TMI Blog1984 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... corporated under the Companies Act on 7th April, 1975. Copy of memorandum and articles of association is filed before us. The main object of the assessee company is stated to be to carry on business of exporters of all kinds of goods produced, manufactured, grown in India and importers of all kinds of goods permitted by the government of India and generally to carry on the business of exporters and importers and Act as manufacturer representative. At the time of hearing of these appeals it is stated by the assessee's counsel Shri M.J. Swamy that the man contemplated business of the assessee was export of tobacco. The previous year for 1979-80 is ended with 30th June, 1978, for 1980-81 it ended with 30th June, 1979 and for 1981-82 it ended w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses . . . . 100.00 To Audit fee 100.00 . . . 120.00 To Filing fee 60.00 . . . 500.00 To Legal expenses 100.00 . . . 1,332.70 . 562.50 1,332.70 . 562.50 30-6-1980 300.00 To Rent 120.00 . By share transfer fee . 2.50 To Postage 2.95 . fee 2.00 100.00 To Audit fee 100.00 562.50 By net loss 739.29 60.00 To Filing fee 180.00 . . . 100.00 To legal expenses . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the company was set up but there is no commencement of business under the circumstances, it was the claim of the assessee that the losses determined in the earlier assessment years should be ordered to be carried forward by the ITO. The ITO did not agree with this submission of the assessee. In asst. yr. 1979-80, for instance, he had refuted the claim of the assessee by observing that "even though obviously some small expenditure was incurred on account of setting up of office, I do not think that the business as such is set up. I, therefore, treat the loss as on account of capital nature and is not allowed for carry forward." The same comments were made even while completing the assessments for two other years by the ITO. Ultimatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The expenses incurred were merely laid out for maintaining the apparatus. There is no evidence of any kind, admittedly, of any business having been carried on by the appellant in any of the three years under consideration. Setting up office by itself would not amount to commencement of a business. By setting up an office one could at best say, the business was set up by the appellant was ready to commence business." As can be seen from the above, the ld. CIT (A) though that by taking premises on rent, equipping it with furniture, typewriter, telephone etc., and by employing some people to maintain office the assessee could be said to have brought into existence the business apparatus and it could be said to have set up business. But set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a person setting up a business and for the purposes of the Indian IT Act the setting up of the business and not the commencement of the business is to be considered. It is only after the business is set up that the previous year of that business commences and any expenses incurred prior to the setting up of a business would not be a permissible deduction. When a business is established and is ready to commence business then it can be said of that business that it is set up but before it is ready to commence business it is not set up. There may, however, be an interval between the setting up of the business and the commencement of the business and all expenses incurred during that interval would be permissible deduction." In CWT vs. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for asst. yr. 1965-66 for which the previous year ended by 31st March, 1965. The ITO refused to carry forward the loss on the ground that the assessee company was found to have commenced business only from 1st May, 1965, on which date the assessee company gave a part of the said building on leave and licence basis. The AAC confirmed the ITO 's order. So also, the Tribunal. The question before the Gujarat High Court was whether Rs. 48,004 could be allowed as business expenditure. The Gujarat High Court approved the decision of Bombay High Court approved the decision of Bombay High Court in (1954) 26 ITR 151 (Bom). The Gujarat High Court ultimately held that from October, 1964, the assessee could be said to have commenced its business activ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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