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TMI Blog2021 (5) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ld. Assessing Officer in assessing the gross interest income under the head 'income from other sources'. 3. The Id. Commissioner of Income '['ax (Appeals)-41, erred in upholding the view of Ld. Assessing Officer in assessing the income from mutual funds under the head 'Short Term Capital Gains'. 4. The Ld. Commissioner of Income Tax (Appeals)-41 erred in upholding the view of Id. AO by not allowing deduction of the expenses debited to the Profit & Loss Account which were incurred wholly and exclusively for the business carried on by the appellant during the previous year. 5. The Ld. Commissioner of Income Tax (Appeals)-41, erred in upholding the view of Ld. Assessing Officer, without prejudice to Ground no. 3 in not allowing deduction of expenses debited to the profit & Loss Account which wholly and exclusively incurred in relation to earning of Interest Income/Other income. 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in the confirming allowance of interest expenditure claimed u/s 57(iii) of the income Tax Act, 1961 only to the extent of Rs. 23,84,07,417/- as against Rs. 42,42,35,075/-. 7. The Ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of SEZ project at Khopta in the state of Maharashtra, viz. Maha Mumbai SEZ (MMSEZ). The Ministry of Commerce and Industries, Government of India had accorded in principal approval to the Company to set up Special Economic Zone (SEZ) at Khopta, district Raigad in Maharashtra vide its letter dated 8th August, 2003 valid for a period of 3 years, which was extended till 7th August, 2009 by the Ministry of Commerce and Industries, Government of India vide its letter dated 11th June, 2008 2. A) Until March 31, 2007, no Profit & Loss account was prepared by the company as its Special Economic Zone Projects were under development and the expenditure (including capital work in progress) during the development period were classified as "Project Development Expenditure" pending allocation under the Capital Work-in- Progress However, based on the opinion given by the Expert Advisor/ Committee of the Institute of Chartered Accountant of India, regarding accounting for property development expenditure and income by developers and based on company's future plans, the company has considered such project development Expenditure as Inventory." 5. During the year consideration, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e off in any manner whatsoever any such infrastructural facilities and services or any rights, titles, concessions acquired, therein to any person whether in India or abroad. 4. To constitute and be part in constitution of any statutory body, area development authority, city management authority, municipal authority, town planning and administration authority and such other authority/authorities as may, be permissible under the laws for the time being in force in the country. 5. To act as promotes, developers, creators, operators, owners, contractors, and organizer and to carry on trade and commerce in all types of goods, commodities and services and to build commercial complexes and market, yards, shopping centers and mall etc. 6. To carry on the business as promoters, developers, creators operators, owners, contractors, organizers of plantation, horticultures, sericulture‟s, agriculture‟s recreations facilities, entertainment parks, amusement facilities, hotels, resorts, clubs, casinos, golf courses, water parks, sport complexes for indoor and outdoor games, health club and any other like facilities for entertainment and recreation." 6. After the certain disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from private parties. The assessee had conducted a survey and started rehabilitation activities to perform the above activities. The assessee had recruited employees, on rental basis office was occupied, engaged few professionals and certain administrative as well as expenditure were incurred. There was sociopolitical development in Gujarat; hence, the assessee has faced some problem but the management had started contemplating an integrated SEZ at Mumbai. Although, the Gujarat Project was not started with full swing but the setting up of Maha Mumbai SEZ was in full swing. The requisite approval was also obtained from the government. After obtaining the approval from the Ministry of Commerce, Government of India, immediately thereafter the project was launched on 9th August, 2003. Because of these facts, we hereby hold following the decision of Styler India Pvt. Ltd. (supra), wherein this issue of "setting up of business" had been discussed at length that the assessee‟s business was set up and the expenses were incurred to propagate the business of the assessee. It is worth to mention that in one of the case ITAT "J‟ Bench Mumbai pronounced in the case of De Beers Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure" as annexed to the balance sheet of the assessee, we hereby hold that for the year under consideration the business was set up by the assessee. 8. On appraisal of the above mentioned finding, it is quite clear that the Hon‟ble ITAT has held that the assessee has started the business in the A.Y. 2003-04, hence, no doubt when it has already been held that the assessee has started the business of A.Y.2003-04 then in the present assessment year business is liable to be considered as commenced accordingly. This issue is decided in favour of the assessee against the revenue. ISSUE NO.2 9. Under this issue the assessee has challenged the interest income which has been treated as income from the other sources. The contention of the Ld. Representative of the assessee is that the gross interest income is liable to be treated as business income and in this regard the issue is also covered by the decision of Hon‟ble ITAT in the assessee‟s own case bearing ITA. No.804/Ahd/2010 for the A.Y. 2003-04 dated 25.04.2014. The copy of the order is on the file in which the relevant finding has been given in para no. 5.2 & 5.3 which is hereby reproduced as under.:- "5.2 Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that the nexus can be established in respect of the interest earned and interest paid. With these directions, the grounds raised by the assessee are partly allowed that too for statistical purpose. 10. On appraisal of the above mentioned finding, we noticed that the assessee was under obligation to place on record the purpose of the deposit, utilization of funds and most important fact is also to be brought on record about the nexus of interest earned and interest paid. Accordingly, the AO was directed to examine the material afresh so that the nexus can be established in respect of interest earned and interest paid. Accordingly, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the controversy afresh in accordance above mentioned guidelines. ISSUE NO.3 11. This issue has not been pressed by the Ld. Representative of the assessee, therefore, this issue is being decided in favour of the revenue against the assessee being not pressed. ISSUE NO.4 12. Under this issue the assessee has challenged the disallowance of deduction of expenses debited to the profit & loss account which were incurred wholly and exclusively for the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be allowed in accordance with law. In this regard no doubt the AO is under obligation to verify the facts and to allow the claim of the assessee in accordance with law, hence, this issue is restore to the AO to allow the claim in accordance with law. REVISED GROUND NO. 6 17. Under this issue the assessee has challenged the allowance of Interest expenditure claim u/s 57(iii) of the I. T. Act, 1961 only to the extent of Rs. 23,84,07,417/- as against Rs. 42,42,35,075/-. The assessee has made an alternative claim of deduction under section 57(iii) of the Act in respect of interest expenditure of Rs. 23,84,07,417 as against Rs. 42,42,35,075/-. As discussed earlier, income earned from ICDs was held by the Departmental Authorities as income from other source as against business income claimed by the assessee. The alternative claim made by the assessee for deduction of interest expenditure under section 57(iii) of the Act in respect of such income was rejected on the ground that such interest expenditure has no nexus with the interest earned on ICDs. While deciding grounds no.1 and 3, of assessee‟s appeal, we have held that interest earned on ICDs are to be treated as income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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