TMI Blog2012 (5) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... volved in these three appeals are common, these are clubbed together and disposed of by this consolidated order for the sake of convenience. 2. Grounds raised in all these appeals are more or less common. The facts, in brief, are that the assessee is engaged in the real estate business. For achieving the object set out in the memorandum and articles of association, the assessee has acquired land on outright basis and has entered into development agreement for development and construction of project at Vattinagula Pally. During the financial year 2005- 06, the assessee had incurred cost of ₹ 76,42,493/- in the project which has been 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 procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business of real estate. The learned AR submitted that the reliance placed by the AO on the decisions of Hon ble Supreme Court in the case of Tuticorine Alkali Chemicals and Fertilisers Ltd. reported in 227 ITR 172 and CIT vs. Bokaro Steels Limited (236 ITR 315) are not applicable to the facts of the assessee s case since the Hon ble Supreme Court has interpreted the words set up and commencement of business in the context of manufacturing concerns involving erection of plant and machinery. The learned AR submitted that since the assessee has acquired land, entered into development agreement and has started development work, its business has been set up and commenced and therefore 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight Mktg. (P) Ltd. Vs. ITO, Ward-9(4), the ITAT, Delhi Bench while examining a similar issue of real estate business, has allowed administrative expenses debited to Profit Loss A/c against interest income by observing in the following manner:- The fact of the present case narrated by us n 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness and necessary benefits or deductions claimed by the assessee have to be allowed in accordance with law. It is ordered accordingly. 9. In the case of Dhoomketu Builders Development (P.) Ltd. Vs. Additional CIT, Range-10 (49 SOT 312 (Delhi), the ITAT Delhi Bench has observed as under:- 7. Section 2(13) provides the definition of expression Business' according to which business includes any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The learned counsel for the assessee has referred a large number of decisions noticed above. Similarly, the Assessing Officer has made a reference to the decision of Hon'ble Supreme Court in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under sec. 10(2) . In this case, the ITAT, Delhi Bench has held that even participating in the tender process would amount to setting up of business. From the analysis of the cited decisions of the Tribunal, it will be seen that business is taken to be set up and commenced in case of a real estate business, once the assessee starts the activity of purchasing land, entering into development agreement as per the terms of memorandum and articles of association. The decisions relied upon by the revenue are clearly distinguishable on facts involved in the present appeals. The Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilisers Ltd. s case (227 ITR 172) CIT vs. Bokaro Steels Limited (236 ITR 315) has interpreted the word set up and commencement of business in the context of a manufacturing unit involving different stages till manufacture of final product. Similarly, the decision of Hon ble A.P. High Court in the case of CIT Vs. Coromandel Fertilisers Ltd (supra) is also involving a manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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