2017 (2) TMI 340

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....ppeal 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 up during the previous year relevant to Assessment Year 20072008 ?" 3. The Respondent - Assessee is an asset management company. During the assessment proceedings, the Assessing Officer noted that the respondent - assessee had shown the business loss of Rs. 1.17 crores and Miscellaneous Income of Rs. 24,720/- for the subject assessment year. The Assessing Officer disallowed t....

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....th effect from 1st October, 2006. Further the impugned order records the fact that from the balance sheet and profit and loss account filed which includes Director's report, it is clear that the company has taken steps for commencing business of venture capital fund. It has engaged legal and financial advisors. It had also incurred expenditure to decide the appropriate tax efficient structure for the funds and employed necessary personnel for purpose of running its business. The impugned order records the fact that human capital is key to the business of asset management. Further, the impugned order 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....

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....ed. According to the Revenue, there is no distinction between setting up of business and commencement of business. Therefore, no expenditure incurred before commencement of business can be allowed. 7. We note that a similar issue viz. distinction between setting up of business and commencement of business had come up for consideration before this Court 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 bu....