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2014 (5) TMI 471 - ITAT AHMEDABADSetting up and commencement of business – Held that:- Following Styler India (P.) Limited. Versus Joint Commissioner Of Income-tax, Special Range - 1, Pune [2008 (4) TMI 388 - ITAT PUNE-A] - the expenditure on building was capital in nature is not allowable - the assessee-company was constituted to develop and operate infrastructure facilities in India towards development of Special Economic Zones at Positra, in the State of Gujarat - The requisite approval was also obtained from the government. After obtaining the approval from the Ministry of Commerce - prospecting activity itself is to be considered as assessee's business activity - There is no dispute with reference to the expenditure being spent on prospecting activities in the year under consideration - the assessee has commenced its business activities. Income from other sources - Taxing of interest receipts on staff loans and deposits for letters of credit - Disallowance of expenses – Interest and bank charges u/s 57(iii) of the Act – Held that:- Following DE Beers India Prospecting (P) Ltd. Versus ITO [2011 (12) TMI 409 - ITAT, Mumbai] - the assessee has commenced its business and is eligible for claim of deduction u/s 37(1) on expenditure of non-prospecting activities and depreciation - the assessee is eligible for set off of the interest income - Most of the issues arose as deductions are being claimed on non-operational incomes also - the assessee is expected to place on record the purpose of the deposit, utilization of funds and most important fact is also to be brought on record about the nexus of interest earned and interest paid - the matter should be remitted back to the AO so that the procurement of funds, its utilization and the source of deposit has to be examined afresh by the AO and the nexus can be established in respect of the interest earned and interest paid – Decided in favour of Assessee.
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