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2022 (12) TMI 1158 - AT - Income TaxExpenses incurred during the intervening period between setting up and actual business - pre-operative expenses - deductibility of the expenditure incurred between set-up business and actual commencement of business, set off of such expenses against the interest income earned on FDs made out of idle funds or not - HELD THAT:- The admitted facts of the case are that in the immediate preceding previous year, the appellant company had sold its business, however, it was in the process of setting up a new business by identifying some distribution business. In the process, incurred certain revenue expenditure in the form of salary, etc other expenses. AO as well as the ld. CIT(A) simply discussed the legal principle without adverting to the material facts on record and had not really decided whether the appellant company had set-up of business and ready to commence the business or not. On perusal of the Profit & Loss Account placed at Paper Book indicates that certain expenditure was incurred in connection with business which was sold were also debited to the Profit & Loss Account. Therefore,AO as well as the ld. CIT(A) had failed to examine the nexus of the expenditure incurred and the new business stated to have been set-up. In these circumstances, we are of the considered opinion that the matter requires remission to the file of the AO to decide the issue in appeal with reference to the material on record whether the appellant company had set-up a new business or not. In case, on examination of the material on record,AO formed an opinion that new business had been set-up, the expenditure incurred during the interval period of setting up of a new business and its commencement of business can be allowed as deduction and can be set-off against the interest income earned on fixed deposits by the assessee assessed under head “Income from the other sources”. Grounds of appeal raised by the assessee stands partly allowed for statistical purposes.
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