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2007 (11) TMI 331 - AT - Income TaxDisallowance of the expenditure - advance loans for interest - Late deposit of the employee's contribution to the provident fund - Penalty levied u/s 271(1)(c). Disallowance of the expenditure - advance loans for interest - difference between the date of setting up of a business and the date of commencement of the business - HELD THAT:- It is well-settled that there is a difference between the date of setting up of a business and the date of commencement of the business and this distinction has been brought out in Western India Vegetable Products Ltd. vs. CIT [1954 (3) TMI 59 - BOMBAY HIGH COURT] by observing that when a business is established and is ready to commence business then it can be said that it has been "set up", but before it is ready to commence business it is not "set up". There may be an interregnum between the date of setting up of the business and the date of actual commencement of the business, but under the Act all expenses incurred after the date of setting up are allowed as a deduction u/s 28. This decision has been applied in its recent judgment in the case of CIT vs. Hughes Escorts Communications Ltd.[2007 (9) TMI 261 - DELHI HIGH COURT]. The fact that the foreign loan and FIPB approval for equity investment by the Whirlpool Corporation of USA were given in January, 1996 does not mean that the business was not set up before these events. These are not statutory formalities and even without the foreign loan and the equity participation the assessee company was in a position to carry on the business in accordance with the objects clause of its memorandum of association from November, 1995 when it had its own offices, branches and regional managers and staff, computers installed and was ready to commence its activities. The expenses were incurred through Kelvinator and Expo Machinery and evidence to this effect is placed at the paper book. Thus, it is clear that the business was set up from 1st Nov., 1995, by which date the company was ready and in a position to commence its business. We accordingly hold that the assessee had set up its business on 1st Nov., 1995 and not on 1st Feb., 1996 as claimed by the IT authorities. The disallowance of the expenditure made on this basis is deleted and the ground is allowed. Late deposit of the employee's contribution to the provident fund - Addition to the income by invoking s. 2(24)(x) of the Act, r/w s. 36(1)(va) - HELD THAT:- Under s. 10 of the General Clauses Act, 1897, if the last day prescribed for an act to be done falls on a day on which the office is closed, then the act shall be considered as done in due time if it is done on the next day afterwards in which the office is open. Applying this section, the deposit of the contribution on 22nd April, 1996 is within time. The addition of the same is accordingly deleted. The ground is allowed. In the result, the appeal is allowed. Penalty levied u/s 271(1)(c) - concealed its income or furnished inaccurate particulars - HELD THAT:- When all the facts are placed by the assessee, before the AO, who has not unearthed any fact not disclosed by the assessee, but has merely taken a view different from the view expressed by the assessee, it cannot be said that the assessee either concealed his income or furnished inaccurate particulars thereof: In Addl. CIT vs. Delhi Cloth & General Mills Co. Ltd. [1984 (1) TMI 10 - DELHI HIGH COURT] and CIT vs. Bacardi Martini India Ltd. [2006 (9) TMI 104 - DELHI HIGH COURT]. Therefore, the CIT(A) has rightly cancelled the penalty. Even otherwise, the penalty has no legs to stand in view of our decision that the business was set up on 1st Nov.,1995 as claimed by the assessee and all expenses incurred after that date are allowable as deduction. Thus, the appeal of the Department is dismissed. In the result, the appeal of the assessee is allowed and that of the Department is dismissed.
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