1993 (10) TMI 30

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...., the assessee was incorporated as a company to carry on, inter alia, the business of running a hotel. The business of the said hotel was ultimately set up. The hotel is known as "President Hotel". The assessee actually commenced its business of running the hotel in April, 1973. During October, 1972, to March 31, 1973, the assessee incurred expenditure of Rs. 3,96,431 concerning the aforesaid business commenced in April, 1973. The assessee claimed deduction of the said expenditure during the course of assessment proceedings pertaining to the assessment year 1974-75. The relevant previous year ended on March 31, 1974. The abovereferred expenditure was incurred by the assessee before the commencement of the said business. The question require....

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....ion of the hotel building was completed by about March, 1973, only. Thus the assessee was not able to commence the business prior to March, 1973. The hotel was not ready for commencement of business till then. The question which arises for the consideration of this court is as to whether the assessee had set up the business for running of the hotel prior to March, 1973, even though the construction of the hotel building was not complete till then. In our opinion, it cannot be said that the assessee was ready to commence its business by October, 1972, or before March, 1973, in view of the finding that the building of the hotel was not ready till March, 1973. Learned counsel for the Revenue has fairly invited the attention of the court ....

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....ntion of the court to the latest decision of this court in the case of CIT v. L. and T. Mcneil Ltd. [1993] 202 ITR 662 to which one of us, i.e., Dr. justice B. P. Saraf, was a party. In this case, this court analysed the relevant decisions and arrived at the conclusion that the business could not be treated as set up merely because of purchase of raw material or procuring of orders for supplying machinery. The court held that the business could not be said to have been set up as the plant and machinery concerning the factory was not yet installed. After applying the principles laid down in the abovereferred cases, we have reached the conclusion that the Commissioner of Income-tax (Appeals) and Tribunal was not justified in reaching the c....