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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 ..... business is not in accordance with the settled principles discussed above. Accordingly we set aside the order of Ld CIT(A). As noticed 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 date is allowable as revenue expenditure in the facts and circumstances of this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 ₹ 19,321/-. The assessee declared a loss of ₹ 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 attributable to earning of exempt income. (b) the assessee has entered into first MOU only on 10.8.2007 and further the assessee has failed to furnish any evidence to show that it has rendered any service during the year under consideration. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the expenses incurred after the date of setting up of business is allowable as revenue expenditure. Before us, the assessee placed reliance on the decision rendered by Hon'ble Delhi High Court in the case of Carefour WC C India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 determine setting up but in case of property dealer, the moment he puts up a chair and table, or starts talking, his business is set up. 7. It can be noticed that Hon'ble Gujarat High Court in the case of Saurashtra Cement a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recruited its employees well before the date of incorporation, which included, inter alia, a Managing Director, a Chief Financial Officer, Human Resource personnals, Secretarial Staff and persons well versed in Strategic Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 date is allowable as revenue expenditure in the facts and circumstances of this case, we restore the matter of examining the expenditure claim to the file of the assessing officer with the direction to examine them af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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