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Issues Involved:
Assessment of business expenses and interest income u/s 143(3) of the Income-tax Act, 1961. Assessment of Business Expenses: The appellant, a company engaged in air transportation, declared a loss for the assessment year due to expenses incurred for pre-operation activities. The assessing officer disallowed these expenses as business expenditure since the appellant had not commenced its business. The appellant argued that the expenses should be treated as preliminary expenses and allowed to be amortized. However, the assessing authority did not consider the expenses for computing taxable income. The appellant contended that the expenses should be set off against interest income to declare a loss. Assessment of Interest Income: The assessing officer determined the bank interest received by the appellant as income from other sources, not allowing it to be set off against the incurred expenses. The appellant, aggrieved by the assessment order, appealed, citing various grounds challenging the decision. The appellant relied on a Delhi High Court decision to support its claim that setting up the business, not commencement, is crucial for claiming business expenses. Judgment: The Tribunal found that activities such as incorporating the company, obtaining necessary certificates, and agreements for aircraft purchase/lease did not constitute setting up the business. The absence of procured aircraft, essential for air transportation operations, indicated the business was not established. The Tribunal emphasized that the procurement of aircraft is vital for considering business setup. As the appellant had not acquired aircraft by the end of the previous year, the claim of setting up the business was deemed invalid. Consequently, the Tribunal upheld the lower authorities' decision to dismiss the appeal, denying the appellant's claim for business expenses deduction and interest income set off.
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