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TMI Blog2012 (10) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law in confirming the action of Assessing Officer in disallowing depreciation of Rs. 175048/- and administration and other expenses of Rs. 219872/- on the ground that no business activities were conducted during the year. 4. That the Ld. Commissioner of Income Tax (A) erred on facts and in law and failed to appreciate that absence of business income does not necessarily mean that there is no business activity carried on by the appellant. It is humble pray before your lordship that depreciation has been claimed on the assets of the business which have been used for the purpose of business only and administrative and other expense were also incurred on business activities conducted during the year, hence may kindly be allowed. 5. That the Ld. Commissioner of Income Tax (A) erred on facts and in law in confirming the action of the Assessing Officer for charging interest under section 234B and 234C of the Act. 6. The appellant craves leave to add, alter, amend or vary the above grounds of appeal before or at the time of hearing." 3. In this case Assessing Officer observed that the assessee, during the year under consideration, has shown agricultural income of Rs. 63, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not necessarily mean that there is no business activity carried on by the Co. With Regard to addition on account of disallowance of administrative and other expenses amounting to Rs 2,34,372, the A/R present for the appellant has submitted that the Company has been 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. A 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 i.e. whether the vendor of land is having valid legal title or not? What is the land use? Whether land can be used for development or not? Whether land falls in RI. zone or having mix land use or falls in agricultural zone? Whether necessary approvals for subject land have been obtained or not i.e. map approval, construction plan approval, NOCs from various authorities etc. 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 possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rplus funds in FDRs for short period and earned an income of Rs. 207537/-. The assessee has claimed this income to be income from business which has not been accepted by the Assessing Officer. Ld. Commissioner of Income Tax (A) further observed that there are plethora of decision by various courts ruling that interest earned before commencement of business on short term deposit with banks out of term loan secured from financial institution is income from other sources. Ld. Commissioner of Income Tax (A) further referred to the case laws for the proposition interest earned before commencement of business on short term deposit with banks out of term loan secured from financial institutions is income from other sources. In light of the above, Ld. Commissioner of Income Tax (A) held that Assessing Officer has correctly taxed income from FDR as income from other sources. He held that he was in agreement with the Assessing Officer that no business activity can be said to have been conducted during the year and therefore the disallowance of administrative expenses and depreciation is justified. 5. Against the above order the assessee is in appeal before me. 6. I have heard the rival con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 31.03.2007. It was further submitted that negotiations were still going on and finally the assessee was able to get the land in subsequent years at two places. Thus assessee intends to develop and sell for residential purpose and farm Houses Purposes after implementation of the proposed Master Plan of Delhi. It was further been submitted that car Insurance, Vehicle Maintenance and part of Travelling, Conveyance Expenses, are directly related to Site Visits & Land Inspections. Legal charges have been paid to advocate for obtaining legal opinion for purchase of land etc. Car is used by directors for various visits and office of various authorities. Assessee further contended that depreciation has to be allowed u/s 32 whether the same has been claimed by the assessee or not. It was further submitted that prior condition to be satisfied any business activity is to first invest and spend for the business. Income will generate thereafter only. In a particular year income may be there and may not be there. Occurrence of some income is not the criteria to prove that the business activities are there. But occurrence of expenses for the purpose of business is certainly the criteria to esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Officer to look into the details of the expenditure claimed by the assessee and deal with their allowablity from the view point of the necessity of the assessee company to retain its status as a company under the Companies Act, 1956, and the expenditure directly or indirectly incurred for earning the income which had been assessed under the head "Other sources". On a reference : Held, that so long as a company is not formally struck off the Register of Companies, it continues to have certain statutory obligations. The company has to file various statements and returns. For that purpose and also for the purpose of retaining its status as a company, it has to incur certain expenditure. Admittedly, the company was earning certain income from other sources. For that purpose, it might have been necessary to incur certain expenditure. The Tribunal was justified in giving the direction as it did, to the Income tax Officer to find out the allowability of expenditure and whether any expenditure was incurred for earning the income assessed under the head "Other sources". 7.4 The above case laws support the claim of the assessee. Hence, in the background of the aforesaid disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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