Tribunal grants deduction for financial services expenses, citing precedent. Appeal allowed, setting aside previous order.

The Tribunal allowed the appeal filed by the assessee, setting aside the order of the ld. CIT(A) and directing the Assessing Officer to allow the deduction claimed by the assessee. The decision was based on a previous judgment in a similar case for the assessment year 2012-13, where it was held that expenses incurred by the assessee for earning income during the relevant assessment year should be allowed as deduction since the assessee was engaged solely in financial services. The delay in filing the appeal was condoned, and the appeal was admitted for adjudication.

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Issues: Capitalization of expenses incurred by the assessee to earn interest income as pre-operative expenses.

Analysis:

Issue 1: Capitalization of expenses as pre-operative expenses
The assessee appealed against the order of the ld. Commissioner of Income Tax (Appeals) confirming the capitalization of expenses incurred to earn interest income as pre-operative expenses. The Assessing Officer observed that since the company was yet to commence its main business activities of setting up and operating hotels and resorts, the interest income earned from short-term lending operations should be assessed under the head 'income from other sources.' Consequently, the expenses incurred by the assessee were capitalized as pre-operative expenses. The ld. CIT(A) upheld this decision, disallowing all expenses, including salary expenses, and capitalizing them. However, the Tribunal referred to a similar case for the assessment year 2012-13 where it was held that since the assessee was engaged only in financial services during the relevant assessment year, the income earned should be treated as business income. Therefore, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee, setting aside the order of the ld. CIT(A).

Issue 2: Delay in filing the appeal
The appeal filed by the assessee was delayed by 3 days. The assessee's counsel filed a petition for condonation of the delay, which was supported by an affidavit. The ld. DR did not raise any serious objection to the delay, and the Tribunal, considering the sufficient cause for the delay, condoned the 3-day delay in filing the appeal, admitting it for adjudication.

Conclusion
The Tribunal allowed the appeal filed by the assessee, setting aside the order of the ld. CIT(A) and directing the Assessing Officer to allow the deduction claimed by the assessee. The decision was based on a previous judgment in a similar case for the assessment year 2012-13, where it was held that expenses incurred by the assessee for earning income during the relevant assessment year should be allowed as deduction since the assessee was engaged solely in financial services. The delay in filing the appeal was condoned, and the appeal was admitted for adjudication.

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