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2021 (10) TMI 907 - ITAT HYDERABADReceipt pertaining to the rights of distribution - Unsecured loan or business receipts - whether the receipt received by the assessee as advance can be treated as business receipt u/s 28(i) of the Act or not ? - HELD THAT:- As the assessee has not undertaken any business activity and he has received only advance for setting off of losses for future years, which commence w.e.f. 01/04/2016, but, no commercial activity has been started, which is clear from the audited financial statements. Therefore, the agreement in this regard for treating it as a revenue income cannot arise. Accordingly, we observe that the advance received is not a revenue in nature for the year under consideration. As decided in SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD., COMMISSIONER OF INCOME TAX [2004 (9) TMI 6 - SUPREME COURT] amounts collected by the respondent-societies towards the Cane Development Fund and was allowed, the amount collected towards the Cane Development Fund would be treated as the income of the assessee and any claim for deduction would be entertained and decided by the Tribunal. - We find substance in the submissions made by the ld. AR of the assessee and accordingly, we direct the AO to delete the addition made on this count. Thus, the grounds raised by the assessee on this issue are allowed Disallowance of expenditure u/s 37(1) - administrative expenses and payment of salaries - assessee submitted that the expenditure was incurred for the purpose of business, and it is allowable as business expenditure if it is incurred on the ground of commercial expediency - HELD THAT:- It is only after the business is set up that the expenses incurred in the business can be claimed as permissible deduction under Section 37 of IT Act. For commencement of a business, there must be some income generating asset or income earning structure. In the case on hand, the assessee is incurring capital expenditure and till date of FY ending, the assessee has not commenced its commercial operations. As per the balance sheet filed by the assessee, the assessee is incurring capital expenditure, therefore, factory maintenance and repair & maintenance expenditure do not arise. The assessee failed to establish that expenditures incurred under Sl. No. 3, 4 & 5 are not directly relating to the installation of the project. The assessee has incurred R&D expenditure earlier, which has been capitalized and, therefore, this expenditure cannot be treated as revenue expenditure since the assessee has not yet started commercial production. In view of the above observations and considering the totality of the facts of the case, this ground of the assessee is partly allowed.
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