Law:

Section:

Section 37(1), read with section 3 of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Assessment Year 1966-67 - Assessee-company, in order to start a new business for manufacture of scientific instruments and communication equipment, placed orders for machinery and equipment in January, 1966, received some of them in February, 1966 and also ordered for raw materials and stores, besides taking certain premises on lease - These preparations went on for a few months and in July, 1966 machinery was installed and production commenced - Assessee, claimed deduction of expenses incurred in connection with new business, during period ending 31-3-1966 - Whether new business could not be said to be set up by assessee until July, 1966, when machinery was installed and factory was ready to commence business - Held, yes - Whether, therefore, finding of Tribunal that business of assessee was set up in previous years, that is, prior to 31-3-1966, was contrary to evidence or based on no evidence at all - Held, yes FACTS The assessee-company decided to start a new business for the manufacture of scientific instruments and communication equipment. In January, 1966, the assessee placed orders for machinery and equipments and some of the machinery for which assessee had placed orders, was received in February, 1966, It also placed orders for raw material and stores and took on lease premises from an industrial estate. These preparations went on, and in July, 1966 the machinery was installed and production was commenced. For the assessment year 1966-67, the assessee claimed deduction of expenses incurred in connection with the new business during the previous year ending 31-3-1966. The Assessing Officer rejected the claim on the ground that the new business in respect of which expenses were stated to have been incurred, was not set up before 31-3-1966, and, therefore, the expenses could not be allowed as a revenue deduction. On appeal, the AAC allowed the assessee's revised claim holding that the new business must be held to have been set up in January, 1966. The Tribunal upheld that AAC's orders. On reference: HELD In the instant case, it was clear that…

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