TaxTMI 
TaxTMI 
2013 (4) TMI 668
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....he head "business" which represented the difference between the interest of Rs. 62,28,333/- received from NGEF Ltd. of Bangalore on the earnest money of Rs. 186 crores deposited with it and the interest of Rs. 1,79,37,534/- paid to DLF Ltd. from whom the assessee had obtained a loan of Rs. 186 crores. The interest income and payment arose in the following circumstances. The official liquidator of the Karnataka High Court floated a tender for sale of 140 acres of land belonging to NGEF Ltd. which had apparently gone into liquidation. In order to participate in the tender, the assessee obtained a loan of Rs. 186 crores on 29.11.2005 from its holding company i.e. DLF Ltd. and on the same day deposited the aforesaid amount as earnest money in response to the tender floated by the official liquidator. The assessee was, however, not successful in purchasing the land and, therefore, the earnest money was returned to it with interest of Rs. 62,28,333/-. On the amount borrowed from DLF Ltd. the assessee was liable to pay interest of Rs. 1,79,37,534/-. The difference between the interest received and the interest paid was claimed by the assessee as loss under the head "business". This is the....
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....e and the revenue filed cross appeals before the Tribunal, the assessee contending that its business in real estate had been set-up on 29.11.2005 when it deposited the earnest money pursuant to the tender floated by the official liquidator of the Karnataka High Court on behalf of NGEF Ltd. and, therefore, it was entitled to the computation of the business loss at Rs. 1,17,12,473/- and carry forward of the same and the revenue contending that the CIT (Appeals) ought not to have allowed deduction in respect of the interest paid to DLF Ltd., while computing the income under the head "income from other sources". The Tribunal in the common order passed on 30.11.2011 first addressed itself to the question arising in the assessee‟s appeal, namely, whether the business in real estate development was set-up during the relevant accounting year. After examining the rival contentions and after referring to a few relevant authorities, it agreed with the assessee‟s contention in the following words: - "8. Adverting to the facts of present case, we find that business of assessee is development of real estates. It has participated in a tender floated by the official liquidator Karnata....
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....ssee‟s attempts to acquire the land did not fructify is not a relevant test for the purpose of finding out whether the business was set-up. It is contended that the setting-up of the business could be either simultaneous with or anterior to the commencement of the business and in this case the moment the assessee borrowed money and deposited them with NGEF Ltd. and thus participated in the tender, it had taken the steps that constitute the setting-up of the business. 8. On a careful consideration of the issue in the light of the facts and the rival contentions, it seems to us that the decision of the Tribunal is based on the relevant tests that have been handed down judicially for the purpose ascertaining as to when a business can be said to have been set-up. The question as to when a business can be said to have been set-up is a question of fact to be ascertained on the facts and circumstances of each case and considering the nature and type of the particular business and no universal test or formula applicable to all types of businesses can be laid down. In recognition of this position the Indore Bench of the Madhya Pradesh High Court in Precision Electricals And vs Commis....
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.... it is to develop real estates, is in a position to perform certain acts towards the acquisition of land, that would clearly show that it is ready to commence business and, as a corollary, that it has already been set-up. The actual acquisition of land is the result of such efforts put in by the assessee; once the land is acquired the assessee may be said to have actually commenced its business which is that of development of real estate. The actual acquisition of the land may be a first step in the commencement of the business, but section 3 of the Act does not speak of commencement of the business, it speaks only of setting-up of the business. When the assessee in the present case was in a position to apply for the tender, borrowed money for interest albeit from its holding company and deposited the same with NGEF Ltd. on the same day, it shows that the assessee‟s business had been set-up and it was ready to commence business. The learned senior standing counsel for the revenue would, however, state that till the land is acquired, the business is not set-up. The difficulty in accepting the argument is that an assessee may not be successful in acquiring land for long period ....