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TMI Blog2013 (10) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is pending before Hon'ble High Court on same issue?" 2. Brief facts of the case are as follow. 2.1 The assessee is a company established and wholly owned by the Government of Gujarat under the provisions of the Companies Act, 1956 for execution of Sardar Sarovar Project-an inter-state multi-purpose project of four States viz. Madhya Pradesh, Maharashtra, Gujarat and Rajasthan with a terminal major dam on the river-Narmada in Gujarat. 2.2 A Nigam was formed by the Government of Gujarat which executed a part of project. The assessee-respondent was granted certificate of commencement of business. The project being under construction, the assessee-respondent did not file returns of income for the Assessment Years 1989- 1990 & 2000-2001. A notice under section 148 was issued and the assessee filed returns, claiming expenditure incurred by it as business expenses. 2.3 The Tribunal for the Assessment Years 1989- 1990 & 2000-2001 held that the business of the assessee could not be said to have commenced as main object for the formation of a company was to construct dams and canals. 2.4 In the instant case, for the Assessment Year 2001-2002, the assessee-respondent took the stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction while computing income from business. Learned counsel also urged that revenue's stand that only on completion of canal as per the desired destination would only amount to commencement of business, is wholly misconceived. He further urged that there being no flow in the reasonings given by the Tribunal, based on voluminous material available on record, this Tax Appeal merits no consideration. 5. Upon thus hearing both the sides, for the reasons to follow hereinafter, this Tax Appeal deserves no consideration for having raised no substantial question of law. 6. At the outset, Question no.2 is required to be addressed. As far as Question No.2 is concerned, the same challenges the constitution of Special Bench Tribunal. Therefore, before dealing with the first question, this question requires to be examined. This issue when was raised before the Tribunal, it dealt with the same by holding that the main issue raised is as to whether the business of the assessee can be said to have been set up during the previous year relevant to the assessment year. The Tribunal was of the opinion that such question is a mixed question of law and facts & therefore, its answer would depend o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination. The Tribunal made a distinction between commencing a business and setting up of a business for the purpose of Income-tax Act, relying on the decision of the Bombay High Court in case of Western India Vegetable Products vs. CIT reported in 26 ITR 151 (Bom.). The Bombay High Court, in the said decision held that what is to be looked into is the setting up of a business for the purpose of income-tax and not the commencement of the business. Between a business which is set up and business which is commenced, assessee can avail benefits. In other words, all expenses incurred after the setting up of the business, but, before its commencement would be permissible as deduction under section 10(2) of the Act. 9. Yet another decision of the Apex Court sought to be relied upon by the Tribunal is rendered in case of CWT vs. Ramaraju Surgical Cotton Mills Ltd. reported in 63 ITR 478(SC). While referring to the decision of Western India Vegetable Products (supra), the Apex Court concluded while interpreting the provisions of Section 5(1)(xxi) of the Wealth-tax Act, 1957 that the company becomes entitled to exemption in respect of value of the assets used in setting up of such bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties if is ceased, the business would come to a grinding halt. Again, it was held that "The business consisted of a continuous process of these three activities and when the first activity was started with a view to embarking upon the second and the third activities, it clearly amounted to commencement of the business. It may be that the whole business was not set up when the activity of quarrying the leased area of land and extracting limestone was started. That would be set up only when the plant and machinery was installed, the manufacture of cement started and an organization for sale of manufactured cement was established. But, as pointed out above, business is nothing more than a continuous course of activities and all the activities which go to make up the business need not be started simultaneously in order that the business may commence. The business would commence when the activity which is first in point of time and which must necessarily precede the other activities." 12. Yet another decision rendered in case of Sarabhai Management Corpn. Ltd. vs. CIT reported in 102 ITR 25 (Guj.), refers to this very issue where the assessee was a private limited company whose main ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... canal and all revenue expenditures after such date shall have to be allowed as deduction. 15. It is thus apparent from the elaborate reasonings given by the Tribunal that it has extensively considered the factual matrix presented before it and on applying all the above referred decisions of this Court to the facts on hands, it could arrive at such conclusion. Neither in appreciating the fact nor in applying the law to the case of the assessee, any error is committed by the Tribunal so as to give rise to any question of perversity. 16. The very object for which the company has been set up is to construct a dam across the river- Narmada and to create canal system emanating from reservoir called the Sardar Sarovar and to set up power house at the foot of the dam and at the canal head. To promote and facilitate navigation in the Narmada river and also for irrigation and water supply in the State and for utilization of water from Sardar Sarovar as well as for managing, developing, exchanging etc. the land, property and resources of the company are some objects set out in the object clause of the Memorandum of Association of the assessee-respondent. What is to be regarded is as to whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a must. Such supply was made from partially completed Narmada Main Canal & material was also produced before the Tribunal that water from Sardar Sarovar was pumped out through installation of 90 water pumps and maintained continuous flow of an average more than 1000 cusecs through the Narmada Canal upto 149 km. 17. We are of the firm opinion that the activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. Under the fiscal legislation when it is vital to determine what is the business of the assessee and what are the activities which constitute such business, it can be noted that execution of the Sardar Sarovar Project comprises of a dam across the river Narmada, canal system as also the power house at the foot of the dam and at the canal head and all other works. It can not be said that such objects could be achieved without contemplating different stages of completion. It would be wholly wrong to uphold the contention of the revenue that only on completion of work of entire canal, the assessee' business can be said to have set up. In a project like Sardar Sarovar, there are bound to be different stages where different activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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