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TMI Blog2012 (5) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... en transferred to work in progress. A search and seizure operation was carried out in the business premises of the assessee on 9-10-2007. Books of account and other records were seized. Notice was issued under section 153C calling for return for the assessment years 2002-03 to 2007-08. 3. The assessee filed its return for the assessment year 2006-07 2007-08 only since it was incorporated on 11-8-2005. For all the three assessment years i.e., assessment years 2006-07, 2007-08 and 2008-09 returns were filed declaring loss. In the assessment proceedings, the AO while going through accounts found that for the assessment year 2006-07, the assessee has claimed certain business expenditure like administrative expenses of Rs. 3,68,133/-, interest on secured loan of Rs. 8,48,672/- and preliminary expenses of Rs. 33,700/- totalling to Rs. 12,50,505/-. It was found by the AO that the assessee has credited interest income of Rs. 11,34,534/- to the Profit & Loss A/c and has computed net loss. The AO while completing the assessment disallowed expenditure of Rs. 12,50,505/- on the ground that the assessee has not started recognising its revenue during the year and the interest income credited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the assessee is entitled to claim the expenditure incurred under administrative head and interest on unsecured loan against the interest income credited to the Profit & Loss A/c. The learned AR has submitted a chart showing details of work in progress, development cost and details of advance paid for land development against development agreement. The learned AR further submitted that the accounts having been prepared in accordance with the accepted accounting standard, the treatment of valuation of work in progress should have been accepted. The learned AR submitted that the interest paid on unsecured loan should have been adjusted against interest income credited to Profit & Loss A/c since they are inter-linked to each other The same loan taken by the assessee was given as advance on which interest was earned. In support of his contention, the learned AR relied on the following decision of different Benches of the Tribunal:- i) Superlight Mktg. (P) Ltd. Vs. ITO, Ward- 9(4),Delhi (2005) 4 SOT 348 (Delhi) ii) Swire Holdings (P) Ltd. Vs. ITO, Ward- 12, (2006) 6 SOT 61 (Bang) iii) Dhoomketu Builders & Development (P.) Ltd. Vs. Additional CIT, Range-10 (49 SOT 312 (Delhi) 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain conditions. It is also seen that the assesses have also entered into agreement for development of plots with the prospective buyers and have received advances from them. In the light of the aforesaid evidence available on record and the facts of the present case, we are of the view that assesses have commenced their business and have claim for deduction towards administrative expenses are fully be allowed. The ld. Counsel for the assessee also puts forward alternative arguments with regard to the allowability of those expenses which arguments are not considered in view of our conclusion that the assesses have commenced their business." 8. In case of Swire Holdings (Pvt.) Limited (supra), the ITAT, Bangalore Bench "B", Bangalore while considering a similar issue has observed in the following manner:- "I have heard the rival submissions and perused the records. The fact that the assessee's main business is real estate business is not in dispute. The fact that the assessee had advanced money to various land owners for the purpose of acquiring and dealing in landed properties is not in dispute. Therefore, as rightly contended by the learned counsel for the assessee, the mome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Tuticorin Alkali Chemicals & Fertilizers Ltd.'s case (supra). In various authoritative pronouncement of Hon'ble Supreme Court and Hon'ble High Court, meaning and scope of expression, business has been propounded. It is not necessary to recite and recapitulate of those decisions but on the strength of them, it would be suffice to say that word "business' had a wide import and it means an activity carried on continuously and systematically by a person by the application of his labour and skill with a view to earn an income. Section 3 of the Income-tax Act, 1961 defines "previous year". Previous means the financial year immediately preceding the assessment year. The proviso appended to this section further contemplates that in case of a business newly set up in the said financial year, the previous year shall be the period beginning with the date of set up of the business. The expression "set up' has not been defined anywhere in the Act but it is understood in the common parlance and has been explained in a large number of decisions. According to the meaning expounded in the authoritative pronouncement, if an assessee is in a position to deliver the goods me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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