TMI Blog2012 (10) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... e cogency in the proposition that assessee’s business has commenced. Accordingly, order is set aside - Decided in favour of the assessee. - ITA No. 3552/Del/2011 - - - Dated:- 27-7-2012 - SHRI SHAMIM YAHYA, J. Assessee by : Sh. Ashok Kumar Khattar, CA Department by : Dr. B.R.R. Kumar, Sr. D.R. ORDER This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-V, New Delhi dated 20.4.2011 pertaining to assessment year 2007-08. 2. The grounds of appeal read as under:- 1. That the Ld. Commissioner of Income Tax (A) erred on facts and in law in confirming the action of the Assessing Officer for treating the interest income as income under the head income from other sources . 2. That the Ld. Commissioner of Income Tax (A) erred on facts and in law in holding that there is no business activity carried on by the assessee without appreciating that the appellant had filed contemporaneous evidence in the form of bills of advocate for the site visits/ verification of land documents vouchers / copy of cheques making payment of advocates fee. 3. That the Ld. Commissioner of Income Tax (A) erred on facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from other sources. Similarly, profit from mutual fund was treated as short term capital gain. Regarding rental income was treated as income from house property. In view of the above, the Assessing Officer held that no business activity was conducted by the assessee during the relevant assessment year. Therefore, depreciation of Rs. 1,75,048/- and Rs. 2,34,372/- claimed under the head administration and other expenses (excluding ROC fees of Rs. 6,000 and audit fee of Rs. 8500) allowable from business income is disallowed. 4. Against the above order assessee appealed before the Ld. Commissioner of Income Tax (A). The assessee s submissions before the Ld. Commissioner of Income Tax (A) are as under:- The A/R present for the appellant submitted that the Assessing Officer is not justified while holding that no business activity is carried on even though it is true that there is no business income apart from agriculture income and business income from renting part premises for exploiting the business assets otherwise than employing them for its own use for making profits for that business. But existence of no business income apart from above and interest income does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isits and office of various authorities. It is clear that these expense are not of personal nature nor capital expenditure and they have been incurred for the purpose of business. Regarding disallowance of depreciation the A/R submitted that the AO is not justified while making an addition on account of depreciation and the act is very liberal as regards allowance of depreciation and once it is established that the assets are put to use for business purpose, depreciation should be allowed whether the same has been claimed or not. 4.1 Considering the above, Ld. Commissioner of Income Tax (A) noted that the annual income disclosed by the assessee is from agriculture, rental income, profit on sale of mutual fund and interest on FDR which the assessee has claimed to be income from business and claimed expenses and depreciation which the Assessing Officer has not allowed. Ld. Commissioner of Income Tax (A) further observed that assessee has not challenged the action of the Assessing Officer in treating the income earned from renting of Rs. 327667/- as income from house property. Ld. Commissioner of Income Tax (A) further observed that admittedly the assessee has invested surplus fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above criteria are met. Hence, it cannot be said that the expenses are not allowable expenses. Assessee has further submitted that the company was incorporated with a view to conduct business activities only. The nature of the business of assessee is such that it involves huge capital and series of very critical and complex decisions regarding buying / selling of land for development purpose. Assessee contended that huge home work has to be done before buying any land which involves huge span of time as number of aspects have to be taken care of. Even if the land has been purchased, there may not be any business receipts in a particular year as development of land and its re-selling after development is not possible overnight, it involves huge time period which may extend upto years also. In such a case, it may be true that the business receipts are not there but it can not be said that the business activities are not there. It was further submitted that during the year under consideration, assessee has considered number of land purchase options and sought legal opinions for the same and discussed the deal with vendors of land but unfortunately no deal could be materialized till 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es laws:- i) C.I.T. vs. Kriti Resorts Pvt. Ltd. 243 ITR 529 (HPHC) ii) C.I.T. vs. Karanpura Collieries Ltd. 201 ITR 498 iii) C.I.T. vs. L VE. Vairavan Chettiar 72 ITR 114. 7.2 In C.I.T. vs. L VE Vairavan Chettiar (Supra) it was held by the Hon ble Madras High court that as the assessee was maintaining the establishment and was waiting for improved market condition in arecanuts and there was nothing to show that he completely abandoned or closed the business forever, the business must be deemed to be continuing. 7.3 In C.I.T. vs. Karanpura Collieries Ltd. (supra), it was observed that the assessee s coal mines had been nationalized under the Coal Mines (Nationalization) Act, 1973. Under section 32 of the said Act the proceedings for the winding up of the assessee company could not be taken up except with the consent of the Central Government. The assessee company was retaining its status as a company under the Companies Act, 1956. The assessee claimed deduction of expenses amounting to Rs. 75,044/- in the assessment year 1996-97 under different heads such as salary, travelling expenses, etc. The Income Tax Officer allowed deduction of Rs. 1,000/-. The tribunal directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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