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The Commissioner of Income Tax-3, Mumbai Versus M/s. Axis Pvt. Equity Ltd.

2017 (2) TMI 340 - BOMBAY HIGH COURT

Allowance of deduction the expenses - business of the Assessee Company was not set up - distinction between setting up of business and commencement of business - Held that:- Tribunal on examination of facts found that the business of the respondent – assessee has been set up in the subject assessment year and consequently, the business loss arising on account of expenditure as claimed by the respondent – assessee was allowable. Thus when executives are employed and the infrastructure is ready to .....

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2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 200708. 2. This appeal urges the following question of law for our consideration :- (A) Whether on the facts and circumstances of the case and in law, the Tribunal was correct in allowing as a deduction the expenses claimed by the assessee in its Profit and Loss Account for the year ended 31st March, 2007 without appreciating that the business of the Assessee Company was not set u .....

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as not been set up during the year under consideration and no evidence in regard to the same was produced. So far as miscellaneous income of ₹ 24,720/- is concerned, the Assessing Officer brought it to tax as income from other sources. 4. Being aggrieved the respondent - assessee carried matter in Appeal. By the order dated 13th December, 2011 the Commissioner of Income Tax (Appeal) [CIT (A)] upheld the order of Assessing Officer disallowing business loss of ₹ 1.17 crores on the grou .....

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the impugned order recorded the fact that the expenses of ₹ 1.17 crores was disallowed as business has not been set up in the year under consideration by the lower authorities. The impugned order also makes reference to the fact that the company was incorporated in the year 2006 and the Assistant Registrar of Companies has issued a certificate that the company had commenced business with effect from 1st October, 2006. Further the impugned order records the fact that from the balance sheet .....

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rder relied upon a decision of the Coordinate bench of the Tribunal is case of HSBC Securities India Holdings Pvt. Ltd. decided in ITA No.3181/M/1999 decided on 28th November, 2001 wherein it was held that the business would be held to be set up as and when assessee had taken business premises and has taken steps to recruit employees and has incurred expenses for promoting its business activity In fact the impugned order also records the fact that in subsequent assessment year 2009-10 similar ex .....

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fficer for subsequent assessment year 2009-10 and accepted by the assessee. 6. The grievance of the revenue before us is only with regard to the impugned order allowing the expenditure of ₹ 1.17 crores as business loss. This conclusion of the Tribunal is premised on the fact that the business has been set up during the year under consideration. It is submitted by the Revenue that no evidence was produced by the assessee to show that any activities of management of funds have been taken by .....

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urt in Western India Vegetable Products Ltd. vs. Commissioner of Income Tax 1954 Vol. 26 ITR Page 151. This Court had held that business is said to have been set up when it is established and ready to be commence. However, there may be an interval between a business which is set up and a business which is commenced. However, all expenses incurred during the interregnum between setting up of business and commencement of business would be permissible deductions. In this case the CIT (A) had disall .....

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