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2022 (2) TMI 1084 - AT - Income TaxDisallowance of business expenditures as the business had not yet commenced - whether the assessee has commenced its business or not during the assessment year 2012-13? - HELD THAT:- The commencement of real estate business would normally start with acquisition of land or immovable property. In the case of the assessee who is in the business of development of real estate construction and infrastructure development, the acquisition of land would clearly show that the assessee is ready to commence business and as a corollary, that it has already been set up. The actual acquisition of the land may be the first step in the commencement of the business. Section 3 of the Act does not speak of commencement of business but only of setting up of the business. We find from the records that the assessee has purchased lands vide documents no. 5158 & 5159 of 2012 dated 11.07.2012. Further, the assessee has produced the application of planning permit before the CMDA on 15.11.2011. The approval was accorded by the respective authorities on 01.07.2013. Based on the above, we find that the business of the assessee has been duly set up during the assessment year 2012-13. Disallowance of professional charges and legal charges - HELD THAT:- It is an admitted fact that the assessee has incurred legal and professional charges directly attributable to the acquisition of land as the assessee has entered into joint development agreement, we are of the opinion that the authorities below has rightly capitalized above expenditure along with cost of acquisition of the property and thus, we find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly, the ground raised by the assessee is dismissed. Treatment of interest from bank deposits as income from other sources - Without any basis, the ld. CIT(A) has simply opined that the temporary deployment of funds and earning interest there upon cannot be considered as inextricably linked to business activity of the assessee. Admittedly, other than business purpose, the interest income or any other funds sourced were utilized. Thus, we are of the opinion that the assessee has invested amounts received which are inextricably linked with the process of setting up of its business as laid down by Hon’ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd [1998 (12) TMI 4 - SUPREME COURT] which was followed in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd. [1999 (4) TMI 7 - SC ORDER]. Therefore we are of the considered opinion that the interest allowed on fixed deposits before the commencement of the project shall be reduced from the cost of the project and thereby, the decision of the ld. CIT(A) is set aside on this issue.
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