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TMI Blog2012 (7) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... activity. It has simply surplus funds which were deposited in the fixed deposit during the period when such funds were not required - against assessee. - ITA No. 4635 & 5471/Del/2010 - - - Dated:- 22-6-2012 - SHRI RAJPAL YADAV AND SHRI SHAMIM YAHYA JJ. Appellant by: Simran Mehta, Adv. Respondent by: Shri Umesh Chandra, Sr.DR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER The assessee and revenue are in cross-appeals before us against the order of Learned CIT(Appeals) dated 10.09.2010 passed for assessment year 2007-08. The revenue on receipt of notice, in the appeal of assessee, has filed cross-objection bearing No. 376/Del/2010. 2. First, we take up the appeal of revenue i.e. ITA No.5471/Del/ and its cross-objection bearing No.376/Del/2010. The solitary substantial ground of appeal projects the grievance of the revenue as under: 1. The Learned CIT(Appeals) has erred on facts and in law in holding that the assessee s business was set up and allowing the assessee s claim of Rs.1,26,64,315 u/s. 36(1)(iii) of the I.T. Act, as interest expenses and on similar grounds also deleting other disallowance of Rs.2,32,,582 ignoring that as per decision of Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rranged a short term loan of Rs. 25 crores from M/s. Dharti Investment Ltd. In the joint construction and development agreement, a nominee of the assessee was appointed on the board of projects as a director and signatory to the bank account to be operated by this project. The loan taken from M/s. Dharti Investment was returned out of share capital money etc. received by the joint venture. The assessee claimed interest expenses as a deduction. Learned Assessing Officer has disallowed the claim of the assessee on the ground that business of the assessee was yet in the process of being set up. According to the Assessing Officer, the business would be considered as set up when it is in such a position that it can deliver the result immediately. Learned Assessing Officer made reference to the judgment of Hon'ble Supreme Court in the case of Rama Raju Surgical Cotton Mills Ltd. reported in 63 ITR 478. He also made reference to the judgment of Hon'ble Bombay High Court in the case of Western India Vegetable Products Ltd. reported in 26 ITR 151 and the order of the ITAT in the case of JCIT vs. Sardar Sarover Narmada Nigam Ltd. reported in 93 ITD 321. Learned Assessing Officer accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In case, it was not ready for commencement, it could not be said to have been set up. According to him, the assessee company was not ready to discharge the functions in which it was incorporated as mentioned in its Memorandum and Article of Association. Whereas the case of the assessee is that in the Memorandum of Article of Association, the main object of the assessee company has been provided as to carry on the business as a owner, builder, colonizer, developer, promoters of the properties. In order to resolve the controversy, one has to look in whether assessee has taken active steps for fulfillment of its objects provided in the Memorandum of Article Association, the assessee had entered into a joint construction and development agreement with two more companies on 5.7.2006. The joint venture was in the process of acquiring land and government approvals. It required funds. According to the Memorandum of Understanding, assessee has to provide the funds for fulfillments of the objects of the joint venture. It has arranged the loan and the joint venture was able to acquire the land measuring 75 acres. The sequence of events suggest that assessee has taken active steps in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate authority has made a lucid analysis on this issue and reproduced the contentions raised by the assessee. After taking into consideration the detailed reasoned order of Learned CIT(Appeals), we do not wish to interfere in her finding. 10. The next issue incorporated by the revenue in the first ground of appeal is that the Learned CIT(Appeals) has erred in deleting the disallowance of Rs.2,32,582. This amount relates to audit fees, traveling expenses, statutory filing fee etc. This was disallowed to the assessee on the ground that business was not commenced. Since in the foregoing paragraphs, we have held that business was set up accordingly, all necessary expenses incurred for the purpose of business deserve to be allowed. Learned CIT(Appeals) has considered this aspect and thereafter deleted the disallowance. We do not see any reason to interfere in the order of the Learned CIT(Appeals). 11. In the result, ground of appeal as well as ground of cross-objection taken by the revenue are de void of any merit, they are rejected. Consequently, the appeal as well as cross-objection of the revenue are dismissed. 12. In the assessee s appeal, the solitary grievance of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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