IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. No. 167 OF 2007 DATE: 22.01.2014 Between:
Karvy Consultants Ltd., Hyderabad.
… Appellant And Deputy Commissioner of Income-Tax, Range-2, Hyderabad.
… Respondent This Court made the following:
THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. No. 167 of 2007 JUDGMENT: (Per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) Learned counsel for the appellant submits that his client does not want to press this appeal in relation to the third issue, namely; disallowance of the capital loss of Rs.3 lakhs and he wants to press the appeal in relation to the first issue only, namely; medical transcription.
This appeal is sought to be preferred and admitted against the judgment and order dated 06.10.2006 of the learned Tribunal in relation to the assessment year 2000-01 on the following suggested question of law.
“8.1. Whether on the facts and in the circumstances of the case, the ITAT is justified in holding that the business of medical transcription could be considered to have commenced only when an order for medical transcription was obtained by the appellant company?
8.2. Whether on the facts and in the circumstances of the case, the ITAT is justified in holding that the appellant company failed to establish that the business of medical transcription commenced earlier to 01.11.1999 with reference to any evidence available on record?
8.3. Whether on the facts and in the circumstances of the case, the ITAT is justified in confirming the disallowance of the expenditure incurred on the medical transcription division of Rs.66,27,839/- incurred during the period 01.04.1999 to 31.10.1999?”
The learned Tribunal on fact found that the assessee has started a new business of medical transcription and it is altogether a different line from that of the business being carried on by the assessee earlier. It further found on fact that the appellant has not able to establish that the business of medical transcription was set up earlier to 01.11.1999. In view of the aforesaid fact finding, the learned Tribunal concluded the legal position that the medical transcription can be considered to have commenced only when an order for medical transcription was obtained by the appellant and the appellant was in a position to carry out such operation.
Learned counsel for the appellant submits that in order to allow deduction of expenditure in relation to the business it is not necessary that actual carrying on business is a requirement. He submits that it is good enough if the business is ready for commencement. In support of his submission, he relied on the decision of this Court in case of
[1]
Commissioner of Income Tax vs. Sponge Iron India Limited and the decision of the Calcutta High Court in case of Commissioner of
[2]
Income Tax vs. Kanoria General Dealers (P) Limited . The Calcutta High Court has also relied on the decision of the Supreme Court in case
[3]
o f CWT vs. Ramaraju Surgical Cotton Mills Limited . Learned counsel has also relied on the said decision of the Supreme Court.
It appears that the learned Tribunal has held that those decisions do not render any help to the assessee’s case and rather support the revenue’s case. This Court in case of Sponge Iron India Limited (1 supra) has laid down the law that a business is deemed to have commenced when it is ready to manufacture sponge iron. It appears that this judgment really do not help, as rightly observed by the learned Tribunal, to the appellant’s case. According to us, it depends upon the nature of the business in order to adjudge as to when the commencement of the same has taken place. The Calcutta High Court in its decision has taken a broader view saying that if the business has been set up in the relevant assessment year and ready to start, in that case the expenditure incurred in connection therewith shall be allowed. The Calcutta High Court has relied on the aforesaid Supreme Court decision also, wherein the Supreme Court had held that where a business unit has been set up by the assessee which was ready to commence production, the assessee was entitled to claim deduction of the expenditure which could not be disallowed on the ground that the same has been incurred prior to the commencement of the actual business.
In this case the Tribunal has found that the business of medical transcription was not set up earlier to 01.11.1999 and the said business activity is a new one. Therefore, it cannot be said to be continuation of the existing business of the appellant. Under the circumstances, we are unable to accept the contention of the learned counsel for the appellant that the points raised herein are required to be decided by this Court. We are of the view that given on the fact finding and in view of the settled position of law as recorded by us hereinabove, no question of law is involved in this matter.
Hence, we dismiss the appeal.
K.J. SENGUPTA, CJ SANJAY KUMAR, J
Date: 22.01.2014 ES
[1] 2001 ITR 770
[2] 1986 159 ITR 524
[3] (1967) 63 ITR 478 (SC)