TMI Blog2016 (7) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favour of assessee. Disallowance of loss which includes business expenditure - addition confirmed as no income was earned by the appellant during the relevant previous year - Held that:- The routine expenses incurred by the assessee after setting of the business in our view are allowable as business expenditure. This issue is accordingly decided in favour of the assessee. See CIT Vs. Dhoomketu Builders and Development P. Ltd. [2013 (4) TMI 668 - DELHI HIGH COURT ] wherein held there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business would be permissible deductions/business loss. - Decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,577/- on compulsory FDR as 'income from other sources' as against receipt from business activity as treated by the appellant. The Learned CIT (A) ought to have directed the Assessing Officer to consider the same as business receipt since it was inextricably linked with the business activities of the appellant; and, as such, deductible from the work-in-progress. 3. Without prejudice to the above and in the alternative, the Learned CIT (A) ought to have directed the Assessing Officer to grant the benefit of netting off of such income against interest expenditure. 4. The Learned CIT (A) has erred in law and on facts in concurring the disallowance of loss of ₹ 4,92,485/-, which includes business expenditure of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration, assessee reduced the entire interest income of ₹ 1,19,33,273/- from its work in progress. During assessment proceedings, the AO asked the assessee as to why the gross interest income on FDR earned by the assessee should not be brought to tax. In response, the assessee submitted that the FDR was in the nature of compulsory fixed deposit into bank as a project performance guarantee and that the same was incidental to the business of the assessee. The assessee thereby submitted that the interest earned on compulsory fixed deposit was inextricably linked to the project of the assessee and hence had rightly been reduced out of work in progress. The assessee therefore submitted that the same should not be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal receipts going to reduce the cost of construction. 6. The ld. CIT(A), however did not accept the above contention of the assessee and observed that in the instant case, the assessee had not actually started business in real terms as the deposits were made in the process of starting business and under these circumstances, the interest income earned on the FDR s was taxable under the head Income from other Sources . He observed that the funds utilized for making the FDR s had not been generated from the business activity of the assessee. He accordingly upheld the finding of the AO on this issue. 7. Being aggrieved by the above findings of the CIT(A), the assessee has come in appeal before us. Ld. AR of the assessee at the outset ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar Mills Ltd.[243 ITR 2] (Supreme Court) and also other decision of the Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. vs. ITO [2009] 315 ITR 255 (Delhi) and also considering the distinguishing facts in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT (supra) has upheld the finding of the Tribunal that the interest earned by the assessee on FDRs has intrinsic and inseggregable nexus with the work undertaken and, therefore, the interest earned by the assessee is capital in nature and shall go towards adjustment against the project expenditure and the same cannot be assessed as income from other sources. 8. We find that the facts of the case in hand are squarely covered by the above various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business would be permissible deductions/business loss. 12. In view of the above proposition of law laid down by the Hon ble Delhi High Court, the routine expenses incurred by the assessee after setting of the business in our view are allowable as business expenditure. This issue is accordingly decided in favour of the assessee. 13. Now, coming to assessee appeal for A.Y.2009-10, the assessee in this appeal has taken six grounds of appeal. The ld. AR of the assessee at the outset had stated that he does not press ground no.1,2 4 are th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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