TMI Blog2017 (4) TMI 1591X X X X Extracts X X X X X X X X Extracts X X X X ..... has been contested by it at a stage proximate to the raising of the said issue by the department. Acceptance of jurisdiction without demur at every single stage of the proceeding, assessment and appeals, has to be taken to be final and inviolable. In the facts and circumstances as we have noticed above, we reject the prayer of the appellant to contest the issue of re-opening under Section 147 of the Act raised before us by way of revised substantial question of law. Business expenditure - as per revenue Appellant has not set up or commenced the business and accordingly expenditure incurred are not allowable as business expenditure - HELD THAT:- The stage wise activities engaged in by the assessee over the relevant previous year indicates that it has traversed beyond the stage of exploratory activity and was, in fact, engaged in activity that was integral to the profit earning apparatus and we hold so. Yet another aspect is that the stand of the assessee for the previous year to the effect that it had already commenced business, was accepted by the department. The fact that such acceptance was only by way of Intimation u/s 143(1) and has not been confirmed under scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parks and other projects. The first return of income was filed in terms of the provisions of the Income Tax Act 1961 (in short 'Act') for financial year 2003-04 relevant to assessment year 2004-05 on 25.10.2004 returning business loss of an amount of Rs.5,09,914/-. The return was accepted and intimation under Section 143(1) of the Act issued. The intimation has not been disturbed thereafter and has attained finality as of now. The position that the appellant claimed to have commenced business in the financial year 2003-04 relevant to assessment year 2004-05 was thus within the domain of knowledge of the department. A return of income was filed in respect of assessment year 2005-06 on 29.10.2005 also claiming a loss from business. 4. A notice under Section 148 of the Act was issued on 06.09.2007 and the 'reasons recorded' in terms of Section 148(2) of the Act duly supplied to the assessee. The basis of the re-assessment was the view of the Assessing Officer that expenditure claimed under the head business ought to be disallowed and capitalised insofar as the same related to a period prior to the commencement of business. 5. He took support of the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the business loss cannot be allowed to be set off against the interest income, since the appellant has not commenced business, while the requirement for computation of business income is only on the profits after the set up of the business? 5. Whether under the facts and circumstances of the case, the reopening of the assessment and the consequential assessment made under Section 147 by the assessing officer is valid? 8. While questions 1 to 4 addressed issues raised in the original three substantial questions, question No.5 seeks to introduce the issue of re-assessment for the first time before us. 9. A counter has been filed by the Revenue objecting to the additional grounds and substantial questions of law now sought to be raised on the basis that it was wholly belated and an afterthought. 10. Various decisions have been relied upon by both learned counsel in support of their respective stands. 11. The main contention of the appellant is to the effect that the question of jurisdiction goes to the root of the matter and being a legal issue, can be raised at any time in the proceedings. Mr.Balaji, learned counsel appearing for the appellant assessee, would rely o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rising in a case, but only those that the assessee demonstrates, has been contested by it at a stage proximate to the raising of the said issue by the department. Acceptance of jurisdiction without demur at every single stage of the proceeding, assessment and appeals, has to be taken to be final and inviolable. 16. In the facts and circumstances as we have noticed above, we reject the prayer of the appellant to contest the issue of re-opening under Section 147 of the Act raised before us by way of revised substantial question of law. 17. On merits, the sole issue to be decided is whether the appellant has commenced business in financial year 2003-04. The Directors Report annexed with the return of income for August 2004-05 states thus with respect to the activities of the assessee for the period 01.04.2003 31.03.2004: The Company was incorporated on 3rd November 2003 and obtained its commencement of business certificate on 13th January 2004. The company has made an advance toward transfer of land from the other Joint Venture partner M/s.Tamil Nadu Industrial Development Corporation Limited (TIDCO). The Company has awarded Design and Build contract worth INR 86.5 crores to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slated to be completed for occupation by June 2005. The completion is delayed by about 6 weeks due to cash flow problems faced by the contractor, Tiong Seng Contractors Private Limited. They are expected to complete the project by end June. The quality of construction has been good. The management of IT Park Chennai anticipates that by April 2005, about 150,000 sq.ft. Will be committed and by June atleast 70% to 80% of the building will be leased out. 19. The activities engaged in by the appellant from the 1st of April 2003 till 31st of March 2005 would thus be as follows: ** An advance made towards transfer of land from Tamil Nadu Industrial Development Corporation (TIDCO). ** A contract for designing and building the infrastructure entered into with SION Contractors Private Singapore Limited, Chennai entered into for an amount of Rs.86.5 crores. ** KP Quantity Surveyors India Private Limited, Chennai appointed as Quantity Surveyors for phase 1 of the development of the IT Park at an agreed fee of 90% of the construction cost. ** Award of contract to Indian Private Limited for project management services as part of the development of IT Park at a fee of Rs.2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bentures and other prescribed items of expenditure. Thus, preliminary expenditure constitutes those expenses incurred at a very nascent stage of activity. The terms 'preliminary' by itself is associated within an exploratory exercise to determine and finalize various initial parameters prior to commencement of business activities. There cannot be, in the light of the myriad forms that business assumes today, a hard and fast rule in this regard. 23. One yardstick that can be adopted is to examine whether the expenditure is solely explorative, incurred merely to set the stage for engaging in business activities or whether the expenditure itself is incurred as part of the activity of business. Business, as defined in Section 2(13) of the Act includes trade, commerce, manufacture or adventure or concern in the nature of trade, commerce or manufacture. The profit earning apparatus of the appellant has be seen to be in place in order to legitimately accept the claim that business has, in fact, commenced or has been 'set up'. The terms 'commencement of business' and 'setting up of business' are used interchangeably in the Act. So too by us, in this decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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