TMI Blog2007 (9) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No. 1687 of 2006, IT Appeal No. 1688 of 2006 - - - Dated:- 17-9-2007 - MADAN B. LOKUR and DR. S. MURALIDHAR JJ. Ms. P. L. Bansal for the appellant. Ajay Vohra with Ms. Kavita Jha for the respondent. JUDGMENT These appeals under section 260(A) of the Income-tax Act, 1961 ("the Act"), are directed against the common order dated May 31, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench "C", New Delhi ("the Tribunal"), in ITA Nos. 191 and 184/Del/2003 for the assessment year 1995-96. 2. The assessee-company which was incorporated on March 17, 1992, is in the business of setting up satellite business communication systems for which a very small aperture terminal ("VSAT") equipment is used. As per the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad placed a purchase order on M/s. Hughes Network Systems, USA on July 28, 1994, for purchase the VSAT equipment and, therefore, it was this date that should be reckoned as date of which the business has been set up. Any expenditure incurred thereafter must, therefore, be considered as revenue expenditure that did not require to be capitalised. On the other hand, the Revenue contended that the assessee had begun receiving the satellite signals only in the month of February, 1995, and further since the installation was complete only on March 15, 1995, it could be said that the business of the assessee had been set up only on March 5, 1995. 5. The Assessing Officer rejected the explanation of the assessee and held that the claim for deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of equipment was completed only in the month of March, 1995. In the circumstances, the Assessing Officer was right in concluding that the business of the assessee could be held to have been set up only in March, 1995. Consequently, all the expenses incurred prior to this date were required to be capitalised and could not have been allowed to be deducted as revenue expenditure. 8. Appearing for the assessee, Mr. Ajay Vohra, learned counsel referred to the proviso to section 3(1) of the Act to contend that it only refers to the date of setting up of the business. He then referred to the date of setting up of the business in the present case was even earlier to the actual commencement of the business and, therefore, the Tribunal's concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the previous year of that business commences and in that previous year the expenses incurred in the business can be claimed as permissible deductions. Any expenses incurred prior to setting up of a business would obviously not be permissible deductions because those expenses would be incurred at a point of time when the previous year of the business would not have commenced." 11. The Bombay High Court, which was in this case dealing with the corresponding provision of the Indian Income-tax Act, 1922, then explained the distinction between the concepts of commencement and setting up of a business (pages 158 and 159) : "It seems to us, that the expression 'setting up' means, as is defined in the Oxford English Dictionary, 'to place ..... X X X X Extracts X X X X X X X X Extracts X X X X
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