TaxTMI 
TaxTMI 
2010 (9) TMI 1091
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....nstruction business should be allowed as a deduction during the current assessment year itself ? 2. Whether the appellate authorities were correct in holding that even when the actual business activity has not commenced, any expenditure incurred by the assessee can be allowed as a business expenditure ?" The Revenue is before us in this appeal impugning the orders of the Tribunal in IT Appeal No. 1538 of 2002. The respondent assessee is a construction company and they had sought for certain revenue expenditure under s. 37 of the IT Act (for short 'the Act') for the asst. yr. 1997-98. The AO held that all the expenditures claimed by the assessee cannot be allowed as the assessee had not yet commenced the work. Therefore, it rejec....
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....hen it incorporated its company with the RoC. Certainly, there is a distinction between the setting up of business and commencement of business. Incorporation of the company on 26th April, 1996 is the first step the company has taken to establish a public limited company. Later commencement certificate was issued by the RoC on 6th Aug., 1996. Unless this commencement certificate was with the assessee company, they could not even do any incidental activity of their construction work on behalf of the said company. Therefore, only after obtaining a commencement certificate on 6th Aug., 1996, legally they are permissible or allowed to do the business. Though the company said to have entered into MoU with Ramayya Builders for turnkey project on ....
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.... charges, payment of architect's fee are not proof of commencement of business. This is an erroneous approach. So far as incorporation of a company, it may be the beginning of the business activity of the company but till it actually obtained commencement certificate of business from the RoC, with just incorporation of the company, it could not have done anything. Therefore, depending upon the nature of the work and who has undertaken the work, one has to look into the material placed and then come to conclusion what exactly would be the commencement of work. Setting-up of a business may require several factors like investment in a building and other permanent structures which cannot be integral part of a business though it could be inc....