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2021 (6) TMI 547 - AT - Income TaxDeduction u/s. 35D - Preliminary expenditure incurred towards ROC fees for authorised share capital - HELD THAT:- Once section 35D is introduced, fee paid to ROC before its commencement for registering company under the provisions of the Companies Act, 1956 is eligible for deduction u/s. 35D of the Act. In the present case, the assessee claimed 1/5th of total expenditure of ₹ 28,59,020 i.e., ₹ 5,71,804. Accordingly, the same has to be allowed as deduction u/s. 35D of the Act. This ground of the assessee is allowed. Disallowance being pre-operative expenses on the reason that date on which VAT license was obtained was the date of commencement of business and not the date of incorporation - HELD THAT:- In this case, the reason for not allowing expenses is that the assessee has not set up business and business was set up only from the date of obtaining VAT registration. As seen from the facts of the case, the assessee was incorporated under the Companies Act on 30.8.2010 and made all arrangements to start the business from the date of introducing the capital on 15.9.2010 and took the premises for operation of its business from 10.10.2010. Key management personnel were also appointed on 2.11.2010. Import/Export license was obtained on 23.11.201. First Purchase Order was placed on YEC Japan in order to purchase goods on 6.10.2010 0 and VAT registration was obtained on 24.12.2010. All these things suggest that the assessee was ready to start its business and in our opinion, it is not necessary or mandatory to obtain registration so as to say that the company has set up its business. Based on the reason of not obtaining VAT certificate, it will not lead to conclusion that business was not set up, though purchase of goods would amount to commencement of business under the said Act, there are various activities to be commenced to carry the activities by the assessee. All the activities are integral part of business of assessee and they are continued activities. When the first steps are taken by the assessee, business is said to be set up, based on which commencement of purchase and sales activities will start. In view of these facts, we are of the opinion that the business is said to be commenced from the date of placing purchase order i.e., on 6.10.2010 and all expenditure incurred from this date i.e., 6.10.2010 to be considered as business expenditure and to be allowed accordingly. This ground of assessee is partly allowed.
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