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TMI Blog2017 (3) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to strictly allocate expenditure in question proratawise of the two projects without taking into account the land component therein. He shall finalize the consequential computation going by the gross amount of expenditure vis-à-vis the two heads and the proportion involved therein. The assessee’s third substantive ground in all of its appeal is accordingly accepted for statistical purposes Capitalization of expenditure disallowed on account of non commencement of business - Held that:- CIT(A) has erred in not specifically adjudicating its plea that if the above stated expenditure had to be disallowed on account of non commencement of business and it ought to be capitalized, corresponding income of each assessment year has to be directed to be adjusted against such cost of the two projects. Learned Departmental Representative fails to dispute the above non-adjudication in the CIT(A)’s order. We however are of the opinion that this issue requires a detailed adjudication at assessing authority’s level first Additions of unexplained investments - Held that:- CIT(A) has already examined Assessing Officer’s conclusions in light of assessee’s disclosure during search as sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Shri Soparkar informs the bench that the assessee does not wish to press for its first substantive ground challenging legality of Section 153A proceedings in all the impugned assessment years. We thus decline this first substantive ground identically pleaded in all five appeals as not pressed. 3. The assessee s second substantive ground in all of its five appeals challenges correctness of both the lower authorities action disallowing deduction of depreciation, employees expenditure and general administrative expenses involving varying amounts in all the impugned assessment years. 4. We advert to the relevant facts. This assessee is a company incorporated on 15.12.2000 for the purpose of carrying real estate business. It purchased land in villages Metal and Devdholera; situated at a distance of around 40kms. from Ahmedabad, for a project including development of 18holes championship golf course and a township. There is no dispute that the assessee could develop only two out of the said 18holes in its golf course in these impugned assessment years. It claimed office, personal and administrative expenses; totaling to ₹ 23,63,914/- in assessment year 2004- 05 alongw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed to the assessee. Learned counsel for the assessee is heard who relied on the decision in the cases of (i) CIT Vs. Club Resorts P. Ltd. (supra) and CIT Vs. Saurashtra Cement Chemical Industries Ltd., (1973) 91 ITR (Guj). 5. I have heard rival submissions and perused material available on record. It Is clear that no business activity was undertaken by the assessee so as to generate revenue inasmuch as neither golf course was ready nor any membership was enrolled nor any business activity was undertaken. Assessee was at a very early stage of completion of golf courses, therefore, it cannot be held that assessee's business activity had commenced. In the case of Saurahstra Cement Chem. Indu. Ltd. (supra) also assessee was in the business of mining on lease for quarry lime stone and the business has commenced by activity of extraction of lime stone, so also in the case of Club Resorts P. Ltd. (supra), business activity by way of sale of cottage has commenced, therefore, these case laws are not applicable to the assessee's case. In view thereof, I find merit in the arguments of the learned DR that expenses connected with office, personal, administrative expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Canal is misconceived. What is to be looked into is the setting up of a business and not the commencement of business. All expenses incurred after the setting up of the business but, before its commencement, would be permissible as deduction u/s.10(2) of the Income Tax Act. It was further submitted that interest expenditure u/s.57 of the Act are part of the business expenses of the assessee and therefore, they ought to have been considered as allowable deductions. Learned Senior Advocate, therefore, submitted that the Tribunal committed serious error in rejecting the appeals filed by the assessee. 7.1 In support of his submissions, reliance has been placed on a decision of the Division Bench of this Court rendered in the case of Commissioner of Income tax, Gandhinagar v. Sardar Sarovar Narmada Nigam Ltd. reported in [2013] 37 taxmann.com 344 (Gujarat) and more particularly, on the observations made in Para17, which reads as under; 17. We are of the firm opinion that the activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. Under the fiscal legislation when it is vital to determine what is the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been set up without the same being commenced. The Tribunal, by elaboration sound and logical reasonings, has dealt with the entire issue. No question of law much less any substantial question of law arises. Resultantly, Tax Appeal is dismissed. 