TMI Blog1979 (1) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee-company, it had purchased plant and machinery of the value of Rs. 3,43,668 and had incurred an expenditure of Rs. 3,981 on buildings which were under construction. The next accounting year of the assessee-company ended on June 30, 1964. Admittedly, the installation of the machinery was completed on August 27, 1963, and the assessee had applied for power connection to the Bombay Suburban Electric Supply Company Ltd. The construction of the factory building was, however, not completed before June 30, 1964. The power connection was secured in the second week of June, 1964. For about four days in January, 1964, the assessee-company hired a generator set from one Barbai Pvt. Ltd. for a trial running of the machinery. On June 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. The Tribunal, however, took the view that the business of the assessee must be taken to be set up with effect from August 27, 1963, when the erection of machinery was completed. It also took the view that the delay in securing no objection certificate, nor the delay in establishment of a power connection, could postpone the date of setting up of a business. The Tribunal found that there was alternative source of power and the assessee had utilised an alternative source for a few days in January, 1964. Thus the Tribunal directed that the expenditure incurred by the company from August 27, 1963, should be allowed as deductions in determining the company's business profits. On this order of the Tribunal, the following question has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be ready to commence production must be taken to be satisfied on that day, because, according to the learned counsel, it could have been possible for the assessee to work its machinery with the aid of alternative source of power, namely, a generator, and it had actually done so from January 25, 1964, to January 28, 1964. It is contended that the machinery was used for experimental production and, according to the learned counsel, no error could be found in the order of the Tribunal when it held that the assessee was entitled to the allowance incurred after August 27, 1963. The test which has been laid down by this court earlier in Western India Vegetable Products Ltd. v. CIT [1954] 26 ITR 151 (Bom), to ascertain as to when a busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to have been set up in the previous year ending June 30, 1964, because the machinery was installed on August 27, 1963. Even though this finding of the Tribunal is found to be erroneous, that would not enable us to completely and effectively answer the question referred to us Mr. Trivedi appearing on behalf of the assessee, while not disputing the test laid down by this court in Industrial Solvents and Chemicals Pvt. Ltd.'s case [1979] 119 1TR 608 (Bom) has, however, contended that the assessee-company could be said to be ready to commence production with effect from August 27, 1963, and, according to the learned counsel, even the test laid down by this court is satisfied in the case of the assessee-company. Unfortunately for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o commence production at least on June 10, 1964. It appears to us that power connection was secured by the assessee in the second week of June, 1964, and it is obvious that it was only after securing the power connection that the assessee purchased raw material. This would indicate that the assesee was at that time ready to commence production. It was sought to be contended by Mr. Trivedi on behalf of the assessee that the power connection was secured on 9th of June. The material before us is, however, silent as to the exact date on which the power connection was secured. But, as already said, the statement of case clearly states that the power connection was secured in the second week of June, 1964. It would, therefore, be a reasonable inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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