TaxTMI 
TaxTMI 
2007 (11) TMI 331
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....2th Aug., 1995 in which additional directors, executives and auditors were appointed. On 4th Sept., 1995, the company placed orders for purchase of computers and peripherals. During the months of September and October, 1995, various key employees such as branch managers, regional managers, consumer finance managers, company secretary and finance manager and accounts manager, etc. were appointed. On 30th Oct., 1995, M/s S.R. Batliboi Consultants (P) Ltd. sent their invoice to the company for recruitment charges which were paid by the company through Kelvinator of India Ltd., another company. During the period from 4th Jan., 1996 to 21st Jan., 1996, the assessee applied for approval of the Foreign Investment Promotion Board (FIPB) for investment by Whirlpool Financial Corporation of USA through its wholly-owned subsidiary by name Whirlpool Financial (Mauritius) Ltd., and for the approval of the Reserve Bank of India for receiving foreign exchange loan against future issue of equity. During the period from November, 1995 to January, 1996, the assessee company paid salary to the staff and employees through two companies, viz., Kelvinator of India Ltd. and Expo Machinery Ltd. The employ....
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.... same has not been commenced, the expenditure incurred after the date of setting up has to be allowed as a deduction. But the question as to when it can be said that a business is "set up" must largely depend on the facts of each case and the nature of the business. There can be no hard and fast rule by which it can be determined as to when the business was set up. In the judgment of the Bombay High Court cited supra, it was a case of a manufacturing concern. It was held that the business was set up when the first order of purchase of raw material was placed and not when the factory was started (at a later point of time). In CIT vs Sarabhai Sons (P) Ltd. (1973) 90 ITR 318 (Guj), the Gujarat High Court was dealing with a company established for the manufacture of scientific instruments. It was held that the purchase of land, placing of orders for machinery and raw materials were merely operations for the setting up of the business and the business was actually set up only when the machinery was installed and the factory was ready to commence business. In Prem Conductors (P) Ltd. v. CIT 1976 CTR (Guj) 324 : (1977) 108 ITR 654 (Guj) the Gujarat High Court held that even securing order....
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....customers and that it would be de hors commercial sense to hold that one would be reaching the stage of having set up the business only when one reaches the stage of receiving customers. It was ultimately held that where there are several integrated activities to be undertaken serially, one forming the foundation for the other, it can be said that the business was 'set up' when the first of such activities was undertaken. It was ultimately held that the business was set up when the building was acquired and was placed at the disposal of the firm. In ITO v. M. Varadarajan (1989) 34 TTJ (Mad) 247 : (1989) 30 ITD 414 (Mad), the Madras Bench of the Tribunal held in the case of a sole-selling agent that his business could be said to have been set up once he obtained the sole-selling agency and it could not be said that it was set up only when he obtained the first business. 4. It may thus be seen that the question when a business may be said to have been set up is dependent on the facts of each case and largely on the nature of the business proposed to be undertaken. Different considerations may apply depending on whether the business is that of manufacture of a product, or l....
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....had also submitted their bill dt. 30th Oct., 1995 for Rs. 2,91,486 for professional services rendered in connection with recruitment of 19 candidates for the post of accounts manager and incidental expenses. The fact that the foreign loan and FIPB approval for equity investment by the Whirlpool Corporation of USA were given in January, 1996 does not mean that the business was not set up before these events. These are not statutory formalities and even without the foreign loan and the equity participation the assessee company was in a position to carry on the business in accordance with the objects clause of its memorandum of association from November, 1995 when it had its own offices, branches and regional managers and staff, computers installed and was ready to commence its activities. The expenses were incurred through Kelvinator and Expo Machinery and evidence to this effect is placed at pp. 24-31 and at other pages (e.g. page 52) of the paper book. From the above evidence it is clear that the business was set up from 1st Nov., 1995, by which date the company was ready and in a position to commence its business. 5. We accordingly hold that the assessee had set up its business....