COMMISSIONER OF INCOME TAX Vs. AAVARAM LIMITED

JUDGEMENT

(1.) THIS reference is made by the Tribunal under S. 256 of the IT Act, 1961, at the instance of the Revenue. The question referred to this Court is as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that Rs. 20,131 being expenses of revenue nature incurred after 9th June, 1973 (the date on which the first raw materials were purchased) is allowable as revenue expenditure?"

(2.) THE assessee company is engaged in the business of manufacturing plastic containers. After the machinery and plant were set up, the assessee company purchased raw materials on 9th June, 1973, and started production on 23rd Nov., 1973. For the asst. yrs. 1974 75, the assessee company claimed deduction of Rs. 30,962 as revenue expenditure. The ITO disallowed the same, as the same was incurred prior to the date of production. The assessee filed an appeal before the AAC who allowed the same. Aggrieved by that order, the Revenue preferred an appeal to the Tribunal. The Tribunal held that the assessee company can be said to have commenced business when it purchased raw materials on 9th June, 1973, and, therefore, the expenses incurred after 9th June, 1973, and before 23th Nov., 1973, were deductible revenue expenditure and that the expenses incurred by the assessee before 9th June, 1973, did not qualify for deduction.

(3.) IN support of his submissions, learned counsel for the Revenue has relied upon the decisions in CIT vs. Sarabhai Sons Pvt. Ltd. (1973) 90 ITR 318 (Guj), CIT. vs. Saurashtra Cement and Chemical Industries Ltd. (1973) 91 ITR 170 (Guj), Addl. CIT vs. Speciality Paper Ltd. (1982) 133 ITR 879 (Guj) and Alembic Chemical Works Co. Ltd. vs. CIT (1989) 177 ITR 377 (SC). The facts are very few in this case and there is no dispute regarding the fact that the first raw materials were purchased on 9th June, 1973, and production started on 23rd Nov., 1973. There is also no dispute on the point that, if the assessee company can be said to have commenced its business on 9th June, 1973, then the amount of Rs. 20,131 would be deductible from the total income of the assessee. Therefore, the only question to be considered is whether, in the facts and circumstances of the case, it can be said that the assessee company had commenced its business on 9th June, 1973, or not.