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2017 (3) TMI 1251
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....claimed. 2. The learned CIT(A) failed in passing a speaking order on facts and law and bringing on record all the submissions made and ignoring various pleas made during the appellate proceedings. 3. The learned ClT(A) erred in understanding the nature of business activity of the assessee company, in holding that it is only to operate mass transport system and that the assessee company's main business activities have not yet commenced and that the income generated is not from the business activity of the assessee company. She ought to have appreciated the fact and to have held that the activity of facilitation of setting up Metro Rail etc.. which is one of the objects, is the objective taken up and pursued and it is the business activity of the assessee company. She ought to have appreciated that to operate mass transport system is only one of the objects, for which it was established. 04. The learned CIT(A) erred in confirming the order of assessing officer in disallowing the entire expenditure incurred on facilitation of setting up of metro rail and debited to Profit and Loss account on the ground that the assessee company has not yet commenced its business. She erre....
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....the AO noticed that the assessee had admitted income from (i) Govt. grant (ii) Interest on deposits and (iii) other incomes. He also observed that the assessee claimed administrative expenditure, M.D's remuneration and preliminary expenses written off as business expenditure. The AO observed that the assessee company is an intermediary between the Govt. of A.P. and L&T Construction for the prestigious project of Metro Rail Development in Hyderabad and that the assessee company is still in the process of constructing the infrastructure. Therefore, he was of the opinion that the assessee company has not yet started its business and the expenditure claimed is pre-operative expenditure which cannot be allowed. He also observed that the assessee has earned interest income on bank deposits and also earned other income out of activities which are not part and parcel of the business activities of the assessee and also that the expenditure debited to the P&L a/c has no connection with the earning of the above incomes. Therefore, a show cause notice was issued to the assessee. The assessee submitted its detailed reply vide letter dated 21.01.2013, according to which, the assessee was incorpo....
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....he administrative expenditure. He also submitted that the assessee had to float tenders and has incurred expenditure for execution of such procedures and has also earned income by issuing the tender documents. Therefore, clearly the nexus between the earning of the income from issuance of RSQs and also business expenditure for floating the tenders has been established by the assessee. He also submitted that the purpose of Govt. grant to the assessee was only to implement the plan of development of infrastructure for the Mass Transit System and as seen from the balance sheet of the assessee, the government grant from the earlier years has reduced which only establishes that the assessee has commenced its business activities. According to him, the assessee has utilized the Govt. grants only for the purpose for which they have been granted by the Govt. As far as the interest income on deposits is concerned, the learned Counsel for the assessee submitted that the assessee has deposited the unutilized Govt. grants in short term deposits in order to reduce the operation cost and not to earn interest income and therefore, the interest income is also directly linked to the business activit....
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....on services including owning, licensing and operating bus routes, passenger and goods carriers, other road vehicles and other modes of transport, and providing seamless transportation services. 3. To commercially exploit and/or facilitate commercial exploitation of land and air space and other available or handed over resources for optimal utilization of their potential. 4. To undertake and/or facilitate road capacity improvement works such as new roads, road widening, parallel roads. slip roads, junction improvements, bridges, road over bridges, road under bridges, flyovers, signalization, bus bays, parking facilities, foot over bridges and sub ways. 5. To undertake and/or facilitate Transit oriented developmental activities on its own or on behalf of the central and or state government or any organizations belonging to or under the direct or indirect control of the central, state or local governments, to encourage dispersed growth and transit oriented development. 6. To run taxicabs, lorries, busses, cars, trucks, station wagons, airplanes, airships, motors, railways. rail motors, vessels, boats and all other vehicles of whatsoever kind propelled by electricity, gas, ....
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....as to whether the assessee therein who was to finance infrastructural projects and has raised funds but had not advanced any funds, has commenced its business or not?. It was held that the answer to such questions will depend upon the facts of each case. The Hon'ble High Court has also considered the judgment of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd vs. CIT (cited Supra) and at Para 3 of its order has held as under: "3. The only question to be considered is whether the assessee can be said to have commenced business before actual advancing of any fund for any infrastructure project. Standing counsel relying on the decision of the Supreme Court in Tuticorin Alkali Chemicals & Fertilisers Ltd.'s case (supra), contended that the case herein is similar to the facts of the case decided by the Supreme Court because as in that case, income earned by the assessee is interest income on deposits made prior to the commencement of business, that is advancing of amounts for infrastructure projects. We are unable to accept the contention of standing counsel that facts in Tuticorin Alkali Chemicals & Fertilisers Ltd.'s case (supra) apply ....
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....for infrastructure projects which is the business of the respondent. Therefore, in our view, deposit of funds in Banks and Treasury is nothing but an activity done in the course of business and, consequently, interest earned is income from business. Since the assessee is a financing company, the interest earned by it on the funds raised through public borrowings cannot be compared to the interest earned on business like manufacturing industries and, therefore, the decision of the Supreme Court relied on by the department is not applicable to the facts of this case. Therefore, the first appellate authority as well as the Tribunal have rightly held that the assessee is entitled to all the deductions available in the computation of business income. We, therefore, uphold the orders of the Tribunal confirming the order of the first appellate authority. Consequently, departmental appeals are dismissed". 10. In the case before us also, the assessee had acquired the land and paid compensation to the displaced land owners and has floated tenders and awarded the contract for building the infrastructure. Thus, the assessee has started its activity of planning and building the Mass Trans....
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....rds, Railway Contractors and suppliers. 12. Bearing in mind these main and ancillary objects of the company, we would need to peruse the materials on record. We have perused the company's profile presented by the company before the Assessing Officer during the course of the assessment. It emerges that the company entered into collaboration with Adani Port Limited ("APL" for short) and set up a joint venture company called Gujarat Adani Port Limited in which the respondent company had 26% equity share. General public, foreign investors etc. held 49% equity share, remaining 25% equity share was held by APL. During the year relevant to assessment year 2001-02, the company had investment of Rs. 15 crores in APL. Besides thus carrying out joint venture activities with APL, the assessee had also undertaken various other activities, as can be seen from its communication dated 26.5.2004 to the Commissioner (Appeals) and had actively participated in the management of the said company. 13. From the documents on record, we further notice that the respondent company had, in consultation with the Government, participated in development of Mundra Port. 14. On the basis of such mater....
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....and it is not necessary that all the categories of its business activities must start either simultaneously or that the last stage must start before it can be said that the business was set up. Again, as Bhagwati C.J. Has emphasized in Saurashtra Cement and Chemical Industries' case [1973] 91 ITR 170 (Guj), the test to be applied is as to when a businessman would regard a business as being commenced and the approach must be from a commonsense point of view." 17. In view of the above judicial pronouncement, the findings of the Tribunal and our observations made hereinabove, we see no reason to interfere. We may also notice that in the earlier years, the case of the assessee that it had set up the business was not questioned by the Assessing Officer". 12. In view of the above judgments and also in view of the fact that the Revenue has not disallowed the business expenditure claimed by the assessee in the earlier two years, we are of the opinion that the assessee has commenced its business and the expenditure has to be allowed as business expenditure. 13. Coming to the nature of the income earned by the assessee, we find that it consists of (i) Govt. grant (ii) Interest o....