TaxTMI 
TaxTMI 
2012 (4) TMI 150
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....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 taxed. This was on the basis of the opinion of the Assessing Officer that the business of the assessee had not yet commenced. 4. The assessee carried the matter in appeal. CIT(Appeals) dismissed the assessee's appeal observing inter alia that from the record it emerges that there was hardly any activity on the part of the assessee during the year under consideration which could be treated as business activity. It was further observed that :- "It is thus apparent that the activity of the appellant in the relevant previous year was only of a pre-operative nature and appellant had not yet started actual work of promoting, organizing and developing any minor or major port, CRP etc. with the aim of generating regular business income. It also did not undertake any other work related to docks/jetties etc. A mere investment of the appellant corporation in GAPL obviously cannot be treated as business activity for the reason that this activity by no means can be treated as an adventure in the nature of trade." 5. The assessee carried the matter further in ....
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....uring 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 although by referring to Note 3 of Part III of Note No.26 of the statement tried to pursue that the business has not been commenced during the year. We may point out that for the purpose of ascertaining whether expenditure is of revenue nature or not, we have to see whether the business has been set up or not. We have not to see that the business has actually commenced. Once the business has been set up, all the expenses incurred after setting up of the business are the revenue expenditure. We have also gone through the decision of the ITAT Bench-D in the case of ACIT v Gujarat State Road Development Corporation Ltd. [ITA No.899/Ahd/2006, order dated 12-12-2008], in which facts involved are the same. In that case also the Tribunal Bench-D has taken a similar view. Therefore, we are of the view that the AO was not correct in holding that the business has not been set up. The business in this case has duly been set up and the AO is directed to treat all the expenses to be the revenue expenditure and allow set off of loss in accordance with la....
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....arehouses etc. relating to cargo-handling, ship-building, ship-repairing and ship-breaking. Besides these another main object for which the company was incorporated was to undertake, promote, develop, aid and assist all types, kinds and forms of port related activities and also to undertake, render and provide all types of services in all matters relating to ports, jetties, harbours, docks and ship-yards. It also included the object of promoting, developing, upgrading and assisting all types, kinds and forms of works, undertakings, projects or enterprises and carrying on port related activities in the State of Gujarat and elsewhere by investment in such bodies in the form of equity participation, preference participation, subscription of other securities or through any other form of financial assistance or participation and to invest the capital of the company; the money raised or borrowed by the company. 11. To achieve such main objects, the Articles of Association also listed objects incidental and ancillary to the attainment of the main objects, one of them being to work and act as agents of the Government, Municipal local Boards, Railway Contractors and suppliers. 12. Bea....
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....ion of the Bombay High Court in the case of Western India Vegetable Products Ltd. v. CIT [1954] 26 ITR 151 observed that for deciding when a company could be said to have set up its business, what the Court has to consider is whether the business of the assessee consists of different categories and whether the activity, which was started earlier is said to have been the essential part of the business activity of the assessee. The Court held and observed as under:- "Thus, it is clear in the light of the decisions of this High Court in Saurashtra Cement and Chemical Industries' case [1973] 91 ITR 170 (Guj) and Sarabhai Management corporation Ltd.'s case [1976] 102 ITR 25 (Guj) that what the court has to consider is, whether the business of the assessee consists of different categories and whether the activity which was started earlier than the actual commencement of the production in the instant case could be said to have been an essential part of the business activity of the assessee. The company can be said to have set up its business from the date when one of the categories of its business activity is started and it is not necessary that all the categories of its business activ....