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TMI Blog2008 (8) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer on scrutiny account, found that in the computation of loss filed by the assessee in return of income, it has shown loss from business to be carried forward at Rs. 6,51,743. According to the Assessing Officer, there are certain ambiguity and errors in the computation. Anyway, the facts relevant for the present dispute are that the assessee had incurred expenses of Rs. 26,56,199 which it claimed as revenue expenses. It has first shown interest income on FDR at Rs. 16,34,795 as income from other sources. After setting this income against the expenditure, loss was claimed at Rs. 10,21,404. But in the note, assessee taken a plea that interest income is not due to be recovered because FDRs will mature in May, 1998 and thus it is not taxable. In this way, ultimately assessee claimed the loss of Rs. 26,56,199. 4. The learned Assessing Officer directed the assessee to explain how this loss is allowable, because in his opinion assessee has not commenced the business during the accounting period. In response to the query of Assessing Officer, assessee has filed written submissions. The relevant submission has duly been noticed by the CIT(Appeals). The same read as under : "Also, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000 from Akzo Nobel, Netherlands. This amount was transferred by Akzo Nobel, Netherlands in the personal bank account of Frank Van Ooijen. 7. Later on, the assessee passed trading entry in their books debiting the expenses amount and crediting the Frank Van Ooijen account of Rs. 18,19,568.92 which was passed on 23-10-1999. Further, this amount has been paid back by the assessee company, Akzo Nobel Car Refinishes India Pvt. Ltd. to Frank Van Ooijen by cheque of the account of the assessee. This information was supplied by the assessee vide his letter dated 9-2-2001 in para 3. Therefore, on the one hand the assessee wants to say that the business has commenced and the expenditure was made by Frank Van Ooijen on behalf of the company making the payments from his bank account for which the entries were passed later on 23-10-1999 which relates to assessment year 2000-01. 8. In this way, learned Assessing Officer has disallowed the claim of assessee. 9. Appeal to the CIT(Appeals) did not bring any relief to the assessee. 10. The learned counsel for the assessee while impugning the order of revenue authorities below appraised us with the facts and circumstances and pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only required to be seen for deciding the issue that business has been set up. For buttressing his contentions he relied upon the decision of ITAT in ITO v. Hindustan Diamond Co. (P.) Ltd. [1986] 19 ITD 184 (Bom.). He further relied upon in the case of Western India Vegetable Products Ltd. v. CIT [1954] 26 ITR 151 (Bom.). He also contended that the director had visited various places with a view to find out the customer and submitted his monthly report to the principal company at Netherlands. Learned counsel also referred the memorandum of association wherein it has been provided that assessee can buy, sell these products under its ancillary activities. He also pointed out that in the next year the assessee has not started its manufacturing activities but it has effected sales. The first purchase order was placed on 19-5-1998. The goods were received on 11-8-1998. The Assessing Officer has accepted this as a trading activity of the assessee and allowed the expenses incurred for the business purposes in assessment year 1999- 2000. In this way, he prayed that the expenses of Rs. 26,56,199 incurred by the assessee in carrying out its trading activities should be allowed as a busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "business" has been propounded. It is not necessary to recite and recapitulate of those decisions but on the strength of them, it would be suffice to say that word "business" has a wide import and it means an activity carried on continu-ously and systematically by a person by the application of his labour and skill with a view to earn an income. Section 13 of the Income-tax Act, 1961 defines "previous year". Previous year means the financial year immedi- ately preceding the assessment year. The proviso appended to this section further contemplates that in case of a business newly set up in the said financial year the previous year shall be the period beginning with the date of setting up of the business. The expression "set up" has not been defined anywhere in the Act. But as it is understood in the common parlance and considered by the ITAT in Hindustan Diamond Co. (P.) Ltd.'s case (supra), if an assessee is in a position to deliver the goods means that business is set up. Actual delivery is immaterial. For example if a person wants to carry on the business of transportation the moment he has purchased the vehicle for transporting the goods and arranged the space, then it would i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been set up. In view of the above discussion, the first ground of appeal raised by the assessee is rejected. 13. The next ground of appeal is inter-connected with the ground No. 1 raised in assessment year 1999-2000. The grievance of the assessee in these grounds of appeal is that learned CIT(Appeals) has erred in confirming the addition of Rs. 16,34,795 and Rs. 14,29,450 in assessment years 1998-99 and 1999-2000 respectively. The learned counsel for the assessee submitted that in assessment year 1998-99 the assessee had made a deposit of Rs. 8,50,00,000. This deposit was made for a period of three months, i.e., February to March. The FD was to be matured in May, 1998. Hence, the interest income though accrued but right to receive would accrue in May, 1998. Therefore, this income is not taxable in the present assessment year under the head "Income from other sources". Similarly, in assessment year 1999-2000, the Assessing Officer has made an addition of Rs. 14,29,450. The right to receive this interest income was not matured during the accounting period and, therefore, it cannot be assessed. The learned counsel for the assessee for buttressing his submissions relied upon the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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