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TMI Blog2012 (11) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of expenditure in that year is Rs.20,94,175/- and depreciation disallowed in that year is Rs.2,70,291/-. Similarly, in AY 2003-04, the interest income assessed as income from other sources is Rs.20,81,474/- and expenditure disallowed in this year is Rs.15,37,327/- and depreciation disallowed in this year is at Rs.2,54,100/-. 3. Since the facts are identical in both years, we narrate the facts for A.Y 2002-03 which are noted by Ld. CIT(A) in para-2.1 to 2.1.9 of his order for A.Y 2002-03. The same are reproduced herein below:- "2.1 The appellant company was .set up for establishment of infrastructure facility for new industry. For the assessment year 2002-03, the appellant filed return of income on 30/10/2002 declaring total income of Rs.3,94,174/- u/s. 1158JB. In the regular computation, the appellant company claimed business loss amounting to Rs.6,63,262/-. The Assessing Officer observed that the appellant company received :he following income: 1. Consultancy charges Rs. 26,763 2. Other Income Rs. 300 3. Sale of bid documents Rs. 1,20,000 (application forms) 4. Interest income Rs.18,94,699 5. Credit balances written off Rs. 13,564 Rs. 20,55.426 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Were made by GIDC on behalf of the appellant. Advances to the tune of Rs.18.69 crores were paid to GIDC against expenditure incurred by them. The final statement of account for the expenditure was yet to be settled and accordingly accounting entries were not passed in appellant's books. It was further pointed out that the expenditure incurred on development of different growth centres were shown under the head 'Stock-in-trade' in the Balance Sheet. Appellant had given deposit to Gujarat Electricity Board for power facilities. It was argued that once the company had purchased land for development of growth centres at different places, given deposit to GE and incurred other expenses for infrastructure facilities, commercial activities had already commenced from July 1993. The administrative and other expenses were revenue in nature. The fact that part of such expenditure was capitalized in the books did not alter its character.. According entries did not determine the deductibility or otherwise of expenditure under I.T. Act. In the context, the expenditure was to be allowed. 2.1.5 Appellant further argued that during A.Y 1995-96, the expenditure was shown as revenue and the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d specified above, you shall be liable to pay simple interest at one and one-half per cent for every month or part of a month from the date commencing after end of the period aforesaid in accordance with Section 220(2) 4. If you do not pay the amount of the tax within the period specified above, penalty (which may be as much as the amount of tax in arrear) may be imposed upon you after giving you a reasonable opportunity of being heard in accordance with Section 221. 5. If you do not pay the amount within the period specified above, proceedings for the recovery thereof will be taken in accordance with Sections 222 to 229,231 and 232 of the Income-tax Act, 1961. 6. If you intend to appeal against the assessment/fine/penalty, you may present an appeal under Part A of Chapter XX of the Income-tax Act, 1961, to the Deputy Commissioner (Appeals) of Income-tax/Commissioner of Income-tax (Appeals)within thirty days of the receipts of this notice, in Form No. 35, duly stamped and verified as laid down in that form. 7. The amount has become due as a result of the order of the Deputy Commissioner(Appeals) of Income-tax/ Deputy Commissioner of Income-tax/Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of res judicata did not apply to tax proceedings and there was no compulsion to adhere to the mistake or omission in A.Y 1995- 96. Accordingly the argument of the appellant in this regard was rejected." 4. Being aggrieved, the assessee carried the matter before Ld. CIT(A) but without success and now the assessee is in further appeal before us. 5. It is submitted by the Ld. AR of the assessee that this very issue was before the Tribunal in assessee's own case for assessment years 1998-99 to 2001-02 in ITA No.434/Ahd/2004, 2244/Ahd/2006, 2245/Ahd/2007 and 2246/Ahd/2006 dated 16-11-2007 and as per this Tribunal order, the issue was decided by the Tribunal against the assessee but this Tribunal order should not be followed because letter dated 27-01-005 issued by Gujarat Industrial Development Corporation (GIDC for short) to the assessee-company was produced before the Assessing Officer in this year for the first time. He submitted the copy of this letter at page-16 of the Paper Book. He also submitted that commencement of business has no relation with allotment of plots. He also submitted that exploitation of asset is relevant for capital asset but in the present case, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a difference in facts in the present two years. The relevant para of the Tribunal order is para-6, which is reproduced below:- "6. We have heard the rival contentions of both the parties. We have carefully gone through the judgments relied on by the learned AR of the assessee. In the case of Prem Conductors Pvt. Ltd. v. CIT, Hon'ble High Court considered the decision in the case of Saurashtra Cement & Chemical Industries and Sarabhai Management Corporation Ltd. (supra) and has laid down the test to be applied in order to determine as to whether the business has commenced. The relevant portion of the said judgment is quoted here under: "10. Thus, it is clear in the light of the decisions of this High Court in Saurashtra Cement & Chemical Industries'. case (supra} and Sarabhai Management Corporation Ltd 's case (supra) that what, the Court has to consider is, whether the business of the assessee consists of different categories and whether the activity which was started earlier than the actual commencement of the production in the instant case could be said to have been an essential part of the business activity of the assessee. The company can be said to have set up its busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was commencement of regular business activity of the assessee. The Hon'ble Patna High Court in the case of Sitalpore Sugar Works Ltd v. CIT (1954) 25 ITR 549, clearly held that merely for the reason that the activity of the company was covered by Memorandum of Association, it could not be concluded that the activity was a business activity. From the notes on accounts for financial year 2001-02 as contained part B of Schedule 1 to the accounts, it could be seen that even as on 31st March, 2002, no growth centre was completely set up and the appellant had only made payment of Rs.18,69,41,210 to Gujarat Industrial Development Corporation for the purpose of setting up of growth centres and that the same was shown under the head loans and advances and even the details of expenditure were pending finalization between the appellant-Corporation and the Gujarat Industrial Development Corporation. Considering the above and the project of the appellant Corporation, I am of the view that the activity of the appellant-Corporation during the previous year was solely in the nature of setting up business and acquiring capital assets and the business activity would commence only thereafter when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two years. 11. Now, we examine the applicability of various judgments cited by Ld. AR of the assessee. The first judgment cited is of the Hon'ble Delhi High Court rendered in the case of E Funds International India (supra). In that case, the decision of Hon'ble Delhi High Court is on the basis that the assessee had taken all steps necessary to obtain business including efforts for marketing itself and on this basis, it was noted that the assessee has commenced business in the relevant previous year but in the present case, no such facts is brought on record by the assessee to show that assessee has taken all steps necessary to obtain business including efforts for marketing and therefore, this judgment of Hon'ble Delhi High Court is not applicable in the present case. Second judgment cited is of Hon'ble jurisdictional High Court rendered in the case of Sarabhai Management Corporation Ltd. (supra) and we find that this decision is not applicable in the present case because the facts are different. In that case, the assessment year under consideration was 1965-66 and the relevant accounting year was the year ending on 31st March, 1965. The facts of that case are that the main objec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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