TMI Blog1986 (1) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... materials was worth only Rs. 1,220, consumption of raw materials was worth only Rs. 120 and stores and spares to the extent of only Rs. 70 had been consumed. The Income-tax Officer field that the assessee had not commenced manufacturing and that production, if any, during the period was only on an experimental basis. On that ground, the Income-tax Officer disallowed depreciation and deduction of business expenditure. For the assessment year 1969-70, the Income-tax Officer found that the plant and machinery of the assessee did not work for the whole year. Total consumption of raw material during the year was also low and very limited quantity of finished goods were produced. On the ground that the factory of the assessee had worked for le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erection of plant had been completed and only a small quantity of raw material was consumed without any actual turning out of finished products, it could not be said that the business of manufacture had commenced. The consumption of raw materials, if any, would be only by way of experiment and the deduction of the amount claimed as business expenditure could not be allowed. The Tribunal held that the Allahabad High Court did not have occasion to consider the decision of the Supreme Court in the case of Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478, where the Supreme Court had allowed the claim of the assessee to deduction of business expenditure where the business had actually been set up. On that ground, the Tribunal rejected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the same had been incurred prior to the commencement of the actual business of commercial production. The Supreme Court made a distinction between setting up of a unit and the operational function of the unit as a business. (b) CIT v. Saurashtra Cement and Chemicals Industries Ltd. [1973] 91 ITR 170 (Guj) : In this case, the assessee was incorporated with the object of manufacture and sale of cement in the relevant assessment year. The assessee obtained a mining lease for quarrying limestone and started meaning operations. In its assessment to income-tax, the assessee claimed deduction of expenditure incurred for extracting limestone and also depreciation and development rebate for its machinery., It was held by a Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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