TMI Blog2012 (4) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure and allow set off of loss in accordance with law.Tax Case Appeal of revenue rejected. - TAX APPEAL NOS. 2139, 2140 & 2143 OF 2009 - - - Dated:- 31-1-2012 - AKIL KURESHI AND Ms. SONIA GOKANI, JJ. M.R. Bhatt and Mrs. Mauna M. Bhatt for the Appellant. Saurabh N. Soparkar, Ms. Bhoomi M. Thakore and Mrs. Swati Soparkar for the Respondent. ORDER Akil Kureshi, J. Revenue is in appeal against the judgment of the Tribunal dated 27.2.2009. Since similar issues arise in all Tax Appeals, we may record facts as emerging from Tax Appeal No.2139 of 2009. 2. The assessment year under consideration is year 2001-02. The respondent assessee is a Government company and is engaged in the business of promoting and organizing minor ports in the State of Gujarat. 3. For the assessment year under consideration the Assessing Officer basing reliance on the decision of the Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172/93 Taxman 502 (SC) disallowed the entire expenditure incurred by the assessee during the year and held that the income of Rs.19.79 lakhs received by the assessee during the same period would be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re meant to the attainment of main objects. These ancillary objects are general in nature and normally form the part of Memorandum of Understanding of all the corporate entities. Out of such objectives one of the ancillary objects has been mentioned as to invest and deal with the fund of the company which are not immediately required in the manner decided by the Board of Directors". This particular clause is a standard ancillary object in the Memorandum of Association of assessee which empowers the Board of Directors to utilize their surplus fund to earn interest income as and when they are not required to be invested in the core activities related to main objects." 7. This is the settled law that if the assessee does first activity towards the attaining its main object, business shall be deemed to have been set up. The assessee has submitted the return for AY 1998-99 on 30.11.98 wherein the basic pattern of investments and operations were the same as in AY 2001-02 and the subsequent year. The set up of the business has been accepted during the AY 1998-99, the AO in our opinion, cannot again go back and say that the business has not been set up during the year. The learned DR alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue authorities. 9. On the other hand, learned counsel for the respondent assessee supported the Tribunal's view by pointing out that there was voluminous evidence on record to suggest that during the relevant period the assessee had set up the business and large number of activities were undertaken. The Tribunal, therefore, correctly overruled the decision of the Revenue authorities. 10. Having thus heard learned counsel for the parties and having perused the documents on record, we find that the main objects outlined in the Memorandum of Association for which the respondent company was incorporated included besides others to undertake and carry on the business of promoting, organizing, managing and developing in the State of Gujarat and elsewhere minor and major ports, ship-yards, jetties, harbours and docks as well as to set up warehouses, godowns, open plots etc. appertaining to any dock. It also included the object of setting up infrastructural facilities, utilities, conveniences and amenities including roads, buildings, warehouses etc. relating to cargo-handling, ship-building, ship-repairing and ship-breaking. Besides these another main object for which the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Tribunal committed no error. As already noted, the main objects of the company included wide variety of subjects principally concerned with the development of minor ports in and outside State of Gujarat. This could be done by acting as promoters, organizers, managers and developers of the ports or also through entering into joint venture undertaking. The subsidiary objective, incidental to the main objects also envisaged the company to work and act as agent of the Government, Municipal Local Boards, Railway Contractors etc. 15. In furtherance of such objects, principal as well as ancillary, the assessee company having entered into a joint venture with another company, which was developing ports at Mundra, it cannot be stated that the business of the company was not set up. 16. It is not in dispute that any expense incurred prior to the setting up of a business would not be a permissible deduction. In the case of Prem Conductors Pvt. Ltd. v. CIT [1977] 108 ITR 65, the Division Bench of this Court relying on and referring to the decision of the Bombay High Court in the case of Western India Vegetable Products Ltd. v. CIT [1954] 26 ITR 151 observed that for deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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