2013 (4) TMI 668 - DELHI HIGH COURT

Assessment of income - when a business can be said to have been set-up? - whether act of depositing earnest money while participating in the tender floated by the official liquidator of the Karnataka High Court and the act of borrowing monies from the DLF Ltd. for the purpose can be construed as acts constituting setting-up of the business of real estate development? - Held that:- The actual acquisition of the land may be a first step in the commencement of the business, but section 3 of the Act does not speak of commencement of the business, it speaks only of setting-up of the business. When the assessee in the present case was in a position to apply for the tender, borrowed money for interest albeit from its holding company and deposited the same with NGEF Ltd. on the same day, it shows that the assessee's business had been set-up and it was ready to commence business.

The revenue contention that till the land is acquired, the business is not set-up is not acceptable as an assessee may not be successful in acquiring land for long period of time though he is ready to commence his business in real estate, and that would result in the expenses incurred by him throughout that period not being computed as a loss under the head “business” on the ground that he is yet to set-up his business. The other argument for the revenue that the tax auditors of the assessee have themselves pointed out that the assessee is yet to commence its business is also irrelevant because of the distinction between the commencement of the business and setting-up of the same.

Under section 260A an appeal lies to the High Court only on a substantial question of law. The finding of the Tribunal in the present case is a finding of fact and it cannot be said that the finding was without any basis or material. Appeal dismissed - no substantial question of law arises. Against revenue