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2011 (12) TMI 409 - AT - Income TaxReopening - Determination of date of commencement of business - The main issue is with reference to allowance of expenditure claimed by the assessee, disallowed by the Assessing Officer on the reason that the assessee has not commenced the business in the year under consideration - Filing the revised return was due to the fact that an expenditure of ₹ 57.44 lakhs stated to have been incurred on prospecting activities were not claimed as per the provisions of section 35E of the Act and was capitalized by the assessee - Held that: - There is no dispute with reference to the fact that the assessee has undertaken prospecting activities in the year under consideration and has suo moto disallowed the expenditure pertaining to the prospecting activities under section 35E of the Income Tax Act - High Court of Gujarat in the case of Saurashtra Cements and Chemical Industry Ltd [1972 (8) TMI 19 - GUJARAT High Court] it is held that the assessee has commenced its business activities. - Claim of expenditure allowed. Regarding interest received on short term deposit under the head 'income from other sources' instead of 'business income' as claimed in the return of income - There is various case law on the issue, holding if the capital funds are kept in deposits then the income is to be assessed as income from other sources and if the working capital funds are kept then to be treated as business income but, most of the case law was given on respective facts. Most of the issues arose as deductions are being claimed on non-operational incomes also. In that context various decisions were rendered depending on facts and applicable law. The discussion will become only academic in nature in this case without there being any consequential effect as interest income is eligible for set off to business loss whether assessed as income from business or income from other sources. The Assessing Officer is however directed to allow the set off of business loss as per the provisions of the Act. - Appeals are partly allowed
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