M.V. Nayar, A.M.: This appeal has been filed by Department against order of CIT(A)-XII, Kolkata giving relief to assessee. assessee company is engaged in manufacture of low ash metallurgical coke at its plant at Khambhalia, Gujarat. For assessment year in appeal, assessee filed its return for asst. yr. 2004-05 on 11th Oct., 2004 showing total income of Rs. 22,10,62,757. Subsequently, assessee company filed revised return showing net total income at Rs. 21,30,91,725. return was selected for scrutiny assessment under s. 143(3) of Act, and assessment was completed on 29th Dec., 2006 at figure of total income of Rs. 28,21,61,831 after making various additions. assessee went in appeal against additions made by AO. CIT(A) allowed relief to assessee against some of additions made by AO and sustained some of additions. Department is in appeal against some of additions deleted by CIT(A). Department has taken following grounds of appeal: Whether on facts and in circumstances of case learned CIT(A) was correct to allow set off of brought forward losses of M/s Aparna Projects (P) Ltd. violating conditions under s. 72A as company was not engaged in business for last three years prior to relevant assessment year? Whether on facts and in circumstances of case learned CIT(A) w s correct in allowing payment of insurance premium which does not pertain to relevant previous year? That on facts and under circumstances of case learned CIT(A) erred in allowing air fare of Rs. 37,126 in absence of details and failure on part of assessee to show that air travel was for business purposes. Regarding ground 1, learned Departmental Representative contended that as per provisions of s. 72A, amalgamating company was required to b e engaged in business in which loss was sustained for minimum period of 3 years before amalgamation for assessee to be eligible for deduction. In assessee s case amalgamating company i.e.. Aparna Projects (P) Ltd. which amalgamated w.e.f. 1st Nov., 2003, was not engaged in production for required period of 3 years and had only started production from asst. yr. 2003-04. He submitted that in view of provisions of s. 72A, assessee was not entitled to deduction of cumulated losses of Aparna Projects (P) Ltd. since it did not fulfil conditions as required by s. 72A. He submitted that in view of same, order of CIT(A) be reversed on this account. Regarding ground 2, learned Departmental Representative contended that insurance premium for amount of Rs. 58,20,079 out of total claim of Rs. 96,39,496 did not pertain to assessment year in question and therefore w s required to be disallowed and treated as prepaid expenses only to be allowed as deduction in subsequent year. He submitted that only expenses pertaining to assessment year in appeal could be allowed as deduction in computing income and therefore, proportionate insurance premium for subsequent year was required to be disallowed even though insurance company had raised bill in this year for period of 12 months, including part of period of next year. He submitted that in this view of matter, CIT(A) s order be reversed. Regarding ground 3, learned Departmental Representative contended that since assessee had not produced any evidence before AO that expenses on travel of Mr. Raja and Mrs. Preeti Agarwalla were for business purpose of assessee, therefore, CIT(A) had erred in allowing relief of Rs. 37,126 to assessee and order of CIT(A) be reversed on this account. In his rebuttal, Sri Tulsiyan firstly addressed ground 1 of appeal. He submitted that what is required under s. 72A(2)(a)(i) is that amalgamating company should be "engaged in business, in which accumulated loss occurred or depreciation remains unabsorbed, for three or more years". He submitted that expression used in section is "engaged in business" as against "started manufacturing or production". He submitted that "engaged in business" is much wider in term than "engaged in manufacturing" and submitted that engagement in business must be reckoned with reference to point of time when business activities were started, which would include also preparatory stage for manufacturing activity, which is just one of stages or ingredients of business. He emphasized that AO had wrongly equated "engaged in business" with "start of manufacturing" although section itself did not specify same. He submitted that latter is much narrower process and it alone cannot be termed as "engaged in business". He further submitted that "business" is of much wider import and encompasses within its fold all steps for starting manufacturing operations. In this particular case, M/s Aparna Project (P) Ltd. was clearly in business when it undertook steps to acquire plant and machineries and that step itself has to be considered to be commencement of business. He submitted that legislature clearly did not intend for start of production as criteria for allowing deduction as AO had interpreted and in support of same he submitted that in certain sections of Act, legislature has made difference between pre-commencement of manufacturing activity and post-commencement thereof and in matter of allowance of certain benefits under Act, commencement of manufacturing activity is prerequisite. But where no such specific mention is made in relevant section and only condition is laid down that assessee should be engaged in business, broader view about definition of "engaged in business" has to be adopted. He placed reliance of decision of Special Bench of Tribunal, Calcutta Bench in case of Peerless Securities Ltd. vs. Jt. CIT (2005) 93 TTJ (Kol)(SB) 325: (2005) 277 ITR 57 (Kol)(SB)(AT), wherein Bench observed that "a business is said to have been set up as soon as essential activities of business are started....... In case of manufacturer, manufacture commences as