AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1084
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.... order of the commissioner of Income Tax (Appeals) enhancing the assessment is wrong, illegal, unjust, arbitrary and is liable to set aside. 2.1 The Commissioner of Income Tax (Appeals) erred in enhancing the income of the Appellant by disallowing the genuine business expenditures incurred by the Appellant. 2.2 The Commissioner of Income Tax (Appeals) erred in proceeding on the basis that the business had not yet commenced; which is untenable. 3.1 The Commissioner of Income Tax (Appeals) erred in disallowing the preliminary expenses of Rs. 2,04,986/-. 3.2 The Commissioner of Income Tax (Appeals) erred in considering Administrative expenses debited in the profit and loss accounting amounting to Rs. 5,48,747/ as expenditure covered u/....
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....ch, 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 linked" with the setting up of the business and therefore is capital receipt, not taxable. 6.4. In any event the Commissioner of Income Tax (Appeals) ought to have set off the interest received with the interest paid, even under the head other sources. 7. Any other ground that maybe raised at the time of hearing." 3. The brief facts of the case are that the assessee is engaged in the business of real estate, construction of housing properties and infrastructure development. The assessee filed its return of income on 29.09.2012 and later revised on 09.02.....
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....ned 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 dep....
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....e business then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. But there may be an interregnum, there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under sec.10(2)." 9. We find from the records that the assessee has purchased lands vide documents no. 5158 & 5159 of 2012 dated 11.07.2012. Further, the assessee has produced the application of planning permit before the CMDA on 15.11.2011. The approval was accorded by the respective authorities on 01.07.2013. Bas....
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....n of the property. Accordingly, as a combined expenditure Rs..11,00,000/- (Rs. 7,50,000 + Rs..3,50,000) are not liable to be claimed as expenditure to set up the business of the assessee and are not allowable for deduction u/s. 35D of the Act and confirmed the disallowance made by the AO. 10.1 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 asses....
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.... is that prior to its business operation, the assessee has temporarily parked its funds in short term deposits and earned interest income, which were capitalized and are inextricably linked with the assessee's business as the entire funds were utilized only for 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. Admi....