Facts of the case
The assessee company was incorporated on 5.2.2001 under the Companies Act, 1956. Following is the sequence of events considered:
Application for FIPB approval – 24.01.2001
First director appointed – 05.02.2001
Additional directors appointed – 10.02.2001
Physical possession of the leased premises – 15.02.2001
Opening of Bank account – 01.03.2001
Agreement for entering into lease of premises – 01.04.2001
Agreement for take over of running business of DHL – 21.05.2001 (to be effective from 01.06.2001)
The assessee considered the date of commencement of business as 01.04.2001. However, the Assessing Officer held that the business of the assessee was set up on 1st June, 2001 i.e. when the assessee acquired the rights under the agreement dated 21st May, 2001.
- There is no dispute to the well settled legal proposition that at the point of time, the assessee is in a complete state of readiness to undertake its activity, it can be said that it has set up its business, the actual commencement of business may be at a later date.
- The trading business of the assessee was ready to commence upon set up of requisite infrastructure i.e. acquisition of place of business, commencement of hiring of suitable personnel, identifying clients, opening bank account etc. which enabled the assessee to carry out its object clause.
- Reliance placed on the ruling of ITAT Delhi Bench in the case of Whirlpool of India Ltd.- 19 SOT 293
- The instant case before us is at a more sound footing where even a bank account was opened prior to 1.4.2001 and the assessee has claimed the expenditure only after it has set up its business which was ready for commencement.
- The tribunal has rightly kept in mind the difference between setting up of business and commencement of business.