Expenditure incurred during interval period of setting up of a new business & its commencement can be allowed as deduction

Messung Systems Private Limited Vs ITO (ITA Pune)

Expenditure incurred during interval period of setting up of a new business and its commencement can be allowed as deduction

The ITAT, Pune in Messung Systems Private Limited v. ITO [ITA No.683/PUN/2018 dated November 7, 2022] partly allowed the appeal of the assessee against the order passed by the Revenue Department holding that the expenses incurred for pre- operative nature cannot be set-off against the interest income. Held that, expenditure incurred by a company during the setting up of new business and its commencement can be allowed as deduction.

Facts:

Messung Systems Private Limited (“the Appellant”) is engaged in the business of trading of Programmable Logic Controllers (“PLC”) and parts thereof. The return of income of the Appellant for the Assessment Year (“A.Y.”) 2014-15 was filed on September 30, 2014 declaring total income of INR 27,83,430/-.  During the immediate preceding year i.e. Financial year (“F.Y.”) 2012-13, the Appellant sold its entire business and thus was in the process of setting up a new business.

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