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The assessee, engaged in setting up a thermal power project, claimed deduction of expenditure incurred after the business had been set up though commercial operations had not commenced. The Assessing Officer treated the expenditure as pre-operative and also assessed interest income from bank deposits and loans as “Income from other sources”, denied deduction under section 57(iii) and taxed foreign exchange gains arising on year-end reinstatement of loans advanced to an overseas concern. The Tribunal held that the relevant test is the date on which the business is set up and not the date of commencement of commercial operations. Once the business is set up, all expenditure incurred wholly and exclusively for business purposes is allowable notwithstanding that no business income has yet been earned. The Tribunal further held that interest income from bank deposits and loans to sister concerns, having no nexus with the power project, was assessable as “Income from other sources”. However, the corresponding finance cost having nexus with such income was directed to be examined and allowed under section 57(iii), ensuring that the deduction was allowed only once. It was further held that marked-to-market foreign exchange gains arising merely on reinstatement of loans advanced to an overseas concern, there being no evidence that the loans were on revenue account, did not constitute taxable income and the addition was deleted. (AY. 2017-18)\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 37(1): Business expenditure -Business set up but not commenced -Expenditure allowable after setting up of business. [S. 4, 28, 56, 57(iii)] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[21],"tags":[],"class_list":["post-62511","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-ggf","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/62511","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=62511"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/62511\/revisions"}],"predecessor-version":[{"id":62512,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/62511\/revisions\/62512"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=62511"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=62511"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=62511"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}