JUDGMENT : K.S. Jhaveri, J. 1. These appeals involve identical questions on law and facts and therefore, they are decided by this common judgment. 2. Tax Appeal No. 449/2004, 477/2004 to 488/2004 are preferred against the order dated 31.08.2004 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'B' in ITA No. 349/A/2001 & group raising the following substantial questions of law: "(1) Whether, in the facts and circumstances of the case, the ITAT was right in law in holding that even in case of an assessee, whose main object is to construct dam, canal, etc., the business commences only when the entire project for construction of dam, canal, etc. is complete, and not when the first brick was put up at the construction site? (2) Whether, in the facts and circumstances of the case, the ITAT was right in law in holding that the appellant has not set up its business? (3) Whether, in the facts and circumstances of the case, the ITAT was right in law in not allowing interest expenditure u/s. 57 of the Income-tax Act against the interest income even though there is a direct and proximate nexus between the two? (4) Whether, in the facts and circumstances of the case, the ITAT was right in law in not allowing expenditure such as salaries, administrative expenses and other such expenses to maintain the corporate status of the appellant u/s. 57 of the Act against the interest income ?" 3. For the sake of convenience, the appeals are classified in a tabular form according to the relevant Assessment Years and Tax Appeal No. 449/2004 is taken as the lead matter for the purpose of this judgment. Sr. No. Tax Appeal No. Assessment Year 1 477/2004 1989-1990 2 478/2004 1989-1990 3 479/2004 1990-1991 4 480/2004 1991-1992 5 481/2004 1992-1993 6 482/2004 1993-1994 7 483/2004 1994-1995 8 484/2004 1995-1996 9 485/2004 1996-1997 10 486/2004 1997-1998 11 487/2004 1998-1999 12 488/2004 1999-2000 13 449/2004 2000-2001 4. The facts in brief are that the assessee is a Company established under the provisions of the Companies Act, 1956 and is entrusted with the work of execution of the "Sardar Sarovar Project", which mainly consists of the construction of a terminal major Dam on the river-Narmada in Gujarat. For the purpose of executing the Project, a "Nigam" was formed by the State Government, which executed a part of the Project. For the purpose of executing the Project, a "Nigam" was formed by the State Government, which executed a part of the Project. As the Project was under construction, the assessee did not file returns of income for the Assessment Years mentioned herein above. Therefore, proceedings under the Income Tax Act were initiated. The Assessing Officer did not accept the case of the assessee. Ultimately, appeals were preferred before the Income Tax Appellate Tribunal, which also refused to accept the say of the assessee. Hence, these appeals. 5. We have heard learned Senior Advocate Mr. S.N. Soparkar for the assessee and learned advocate Mr. Sudhir Mehta for the Revenue. 6. Learned Senior Advocate Mr. Soparkar submitted that the expenses claimed by the assessee are revenue in nature and are required to be allowed as deduction while computing "income from business". It was submitted that the stand adopted by Revenue that business can be said to have commenced only on completion of the Canal is misconceived. What is to be looked into is the setting up of a business and not the commencement of business. All expenses incurred after the setting up of the business but, before its commencement, would be permissible as deduction u/s. 10(2) of the Income-Tax Act. It was further submitted that interest expenditure u/s. 57 of the Act are part of the business expenses of the assessee and therefore, they ought to have been considered as allowable deductions. Learned Senior Advocate, therefore, submitted that the Tribunal committed serious error in rejecting the appeals filed by the assessee. 6.1 In support of his submissions, reliance has been placed on a decision of the Division Bench of this Court rendered in the case of Commissioner of Income-tax, Gandhinagar v. Sardar Sarovar Narmada Nigam Ltd. reported in [2013] 37 taxmann.com 344 (Gujarat) and more particularly, on the observations made in Para-17, which reads as under; "17. We are of the firm opinion that the activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. We are of the firm opinion that the activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. Under the fiscal legislation when it is vital to determine what is the business of the assessee and what are the activities which constitute such business, it can be noted that execution of the Sardar Sarovar Project comprises of a dam across the river Narmada, canal system as also the power house at the foot of the dam and at the canal head and all other works. It can not be said that such objects could be achieved without contemplating different stages of completion. It would be wholly wrong to uphold the contention of the revenue that only on completion of work of entire canal, the assessee' business can be said to have set up. In a project like Sardar Sarovar, there are bound to be different stages where different activities take place and those activities being integral parts of the business and when they are set up phase vice, assessee cannot be deprived of benefits of fiscal legislation in disregard to well settled principles on the issue by adopting over technical approach. For determining as to when the business can be said to have been set up, the flow of the water from Narmada Canal in the given circumstances needed to be viewed as an integral and inseparable activity of the business of the assessee. The Tribunal has rightly approached the issue by holding that test in such events will have to be applied which must appeal to the common sense. It is apparent from the record that the assessee supplied water through its main canal, one of the