9911796707
TMI Blog2012 (7) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Ramaraju Surgical Cotton Mills Ltd. (63 ITR 478) a unit cannot be said to have been set up unless it is ready to discharge the function for which it is being up set. Reliance is also placed on the decision of Hon'ble Kerala High Court in the case of S.P.V. Bank Ltd. Vs. CIT (126 ITR 773)." 3. In the cross-objection, the revenue has taken a similar grounds of appeal. Therefore, we take up both these grounds together. 4. The brief facts of the case are that assessee company has filed its return of income on 23rd October, 2007 declaring a loss of Rs.31,75,090. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) dated 16.9.2008 was issued to the assessee which was duly served upon it. In response to the notice, Shri Shridhar Dhabekar, CA appeared before the Assessing Officer. The assessee company was incorporated on 4.8.2005 under the Indian Companies Act, 1956. In the Memorandum of Association, it has been incorporated that main objects of the assessee company are to carry on the business as owner, supplier, colonizer, developers, promoters, proprietors etc. and to deal all kind of immoveable properties whether belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot allow the deduction of interest expenses and made an addition of Rs.1,26,64,315. Similarly, he disallowed a sum of Rs.2,32,582 which was claimed by the assessee towards expenses incurred on audit fee, traveling expenses, statutory filing fees etc. 5. Dissatisfied with the disallowances, assessee carried the matter in appeal before the learned first appellate authority. It was contended by the assessee that learned Assessing Officer has misread the facts on the record. According to the assessee, the main activity of the assessee company is to finance the project through special purpose vehicles (hereinafter referred to SPV) to other local companies for buying land more than 100 acres or bringing other licenses from the Government Departments. According to the assessee, 75.39 acres of project land was acquired by the joint construction development agreement which took government's approval etc. Hence, it cannot be said that the assessee has not set up the business. The assessee put reliance upon the following judgments: (i) CIT vs. ESPN Spftware India (P) Ltd. (2009) 184 Taxman 452 (Del.); (ii) CIT vs. Hughes Escort Communications (2007) 165 Taxman 318 (Del.); (iii) CIT vs. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orandum and Article of Association. The controversy can be explained with the help of a simple example, namely, a person wants to run business of taxi operators. He purchased the taxi, parked it on a tax stand but was unable to get the passengers. Whether his business of a taxi operator has been set up or not? In our understanding, his business of tax operation has been set up because he was in a position to deliver the results. It is a irrelevant factor that customers had approached him or not. In the present case also, the moment it entered into the joint venture agreement and arranged the funds for fulfillment of the objects of the joint venture would suggest the business was set up. Learned Assessing Officer has failed to construe the facts in right perspective. 8. The second aspect is whether interest expenses are to be allowed as a deduction or not. Section 36(1)(iii) provides as under: "36(1) The deductions provided for the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 - x x x x x x x x x x x (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) has erred in treating the interest income of Rs.97,22,805 received from short term fixed deposits as income from other sources against the claim of assessee that the same be treated as income from business. 13. The brief facts of the case are that the assessee received subscription towards share capital from three foreign as well as two domestic investors who joined hands to participate in the development of industrial I.T. Park Project at Mohali under the joint venture. In order to exercise control on the use of the funds meant for project, the assessee did not pay the total amount received from investors to the development partners at one go. The funds were released only after the details for purchase of project land was negotiated by the development partners and approved by the assessee. The surplus fund was kept in the fixed deposit which give rise to interest income. The assessee claimed that interest income so earned by it, is to be assessed as a business income. Learned Assessing Officer has held that interest income from surplus funds is to be assessed as a income from other sources. Learned Assessing Officer put reliance upon the judgment of the Hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
