Case Law Details
Brief of the Case
ITAT Mumbai held in the case of M/s. Multi Act Realty Enterprises Pvt. Ltd. vs. ITO that setting up of business’ and ‘commencement of business’ may be too different and independent events. For the purpose of deductibility of the business expenses, the reference point would be initial setting up of the business. The commencement of the business may take place at later date. Thus, even if the assessee does not earn any business income during the year, but if the business is set up, it would amount to carrying on the business under the income tax law and therefore, the business expenses would stand allowable. In the present case, it may be seen that the assessee has already purchased residential flat for the purpose of resale/lease, and therefore assessee was apparently ready to do its business. Under these circumstances, it can be said that the business is set up by the assessee during the year. Accordingly, the expenses would stand allowable to the assessee.
Facts of the Case
The assessee was in the business of dealing in immovable properties and development rights etc. It was observed for by the AO that no business income was earned by the assessee company during the year. However, in the income tax expenditure account, the assessee has debited various expenses such as travelling expenses, conveyance, printing & stationery, audit fees, professional fees, sundry expenses and interest on statutory payments etc. aggregating to Rs.2,69,275/-. The AO disallowed these expenses on the ground that there was no business income received by the assessee during the year.
Held by CIT (A)
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