8. Mr. Sudhir Mehta, learned counsel appearing for the Revenue, submitted that the business had neither commenced nor it had been set up, as the Project undertaken by the assessee was not only for the construction of canal but, also to operate and earn income by supplying water and generating electricity. It was submitted that the assessee was not doing the construction work for somebody else but, was constructing it for itself in order to earn income and therefore, unless it is ready to give result or the income, it cannot be said to have commenced or set up the business. Hence, the Assessing Officer was justified in holding that the assessee had not commenced its business. 8.1 Learned counsel Mr. Mehta further submitted that for allowing interest u/s.57 of the Act, the expenditure must not be in the nature of capital expenditure but, of revenue expenditure. The expenditure must have been laid out or expended wholly and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also Question no.2 in favour of the assessee and against the Revenue. 8. Shri Soparkar vehemently contends thereafter that we must also hold the assessee to have set up its golf course business even in case of having developed two out of 18 holes therein. We however do not find any merit in this argument. We make it clear that first of all this tribunal s findings in the very facts in first round (supra) have attained finality. We further observe that hon ble jurisdictional high court has followed hon ble apex court s decision in Saurashtara Cement and Chemicals Ltd. (supra) in para5 which already stands distinguished in the above extracted co-ordinate bench s decision. We thus find no reason to disturb the CIT(A) s identical conclusion upholding Assessing Officer s action. The assessee s second substantive ground identically pleaded in all appeals except variations in figures involved is thus declined. 9. The assessee s third substantive ground pleaded in all of its five appeals avers that the CIT(A) has erred in not accepting its alternate plea that its entire expenditure and not merely 2/3rd as directed; was required to be added as work-in-progress value relating to to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s level first. More so when it is already supposed to frame consequential computation as directed in the preceding substantive ground hereinabove. We thus accept assessee s instant substantive ground in all of its five appeals for statistical purposes. Needless to say, the Assessing Officer shall afford the assessee adequate opportunity of hearing before taking the final call on this issue. 12. The assessee s fifth substantive ground raising the issue of Section 234B interest is treated as consequential in nature as stated by both the learned representatives. 13. The assessee s five appeals IT(SS)A Nos. 359 to 363/Ahd/2011 are partly accepted for statistical purposes. 14. We now advert to Revenue s two appeals IT(SS)A Nos. 366 367/Ahd/2011 in assessment years 2005-06 and 2006-07 alongwith assessee s cross objections therein CO Nos. 143 144/Ahd/2011; respectively. The Revenue s identically pleaded substantive ground in its appeals is that the CIT(A) has erred in deleting unaccounted transaction of land purchases addition of ₹ 56,62,497/- in above former and ₹ 17,24,265/- respectively in latter assessment year followed by yet another addition of disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by the assessee. The seized papers bear some rough notings from which no conclusion can be drawn that these notings represent actual transactions and prove actual unaccounted payments made by the appellant-company. It is not known as to by whom these papers were written. The Assessing Officer has mentioned that some of the intermediary farmers were examined by the Department during the course of the search. However, there is no mention in the assessment order as to whether any of these farmers admitted having received unaccounted cash to-be paid to the farmers from whom lands were purchased. Except the aforesaid three seized papers, no evidence has been brought on record by the Department to show that the assessee actually paid on-money on purchase of land. In the written submissions, it has been convincingly explained by the appellant-company that even if it is assumed that the appellant-company actually purchased agricultural land shown in the seized papers at the rate of ₹ 70,000 or at the rate of ₹ 1,15,000, as assumed by the Assessing Officer in the subsequent assessment years, the position regarding the assumed excess payment could be much less than the variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -07 29.65 70000 2075500 386545 1688955 10110065 8421110 2007-08 160.59 115000 18467850 1297493 17170357 17275057 104700 Total 230.82 23383950 5944091 21273859 33047619 11773760 18. It may be mentioned that this ground of appeal has been raised by the appellant company without prejudice to the main argument that no addition on the basis of seized papers is called for. Thus, it is only an alternative ground. While deciding the main ground, I have already held that for the present assessment year no addition can be made on the alleged ground of payment of unaccounted on money on purchases of land. In view of this, this alternative ground becomes infructuous and does not require to be adjudicated. 17. We have heard both the parties at length. It emerges that the CIT(A) has already examined Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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