Styler India (P) Ltd. vs Joint Commissioner Of Income Tax on 8 April, 2008
7.6 Again, in the case of Sarabhai Management Corporation Ltd. v. CIT (supra), the Hon'ble Gujarat High Court noted the above decision and observed as under:
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Sarabhai Management Corporation Ltd. vs Commissioner Of Income-Tax, Gujarat on 27 August, 1975
Interlink Petroleum Ltd. vs Deputy Commissioner Of Income Tax on 16 October, 2003
9.3 In the case of Sarabhai Management Corporation Ltd. v. CIT (supra), the Hon'ble Gujarat High Court held that the company formed with the main object of acquiring immovable property and to give it out on leave and licence basis should be treated to have been commenced its business activity after they have purchased the immovable property and carried out necessary repairs, installation of lift etc. so as to render premises more serviceable to its prospective licencees or lessees, which was done upto October, 1964 regardless of the fact that the premises were in fact given on leave and licence basis on 1st May, 1965. The Hon'ble High Court held that the expenditure of Rs. 48,004 incurred by the assessee between 1st Oct., 1964 to 31st March, 1965 should be allowed as business expenditure.
Sardar Sarovar Narmada Nigam Ltd.,, vs Assessee on 20 July, 2012
54. Thus it can be said that the principles laid down in the cases of
Commissioner of Income-tax v. Saurashtra Cement and Chemical Industries
[1973] 91 ITR 170 (Guj), Sarabhai Management Corporation Ltd. v.
Commissioner of Income-tax [1976] 102 ITR 25 (Guj) and Prem Conductors
Pvt. Ltd. 108 ITR 654 (Guj.), would hold the field and has to be regarded as
SB ITA No.2654/AHD/04
Page 51 of 60
the view of the jurisdictional High Court.
Dcit 1(2)(2), Mumbai vs Ppfas Asset Management P.Ltd, Mumbai on 13 March, 2019
Ltd. (supra) and in the case of
Sarabhai Management Corp. Ltd. Vs. CIT (supra) does not
support this contention of the assessee that the assessee‟s
business had actually been set up merely for the reason
that the assessee company was registered as a private
limited company under the Companies Act. It is not in
dispute that the assessee made application for registration
before the National Stock Exchange of India Ltd. for
trading membership of capital and future options segments
on 15.10.2004 by paying application fee of Rs.10,000/-
vide demand draft dated 12.10.2004 payable at Mumbai.
In order to commence the business of acting as
trading membership of capital market and futures
options segments, it was necessary on the part of the
assessee to get requisite registration from the Stock
Exchange. The assessee's application for
registration was allowed on provisional basis on and
from December 6, 2004. Thereafter, the assessee also
made applications before SEBI as well as National
Securities Clearing Corporation Ltd. by paying necessary
fees and complying with all the requirements. In this case,
the first stage relates to the activity of acting as trading
members and clearing member of the wholesale debt
market, capital market and futures and options segments
of any Stock Exchange was to get registration from the
Stock Exchange. It is well settled that all the expenses
incurred after the business had been set up are allowable
as business deduction u/s 37 of the Act. There may be
interval between the setting up of the business and the
actual commencement of the business but all the expenses
incurred during the interval of setting up of the business
and the commencement of the business are also
permissible for deduction as so held in the above referred
decisions. Having regard to the nature of the assessee‟s
business of acting as a trading member and clearing
member of the wholesale debt market etc., it can be said
that assessee‟s business was set up as soon as the
assessee got registration by the National Stock Exchange
for trading membership of capital market and futures
options segments inasmuch as the assessee‟s business
was ready to commence on the day when the assessee got
provisional registration from the National Stock Exchange.
We are, therefore, of the considered view that the expenses
incurred on or after 06.12.2004 are permissible for
deduction as business expenses and in order to allow
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I.T.A. No.6687/Mum/2017
these expenses as admissible deduction, it is not
necessary that the assessee should have earned some
income out of such activity or all the three stages referred
to by the Hon‟ble Gujarat High Court in the above referred
decision should have been completed. It is enough that the
first stage of the business had started in order to claim the
business expenses as admissible deduction. We, therefore,
hold that the assessee is entitled to a deduction of
admissible business expenses incurred by it on or after
06.12.2004 when the business can be said to have been
set up by the assessee. We, therefore, direct the Assessing
Officer to quantify the amount of expenses in the light of
our decision above and allow the same as per law after
examining and verifying the genuineness of the expenses
and their admissibility under the provisions of Income-tax
Act. The AO shall provide reasonable opportunity of being
heard to the assessee while quantifying the amount of
business expenses incurred by the assessee on or after
15.10.2004. We order accordingly."
Commissioner Of Income-Tax vs Western India Seafood (P) Ltd. on 10 August, 1992
"For deciding when a company could be said to have set up its business, what the court has to consider is, in the light of the decisions in the cases of CIT v. Saurashtra Cement and Chemical Industries Ltd. [1973] 91 ITR 170 (Guj) and Sarabhai Management Corporation Ltd. v. CIT [1976] 102 ITR 25 (Guj), whether the business of the assessee consists of different categories and whether the activity which was started earlier than the actual commencement of the production could be said to have been an essential part of the business activity of the assessee. The company can be said to have set up its business from the date when one of the categories of its business is started and it is not necessary that all the categories of its business activities must start either simultaneously or that the last stage must start before it can be said that the business was set up. The test to be applied is as to when a businessman would regard a business as being commenced and the approach must be from a common sense point of view."
