Technologies Limited

Badar Durrez Ahmed, J.—This appeal is in respect of the assessment year 2001-02 and is directed against the order of the Income Tax Appellate Tribunal dated May 15, 2007, in I.T.A. No. 1436/Del/2004. The assessee had shown expenditure as deferred revenue expenditure in its books. However, it had claimed it as revenue expenditure in its return. The Assessing Officer had disallowed the same and the Commissioner of Income Tax (Appeals) had confirmed the disallowance. The total extent of disallowance was Rs. 31,54,846. The Income Tax Appellate Tribunal has allowed the deduction on the ground that, although the said sum had been shown differently in the books, the same was allowable as per law.

The learned Counsel for the Revenue has pointed out before us that the said sum of Rs. 31,54,846 comprised of two components, a sum of Rs. 8,19,365, which is said to be expenditure incurred between the period April 1, 2000, to May 30, 2000 (pre-commencement period) and a sum of Rs. 23,35,481 incurred after May 30, 2000. The assessee had three businesses-networking, call centre and e-business activities. The learned Counsel for the Revenue pointed out that as regards the expenditure of Rs. 8,19,365, it was clearly incurred prior to the date of commencement of any business activity of the assessee and, accordingly, the same was in the nature of pre-operative expenses.

We have considered the submissions made by the learned Counsel for the appellant/Revenue. Nobody has appeared on behalf of the assessee, although the service was completed by means of substituted service. Considering the decision of the Income Tax Appellate Tribunal and the submissions made before us by the learned Counsel for the Revenue, we are of the view that no interference whatsoever is called for with regard to the expenses incurred after May 30, 2000, which are in the sum of Rs. 23,35,481. But, with regard to the balance sum of Rs. 8,19,365, which are expenses for the pre-commencement period, we find that there is no discussion with regard to this in the impugned order. However, we are not inclined to interfere with the impugned order because the tax effect in respect of the said expenditure of Rs. 8,19,365 would be less than Rs. 4 lakhs.

The appeal stands disposed of accordingly.