TMI Blog2002 (5) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. Briefly stated, the facts of the case are that the assessee had filed return of income declaring therein loss of Rs. 3,03,195. The assessee had claimed deduction for expenses of Rs. 6,13,603 by way of finance charges (Rs. 582610), preliminary expenses written off (Rs. 3140) and administrative and other charges (Rs. 27853). However, the Assessing Officer by referring to the objects of the company observed that the business of the assessee had not commenced inasmuch as the assessee had not started the manufacturing activities and also no transaction of sale and purchase of goods had taken place. While examining the claim of the assessee for deduction of expenses the Assessing Officer observed that the assessee had incurred finance char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot merely mean purchasing and selling of a commodity but all related activities. It was submitted that in this case, the assessee had carried out all activities necessary for carrying out the business. The assessee had obtained the bank guarantee required for exporting rice and for submitting, application to APEDA. On the basis of bank guarantee, the APEDA granted registration- cum -allocation certificate. The assessee also entered into contract for export of rice. It was submitted that even though one deal fell through as the cheque had bounced by the assessee had exchanged correspondence with ITC Ltd. during the year asking them to export goods by 31-3-1992. No doubt the deal did not come through till 31st March but the shipment for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i ) Prem Conductors (P.) Ltd. v. CIT [1977] 108 ITR 654 (Guj.); and ( iii ) Sarabhai Management Corpn. Ltd. v. CIT [1976] 102 ITR 25 (Guj.). Following these judicial pronouncements the appellant succeeds in this appeal and would have to be allowed a deduction of expenditure of Rs. 613603." Aggrieved, the revenue has filed the present appeal before us. 4. The ld. D.R. did not make any specific submission except relying on the order of the Assessing Officer. 5. The learned Counsel for the assessee on the other hand, heavily relied on the order of the CIT(A) and reiterated the submissions, which were made before the lower authorities. In response to a specific query from the Bench, the ld. Counsel filed copies of returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly connected with the business of the assessee as without obtaining the bank guarantee the assessee could have not made an application to APEDA for getting the registration- cum -allocation certificate for exporting rice. Thus, even the interest income in this case was liable to tax as business income. Even otherwise, we find that the assessee had taken all steps necessary for setting up the business. The mere fact that assessee had not started its manufacturing activity or had not purchased/sold the goods would not mean that the business of the assessee had not been set up. The Bombay High Court in the case of Ralliwolf Ltd. ( supra ) has drawn distinction between setting up and commencement of business. It has been held that sett ..... X X X X Extracts X X X X X X X X Extracts X X X X
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