Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2013 (1) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (1) TMI 111 - HC - Income TaxWhen can it be said that the business commenced for the purpose of determining its tax liability? - Held that:- As decided in CWT v. Rama Raju Surgical Cotton Mills Ltd [1966 (10) TMI 41 - SUPREME COURT] A unit cannot be said to have been set-up unless it is ready to discharge the function for which it is being set-up. It is only when the unit has been put to such a shape that it can start functioning as a business or a manufacturing organization that it can be said that the unit has been set-up. Reasoning given by the AO in his order for the assessment year 1998-99 is clear and conclusive that heavy expenditure incurred by the assessee to create an infrastructure for facilitation of future business, hence, benefit of enduring nature was imposed to be derived. It accepted the assessee's contentions with regard to having commenced business with effect from 01.01.1997. It was only on the basis of such a fundamental premise that income was assessed and certain disallowances were made. In these circumstances, it would be unfair for the revenue to contend for each successive assessment year that the assessee had to establish that it "commenced business." The evidence on record clearly shows that substantial services were being rendered and salaries etc. were disbursed even though on reimbursement basis. The mere fact that other service charges are meager in nature would not, in any way, influence the decision as to whether business was commenced. Furthermore, in line with the decision of this Court in ESPN Software (P.) Ltd. (2008 (3) TMI 90 - DELHI HIGH COURT) the question of date of commencement of business is one of fact. It is setting-up of business and not commencement that is to be considered. Having regard to these circumstances, it is held that the findings of the Tribunal in the impugned common judgment and order are sound and do not call for interference. The question of law is accordingly answered in favour of the assessee.
|