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TMI Blog2013 (7) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... expense are capital in nature as they are "Set up" expenses. The findings recorded by the tribunal reads as under:- "6. In view of the above, the business of the assessee could be said to have been set up on 3.9.95 as prior to this necessary agreements had been entered into, key personnel had been recruited and the assessee company had started working necessary infra structure like office premises, office equipments etc. and the assessee company was ready to commence trading operation as on the date of incorporation viz. 3.8.95. Accordingly, A.O. is directed allow the revenue expenditure incurred after the setting up of business which was 3.9.1995, notwithstanding the fact that commercial operations started w.e.f. 1.10.1995. For the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer in the assessment order has recorded that the expenses were incurred before actual business operation started on 1st October, 1995 and in view of judicial pronouncement of the Bombay High Court in Western India Vegetables Products Ltd. Vs. CIT, (1954) 26 ITR 151 and Supreme Court in CWT Vs. Ramaraju Surgical Cotton Mills Ltd., (1967) 63 ITR 478 (SC) and Sarabhhai Managment Corporation Ltd. Vs. CIT, (1991) 192 ITR 151, the same should be disallowed as expenditure. We may only note that the Assessing Officer did not go into the factual matrix applicable to the assessee‟s case to find out the date of setting up of business. He simply took the date 1st October, 1995 i.e. as the date of start of the actual commercial s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded para 3 onwards. The assessee company was set up to carry on its business of manufacturing and trading in consumer durables. The date of commencement of business was certified as 9th August, 1995, though the date of incorporation was 3rd August, 1995. Tribunal has referred to various facts as to what was required to be done before the first actual sale invoice to a customer was issued. It included recruitment of employees, their training and establishment of showrooms by taking places on rent etc. Advertisements had also been issued and in fact M/s Reasonable Computer Solutions Private Ltd., the joint venture partner on 25th July, 1995 had appointed M/s Mudra Diversified Limited as their Public Relations Consultant for the period 15t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence business it is not set up. But there may be an interregnum, there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under section 10(2)." 7. The aforesaid distinction is relevant when we examine and refers to the definition of „previous year‟. Following the said judgment, in the case of CIT Vs. L.G. Electronic (India) Ltd. [2006] 282 ITR 545 (Delhi), it has been observed that the date of setting up of business and date of commencement of business may be two separate dates. This decision in the case of L.G. Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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