Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1972-73 - Assessee's business was of processing marine products for which fish and other marine products had to be caught by fishermen - Assessee entered into contract with fishermen in June 1970, while actual infrastructure required for running of business became available to assessee by 15-8-1970 with acquisition of godown for that purpose - Actual procuring offish and their delivery to assessee took place on and after 6-10-1970 - Whether business of processing of marine products could be deemed to have been set up when godown was procured where processing could be done, and all revenue expenditure incurred after 15-8-1970 and before 6-10-1970 was deductible under section 37 even though collection offish actually started after 6-10-1970 - Held, yes FACTS During the accounting year relevant to the assessment year 1972-73, the assessee's business was of processing marine products for which fishes and other marine products had to be caught by the fishermen. For that purpose, the assessee had entered into various contracts with fishermen in June 1970. However, the actual infrastructure required for running of business became available to the assessee by 15-8-1970 when the assessee acquired godown for that purpose by paying advance rent of one year. As that was monsoon season, actual procuring of fish and their delivery to the assessee did take place on and after 6-10-1970. The assessee claimed deduction in respect of expenses incurred before the actual commencement of the business transaction, but after setting up of the business. The ITO disallowed the assessee's claim. On appeal, the AAC held that the business was set up on 15-8-1970 and, therefore, the assessee was entitled to deduction as claimed. The Tribunal dismissed the revenue's appeal against the decision. On reference: HELD For setting up of business of processing marine products, the assessee during the assessment year in question had to make all preparations and had also to provide on spot, necessary infrastructure. Even conceding that entering into advance contracts with fishermen for collection…

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