ORDER
1. The revenue is aggrieved by an order dated 1-12-2004 passed by the Income Tax Appellate Tribunal, Delhi Bench, SMC-1 in ITA No. 2498/ Delhi/2002 relevant for the assessment year 1998-99.
2. The assessed was incorporated on 14-7-1997 and is engaged in the business of information technology services such as software development/consultancy, business process management, electronic banking schemes etc.
3. It filed a return on 26-11-1998 claiming a loss of about Rs. 4.4 crores. The assessed was asked to explain why the expenses claimed in the profit and loss account be not disallowed, as the only receipt of income of the assessed was on account of interest which was taxable as income from other sources. The assessed filed its reply but that was not acceptable to the assessing officer who passed an assessment order computing the income of the assessed at Rs. 3,68,950. It was held that the assessed had not suffered any loss during the relevant previous year since it had not commenced its business activities in the previous year relevant to the assessment year.
4. The assessed filed an appeal before the Commissioner of Income-tax (Appeals) which was allowed.
5. Feeling aggrieved, the revenue preferred an appeal before the Tribunal and that appeal was dismissed and that is how the revenue is before us under Section 260A of the Income Tax Act, 1961.
6. The Tribunal has relied upon the order passed by the Commissioner (Appeals) and in fact has more or less adopted the reasoning given by the First Appellate Authority. It has been noted that the assessed had employed as many as 30-40 employees for the purposes of developing software and had acquired requisite infrastructure such as premises, utilities etc. during the previous year relevant to the assessment year. It must be remembered that the assessed was in the business of developing software and that cannot be an overnight exercise. The assessed had put consistent efforts for developing the software and it is only thereafter that the assessed was able to procure some business. It is possible that the assessed may not have earned any income during the relevant previous year but the fact that the assessed had taken all steps necessary to obtain business including efforts for marketing itself shows that the assessed had commenced business in the relevant previous year. Apart from the aforesaid, it had also shown pre-incorporation expenditure of Rs. 11.32 crores as having been expended for the purposes of setting up its business. The Tribunal has noted that none of the factual findings that have been arrived at by the Commissioner (Appeals) were controverter by the revenue in appeal. The assessed had also produced some additional evidence before the Commissioner (Appeals) and even this was neither objected to nor controverter by the revenue.
7. Under these circumstances, the Tribunal did not find it appropriate to interfere with the order passed by the Commissioner (Appeals).
8. Learned counsel for the revenue has relied upon CIT v. Mohan Steel Ltd. to contend that business activities should have been started by the assessed in the relevant previous year. There is no quarrel with the legal proposition laid down in this decision. However, having gone through the judgment relied upon by learned counsel, we find that the factual scenario in the present case is completely different. Insofar as the present case is concerned, as already pointed out, the assessed was in the business of developing software and it is for this purpose that it had acquired certain infrastructure facilities and had also employed as many as 30 to 40 persons in the relevant previous year who were required to provide the necessary intellectual input for developing the software. It cannot be compared with manufacturing activities as was the situation in the case of Mohan Steel Ltd. supra).
9. We are of the view that under these circumstances, no substantial question of law arises for our consideration given the factual matrix of the case.