TMI Blog2022 (2) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... orities on 01.07.2013. Based on the above, we find that the business of the assessee has been duly set up during the assessment year 2012-13. Disallowance of professional charges and legal charges - HELD THAT:- It is an admitted fact that the assessee has incurred legal and professional charges directly attributable to the acquisition of land as the assessee has entered into joint development agreement, we are of the opinion that the authorities below has rightly capitalized above expenditure along with cost of acquisition of the property and thus, we find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly, the ground raised by the assessee is dismissed. Treatment of interest from bank deposits as income from other sources - Without any basis, the ld. CIT(A) has simply opined that the temporary deployment of funds and earning interest there upon cannot be considered as inextricably linked to business activity of the assessee. Admittedly, other than business purpose, the interest income or any other funds sourced were utilized. Thus, we are of the opinion that the assessee has invested amounts received which are inextricably linked with the process of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 3,50,000/- is also attributable to acquisition of property and therefore it also needs to be capitalized. 5.3. The Commissioner of Income Tax (Appeals) erred in the business income( loss) computation, in the page number 20 of the CIT(A) order, the net loss as per profit and loss account (After deferred tax assets of ₹ 48,288/- ) was wrongly taken of Rs. (19,05,445/-) instead of Rs (19,53,733/-). While computing the Taxable Income and therefore the net loss as per profit and loss should be taken before deferred tax Asset of Rs. (19,53733/-). 6.1. The Commissioner of Income Tax (Appeals) has grossly erred in confirming the treatment of interest on bank deposits to the tune of ₹ 10,36,165/-as income from other sources. 6.2. The Commissioner of Income Tax (Appeals) ought to have seen that the Assessee has rightly capitalized the net the interest paid after netting of interest received during the construction period under the head ``work in progress and as such, the order of the Assessing Officer is erroneous. 6.3. The Commissioner of Income Tax (Appeals) ought to have appreciated that the Interest earned on the Deposits is inextricably linke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n set up and commenced. The ld. Counsel for the assessee also reiterated that until the planning permission is sanctioned no construction activity can be commenced. The first step in the commencement of business is to apply for the planning permit with respective authorities. 7. Countering the arguments, the Ld. DR argued that except for the application to CMDA for the planning permit there are no activities carried out by the assessee showing commencement of business. Hence, the expenditure incurred before the commencement of business cannot be treated as pre-operative expenses and capitalized with the project cost. The Ld. DR also argued that the interest n the fixed deposits is arising out of investment on surplus funds in short term fixed deposits and hence to be treated as income from other sources. The Ld. AR argued that the interest under fixed deposits on a short term basis by parking available funds arising out of share capital and it should be utilized to reduce the cost of the project and capitalized. The Ld. DR relied on the Hon ble Madras High Court judgment in Express Infrastructure Pvt Ltd vs DCIT in TCA No. 783 of 2018. 8. We have heard the rival contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On appeal before the ld. CIT(A), the assessee was asked to explain with all the vouchers and details of services rendered for incurring the above expenditure. Accordingly, before the ld. CIT(A), the assessee has submitted that M/s. NCR Consultants Ltd has been engaged for preparation of project report documentation support and other advisory service charges and paid ₹.7,50,000/-. Similarly, M/s. Sai Raj Associates has been engaged towards consultation and providing drafts of affidavits, draft agreement, etc. for the property and an amount of ₹. 3,50,000/- has been paid. In support of the claim, the assessee has furnished all vouchers, bills raised by the consultants. After considering the above, the Ld. CIT(A) was of the opinion that the professional charges as well as legal charges are directly related to the acquisition of land as well as joint development agreement entered into by the assessee, these expenditure are directly relatable to capital acquisition and are liable to be capitalized along with the cost of acquisition of the property. Accordingly, as a combined expenditure ₹.11,00,000/- (₹ 7,50,000 + ₹.3,50,000) are not liable to be claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business purposes. We find force in the arguments of the ld. Counsel. On perusal of the material available before us, decision of the Hon ble Supreme Court in the case of M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd (supra) is not applicable for the case of the assessee. Without any basis, the ld. CIT(A) has simply opined that the temporary deployment of funds and earning interest there upon cannot be considered as inextricably linked to business activity of the assessee. Admittedly, other than business purpose, the interest income or any other funds sourced were utilized. Thus, we are of the opinion that the assessee has invested amounts received which are inextricably linked with the process of setting up of its business as laid down by Hon ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd (236 ITR 315) which was followed in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd (243 ITR 2). Therefore we are of the considered opinion that the interest allowed on fixed deposits before the commencement of the project shall be reduced from the cost of the project and thereby, the decision of the ld. CIT(A) is set aside on this issue. 12. In the result, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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