soon as he undertakes activity required for manufacture". It has further been held in said judgment, "Expenditure incurred after business is set up is allowable although business has not commenced". He submitted that it was clear from above observation that Special Bench of Tribunal had made clear distinction between date of commencement (set up) of business and commencement of manufacturing activities. It has also been held by Special Bench that expenditure incurred during period of interregnum between commencement of business and commencement of manufacturing activities is allowable business expenditure meaning thereby that business will have to be said to be in existence during this period of interregnum. He further placed reliance on following case law in support of his argument that business is set up as soon as first integral activity is performed by assessee for purpose of said business: (a) CIT vs. Sarabhai Management Corporation Ltd. (1992) 102 CTR (SC) 164: (1991) 192 ITR 151 (SC); (b) CIT vs. Western India Sea Food (P) Ltd. (1992) 107 CTR (Guj) 106: (1993) 199 ITR 777 (Guj); (c) CIT vs. Electron India (2000) 164 CTR (Mad) 330: (2000) 241 ITR 166 (Mad); (d) CIT vs. Stones & Mineral Associated Ltd. (2002) 257 ITR 479 (Raj). He submitted that in all above cases various Courts have held that first activity integral to carrying on of business leads to set up or start of business and makes assessee eligible for deduction of expenses as revenue expenses. He submitted that once business is said to have been set up, then assessee shall have to be deemed to be "engaged in that business from that moment on and would meet criteria as required under s. 72A. He submitted that in instant case, AO had held that business of M/s Aparna Project (P) Ltd. had not been in existence before actual manufacturing activities were started by that company, which was directly against decisions of various Courts as cited above. He submitted that M/s Aparna Project (P) Ltd. had been carrying on its business since April, 2000 i.e. moment it applied for license to manufacture coke being first integral and necessary activity for purpose of carrying on of business. He therefore submitted that since M/s Aparna Project (P) Ltd. was engaged in its business since April, 2000, it had fulfilled necessary condition for allowability of benefit under s. 72A of Act and assessee was eligible for benefit of allowance of brought forward loss and also unabsorbed depreciation of amalgamating company i.e. M/s Aparna Project (P) Ltd. Sri Tulsiyan thereafter took up ground 2 for his arguments. He submitted that alleged advance payment of premium was not actually advance in nature. He submitted that insurance companies raise their bills for payment of premium for period of 12 months irrespective of date of start of policy. assessee company has no option but to pay part of premium related to assessment year in which bill is raised and pay part related to subsequent year in next year. entire amount of premium has to be paid at time when bill is raised by insurance company and in event o f non-payment of entire amount, insurance policy lapses and assessee does not get any benefit of insurance coverage. liability in respect of payment of insurance premium has got to be allowed even under mercantile system on basis of due date for making payment and for entire amount of premium and not part thereof. He submitted that assessee company follows mercantile system of accounting and has to account for all expenses as and when they accrue. In this case, expense for premium accrues as soon as insurance company raises its bill for payment of premium for entire 12 months and therefore, assessee is required to account for same in its P&L a/c. He further submitted that in computing income for purpose of income-tax, revenue expense has to be allowed as deduction in its entirety in year of payment and cannot be treated as prepaid expense to be allowed partly in any subsequent year other than deductions expressly provided as such, like deductions under s. 35D. There is no scope for apportionment of revenue expense for purpose of income-tax other than said specific provisions. In view of above, he submitted that CIT(A) s order be confirmed on this aspect. Authorised Representative thereafter took up ground 3 for his rebuttal. He submitted that amount of Rs. 37,126 pertains to foreign travel expenses of Mr. Raja and Mrs. Preeti Agarwalla, who are consultants of appellant company. expense was incurred for travel of consultants of company for business purposes to factory of assessee and cannot be treated as personal in nature on any account since abovementioned two persons were not related to company in their personal capacity. He submitted that since no personal expense can be alleged in regard to expense for travel of consultants of company, disallowance was unwarranted and only based on suspicion and CIT(A) had rightly deleted same. We have heard rival parties, considered their rival submissions and perused records available with us. Ground 1 of appeal mainly pertains to allowance of brought forward loss and unabsorbed depreciation of amalgamating company viz. Aparna Projects (P) Ltd. as per provisions of s. 72A. relevant provisions of s. 72A state as under: "(1) Where there has been amalgamation of company owning industrial undertaking or ship or hotel with another company or amalgamation of banking company referred to in cl. (c) of s. 5 of Banking Regulation Act, 1949 (10 of 1949), with specified bank, then, notwithstanding anything contained in any other provision of this Act, accumulated loss and unabsorbed depreciation of amalgamating company shall be deemed to be loss or, as case may be, allowance for depreciation of amalgamated company for previous year in which amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. (2) Notwithstanding anything contained in sub-s. (1), accumulated loss shall not be set off or carried forward and unabsorbed depreciation shall not be allowed in assessment of amalgamated company unless (a) amalgamating company (i) has been engaged in business, in which accumulated loss occurred or depreciation remains unabsorbed, for three or more years; (ii) has held continuously as on date of amalgamation at least three-fourths of book value of fixed assets held by it two years prior to date of amalgamation;" There appears to be no dispute in this case regarding other requirements of s. 72A for eligibility of set off of brought forward loss and unabsorbed depreciation of Aparna Projects (P) Ltd. except requirement of unabsorbed depreciation of Aparna Projects (P) Ltd. except requirement of being engaged in business, in which accumulated loss occurred or depreciation remains unabsorbed, for three or more years. moot question in this case is point in time from which person shall be treated as being engaged in business. Black s Law Dictionary defines engage as "To employ or involve oneself; to take part in; to embark on". Therefore, dictionary meaning of word engage implies situation where person embarks on some activity or employs oneself in some work. Now let us examine argument advanced by learned Authorised Representative that person shall be treated as being engaged in business when business itself is said to have been set up. We find that there can be no doubt that person shall be termed to be engaged in business if business has been set up or it has come into existence. "Engaged in business" does not imply "engaged in production". If legislature in its wisdom has not used words "engaged in production", it is not open to AO to import such words or meaning to term "engaged in business". basic postulate of interpretation of statutes requires that literal construction of statute has to be accepted if there is no ambiguity in said statute. It is not open to Courts to import words into provision and give it meaning different from meaning as borne out by literal reading of section. In this case, AO appears to have imported word "production" into statute in place of word "business" and thereby changed entire requirement of said section. Sec. 72A(2)(a)(i) clearly uses words "engaged in business" and there is no requirement of start of production to be eligible for deduction. There may be many instances where business may have commenced but actual production may not have commenced but that would not imply that business itself had not commenced and that assessee would not be engaged in production. Therefore, it appears, AO has narrowed down requirement of section without there being any such intendment within section itself. In this case, therefore, it needs to be examined whether Aparna Projects (P) Ltd. had been engaged in business for period of 3 or more years. In this case, said company had applied for license to manufacture coke, being first integral and necessary activity for purpose of carrying on of business, in month of April, 2000. brought forward losses and unabsorbed depreciation sought to be set off pertain to said business of manufacturing coke. Therefore, assessee had performed first integral and necessary activity for start of business in month of April, 2000 without which it could not have carried on its business of manufacture of coke. It needs to be examined whether such activity in itself shall qualify for being called as business having commenced and therefore condition of s. 72A having been fulfilled. We have examined following case law cited by learned Authorised Representative above on issue of set up of business: (i) Peerless Securities Ltd. vs. Jt. CIT (supra); (ii) CIT vs. Sarabhai Management Corporation Ltd. (supra); (iii) CIT vs. Western India Sea Food (P) Ltd. (supra); (iv) CIT vs. Electron India (supra); (v) CIT vs. Stones & Minerals Associated Ltd. (supra). In all of abovementioned case law, various Courts have held that business is said to have been set up as soon as essential activities of business are started. It has been held that in case of manufacturer, manufacture commences as soon as he undertakes first activity required for manufacture. Hon ble Supreme Court in case of CIT vs. Sarabhai Management Corporation Ltd. (supra) affirming decision of High Court, held that, "even if acquisition of property for being let out could be said to be only preparatory stage, subsequent activities constituted activities in course of carrying on of respondent s business. It was not correct to treat respondent as having commenced business only when licensee or lessee occupied premises or started paying rent. Tribunal had proceeded on misapprehension regarding nature of respondent s business and High Court was right in interfering with finding of Tribunal which was based on misdirection in law." Hon ble Gujarat High Court in case of CIT vs. Western India Sea Food (P) Ltd. (supra) held as under: "That though assessee had not actually carried out purchases or sales i t had carried out all requirements of provisions and advances, etc., towards purchases and did not actually carry on purchasing as importer could not arrange for transport of goods. Therefore, expenses of Rs. 23,698 incurred by assessee in procurement of materials for exports could be allowed as revenue expenditure." other cases relied on by learned Authorised Representative have held similarly that when assessee has performed first initial steps being integral for carrying on of business, business is deemed to have been set up and expenses are allowable as revenue expenses. In this connection, case of CIT vs. Saurashtra Cement & Chemical Industries Ltd. (1973) 91 ITR 170 (Guj) is of relevance. Hon ble