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M/s. Multi Act Realty Enterprises Pvt. Ltd. Versus ITO-8 (2) (3) , Mumbai

2015 (12) TMI 617 - ITAT MUMBAI

Disallowance of business expenditure - Held that:- The assessee has already purchased residential flat for the purpose of resale/lease, and therefore assessee was apparently ready to do its business. Under these circumstances, it can be said that the business is set up by the assessee during the year under consideration. For the deductibility of expenses incurred after this stage, earning of the business income is not a mandatory condition under the law. The assessee may not have been successful .....

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he AO is contrary to law and facts and the same is deleted and the AO is directed to allow the expenses claimed by the assessee - Decided in favour of assessee. - ITA no.7274/Mum/2011 - Dated:- 28-8-2015 - SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER For The Appellant : Shri Satish Mody (AR) For The Revenue : Shri Vijay Kumar Soni (DR) ORDER PER ASHWANI TANEJA, A.M. The present appeal has been filed by the Assessee against order dated 12.09.2011, passed by the .....

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ome assessed under the head income from other sources. 3. It is seen by us that aforesaid ground is modified ground and does not require any examination of new facts. Therefore, after obtaining consent of both the parties in this regard, this ground is admitted for adjudicating this appeal. 4. Brief facts as per assessment order are that the assessee was in the business of dealing in immovable properties and development rights etc. It was observed for by the AO that no business income was earned .....

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, wherein the Ld. CIT(A) confirmed the disallowance on the ground that no business was carried out during the year. Before us, the Ld. Counsel appearing on the behalf of the assessee submitted that routine business expenses incurred during the normal course have been wrongly disallowed by the authorities below and requested for reversing the action of AO and Ld. CIT(A). On the other hand, the Ld. DR relied upon the orders of Ld. CIT(A) and the AO. 5. We have carefully considered arguments made b .....

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here for the sake of ready reference: 3. For the purposes of this Act, previous year means the financial year immediately preceding the assessment year: Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and .....

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ake place at later date. Thus, even if the assessee does not earn any business income during the year, but if the business is set up, it would amount to carrying on the business under the income tax law and therefore, the business expenses would stand allowable. 6. In following cases it has been held that whether income has been earned or not and whether ultimate benefit has accrued immediately or not, the expenses incurred shall be allowable if these have been incurred for the purpose of busine .....

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es it has been held that expenses shall become deductible after setting up of the business, even if commencement of business has not yet taken place: 1.CIT Vs. Ralliwolf Ltd. (121 ITR 262) (Bom) 2.Saurashtra Cement & Chemical Industries Ltd. (91 ITR 170) (Guj) 3.Western India Vegetable Products Ltd. (26 ITR 151) 4.Ramaraja Surgical Cottons Mills Ltd. (63 ITR 478) 5. CIT v. Whirlpool of India Ltd 318 ITR 347 (Delhi High Court) In the case of CIT vs Sardar Sarovar Narmada Nigam Ltd 364 ITR 477 .....

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