TaxTMI 
TaxTMI 
2026 (7) TMI 1730
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....venue, the impugned order of the ITAT gives rise to the following substantial questions of law. i. On the facts and in the circumstances of the case and in law, whether Hon'ble ITAT was right in holding that preinstallation period broadband income of Rs. 9,81,38,257/- and income from sale of scrap of Rs. 1,27,67,139/- is capital in nature instead of revenue in nature when the whole of income has been earned on account of setting up the business and the income is primarily in the nature of business income earned from running the business? ii. On the facts and in the circumstances of the case and in law, whether Hon'ble ITAT was right in holding that preinstallation period broadband income and income from sale of scrap is ca....
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....ation of the broadband project and the sale thereof generated income of Rs. 1,27,67,139/-. Hence, the ITAT concluded that both these incomes were inextricably linked with the broadband project, which was in the installation phase, and that the Assessee had rightly treated the income as capital work-in-progress. Consequently, the same could not be brought to tax, was the conclusion. In arriving at this conclusion, the ITAT placed reliance upon the decision of the Supreme Court in the case of CIT Vs. Bokaro Steel reported in 236 ITR 315. 4. The learned Counsel appearing on behalf of the Appellant Revenue, sought to distinguish the decision of the Supreme Court in Bokaro Steel by contending that it dealt only with the capitalisation of inte....
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....sessee. To the extent of such royalty received, the cost of the plant to the Assessee stands reduced. Therefore, the royalty is required to be treated as a capital receipt. 7. The ratio of the aforesaid decision is that any income generated before the commencement of the business, which is inextricably connected with the setting up of a capital asset, is capital in nature and serves to reduce the cost of construction and the same cannot constitute taxable income. Therefore, the ITAT has recorded a categorical finding of fact and concluded that the income from the broadband project during the trial runs, and sale of scrap before the commencement of business, is a capital receipt and not liable to be taxed. Hence, no substantial question o....
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.... Assessee's own case pertaining to A.Y. 2002-03 and decided the issue in the Assessee's favour. In its order for Assessment Year 2002-03, the ITAT had placed reliance upon CBDT Circular No. 1 of 2016 dated 15.02.2016. The relevant portion of the Circular reads as under: In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring....
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....u/s 80IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in sub-section (5) of that section for which the Standing Counsels/D.R.s be suitably instructed. 11. The ITAT also placed reliance upon the decision of the Madras High Court in CIT Vs. G.R.T. Jewellers (India) in TCA No. 176 of 2016. In the said decision, the High Court relied upon the aforesaid circular as well as its earlier decision in Velayudhaswamy Spinning Mills P.Ltd. Vs. ACIT reported in 340 ITR 477 and decided the issue in favour of the Assessee. 12. This Court has also taken a similar view in CIT v. Hercules Hoists Ltd., reported in 2017 (6) TMI 1125 (Bom), and CIT v. B.G. Chitale, reported in 2018 (2) TMI 112 (....