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2014 (9) TMI 793 - HC - Income TaxDate of setting up of business - Whether the Tribunal was right in holding that the assessee had not set up its business till 31.03.2008 – Held that:- There is a distinction between setting up of a business and commencement of a business - it is only after the business is set up, that the expenses incurred in the business can be claimed as permissible deduction u/s 37 of the Act - the assessee company was incorporated on September 19, 2007 - It rented out the office premises in the month of October, 2007. Bank account was opened on October 04, 2007. Employees were also appointed during the said period. TDS deduction for the said employees was also placed on record. Registration under the Shops and Establishment Act was also effected. These activities are the first stage activities which would lay foundation for placing orders for procuring the stock and storing them in a warehouse/shop followed by the third stage of marketing them. Suffice to state for a foreign entity without establishing itself under the local laws, appointing personnel, identifying the prospective manufacturers, clients etc. obtaining storage facilities followed by stock-in-trade, the business of trading cannot commence. The Tribunal missed the point that the assessee as a prudent trader could not have made purchases without undertaking the aforesaid exercise - The exercise was a precursor to commencement but post set up – reling upon COMMISSIONER OF INCOME-TAX Versus ESPN SOFTWARE INDIA P. LTD. [2008 (3) TMI 90 - DELHI HIGH COURT] – the activities demonstrate setting up of the business by the assessee with a commitment to commence the business - nothing barred or prevented the appellant from making first purchase, after necessary legal approvals, but the fact that the appellant wanted to commence actual trading after negotiations with several parties, would not postpone the date when the business was set up - the orders of the authorities below do not indicate that it was the case of the revenue that the assessee has claimed deduction of expenditure, prior to the setting up of business – Decided in favour of assessee.
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