TMI Blog2006 (9) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... her services for any persons, firms or companies and to sell, distribute, redeem, print, issue and deal in the vouchers, cards or any other media required for such service and to negotiate and enter into the contact with any person for providing and maintaining a luncheon service or for the provision of meals. In the profit loss account, the assessee credited interest income of Rs. 6,52,909. Against this, personal cost, administrative and selling expenses and depreciation totalling to Rs. 91,14,306 has been debited. Thus the assessee filed return declaring a loss of Rs. 85,40,673. The Assessing Officer disallowed the claim of expenses and accordingly, loss claimed by the assessee was negatived. While doing so, the Assessing Officer has observed that company did not succeed in earning in any income from service charges during the previous year ending on 31st March, 1997 and the assessee has earned such income for the first time only during the previous year relevant to assessment year 1998-99 where the service charges of Rs. 3,53,996 are shown in the net income of that year. On appeal, the contention of the assessee-company did not find favour with the CIT(A) and accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration. In fact, the assessee-company had entered into an agreement for sale of coupons with few customers in March 1997 itself. The copies of such contacts are placed on pages 24 to 26 of the paper-book. The assessee-company had appointed various senior executives like Managing Director, Finance Controller, Marketing Executive, Logistics Executive Affiliation Executive, and various other members of the staff. The salaries, wages and allowances paid to such executives and staff during the year amounted to Rs. 20,92,935. The detail of such salary paid is placed at page 27 of the paper-book. The assessee-company had entered into business centre arrangement with Radhakrishna Foodland Pvt. Ltd. A copy of the agreement is placed at pages 66 to 69 of the paper-book. The assessee-company acquired office premises on lease and incurred expenditure to the tune of Rs. 34,72,496 for renovation and restructuring these premises so as to make it useful for carrying on the business and capitalized the same under the head Lease Hold Improvements . Details of these expenditures are placed at page 3 of the paper-book. The company has also spent a sum of Rs. 5,14,196 for acquiring furniture and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business is set-up and further that all expenses of an assessee are allowed as a deduction from the time the business is set-up. It is possible that there is a time gap between the set-up of business and the commencement of business, but expenses are allowable as soon as the business is set-up. In the instant case, the business of the assessee has been set-up and also has commenced. The words "ready to commence" would not necessarily mean that all the integrated activities are fully carried out and/or fully completed. We have taken into consideration the various case laws in CIT v. Saurashtra Cement Chemical Industries Ltd. [1973] 91 ITR 170 (Guj.), CIT v. Ralliwolf Ltd. [1980] 121 ITR 262 (Bom.), CIT v. Sarabhai Management Corpn. Ltd. [1991] 192 ITR 151 (SC), Hotel Alankar v. CIT [1982] 133 ITR 866 (Guj.), CIT v. Aavaram Ltd. [1992] 197 ITR 22 (Guj.). On the ratio of these decisions, the reliance have been placed by the learned A.R. which are in favour of the assessee. In the case of Hotel Alankar v. CIT [1982] 133 ITR 866 (Guj.), it has been observed and held as under : "When a business is established and is ready to commence business then it can be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT v. Saurashtra Cement Chemical Industries Ltd. [1973] 91 ITR 170 (Guj.), the High Court has observed and held as under : " Business connotes a continuous course of activities. All the activities which to make up the business need not be started simultaneously in order that the business may commence. The business would commence when the activity which is first in point of time and which must necessarily precede all other activities is started. A company was formed in 1956 for the manufacture and sale of cement. As part of its business the assessee obtained a mining lease for quarrying limestone and started the mining operations in 1958. It claimed the expenditure incurred for the purpose of extracting limestone as also depreciation and development rebate for the machinery installed for that purpose for the assessment years 1960-61 and 1961-62: Held , that the activities which constituted the business of the assessee were divisible into three categories, the first category consisted of the activity of extraction of limestone by quarrying the leased area of land. This activity was necessary for the purpose of acquiring the raw material to be utilised in the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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