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TMI Blog2018 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... us year. Consequently, the assessee would be entitled to claim all the revenue expenses as deduction in computing its total income - The claim made by the assessee for deduction should have been allowed by the revenue authorities. Accordingly direct the AO to allow the deduction. - Decided in favour of assessee - ITA No.2149/Bang/2018 - - - Dated:- 3-10-2018 - Shri N.V. Vasudevan, Judicial Member For the Appellant : Shri K.P. Srinivas, CA For the Respondent : Shri Rajendra Chandekar, Jt.CIT(DR)(ITAT), Bengaluru. ORDER This appeal by the assessee is against the order dated 17.05.2018 of the CIT(Appeals)-III, Bengaluru relating to assessment year 2015-16. 2. The assessee is a company incorporated on 19.9.2014. As per the objects clause in the Memorandum of Association, the assessee was formed to pursue the following 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, equip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Note No. Period Ended Revenue from Operations Other Income Total Revenue Expenses: Depreciation and Amortisation of Assets Other Expenses Total Expenses Profit (Loss) Before Tax Tax Expense: Current Tax Deferred Tax Liability (Asset) Profit (Loss) for the period 11 12 - 679,075 679,075 94,188 5,299,159 5,393,347 (4,714,272) - - (4,714,272) 6. It can be seen from the P L account that assessee had revenue of ₹ 6,77,075. Note 11 to the P L account gives the break up of revenue which is as follows:- NOTE 11: Other- Income (Amount in Rs.) Commission Income 88,285 Foreign Exchange Fluctuation on account of restatement 580,641 Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was that its business has been set up and therefore all revenue expenses should be allowed as a deduction and total income of the assessee as declared in return of income should be accepted. The assessee pointed out the following facts which goes to show that its business was set up:- 1. It had earned commission income during the relevant previous year. It acted as a commission agent in respect of sale of its principal s products. Under clause 14 of the Objects incidental to main objects, the business of assessee also includes business of acting as commission agent. Since there was income from business of commission agency, it can be said that assessee has set up its business during the previous year. 2. Its directors undertook travel for the purpose of the trading segment of the assessee s business. Though no business actually resulted on account of such travel, the fact remains that attempts were being made by the assessee to do trading in appliances, equipments, etc. 3. The assessee took the premises on lease for the purpose of commencement of its business of manufacturing which was also used for the purpose of its trading activity. The assessee filed copy of lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 Tribunal. 13. I have heard the rival submissions. The ld. Counsel for the assessee brought to my notice the facts which were stated before the CIT(A) and also placed reliance on certain judicial pronouncements. The ld. DR relied on the order of CIT(A). 14. I have considered the rival submissions. The legal position with regard to expenses claimed prior to setting up of business and the sequence of point of time when the business can be said to have been set up as follows:- The definition of the previous year as contained in Section 3(1) of the Act, which is relevant for the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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