Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (8) TMI 481 - AT - Income TaxDisallowance of expenditure - business setting up in the year under consideration or not - proof of commencement of business - accrual or receipt of income - Held that:- AO and the FAA had taken note of expenditure incurred only they had dealt with the concept of setting up of business and commencement of business. We find that after getting approval from FIPB the assessee had made downstream investments of ₹ 22.3 crores in a Bangalore based Hospitality Venture, that for acquisition of a plot of land it had provided ₹ 20 crores as application money in a JV,that had started consultation and preparing feasibility reports. In our opinion, the accrual or receipt of income is not the only criteria to decide the taxability of the assessees. Business is a complex commercial activity and it takes quite a long time to start the practical operations. Therefore, such an issue has to be decided after considering the surrounding circumstances. In the appeal before us, the AO and the FAA have held that expenses incurred were pre-operative period. Besides, the assessee is a company and it has to incur certain expenses for functioning of corporate entity. Thus the assessee had set up the business and that expenditure incurred by it has to be allowed as business expenditure – except for the expenditure incurred on account of ROC charges for increase in authorised capital. In its letter to the AO, dtd. 28.11.2011, the assessee had agreed that it had no objection if the disputed demand was disallowed. We direct the AO to allow the remaining expenses. - Decided in favour of assessee in part. Assessment of income - activity of receiving interest income or receiving some profit on redemption of short term mutual fund investment - under the head income from other sources or business income - benefit of netting of income - Held that:- We find that the assessee company was incorporated to carry on business of setting up of new hotels and investment in hotel projects. It had never applied to RBI for getting a certificate of registra-tion as NBFC. Just because it sold some debentures it cannot be treated an NBFC or an investment company. In our opinion, activity of receiving interest income or receiving some profit on redemption of short term mutual fund investment was not in nature of business. Income arising out of above two activities cannot be termed business income and that the revenue authorities have rightly taxed it under the head income from other sources. Confirming the order of the FAA, we decide second ground of appeal against the assessee. As far as netting of interest is concerned, it is found that the FAA has not dealt with the issue.In our opinion, even if income is to be assesseed under the head income from other sources,benefit of netting of income cannot be denied to the assessee. AO is directed accordingly.
|