purposes of setting up the company is to supply the water through the canal & even if the entire stretch of canal is yet to come into existence, in a project of this big a size, it will surely be not right to hold that the business of the assessee-respondent has not been set up. The construction of dam and canal are essential and inseparable parts of the activity which would necessarily precede other activities. The construction of dam and canal are essential and inseparable parts of the activity which would necessarily precede other activities. As well laid down by this Court in the decisions in case of Saurashtra Cements and Chemicals Ltd. (supra) and other judgments, when each one of the activities essential & vital, combined together, constitutes business of the assessee and this being a continuous process, all the activities which go to make a business need not be started simultaneously in order to hold that the business has commenced. Those of the activities which form integral part of entire term business when preceded other activities, no fault can be found in the approach of the Tribunal when it held the business to have been set up without the same being commenced. The Tribunal, by elaboration sound and logical reasonings, has dealt with the entire issue. No question of law much less any substantial question of law arises. Resultantly, Tax Appeal is dismissed." 7. Mr. Sudhir Mehta, learned counsel appearing for the Revenue, submitted that the business had neither commenced nor it had been set up, as the Project undertaken by the assessee was not only for the construction of canal but, also to operate and earn income by supplying water and generating electricity. It was submitted that the assessee was not doing the construction work for somebody else but, was constructing it for itself in order to earn income and therefore, unless it is ready to give result or the income, it cannot be said to have commenced or set up the business. Hence, the Assessing Officer was justified in holding that the assessee had not commenced its business. 7.1 Learned counsel Mr. Mehta further submitted that for allowing interest u/s. 57 of the Act, the expenditure must not be in the nature of capital expenditure but, of revenue expenditure. The expenditure must have been laid out or expended wholly and exclusively for the purpose of making or earning "income from other sources". If there is no evidence to show that the expenses incurred by the assessee were to facilitate the earning of or at least for protecting the income, it cannot be an allowable deduction. Therefore, the Assessing Officer was justified in not allowing interest expenditure u/s. 57 of the Act. 8. If there is no evidence to show that the expenses incurred by the assessee were to facilitate the earning of or at least for protecting the income, it cannot be an allowable deduction. Therefore, the Assessing Officer was justified in not allowing interest expenditure u/s. 57 of the Act. 8. The issue raised by way of Question No. 1 has already been answered in the decision reported in CIT, Gandhinagar v. Sardar Sarovar Narmada Nigam Ltd. (supra). For determining the question, it is necessary to know as to what constitutes the business of the assessee and for determining that, what are the activities which constitute such business needs to be ascertained. The very object for which the assessee-Company has been set up is to construct a Dam across the river Narmada, to create a canal system emanating from the reservoir called the Sardar Sarovar and to set up a Hydro-power plant at the foot of the Dam and at the canal head. To promote and facilitate navigation in the Narmada river and also for irrigation and water supply in the State. These are some objects set out in the object clause of the Memorandum of Association of the assessee. In our opinion, the activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. 9. What is to be regarded is as to whether the business of the assessee has been set up or not so that the assessee could avail benefits under the Act. Broadly speaking, the activity of the assessee could be divided into three categories - (i) Construction of Dam and related works (ii) Hydro-Power Plant and (iii) Narmada Main Canal. Considering the different categories of work, it can not be said that such objects could be achieved without contemplating different stages of completion. 10. It would be wrong to uphold the contention of Revenue that only on completion of work of entire Canal, the assessee's business can be said to have been set up. In a Project like the "Sardar Sarovar", there are bound to be different stages where different activities take place and those activities being integral part of business and when they are set up phase wise, the assessee cannot be deprived of the benefits of fiscal legislation in disregard of the well settled principles on the issue. In a Project like the "Sardar Sarovar", there are bound to be different stages where different activities take place and those activities being integral part of business and when they are set up phase wise, the assessee cannot be deprived of the benefits of fiscal legislation in disregard of the well settled principles on the issue. In view of the above, we answer both Questions No. 1 as also Question No. 2 in favour of the assessee and against the Revenue. 11. Insofar as Questions No. 3 & 4 are concerned, we are of the view that the expenditure of interest paid on borrowings raised by the assessee for the purpose of construction of Dam would be allowable deduction since the purpose of expenditure is manifest and there is a clear nexus between the expenditure and the earning of income. Therefore, essentially, the expenditure is a part of the business expenses of the assessee. Hence, we answer both Questions No. 3 & 4 in favour of the assessee and against the Revenue. 12. Consequently, all the appeals stand allowed.