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2014 (2) TMI 892 - AT - Income TaxDeletion on account of pre-operative expenses – Business not commenced – Held that:- The business would commence when the activity which is first in point of time and which must necessarily precedes the other activities is started - Relying upon CIT Vs. Saurashtra Cement and Chemical Industries ltd. [1972 (8) TMI 19 - GUJARAT High Court ] - one of the essential activity namely license/ right to explore the blocks has been granted and exploration of blocks has already been started without which no production can take place - business had commenced at the stage when licence to explore the respective blocks was granted by the Govt. of India to assessee company. The CIT(A) has rightly made a finding that the assessee have commenced its business, when the appellant has carried the first activity being assignment of the right to explore the block awarded in the New Exploration and Licensing Policy (NELP) and commencement of exploration activities thereafter incurred an expense of more than Rs. 258 crores - None of the expenses mentioned are of personal in nature and the expenses are of revenue in nature - the assessee has capitalized all the exploration cost and the same have been reflected as “capital work for progress” in the balance-sheet - The assessee has only claimed deduction of the expenses which have been incurred for day to day operation of the business which are eligible for deduction u/s 37(1) of the Act – thus, there is no infirmity in the order of the CIT(A) – Decided against Revenue. Deletion made u/s 35D of the Act - Expenses incurred for increasing the authorized share capital – Held that:- The assessee company has commenced its business and already commenced exploration activities on the blocks awarded to it in the relevant Assessment Year – as in the preceding years too the said claim of the assessee company was allowed by the Assessing Officer - there is no material on record to suggest or support any change in the character or nature of the said expense incurred by the assessee company –there is no infirmity in the order of the CIT(A) directing the Assessing Officer to allow the deduction u/s 35D of the Act in respect of expenses incurred for increasing the authorized share capital – Decided against Revenue.
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