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TMI Blog2013 (4) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... or long period of time though he is ready to commence his business in real estate, and that would result in the expenses incurred by him throughout that period not being computed as a loss under the head “business” on the ground that he is yet to set-up his business. The other argument for the revenue that the tax auditors of the assessee have themselves pointed out that the assessee is yet to commence its business is also irrelevant because of the distinction between the commencement of the business and setting-up of the same. Under section 260A an appeal lies to the High Court only on a substantial question of law. The finding of the Tribunal in the present case is a finding of fact and it cannot be said that the finding was without any basis or material. Appeal dismissed - no substantial question of law arises. Against revenue - ITA 528/2012, ITA 529/2012 - - - Dated:- 23-4-2013 - Badar Durrez Ahmed And R. V. Easwar,JJ. For the Petitioner : Mr N. P. Sahni, Sr. Standing Counsel. For the Respondent : Mr Ajay Vohra with Ms Kavita Jha, Mr Vaibhav Kulkarni and Mr Somnath Shukla, Advocates. JUDGMENT R. V. Easwar, J. 1. These are two appeals filed by the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was not successful in acquiring the land from NGEF Ltd., it cannot be said that the business was set-up in the relevant accounting year. He also noted that the tax auditors in their tax audit report stated that the assessee had not commenced any business activity and, therefore, the accounting standards on segment reporting were not applicable. According to the assessing officer, the mere act of participating in the tender and making the earnest money deposit did not amount to acts that can be said to have resulted in the setting up of real estate business. In this view of the matter and after referring to some authorities, he assessed the interest income of Rs. 62,28,333/- under the head income from other sources . He also did not allow the interest of Rs. 1,79,37,534/- paid by the assessee to DLF Ltd. against the interest income. Since there was no computation of any income under the head business there was no question of permitting the assessee to carry forward any business loss as claimed in the return. 4. The assessee appealed against the assessment before the CIT (Appeals) who after a detailed examination of the facts and the rival stands, agreed with the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus fund rather it was earnest money paid by the assessee for the purchase of land. Thus, assessee has demonstrated that its business was set up during the accounting period relevant for this assessment year. The observations of the auditor are with regard to commencement of business and not set up of the business. In the light of participation in the tender such observations would not be a decisive factor. Thus, considering the facts and circumstances, we are of the opinion that income of the assessee has to be assessed under the head business income and consequently loss computed by the Learned First Appellate Authority at Rs. 1,17,12,473 deserves to be permitted for carry forward. 9. In the result, the appeal of the assessee is allowed and that of the revenue is dismissed. 6. In the view taken by the Tribunal, it allowed the appeal of the assessee and dismissed that of the revenue. 7. The revenue is in appeal and the main contention put forth on its behalf is that the mere act of depositing earnest money while participating in the tender floated by the official liquidator of the Karnataka High Court and the act of borrowing monies from the DLF Ltd. for the purpose canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion which it did. The locus classicus on the question as to when a business can be said to have been set-up is the judgment of the Bombay High Court speaking through Chief Justice Chagla, in Western India Vegetable Products Ltd. v. CIT : (1954) 26 ITR 151. The following pithy observations are worth quoting: - It seems to us, that the expression setting up‟ means, as is defined in the Oxford English Dictionary, to place on foot‟ or to establish‟, and in contradiction to commence‟. The disctinction is this that when a business is established and is ready to commence 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. The Tribunal has observed that having regard to the business of the assessee, which is the development of real estates, the participation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and setting-up of the same. 10. We do not feel constrained to refer to the authorities cited by both the sides on the question of setting-up of a business except the judgment of the Bombay High Court (supra) because as we have already observed, the question is essentially one of fact depending upon the nature of the business and none of the authorities cited by both the sides was directly on the question as to when a real estate business can be said to have been set-up. Under section 260A of the Act, an appeal lies to the High Court only on a substantial question of law. The finding of the Tribunal in the present case is a finding of fact and it cannot be said that the finding was without any basis or material. Moreover, the Tribunal did take note of the distinction between the commencement of a business and setting-up of a business and applied the test laid down by the Bombay High Court (supra) which decision has been noticed by us to have formed the bedrock of almost all the authorities cited before us. 11. In the above circumstances, we do not think that any substantial question of law arises out of the order of the Tribunal. We accordingly dismiss the appeals filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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