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2020 (6) TMI 569 - AT - Income TaxSetting up of business during the year under consideration - whether set up of business is only set up or is also commencement of business? - HELD THAT:- We hold that in the case of the assessee where substantial activities were carried out by the assessee, since the date of incorporation which had culminated in raising loans, making investment in purchase of land, which was reflected as stock in trade and also advancing loans to associate concerns for purchasing different pieces of land, in order to fulfil the condition of Land Bank of 100 Acres or more, to develop the township in Haryana and where the assessee is entered into development agreement at the close of the present year/beginning of the next year, then assessee can be said to have set up and commenced its business. Assessee having also invested substantial amount in the purchase of another property in the year itself, thus, set up of its business as per its Memorandum of Understanding was done, since it was engaged in the business of real estate. It is held that there is no merit in the order of the authorities below in this regard and the same are reversed. Accordingly, we hold that the assessee having not only set up its business but had also commenced its business during the previous year itself. Hence, ground no.1 of the assessee is allowed. Allowance of interest expenses - HELD THAT:- Once the business had been set up and also commenced in instant year itself, then the interest expenses claimed by the assessee and any other expenditure claimed by the assessee is to be allowed as business expenditure. The assessee had also parked certain funds temporarily in the bank FDRs, on which it had earned interest which is to include also as business income in the hands of the assessee. Accordingly, ground no 2 and 3 raised by the assessee also stand decided in the favour of the assessee and same is dismissed. Taxability of interest income - HELD THAT:- As held as business income; even otherwise the said interest income needs to be set up of against interest expenditure as funds have been borrowed by the assessee and only surplus borrowed funds have been invested in bank FDRs. Accordingly, the ground no. 5 raised by the assessee is allowed.
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