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2020 (3) TMI 1194 - AT - Income TaxNon commencement of business - disallowance of expenses - HELD THAT:- It is not substantiated with relevant evidences that business has been set up. We have also gone through the judicial pronouncements referred by the ld. counsel and noticed that facts of these cases are distinguishable from the case of the asssessee. In the case of CIT Vs. Samsung India Electronics Ltd. [2013 (7) TMI 335 - DELHI HIGH COURT] the assessee company was ready to commence trading operation as on the date of incorporation viz. 3.8.1995. In the case of Prem Conductors (P) Ltd. Vs. CIT [1976 (3) TMI 28 - GUJARAT HIGH COURT] it was seen that assessee company has started accepting orders for production of goods since very date of its incorporation. In the light of the facts of the case, material on records and judicial findings, we consider it is not substantiated that assessee has commenced its business operations during the year under consideration and the expenses claimed by the assessee company appeared to be at the stage of setting up of its business, therefore, this ground of appeal is dismissed. Whether interest income earned from temporary deposit of the fund brought by way of share capital are inextricably linked to setting up of manufacturing facilities and same should be considered as capital in nature and should be reduced from the cost of the project? - HELD THAT:- Once it has been considered that assessee has not commenced its business, therefore, the interest income earned by the assessee prior to the commencement of the business is required to be treated as capital receipt - See INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED, NEW DELHI VERSUS INCOME TAX OFFICER [2009 (2) TMI 32 - DELHI HIGH COURT] We consider that the impugned interest receipt by the assessee company is related to the prior period to commencement of business which is in nature of capital receipt and was required to be set off against pre-operative expenses. Therefore, first ground of appeal of the assessee for treating expenses to the amount as revenue expenditure is dismissed. However, the alternative ground of appeal of the assessee for treating the interest income earned on fixed deposit pertaining to prior period commencement of business is allowed by treating the impugned interest income as capital receipt which is adjusted against pre-operative expenses of the assessee. Therefore, the alternative ground of appeal of the assessee is allowed.
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