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TMI Blog2016 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... administrative expenses debited to profit and loss account as the pre-operative expenditure and setoff with interest income cannot be considered. Considering the provisions, financial statements, judicial decisions, written submissions and material papers filed, the action of set off interest income with expenditure is not permitted in the circumstances were assessee has not set up the business or commenced the business and also not submitted commencement of business certificate issued by Registrar of Companies under Companies Act, 1956. We are of the opinion that the ld. Commissioner of Income Tax (Appeals) has elaborately dealt on the disputed issue in confirming the order of Assessing Officer and we are not inclined to interfere with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company carried on the business of developing an IT Park and filed return of income disclosing loss of ₹ 1,49,96,827/-. The return of income was processed under sec 143(1) and loss was accepted. Subsequently, the Assessing officer issued notice u/see 148 of the Act were the Assessing Officer has reason to believe that the expenses claimed by the assessee in the precommencement period should be capitalized and interest on deposits taxable under the head Income from other sources . The Assessee submitted explanation with supporting (Annx 1 and 2) that the marketing division of the assessee premises had commenced in previous year and consequently expenditure is charged to profit and loss account as Revenue in nature but the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s different from the regular business. He is of the opinion that once the advances were paid to acquire land for construction of I. T. parks, the business commence. The appellant argues that it itself has capitalized some part of the pre- operative expenditure and some was claimed as revenue. As seen from the facts of the case the issue in question is the treatment given to the interest income earned from the banks of ₹ 17,42,295 prior to the commencement of business. There was no dispute with regard to the treatment given to the expenditure incurred by the appellant till the commence of business. As per the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd (supra), the income earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative substantiated with written submissions on the main objects of the assessee company as development of I.T. Park and industrial park and construction and maintenance of infrastructure for IT and industrial parks by acquiring land for development. The assessee took possession of the land in May, 2004 and advanced money to the contractors to commence construction of park during financial year 2004-05. The company has capitalized expenditure incurred in capital assets which are in the nature of project management fees, property mangement fees and other expenses and the interest on fixed deposits in bank ₹ 17,42,295/- is credited to profit and loss account and setoff of against the business expenditure. The ld. Authorised Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the financial year 2004-05 relevant to current assessment year were the assessee has advanced money for purchase of land and the construction of tech park was commenced and also capitalizated the expenditure in the books of account. Generally in the first year of operations, were the assessee acquired the land cannot be treated as commencement of business. It is in the nature of gestitation period were the assessee company yet to start business activities. On perusal of objects of Memorandum of Association and Articles of Association assessee is carrying on the business in India including maintaining, establishing, developing and construction of commercial complex and residential building. The assessee has claimed set off on assumption th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive expenses debited to profit and loss account as the pre-operative expenditure and setoff with interest income cannot be considered. Considering the provisions, financial statements, judicial decisions, written submissions and material papers filed, the action of set off interest income with expenditure is not permitted in the circumstances were assessee has not set up the business or commenced the business and also not submitted commencement of business certificate issued by Registrar of Companies under Companies Act, 1956. We are of the opinion that the ld. Commissioner of Income Tax (Appeals) has elaborately dealt on the disputed issue in confirming the order of Assessing Officer and we are not inclined to interfere with the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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