TMI Blog2023 (3) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the findings of the Tribunal the finding of the Learned CIT(A) of the issue in dispute is upheld. The grounds raised by the revenue are accordingly dismissed. - ITA No. 4190/Del/2018 - - - Dated:- 16-3-2023 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For the Appellant : Sh. Anuj Garg, Sr. DR For the Respondent : Ms. Ananya Kapoor, Advocate ORDER PER O.P. KANT, AM: This appeal by the revenue is directed against order dated 28/03/2018 passed by the Learned Commissioner of income-tax (Appeals)-4, New Delhi [in short the Ld. CIT(A)] for assessment year 2014-15 raising following grounds: 1. Whether the Ld. CIT(A) has erred on facts and in law in holding that the business or rentin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under the P L account. The assessee filed return of income for the year under consideration on 30.09.2014 declaring total loss of Rs.1,42,14,868/-. The return was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short the Act ) were issued and complied with. According to the Assessing Officer (in short the AO), the business of the assessee was not set up and, therefore, the expenses debited in P L account amounting to Rs.1,62,73,525/- were not eligible for allowing as revenue expenditure u/s. 37(1) of the Act and same should have been capitalized. 3. On further appeal the CIT(A) following the findings of his predecessor in A.Y.2012-13 and 2013-14, allowed the claim of the assessee. 4. Aggrieved with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,525/- out of claimed revenue expenditure to the extent of loss under the head business and profession holding the same as capital in nature. Exactly on the same issue, I have decided the matter in favour of the appellate for A.Y. 2012-13 and 2013-14 holding that expenses not directly related to the project being general and necessary to run the business is allowable business expenses once the business is set up. 6.3 The concluding paragraphs of my order for A.Y. 2012-13 is being reproduced for ready reference :- 6.7 The only test is whether business has set up. Further, it is not in dispute that appellant had entered into a collaboration agreement in assessment year 2009-10 and therefore, setting up of business cannot be dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht be a gap between the date on which the business is set up and the date of commencement of the business. In the case of CIT Vs Hughes Escorts Communication [2009] 311 ITR 253, it has been held that the expenses incurred in the previous year, prior to the commencement of the business but after the setting up of its business, which two dates need not be the same, would be deductible as revenue expenses. In this case, while making distinction between the setting up and commencement of a business the Hon'ble Court has relied upon the Bombay High Court in Western India Vegetables Products Ltd. In this case, the Bombay High Court, which was in this case dealing with the corresponding provision of the Indian Income-tax Act, 1922, then expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pn. Ltd. [1991] 192 ITR 151, where the Hon'ble Supreme Court went a step ahead that even the activities at a preparatory stage are also admissible. It is well settled that all the expenses incurred after the business had been set up are allowable as business deduction under section 37 of the Act. There may be interval between the setting up of the business and the actual commencement of the business but all the expenses incurred during the interval of setting up of the business and the commencement of the business are also permissible for deduction as so held in the above referred decisions. Thus, it is clear that it is now well settled law that, once business is set up expenditure is allowable as business expenditure, as has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is in a position to perform certain acts towards the acquisition of land, that would clearly show that it is ready to commence business and, as a corollary, that it has already been set up. The actual acquisition of land is the result of such efforts put in by the assessee; once the land is acquired the assessee may be said to have actually commenced its business which is that of development of real estate. The actual acquisition of the land may be a first step in the commencement of the business but section 3 of the Act does not speak of commencement of the business, it speaks only of setting up of the business. The ratio laid down in Dhoomketu Builders and Development (supra) is squarely applicable in the present case. Thus, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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