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2013 (10) TMI 162 - HC - Income TaxDisallowance of revenue expenditure - Non commencement of business - Construction of DAM and canal - whether the appellant company was of preoperative nature and the commencement of the business would start only when the appellant company starts exploitation of the project - Held that:- activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. Under the fiscal legislation when it is vital to determine what is the business of the assessee and what are the activities which constitute such business, it can be noted that execution of the Sardar Sarovar Project comprises of a dam across the river Narmada, canal system as also the power house at the foot of the dam and at the canal head and all other works. It can not be said that such objects could be achieved without contemplating different stages of completion. It would be wholly wrong to uphold the contention of the revenue that only on completion of work of entire canal, the assessee' business can be said to have set up. In a project like Sardar Sarovar, there are bound to be different stages where different activities take place and those activities being integral parts of the business and when they are set up phase vice, assessee cannot be deprived of benefits of fiscal legislation in disregard to well settled principles on the issue by adopting over technical approach. For determining as to when the business can be said to have been set up, the flow of the water from Narmada Canal in the given circumstances needed to be viewed as an integral and inseparable activity of the business of the assessee. - It is apparent from the record that the assessee supplied water through its main canal, one of the purposes of setting up the company is to supply the water through the canal & even if the entire stretch of canal is yet to come into existence, in a project of this big a size, it will surely be not right to hold that the business of the assessee respondent has not been set up. The construction of dam and canal are essential and inseparable parts of the activity which would necessarily precede other activities - Those of the activities which form integral part of entire term business when preceded other activities - deduction of expenses allowed - decided against the revenue.
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