AO not justified in making disallowance u/s 37 for expenses incurred by assessee before commencement of business operation but after setting up of business

The important question that has got to be considered is from which date are the expenses of this business to be considered permissible deductions and for that purpose the section that we have got to look to is section 2(11) and that section defines the ^„previous year^‟ and for the purpose of a business the previous year begins from the date of setting up of the business. Therefore it is only after the business is set up that the previous year of that business commences and in that previous year the expenses incurred in the business can be claimed as permissible deductions. Any expenses incurred prior to setting up of a business would obviously not be permissible deductions because those expenses would be incurred at a point of time when the previous years of the business would not have commenced.

IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of decision: 9^th July, 2013

ITA 131/2010

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