TMI Blog2005 (5) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... n ITA No. 4142/Del./2004) and a sum of Rs. 2,62,915 (in the case of the assessment in ITA No. 4143/Del./2004) on the ground that the business of the assessees had not commenced and, therefore, the expenditure in connection with business cannot be allowed as deduction. The facts and circumstances under which the disallowance was made by the Assessing Officer are identical. These appeals were heard together and a common order is being passed for the sake of convenience. 2. Both the assessees are promoters and developers of land at Gurgaon. For assessment year 2001-02, the assessee in ITA No. 4142/Del./2004 filed return of income declaring nil income. There was, however, book profit under section 115J of Rs. 38,881 on which tax had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment of the land acquired separately by each of the parties to the joint development agreement. Copy of the said agreement dated 5-8-1996 has been placed before us. The land to be developed by the assessees together with its associates was known as Mayfield Gardens. In connection with the grant of licence, the Director of Town Planning asked the assessees to provide a Bank Guarantee and the FDR on which interest was received which have been credited in the P L A/c. by both the assessees was taken out for the purpose of providing as security to the book for the bank guarantee provided by the Bank on behalf of the assessee to the Director of Town Planning. 3. In the light of the aforesaid facts, the Assessing Officer called upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn interest income were to be allowed as deduction. He found postage and telegram, filing fee, bank charges and audit fees were allowable as expenses in earning the interest income and consequently disallowed a sum of Rs. 2,70,661 in the case of the assessee in ITA No. 4142/Del./2004 and a sum of Rs. 2,62,950 in the case of the assessee in ITA No. 4143/Del./2004. On appeal by the assessee, the CIT(A) upheld the order of the Assessing Officer by holding that the business of the assessee had not commenced and merely acquiring a land for the purpose of joint development with various other companies and getting the licence from HUDA for construction of residential complex cannot be construed as factors which can go to show that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year." It is on the basis of this definition that the Hon ble Bombay High Court held that for the purpose of Indian Income-tax Act, it is the setting up of the business and not the commencement of the business that is to be considered. The Hon ble High Court further held that when the business is established and ready to commence the business, then it cannot be said that business itself is set up but before it is ready to commence, it is not set up. It further held that there may be time gap in setting up of the business and commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew. Considering the principles emerging from the various decisions referred to above, we shall now examine as to what constitutes the business of the assessee. 5. The fact of the present case narrated by us in paras 2 and 3 of this order are not in dispute. As already noticed while narrating the facts, in our view purchase of land for the purpose of divisions into plots would amount to commencement of business. A copy of the licence granted by the Director, Town Planning to the assessee and its associated concerns also goes to show that necessary licence had been given by the authorities subject to fulfilment of certain conditions. It is also seen that the assessees have also entered into agreement for development of plots with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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