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2017 (9) TMI 656 - ITAT MUMBAIWhether Business Activity taken place during the PY by assessee - business of development of ship building and ship repairing yard - Business set up in January 2008 - AO disallowed all the expenses u/37 in view that the business had not commenced during the year - Held That:- No doubt, the assessee has commenced commercial operation on 01.04.2009, but that is not the date when the business has been set up. Setting up business and commencement of business are two different things. Expenses prior to setting up of business are not allowable. If the facts of Saurashtra Cement & Chemical Industries Ltd (supra), is applied to the facts of the assessee, we are of the view that business activities of the assessee can be divided in to various activities such as the receipt of the confirmed orders, designing of the ship, procurement of raw materials, erection and building of ship, elaborate and comprehensive testing analysis and inspection and delivery of the ship. - No illegality or infirmity in order of CIT(A) - Appeal of revenue is dismissed. Claim of administrative expenses u/s 37 - chargeability of the interest income under the head ‘Income from business’ - Held That:- While disposing off ground no.1, we confirmed the order of the CIT(A) that the business was set up during the year in January 2008. Therefore the expenses incurred after the set up of the business are revenue expenses - CIT(A) is correct in allowing all these expenses. Similarly, the interest income,the interest earned on Fixed Deposit be assessed as business income out the total interest earned by the assessee - Thus, this ground is also dismissed. Deletion of disallowance u/14A - interest expenses - interest corelated to acquisition of fixed assets and capital work-in-progress and is capitalized - Held That:- For the purpose of disallowance u/s. 14A read with Rule 8D(2)(ii) interest which is directly attributable to acquisition of fixed assets or capital work-in-progress,cannot be disallowed as the same cannot to attributable to any particular income or receipt. No illegality in order of CIT(A) - Appeal by revenue dismissed
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