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TMI Blog2015 (8) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 2. The facts relating to the issue are stated in brief. The assessee herein was incorporated on 02-03-2007. Hence the accounting period for the assessment year under consideration was from 02-03-2007 to 31.3.2007. The assessee was formed to carry on the business of providing advisory services in the field of real estate and infrastructure project. During the year under consideration, the assessee did not receive any operative income. The only income declared by the assessee was dividend income of Rs. 19,321/-. The assessee declared a loss of Rs. 61,01,298/- after claiming expenditure of various types. The assessing officer disallowed the claim of loss for the following reasons:- (a) the entire expenditure was directly attribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness at all during the year under consideration. The AO has reached this conclusion only on the reasoning that the assessee has entered into first MOU only on 10.8.2007. However, according to the assessee, it has started the business of providing advisory services in real estate and infrastructure and such kind of business does not require any gestation period, as in the case of manufacturing industries. Accordingly, it is contended that the assessee has set up its business on the date of incorporation itself. It was further submitted that the assessee had recruited the employees and started all kind of back ground works much prior to the date of incorporation as per the decision taken by the promoter company. 6. There is no dispute that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd (1973) (91 ITR 170) and finally held as under:- "11. On a reading of the above referred quotations, it is clear that it is only after the business is set up, that the expenses incurred in the business can be claimed as permissible deduction under Section 37 of the Act. For commencement of a business, there must be in place some income generating asset or income earning structure. In several cases, there is a gap or an interval between setting up and commencement. When the business is set up, is a mixed question of law and fact and depends upon the line, nature and character of the business/professional activity. For example, for manufacturing business, purchase of new material or electricity connection may be relevant point to determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, 1995. Accordingly, the Assessing Officer is directed to allow the revenue expenditure incurred after the setting up of business which was September 3, 1995, notwithstanding the fact that commercial operations started with effect from October 1, 1995. For the purpose of claiming expenditure incurred thereafter, as revenue expenditure, reliance are placed on the following decisions." 9. In the instant case, the business of the assessee was providing advisory services in real estate and infrastructure projects. We have already noticed that, for a company providing consultancy services, the date of opening of office can be considered as date of setting up of business. In the instant case, we have noticed that the assessee company has recru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g year should be considered as date of setting up of business is not in accordance with the settled principles discussed above. Accordingly we set aside the order of Ld CIT(A). 10. However, we notice that the assessing officer did not have occasion to examine the expenditure claim put forth by the assessee, since he had treated all the expenses as 'prior period expenditure'. Since we have reversed the view taken by the assessing officer, we are of the view that all the expenditure claimed by the assessee need to be examined at the end of the assessing officer. Accordingly, while holding that the assessee's business can be considered to have been set up on the date of incorporation and hence the expenditure incurred after that d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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