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2021 (5) TMI 744 - AT - Income TaxAllowability of expenditure - commencement of business or not ? - HELD THAT:- As decided in own case [2014 (5) TMI 471 - ITAT AHMEDABAD] hon‟ble ITAT has held that the assessee has started the business in the A.Y. 2003-04, hence, no doubt when it has already been held that the assessee has started the business of A.Y.2003-04 then in the present assessment year business is liable to be considered as commenced accordingly. This issue is decided in favour of the assessee against the revenue. Correct head of income - Interest income treated as income from the other sources or business income - HELD THAT:- We noticed that the assessee was under obligation to place on record the purpose of the deposit, utilization of funds and most important fact is also to be brought on record about the nexus of interest earned and interest paid. Accordingly, the AO was directed to examine the material afresh so that the nexus can be established in respect of interest earned and interest paid. Accordingly, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the controversy afresh in accordance above mentioned guidelines. Disallowance of deduction of expenses debited to the profit & loss account which were incurred wholly and exclusively for the business carried on by the appellant during the previous year - HELD THAT:- Since the business has been commenced in the year 2003-04 then no doubt the deduction of expenses debited to the profit & loss account which were incurred wholly and exclusively for the business carried on by the appellant is liable to be allowed in accordance with law. In this regard no doubt the AO is under obligation to verify the facts and to allow the claim of the assessee, hence, this issue is restore to the AO to allow the claim in accordance with law. Disallowance u/s 14A r/w rule 8D - HELD THAT:- The factual position which emerges is, in the year under consideration the assessee has not earned any exempt income. That being the case, as per settled principle of law, no disallowance under section 14A r/w rule 8D can be made. See decision of t PCIT v/s Rivian International Pvt. Ltd [2017 (12) TMI 811 - BOMBAY HIGH COURT] - In view of the aforesaid, we delete the disallowance made by the Assessing Officer. Allowance of Interest expenditure claim u/s 57(iii) - income earned from ICDs was held by the Departmental Authorities as income from other source as against business income claimed by the assessee - alternative claim made by the assessee for deduction of interest expenditure under section 57(iii) of the Act in respect of such income was rejected on the ground that such interest expenditure has no nexus with the interest earned on ICDs - HELD THAT:- As held that interest earned on ICDs are to be treated as income from business. Consequently, the interest expenditure claimed by the assessee has to be allowed. Therefore, the alternative claim of deduction under section 57(iii) of the Act becomes redundant. Suffice it to say, assessee‟s claim of deduction under section 57(iii) of the Act in respect of interest expenditure has been allowed by learned Commissioner (Appeals) and the issue has attained finality as neither the assessee nor the Revenue has contested the order of learned Commissioner (Appeals). Therefore, even otherwise also, assessee‟s claim of deduction under section 57(iii) of the Act is allowable. Disallowance of interest capitalized to work in progress (WIP) - HELD THAT:- Advanced given to the sister concern for purchase of land. The AO disallowed the interest expenses and did not allow to get capitalized to WIP. Additional evidence was filed before the CIT(A) appeal who did not admit the additional evidence. The advance was given to the sister concern who is also engaged in the business of land development and used it for business purpose. The Ld. Representative of the assessee has placed reliance upon the decision in the case of S.A.Builders Ltd. vs CIT (2006 (12) TMI 82 - SUPREME COURT) Taking into account all the facts and circumstances, we set aside the finding of the CIT(A) and restore the issue before the AO to examine the matter of controversy denova.
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