1986 (7) TMI 143

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....wise. The accounting year relevant to the assessment for 1979-80 ended on 31-3-1979. In the return, the assessee claimed net loss of Rs. 11,12,558 from business. The ITO did not allow it on the reason that the business had not yet started. He took the net loss at nil. In the appeal, the Commissioner (Appeals) held that the business had been set up during the year and the loss claimed was eligible to be allowed and carried forward. The revenue has appealed to object. The grounds in the cross-objection are only to support the order of the Commissioner (Appeals). 3. The assessment had been completed under section 143(3), read with section 144B of the Income-tax Act, 1961 ('the Act'). The main reason for not allowing the loss was that the as....

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....cing orders for raw materials and stones would not put the company into the shape so as to start functioning. He, therefore, contended that the assessee cannot be said to have set up business since it had not embarked upon even a single transaction of purchase. 5. The Commissioner (Appeals) has in para 4 of the impugned order pointed out certain events which had in fact taken place before the end of this accounting year. They are : "(i) The appellant appointed a Company Secretary, Finance Manager and Departmental Heads between 1-5-1978 to 3-6-1978. (ii) The appointees started taking action for selecting various other members of the staff. (iii) Office accommodation was hired on 1-6-1978. (iv) Registration under the Shops and ....

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....e mentioned that Western India Vegetable Products Ltd.'s case is approved by the Supreme Court in the case of CWT v. Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478. 6. Turning to Sarabhai Sons (P.) Ltd.'s case, the assessee therein was a company engaged in the business of manufacture of scientific instruments. It had placed orders for machinery and equipments in January 1966. Parallelly it had also placed orders for raw materials and stores and taken a premises on lease for establishing an industrial estate. The preparations continued up to July 1966 and the question was whether the business has commenced before the year that ended on 31-3-1966. As a fact, it was found that the business could not have commenced until July 1966, ti....