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2017 (1) TMI 252 - HC - Income TaxRevision u/s 263 - whether the order of the Assessing Officer is erroneous on the ground of not being in accordance with law? - absence of actual business activity - Held that:- CIT in his order has held that the Assessing Officer has not taken into account the relevant consideration of absence of actual business activity of the appellant for the purpose of treating the expenditure claimed as an allowable expenditure. Perusal of the assessment order quoted above substantiates these observations of the CIT. Therefore, in our opinion, the first requisite of law stands satisfied. Loss to the revenue on account of the error in the assessment order - Held that:- The impugned orders observe that the Assessing Company during the previous year, relevant to the Assessment Year 2009-10, has not commenced the business of development of SEZ/Real Estate and that the Company had merely obtained loan from the holding company amounting to ₹ 49,81,00,000/- in the financial year 2007-08 and utilized it for investing in share of subsidiary company M/s. Zuari Developers Pvt. Ltd., to the extent of ₹ 8,26,75,564/- and giving loans to subsidiary company to the extent of ₹ 42,16,40,630/-. The interest paid on the loans amounted to ₹ 3,56,51,678/- and other incidental expenses, amounting to ₹ 4,69,544/- were charged to the Profit and Loss Account as expenses incurred during the P.Y. relevant to the assessment year 2009-10. On the basis of this business loss of ₹ 36,10,09,708/- was computed and claimed as loss to be carried forward to subsequent years. In the opinion of the CIT and ITAT since the Company had not commenced its business of development of SEZ/Real Estate, the expenditure claimed could not have been treated as the expenditure incurred for the purpose of business. As such, it was denied. Since the expenditure was not allowable expenditure, it amounted to irregular allowances of loss. Such loss was allowed to be carried forward to the extent of ₹ 1,78,57,950/- and involved notional tax effect of ₹ 60,69,917/- (33.99% of ₹ 1,78,57,950/-). This notional tax effect is directly attributable to the error in the assessment order. Therefore, even the second requisite is satisfied.
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