Assessee claimed that it had set up a business inasmuch as various preliminary steps had been taken by it which included appointment of key personnel, preparation of draft model development agreement and initiation of process to tender financial and advisory services and claimed deduction of depreciation, preliminary expenses and employee’s remuneration. AO held that even though key personnel were engaged, nothing further was done or achieved. Accordingly rejected the claim, which was up held by the Tribunal.   Allowing the appeal the Court held that, in case of service sector, where entity has involved itself in various kinds of steps, some of which are preliminary to setting up main substantial commercial venture, linkage between these preliminary steps and nature of ultimate activity maybe a relevant factor to be taken into account. Accordingly even certain kinds of preliminary steps, such as engaging in negotiation or employment of personnel, could be relevant even though actual activity might not be involved.  (AY. 2013-14)