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2016 (6) TMI 88 - ITAT CHENNAI

2016 (6) TMI 88 - ITAT CHENNAI - TMI - Set off interest income with expenditure - non commencement of business - Held that:- Assessing Officer relied on Supreme Court decision of Tuticorin Alkali Chemicals and Fertiliser Limited (1997 (7) TMI 4 - SUPREME Court) were it was held that interest on bank deposits received before commencement of operations of the business should be offered separately as income from other sources. The assessee has acquired the property and also invested in bank deposit .....

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in the circumstances were assessee has not set up the business or commenced the business and also not submitted commencement of business certificate issued by Registrar of Companies under Companies Act, 1956. We are of the opinion that the ld. Commissioner of Income Tax (Appeals) has elaborately dealt on the disputed issue in confirming the order of Assessing Officer and we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and uphold the same and dismiss the gr .....

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5- 2006 passed u/s.143(3) r.w.s. 147 and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). 2. The assessee has raised the following grounds:- 2. The learned CIT(A) has failed to appreciate that the work business is one of wide import and in fiscal statutes, it must be construed in a broad sense rather than a restricted sense. 3. The learned CIT(A) failed to appreciate the fact that where the tax payer is engaged in real estate activity, the business can be considered to be .....

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turn of income was processed under sec 143(1) and loss was accepted. Subsequently, the Assessing officer issued notice u/see 148 of the Act were the Assessing Officer has reason to believe that the expenses claimed by the assessee in the precommencement period should be capitalized and interest on deposits taxable under the head "Income from other sources". The Assessee submitted explanation with supporting (Annx 1 and 2) that the marketing division of the assessee premises had commenc .....

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relied on the decision of Tuticorin Alkali Chemicals and Fertiliser Limited Vs CIT 227 ITR 172 (SC). Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4. In the appellate proceedings, the Commissioner of Income Tax (Appeals) considered the grounds and findings of the Assessing Officer on the claim of interest on deposits set off against the expenditure and the assessee contention being set up of commercial business operations. The ld. Authorised R .....

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the submissions of the Id.AR. The Id.AR argues that the commencement of the business in the case of I.T.parks is different from the regular business. He is of the opinion that once the advances were paid to acquire land for construction of I. T. parks, the business commence. The appellant argues that it itself has capitalized some part of the pre- operative expenditure and some was claimed as revenue. As seen from the facts of the case the issue in question is the treatment given to the interest .....

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uch commencement needs to be capitalized. Since no business has commenced during the financial year relevant to A.Y. 2005-06 by generating any income by the appellant company, the bank interest earned during the year from the expenditure of the company for the year when the business has not commenced, is not in order. The action of the Assessing Officer by bringing to tax such bank interest earned prior to the commencement of business under Income from Other Sources is well within the law. I do .....

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n broader sense and applicability. The ld. Commissioner of Income Tax (Appeals) has erred in not appreciating the facts that assessee is engaged in real estate activity and the business is presumed as commenced on acquisition of land and any expenditure incurred during the said period is treated as Revenue expenditure. The ld. Authorised Representative substantiated with written submissions on the main objects of the assessee company as development of I.T. Park and industrial park and constructi .....

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it and loss account and setoff of against the business expenditure. The ld. Authorised Representative relied on the judicial decisions and produced memorandum of association and articles of association and substantiated the grounds with Tribunal decisions in the case of Arcane Developers Pvt. Ltd vs. ITO & others in ITA 4632/Del/2010 dated 22.06.2012 and emphasized on High Court decision of CIT vs. M/s. Dhoomketu Builders & Development Pvt. Ltd. in ITA 528 & 529/2012, dt 23.04.2013 a .....

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ness operations during the year and the ld. Authorised Representative drew our attention to the annual report of the company and referred to schedule of profit and loss account were the assessee has offered income in the profit and loss account and claimed expenditure. Further offered the net loss as per return of income. The decisions relied by the assessee on acquisition of land is deemed as business been set up but the assessee company was incorporated on 03.11.2003 which falls in the financi .....

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period were the assessee company yet to start business activities. On perusal of objects of Memorandum of Association and Articles of Association assessee is carrying on the business in India including maintaining, establishing, developing and construction of commercial complex and residential building. The assessee has claimed set off on assumption that business has been setup and income has to be adjusted against the project cost. The ld. Authorised Representative relied on the decisions, are .....

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