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TMI Blog2007 (2) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... y business of the assessee was providing telecommunication services and this was not possible without a license from the Department of Telecommunications. The Assessing Officer noticed that only on 11-12-1996, the Asstt. Director General granted a license for commercial use of telecommunication service by the assessee and therefore the business of the assessee had not been set up during the previous year relevant to assessment year 1996-97. Consequently he was of the view that ( a ) expenses debited to the Profit and Loss account prior to setting up of business cannot be allowed as a deduction. ( b ) The interest income on FDR s had to be brought to tax as "Income from other sources" as the same was earned prior to setting up of business of the assessee. In bringing the said interest to tax as above, the Assessing Officer relied on the decision of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilisers Ltd. v. CIT [1997] 227 ITR 172 . 3. The plea of the assessee before the Assessing Officer was that the assessee was engaged in the business of providing VSAT based communication services. The main activities of the assessee s business was broadly ( a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sight. Wide scale demand for VSAT equipments was anticipated in Indian market. The assessee was, therefore, keen on trading in required equipments. No licence or prior permission whatever (except for routine recurring import licence at the time of every import as may be applicable under the prevalent Import Export Policy) was required to be able to deal in these products. The assessee obtained importer/exporter code number on 1-5-1995. 5. The assessee pointed out that in the tender floated by NSE was for mere supply of equipments. There was no reference to provisioning of net work services - because, NSE was to be a captive user of services procured directly from DOT. In fact, the tender came to be won by the assessee s competitor one M/s. HCL Comnet. Like contract of NSE, there are quite a few other instances which go to prove and establish that the customer can acquire (or has acquired) VSAT equipments from a person who is not a service provider to the customer and vice versa. According to the assessee, the above instance amply highlights the proposition that activity of supply of equipments is independent of provisioning of services and that equipment supply is not mere i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee did provide services to private HUB in the form of consultancy and even this was sufficient to hold that telecommunication services business had also been set up by the assessee. The CIT(A) thus held that all revenue expenses claimed by the assessee had to be allowed. The concluding observation of the Assessing Officer in this regard are as follows : "With regard to the Assessing Officer s reliance on the decision in Tuticorin case, I am of the view that the same is not applicable, in, as much as, in the case of the appellant, the business is already set up and the appellant is asking for set off of deduction of all revenue expenses incurred in the course of carrying on business. Accordingly, all such revenue expenses which are claimed in the return of income or during the assessment proceedings should be considered. In this view of the matter, the Assessing Officer is directed to go through the computation of returned income/loss filed by the appellant and recomputed the same in accordance with law after giving proper opportunity to the appellant of being heard." 10. Aggrieved by the order of CIT(A), the Revenue is in appeal before the Tribunal raising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), it has been held that under the Income-tax Act, what is relevant is the setting up of business and not the commencement of the business that is to be considered. The definition of the previous year as contained in section 3 of the Income-tax Act, 1961 reads as follows : "3. Previous year defined. For the purposes of this Act, previous year means the financial year immediately preceding the assessment year: Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year." It is on the basis of this definition that the Hon ble Bombay High Court held that for the purpose of Indian Income-tax Act it is the "setting up" of the business and not the "commencement of the business" that is to be considered. The Hon ble High Court further held that when the business is established and ready to commence the business, then it cannot be said that business itself ..... X X X X Extracts X X X X X X X X Extracts X X X X
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