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2019 (4) TMI 816 - DELHI HIGH COURTRevision u/s 264 - commencement of business - allowability of expense u/s 37(1) - established by the government for specific purpose of developing old stations - entire major services are outsourced to consultants - during the assessment year the assessee engaged all key personnel. CEO took charge sometime in the beginning of November, 2012. It finalised a tender for obtaining financial bid and tender advisory service on 17.12. 2013 and the first consultant was appointed on 01.02.2013 - AO disallowed three items of expenditure claimed as deduction, i.e., depreciation, preliminary expenses, and employees’ remuneration - HELD THAT:- There is no bright line that can be determinative as to when business commences. In case of the service sector, where the entity has involved itself in various kinds of steps, some of which are preliminary to setting up the main substantial commercial venture, the linkage between these preliminary steps and nature of the ultimate activity may be a relevant factor to be taken into account. Therefore, Carefour [2014 (9) TMI 793 - DELHI HIGH COURT] dealt with this trading related aspect and stated that even certain kinds of preliminary steps, such as engaging in negotiation or employment of personnel, could be relevant even though actual activity might not be involved. Keeping this principle in mind, this Court is of the opinion that the petitioner’s activity, which it claims to be preliminary steps towards the fulfillment of the purpose, which is embodied in the MoU and extracts of which have been reproduced above, clearly indicates that it had set up its business and that these steps were for the ultimate fulfillment of its purposes, which was the preparation of development plans leading to the projects. The Principal Commissioner of Income Tax, in the impugned order, was plainly wrong in holding otherwise. For the aforesaid reasons, we are of the opinion that this writ petition is to succeed. The impugned order of the CIT, as well as the AO are set aside.he matter is remitted to the AO to give tax effect and to ensure that the deduction claims are appropriately granted.
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