Business expenses allowed post incorporation date; carry forward of losses permitted. Tribunal dismisses Revenue's appeal.

The Tribunal dismissed the Revenue's appeal, affirming that the business was set up on August 21, 2007, allowing expenses incurred after that date and permitting the carry forward of business loss. The Tribunal upheld the CIT(A)'s decision, emphasizing the distinction between setting up and commencement of business, and rejected the Revenue's argument that the business commenced in August 2008.

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Issues Involved:
1. Determination of the date when the business of the assessee was set up.
2. Consideration of the date of the first sale as the commencement of business.
3. Allowance of proportionate expenses claimed by the assessee.
4. Set off and carry forward of business loss.

Detailed Analysis:

1. Determination of the Date When the Business of the Assessee Was Set Up:
The CIT(A) held that the business of the assessee was set up during the year ended 31.03.2008. The CIT(A) relied on various judicial precedents to determine the date of setting up of the business. Notably, the distinction between setting up and commencement of business was emphasized, citing Western India Vegetable Products Ltd. vs. CIT 26 ITR 151, which stated that the business is set up when it is ready to commence. The CIT(A) observed that the first activity of the business started on August 21, 2007, when the assessee sent introductory letters to clients. Thus, the business was considered set up in A.Y. 2008-09.

2. Consideration of the Date of the First Sale as the Commencement of Business:
The Revenue contended that the business should be considered commenced from August 2008, the date of the first sale. However, the CIT(A) and the Tribunal found that the business was set up earlier, on August 21, 2007, when the assessee began its business activities, such as sending introductory letters to clients. The Tribunal supported this view by referencing the decision in Reliance Gems & Jewels Ltd., ITA No.3855/Mum/2013, which allowed similar claims based on the setting up of business activities prior to actual sales.

3. Allowance of Proportionate Expenses Claimed by the Assessee:
The AO disallowed the expenses claimed by the assessee, arguing that the business had not commenced until August 2008. The CIT(A) and the Tribunal disagreed, stating that since the business was set up on August 21, 2007, expenses incurred after this date were allowable. The Tribunal referenced multiple cases, including Omniglobe Information Tech India Pvt. Ltd. and Whirlpool of India Ltd., to support the view that expenses incurred after the business is set up are permissible deductions.

4. Set Off and Carry Forward of Business Loss:
The AO did not allow the assessee to carry forward the business loss from the previous year, arguing that the business had not commenced in A.Y. 2008-09. The CIT(A) and the Tribunal found that since the business was set up in A.Y. 2008-09, the assessee was entitled to carry forward the business loss. The Tribunal upheld the CIT(A)'s decision, allowing the set off and carry forward of the business loss.

Conclusion:
The Tribunal dismissed the appeal of the Revenue, affirming the CIT(A)'s findings that the business was set up on August 21, 2007, and not in August 2008 as contended by the Revenue. Consequently, the expenses incurred after the business was set up were allowable, and the assessee was entitled to carry forward the business loss from the previous year. The Tribunal found no reason to interfere with the CIT(A)'s conclusions, resulting in the dismissal of the Revenue's appeal.

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