TaxTMI 
TaxTMI 
2018 (12) TMI 56
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....ollowing objects on its incorporation:- "1. To set - up, acquire and carry on the business, within India or abroad of developing, manufacture, procure, produce, trading, contracting, franchising, selling, buying, exporting, importing, repairing, maintaining, assembling, engineering service provider or otherwise dealing in all kinds of appliances, equipments, devices, instruments, components, tools, accessories, sensors, controllers, apparatus, machinery, spare parts and other related appliances of heating elements and temperature control systems for any - domestic, commercial ,industrial application and Customer specific solutions." 3. The Memorandum of Association (MoA) also specifies the following objects can be pursued by the....
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....e considered separately Depreciation as per Income Tax Act, 1961: Preliminary expense write off allowed as per income tax act 40,563 40,563 (38,16,305) Total income (38,16,300) 5. It can be seen from the Profit & Loss (P&L) account of the assessee that the loss of Rs. 47,14,272 was arrived at as follows:- Particulars Note No. Period Ended Revenue from Operations Other Income Total Revenue Expenses: Depreciation and Amortisation of Assets Other Expenses ....
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....ed as pre-commencement expenses and cannot be allowed as deduction. The following were the relevant observations of the AO in this regard. "4. Prior Period Expense: On perusal of the details furnished by the assessee, it was revealed that the assessee company has debited Rs. 53,93,347 towards expenses under the head- Other Expenses and Depreciation and amortization. Company was incorporated in Sep 2014. There are zero revenue from operation. The business has set up, however it has not commence operations. Therefore, the expenditure claimed can not be allowed as revenue expenditures. The assessee vide order sheet dated 15.12.2017 was asked why prior period expense of Rs. 53,93,347 should not be disallowed. 5. It wa....
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....remises taken on lease by the assessee. The lease deed is dated 11.11.2014 and the lease was for a period of 3 years w.e.f. 10.11.2014. The recitals in the lease deed were as follows:- "WHEREAS, the Lessor is the owner of the property measuring total area of 7200 sq. ft., of Building more particularly specified in Schedule. (Hereinafter collectively referred to as the 'demised premises'). AND WHEREAS, the Lessee is in manufacturing business. The Lessee requires an Industrial shed for manufacturing Industrial heaters and heating systems. AND WHEREAS, the Lessor has expressed his intention to lease the demised premises to the Lessee for manufacturing Industrial heaters and heating systems. AND WHERE....
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....llant has obtained necessary licenses and approvals from the regulatory authorities for carrying out its activities. There is no purchase of raw material or trading goods for purpose of carrying out manufacturing/trading activity. Thus the expenses incurred by the appellant are pre-operative and preparatory expenses which were incurred prior to setting up of business and prior to coming into an existence an altogether new source of income. So these expenses cannot be allowed as revenue expenditure. The reliance of the appellant on different decisions is found to be misplaced as none of them was rendered on similar facts as in the case under consideration." 12. Aggrieved by the order of CIT(Appeals), the assessee is in appeal before the T....
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....rial in that respect. Similarly, a manufacturer has to undertake several activities in order to bring to produce financial goods and he commences his business as soon as he undertakes first of such activities (Commissioner of Income Tax vs. Saurashtra Cement and Chemical Industries Ltd. 1973 (91) ITR 170 Gujrat). 15. The Hon'ble Delhi High Court in the case of CIT v. ESPN Software India P. Ltd. (2009) 184 Taxman 452 (Del) explaining the position with regard to the time when a business can be said to have been set up held that it is a finding based on facts of each case. In that case, the business of assessee was distribution of ESPN programming services and the fact of assessee entering into the agreement acquiring license to distribute ....