Till Business commencement all expenses for Business set-up will be treated as Capital Expenditure

Isolux Corsan Power Concession India Pvt. Ltd. Vs ITO (ITAT Delhi)

In this case AO has treated Interest income as Income from other sources as Business of Assessee was not set-up in the year under consideration  and held as follows:-

In the present case, the appellant has miserably failed to demonstrate that during the year under consideration the business has been set up against which the claimed expenses could be allowed. Under the circumstances, the assessing officer was fully justified in concluding that the business has not been set up in the interest received during the year has to be treated as income from other sources. Now, since there is no setting up of business by the appellant for the year under consideration, the Assessing Officer was correct in treating the income of Rs. 18,07,793/-as income from other sources and at the same time disallowing the business loans claimed by the appellant.

ITAT held that deduction for expenses can be claimed only after the business has commenced. Till such time the coming into existence of new sources of income, whole expenses whether revenue or capital, connected with setting up of such business would be capital expenditure and, therefore, not allowable as deduction. The learned Commissioner specifically held that since there is no setting up of business by the  appellant/Assessee for the year under consideration, the Assessing Officer was correct in treating the income of Rs. 18,07,793/- as income from other sources and at the same time disallowing the business loss claimed by the Assessee. The Assessee before us, failed to controvert the findings of the  authorities below and even otherwise we also do not find any reason/material to controvert such findings, hence are inclined not to interfere in the conclusion drawn by the learned Commissioner. Consequently, appeal filed by the Assessee is liable to be dismissed.

FULL TEXT OF THE ORDER OF ITAT DELHI

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