TMI Blog2011 (11) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... crores was not as a deposit out of surplus fund rather it was earnest money paid by the assessee for the purchase of land. Thus, assessee has demonstrated that its business was set up during the accounting period relevant for this assessment year. Therefore, income of the assessee has to be assessed under the head "business income" and consequently loss computed by allowing interest expenditure against interest income deserves to be permitted for carry forward. - Decided in favor of assessee. - IT Appeal Nos. 1428 and 1723 (Delhi) of 2011 - - - Dated:- 30-11-2011 - RAJPAL YADAV, K.D. RANJAN, JJ. Pradeep Dinodia for the Appellant. Rohit Garg for the Respondent. ORDER Rajpal Yadav, Judicial Member The assessee and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... longwith questionnaire were issued. 3. During the scrutiny of the accounts, it came to the notice of the Assessing Officer that official liquidator of the Hon'ble High Court of Karnataka floated a tender for sale of 140 acres of land of M/s. NGPF Ltd. (Government of India, Ministry of Company Affairs). The assessee has raised an interest bearing unsecured loans of Rs. 186 crores on 29.11.2005 from its holding company i.e. DLF Ltd. and has deposited the above amount of Rs. 186 crores on the same day as earnest money in response to the tender invited by the official liquidator. The bid, however, could not materialized and ultimately the amount of Rs. 186 crores was returned to the assessee along with interest. An interest of Rs. 62,08,333 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority that it is engaged in the business of real estates development. The moment it participated in the tender, it will demonstrate that business has been actually commenced. Apart from that factor, if assessee has started any of the activities i.e. identifying the space for the office etc., it would amount to set up of the business and there can be a gap between the set up of a business and commencement of the business. Under the Income-tax Act, 1961, all expenses incurred after the business is set up are allowable expenses, if the same are allowable otherwise as per law. Learned Commissioner took into consideration all these factors. He made a reference to the decision of Hon'ble Delhi High Court in the cases of Indian Oil P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p on completion of first activity in the series of activities. For buttressing his proposition, he relied upon the following decisions: CIT v. Hughes Escorts Communications Ltd. [2009] 311 ITR 253/[2007] 165 Taxman 318 (Delhi) CIT v. L.G. Electronic India Ltd. [2006] 282 ITR 545/[2005] 149 Taxman 166 (Delhi) CIT v. Club Resorts (P.) Ltd. [2006] 287 ITR 552 (Mad.) CIT v. Herbalife International Ind. [2008] 297 ITR 303/[2007] 163 Taxman 147 (Delhi) SLP dismissed by the Supreme Court in 297 ITR (St.) 17 (SC) CIT v. Whirlpool of India Ltd. [2009] 318 ITR 347/185 Taxman 387 (Delhi) Sarabhai Management Corpn. Ltd. v. CIT [1976] 102 ITR 25 (Guj.). Approved by the Hon'ble Supreme Court in CIT v. Sarabhai Management Corpn. Ltd. [1991 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial year immediately preceding the assessment year. The proviso appended to this section further contemplates that in case of a business newly set up in the said financial year, the previous year shall be the period beginning with the date of set up of the business. The expression "set up" has not been defined anywhere in the Act but it is understood in the common parlance and has been explained in a large number of decisions. According to the meaning expounded in the authoritative pronouncement, if an assessee is in a position to deliver the goods means that the business is set up. Actual delivery is immaterial. For example, if a person wants to carry on the business of transportation, the moment he purchased the vehicle for tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under sec. 10(2)." 8. Adverting to the facts of present case, we find that business of assessee is development of real estates. It has participated in a tender floated by the official liquidator Karnataka High Court. To our mind, the participation in the tender is starting of one activity which enable the assessee to acquire the land for development. The actual development of the land is immaterial for construing that business of the assessee has been set up. The revenue authorities have erred in not appreciating these facts rather considering the concept whether the assessee has a surplus fund which has been investe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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