Gujarat High Court held as under: " Business connotes continuous course of activities. All activities which go to make up business need not be started simultaneously in order that business may commence. business would commence when activity which is first in point of time and which much necessarily preceded all other activities is started." In case of CIT vs. Sponge Iron India Ltd. (1993) 111 CTR (AP) 67: (1993) 201 ITR 770 (AP), Hon ble Andhra Pradesh High Court held as under: (i) whether business has been commenced or not is question of fact. However, what activities constitute commencement of business is mixed question of law and fact and it has to be decided on facts of each case; (ii) there is distinction between setting up of business and commencement of business. business is said to be set up when it is ready to commence; (iii) where business consists of continuous course of activities, for commencement of business all activities which go to make up business need not be started simultaneously. As soon as activity which is essential activity in course of carrying on business is started, business must be said to have commenced. If we analyse abovementioned decisions of Gujarat High Court and Andhra Pradesh High Court then same are squarely applicable to case of assessee. As already held by us above, amalgamating company is required to be engaged in business for period of 3 or more years to be eligible for benefits of s. 72A and requirement is not start of production. assessee has to be held to be engaged in business from point in time when business is said to have commenced. abovementioned decisions have also held this view and have held that where business consists of continuous course of activities, for commencement of business all activities which go to make up business need not be started simultaneously. As soon as activity which is essential activity in course of carrying on business is started, business must be said to have commenced. In present case before us, company Aparna Projects (P) Ltd. can be said to have commenced its business as soon as it had applied for license to enable it to start manufacturing coke since said company could not have started manufacturing without said requisite permission from Government authorities. Thereafter, said company had initiated steps to set up its plant required for production and had started manufacturing coke from asst. yr. 2003-04. Therefore, we hold that Aparna Project (P) Ltd. was engaged in business of manufacturing of coke from April, 2000 and therefore, was engaged in business for period of 3 or more years as required by s. 72A(2)(a)(i). This being case, we hold that assessee was entitled to set off of brought forward loss and unabsorbed depreciation of Aprna Projects (P) Ltd. as rightly held by CIT(A). We dismiss this ground and decide this issue against Revenue and in favour of assessee. We have considered arguments of both sides in regard to ground 2 raised by Revenue. We find that there is no dispute regarding fact that insurance company had raised single bill for period of 12 months on assessee for payment of premium and assessee had no option to pay part of premium relating to this year in year in appeal and balance in subsequent year. We have considered argument advanced by learned Authorised Representative that raising of bill by insurance learned Authorised Representative that raising of bill by insurance company for period of 12 months leads to accrual of liability on date of receipt of bill as per mercantile system of accounting. In mercantile system of accounting, expenditure is said to have accrued when said expense becomes due for payment. In this case we find that premium for period of 12 months, partly attributable to subsequent year, had become due for payment in this year itself and therefore has to be held as having accrued during year. expense has to be allowed as deduction in year it has accrued to assessee. benefits of such expense may be enjoyed by assessee over period which may extend beyond relevant assessment year but expense has to be allowed in its entirety in year of accrual unless specifically barred by any provision of IT Act, 1961. good example would be advertisement expense incurred by assessee, benefits of which may be available to assessee for more than one year but same has to be allowed as deduction in assessment year in which expense had accrued. In this case, we find that since expenditure for payment of premium had accrued during relevant assessment year in appeal, therefore, same was allowable as deduction in its entirety in this year itself and AO had wrongly disallowed part of expense as being not related to this year. In view of same, we hold that CIT(A) had rightly deleted addition made by AO and decide issue against Revenue. We have gone through arguments advanced by both parties in respect of ground 3. We find that AO has disallowed expense only on account of fact that assessee had not produced any evidence to show that said expense was related to business of assessee. learned Authorised Representative has submitted that said expense was incurred on consultants appointed by company for their travel to factory premises of assessee. He submitted that said persons were not related to any of directors of company and therefore it could not be presumed that expense was not incurred for business of assessee. We find argument of Authorised Representative to have due force and in absence of any evidence to contrary brought on record by Department to show that expenses incurred on consultants were, personal in nature or not allowable as deduction, we uphold deletion made by CIT(A) and decide this ground against Revenue. In result, appeal of Revenue is dismissed. *** DEPUTY COMMISSIONER OF INCOME TAX v. GUJARAT NRE COKE LTD.