Asset Management Company eligible to Claim Business Deductions after getting Approval from SEBI to Commence Business: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai has held that an asset management company was not eligible to claim business deductions from the day the Securities and Exchange Board of India (SEBI) granted approval to commence business.

The assessee, an asset management company incorporated on 8th August 2011, required to obtain Securities and Exchange Board of India approval for undertaking such business. However, the approval was finally granted on 17.10.2012.

The AO observed that the assessee has declared income from interest of Rs. 1,29,75,114/- and Rs. 2,44,479/- from sale of investments, which income were declared by the assessee in its return of income as income from other sources. The AO was of the view that the above expenses cannot be allowed as business/revenue expenses before 17.10.2012 on the ground that the assessee has no business activity as it has not obtained necessary approvals to initiate business activities.

Relying on the decision of the ITAT, Delhi in the case of GNG Stock Holdings Private Limited, the Tribunal held that the assessee-Company shall be entitled to claim expenses w.e.f. 17.10.2012 as deduction as business expenses provided other ingredients of allowability of these expenses are met as laid down in the relevant provisions of the 1961 Act.

The Tribunal held that the business of the assessee before us was set up and ready to commence its business on 17.10.2012 when it got approval from SEBI vide Sub regulation (2) of Regulation 21 of the 1996 Regulation.

“We, therefore, hold that the assessee is entitled to a deduction of admissible business expenses incurred by it on or after 17.10.2012 when the business can be said to have been set up by the assessee. We, therefore, direct the Assessing Officer to quantify the amount of expenses in the light of our decision above and allow the same as per law after examining and verifying the genuineness of the expenses and their admissibility under the provisions of Income-tax Act which were incurred post 17.10.2012 till the end of the relevant previous year under consideration before us.”