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TMI Blog2020 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is that the Ld. CIT (A) has erred in confirming the order of the Ld. AO who had disallowed the expenditure of Rs. 38,11,919/- by treating it as pre-commencement expenditure and hence it has to be capitalised. 3. The brief facts of the case are that the assessee is a Private Limited Company engaged in the business of generation of power, filed its return of income, on 24/09/2015 admitting total income of Rs. 19,31,080/- and agricultural income of Rs. 70,270/-. Subsequently, the case of the assessee was taken up for scrutiny under CASS and thereafter assessment was completed U/s. 143(3) of the Act on 25/11/2016 wherein the Ld. AO disallowed the expenditure of Rs. 38,11,919/- on the ground that the assessee had not commenced its business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher judiciary and the Tribunal cited in his order. 6. The Ld. AR vehemently argued before us stating that the amount of Rs. 36,98,025/- was incurred towards interest and financial expenses attributable to the loan obtained from the bank which was deposited in the bank and the assessee had earned interest from those bank deposit. The Ld. AR further argued stating that the assessee had commenced its business because staff were recruited, loan to the extent of Rs. five crores were obtained from bank, and had also incurred administrative and miscellaneous expenses. It was therefore pleaded that the expenditure incurred by the assessee may be treated as revenue expenditure and may not be capitalised. Hence, it was requested that the additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred towards agricultural operations of Rs. 1,50,140/-. From the statement of affairs of the assessee company also it is clear that the assessee had not conducted any other activity other than obtaining loan from bank, purchase of land, investment in non-current assets, certain advances & deposits, and receipt towards share capital. Therefore, it is apparent that as pointed out by the Ld. DR the assessee has not installed any plant & machinery for generation of power. Thus, as per the provisions of Section 3 of the Act the business of the assessee company cannot be considered to be set-up. In the decision render by the Hon'ble Bombay High Court in the case Western Vegetable Products vs CIT reported in 26 ITR 151 it was held that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing misguided by the loose expressions of vague and indefinite import..........". In the case of E-funds International DHC reported in 162 Taxmann.1 the Delhi Bench of the Tribunal held that "when the necessary infrastructure was set and the technical employees to render IT services were employed the business of the assessee can be said to be set up". The Hon'ble Gujarat High Court in the case of Sarabhai Sons reported in 90 ITR 318 it was held that when the land is purchased and the machinery is installed, raw materials were purchased, it can be said that the business of the assessee is set up. The Hon'ble Gujarat High Court in the case of Western India Sea Products reported in 199 ITR 777 has held that "in Marine Processing Industry, acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to utilisation of mixed funds of the assessee it is up to the assessee to determine as to which funds are to be deployed for what purpose and what funds are to be treated as retained. That is because the Revenue cannot sit on the shoes of the assessee and decide as to how the assessee has to conduct its business. Hence, we hereby direct the Ld. AO to compute the aggregate expenditure proportionately attributable to borrowed funds as discussed herein above and allow the same as deduction while computing the income of the assessee under the head "income from other source" since the provisions of Section 57(iii) of the Act mandates for the grant of deduction with respect to any revenue expenditure incurred wholly and exclusively for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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