Law:

Section:

Section 37(1) , read with section 3 of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv), read with section 2(11) of the Indian Income-tax Act, 1922] - Business expenditure - Year in which deductible - Assessment year 1947-48 - Whether for purpose of a business it is only after business is set up that previous year of that business commences and in that previous year expenses incurred in business can be claimed as permissible deductions - Held, yes - Assessee-company was registered on 29-12-1945 and received its certificate of commencement of business on 20-4-1946 - It purchased a groundnut oil mill on 1-11-1946 for running it - Assessee closed its accounts for first time on 31-3-1947 - Expenditure incurred from its inception was debited to profit and loss accounts - ITO held that business started on 1-11-1946 when assessee purchased ground-nut mill while AAC held that business started on 20-4-1946 when it received certificate of commencement of business - Tribunal found that first purchase of raw material was made in end of September, 1946 from which inference could be drawn that assessee had set up its business by that date - After scrutinizing various details of expenses, it came to conclusion that business was not set up prior to 1-9-1946 and, therefore, allowed expenses subsequent to that date - Whether there was evidence before Tribunal to hold that assessee-company set up its business as from 1-9-1946 - Held, yes Section 2(34) of the Income-tax Act, 1961 [Corresponding to section 2(11) of the Indian Income-tax Act, 1922] - Previous year - Assessment year 1947-48 - Whether for purposes of business, previous year begins from date of setting up of business - Held, yes Words and phrases : Terms "setting up" and ''commenced'' occurring in section 2(11) of Indian Income-tax Act, 1922. FACTS The assessee-company was registered as a public company on 29-12-1945. It received its certificate of commencement of business on 20-4-1946. It purchased a groundnut oil mill on 1-11-1946. The assessee closed its accounts for the first time on 31-3-1947. It showed a profit of Rs. 3,023 for the period ending on 31-3-1947. In making up these accounts, all the…

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