Tetron Commercial Ltd. vs Commissioner Of Income Tax on 15 January, 2003
In Sarabhai Management Corporation Ltd. v. CIT (supra), the Gujarat High Court took the same view and held that the business commences with the first activity for acquiring by purchase or otherwise, immovable property. There may be an interval between the setting up of the business and the commencement of the business.
Commissioner Of Income-Tax vs L. And T. Mcneil Ltd. on 3 February, 1993
18. So far as the Gujarat High decision in Sarabhai Management Corporation Ltd. v. CIT [1976] 102 ITR 25 is concerned, we find that the ratio of this judgment is in no way different from that of the decision of this Court referred to above.
N. K. Pharma Industries, Ahmedabad vs Assessee on 7 December, 2011
In the decision of Sarabhai
Corporation Ltd v. CIT (supra), the Hon'ble Gujrat High Court was not dealing
with the cases of manufacturing unit as is the case of the appellant. Therefore,
the ratio of that decision which is in relation to certain company letting out a
building, on lease and license would not apply to the facts and circumstances of
appellant's case.
Gng Stock Holdings Pvt. Ltd., New Delhi vs Assessee on 22 December, 2010
Ltd. (supra) and in the case of Sarabhai Management Corp.
Ltd. Vs. CIT (supra) does not support this contention of the assessee that the
assessee's business had actually been set up merely for the reason that the
16
assessee company was registered as a private limited company under the
Companies Act. It is not in dispute that the assessee made application for
registration before the National Stock Exchange of India Ltd. for trading
membership of capital and future options segments on 15.10.2004 by paying
application fee of Rs.10,000/- vide demand draft dated 12.10.2004 payable
at Mumbai. In order to commence the business of acting as trading
membership of capital market and futures options segments, it was necessary
on the part of the assessee to get requisite registration from the Stock
Exchange. The assessee's application for registration was allowed on
provisional basis on and from December 6, 2004. Thereafter, the assessee
also made applications before SEBI as well as National Securities Clearing
Corporation Ltd. by paying necessary fees and complying with all the
requirements. In this case, the first stage relates to the activity of acting as
trading members and clearing member of the wholesale debt market, capital
market and futures and options segments of any Stock Exchange was to get
registration from the Stock Exchange. It is well settled that all the expenses
incurred after the business had been set up are allowable as business
deduction u/s 37 of the Act. There may be interval between the setting up of
the business and the actual commencement of the business but all the
expenses incurred during the interval of setting up of the business and the
17
commencement of the business are also permissible for deduction as so held
in the above referred decisions. Having regard to the nature of the
assessee's business of acting as a trading member and clearing member of
the wholesale debt market etc., it can be said that assessee's business was set
up as soon as the assessee got registration by the National Stock Exchange
for trading membership of capital market and futures options segments
inasmuch as the assessee's business was ready to commence on the day
when the assessee got provisional registration from the National Stock
Exchange. We are, therefore, of the considered view that the expenses
incurred on or after 06.12.2004 are permissible for deduction as business
expenses and in order to allow these expenses as admissible deduction, it is
not necessary that the assessee should have earned some income out of such
activity or all the three stages referred to by the Hon'ble Gujarat High Court
in the above referred decision should have been completed. It is enough that
the first stage of the business had started in order to claim the business
expenses as admissible deduction. We, therefore, hold that the assessee is
entitled to a deduction of admissible business expenses incurred by it on or
after 06.12.2004 when the business can be said to have been set up by the
assessee. We, therefore, direct the Assessing Officer to quantify the amount
of expenses in the light of our decision above and allow the same as per law
18
after examining and verifying the genuineness of the expenses and their
admissibility under the provisions of Income-tax Act. The AO shall provide
reasonable opportunity of being heard to the assessee while quantifying the
amount of business expenses incurred by the assessee on or after
15.10.2004. We order accordingly.
Carefour Wc&C; India Private Limited vs Deputy Commissioner Of Income Tax on 22 September, 2014
In Sarabhai Management
Corporation Ltd. v. CIT, [1976] 102 ITR 25, the
Gujarat High Court took the same view and held that
the business commences with the first activity for
acquiring by purchase or otherwise, immovable
property. There may be an interval between the setting
up of the business and the commencement of the
business. All expenses incurred during that interval are
also permissible for deduction.