TaxTMI 
TaxTMI 
2013 (11) TMI 310
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....ices, infrastructure development such as development of information technology park and commercial complex. For the impugned assessment year the assessee files its return of income declaring total income of Rs.9,59,802/-. In course of the assessment proceedings, the Assessing Officer noticed that the assessee had shown interest income of Rs.2,78,42,337/- on deposits kept in banks and debited an amount of Rs.2,49,98,538/- to the P & L A/c. under administrative and other expenses. The Assessing Officer further noticed that the notes on accounts in the annual report read as under : "The Company was incorporated on February 6th, 2003 as Pioneer Telafone Pvt. Ltd. and changed its name on March 14th, 2007 as Iconic Designs Pvt. Ltd.....
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....ess activities the expenditure has to be reduced from such income. 4. The Assessing Officer, however, did not accept the contentions of the assessee by observing that though the company was not setting up a factory but it is developing infrastructure, which involves building I.T. Parks and complexes and construction activity was going on. Though the income was on short term investments not out of borrowed funds for setting up of factory but out of funds received towards investment for expansion of business activities, but still then interest earned on deposits made out of capital contribution is to be treated as income from other sources. The Assessing Officer further held that Director's annual report in schedule 'N' under significant acc....
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.... 234 ITR 412 held that the interest income has to be treated as income from other sources. The Assessing Officer further held that as the interest income was earned during construction and before commencement of business, the interest income cannot be set off against loss of the company. He further held that the interest income also cannot be reduced from the cost of construction as it has no nexus with the construction. He accordingly completed the assessment by determining the taxable income at Rs.2,78,42,337/-. 5. The assessee being aggrieved of the assessment order preferred an appeal before the CIT(A). However, as the assessee did not appear, the appeal was decided ex-parte by the CIT(A) by holding as under : "6.4. Durin....
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....e the old one had ceased. Therefore, I agree with the A.O. that the income earned on interest on deposits was to be classified as 'Income from other sources'." 6. The learned A.R reiterating the stand taken before the revenue authorities submitted that there is no change in line of business but there is only a change of name. Referring to the memorandum of association of the earlier company M/s. Pioneer Talafone Pvt. Ltd. and the assessee company, the learned AR submitted that the objects of both companies are virtually the same and the company has been filing its return of income regularly. It was submitted that the management of the company is also same and the company has already commenced its business and continuing the same business a....
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....P. Ltd. (2006) 281 ITR 346 (Del.) (ii) DCIT v. Assam Asbestos Ltd., (2003) 263 ITR 357 (Gau.) (iii) Sujay Trading P.Ltd. v. JCIT (2008) 111 ITD 249 (Mum.) (TM) (iv) CIT v. Havells India Ltd. (2012) 253 CTR 271 (Del.) 7. The learned DR on the other hand strongly supported the Orders of the CIT(A) and submitted that there is no continuity of business which would be evident from the P & L account as the assessee has not declared any income from business. It was submitted that after formation of new company, the earlier business was totally stopped and the assessee has changed over to completely new line of business which is not yet commenced. Therefore, the expenditure/loss relating to pre-commencemen....
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....d Commercial Complexes'. However, it is the contention of the assessee throughout that it is only a change of name of the company incorporated in the year 2003-04 and there is continuity of the earlier business activity in addition to the new activity of 'Infrastructure Development'. It was, therefore, contended that the lower authorities were not correct in denying set off of business loss under sec. 71 of the Act on the grant of non-commencement of business activities. 9. The certificate of incorporation issued by Registrar of Companies (ROC) does indicate that it is not an incorporation of new company but change of name of earlier company viz., Pioneer Talafone Pvt. Ltd. to Iconic Designs Pvt. Ltd. On going through the memorandum of ass....