Income Tax Act, 1961

--Head of income--Business income or income from other sources Whether business was set up during the accounting period relevant to impugned assessment year.--Assessee was in business of real estate development. In the relevant assessment year, it had raised an interest-bearing unsecured loan certain amount from its holding company and had deposited the above amount on the same day as earnest money in response to the tender invited by the Official Liquidator of Karnataka High Court for sale of land. The bid, however, could not materialize and ultimately the entire amount was returned to assessee along with interest. In the return filed for the impugned year, it claimed net business loss computed by reducing the amount of interest paid to its holding company from the amount of interest received from Official Liquidator. Assessing officer assessed the income of assessee under the head 'income from other sources'. According to him, the mere act of participating in the tender and making the earnest money deposit did not amount to acts that could be said to have resulted in the setting up of real estate business. Until assessee actually acquired any land for the purpose of carrying on its business, the business could not be said to have been set-up within the meaning of section 3. Assessee contended that its business in real estate had been set-up when it deposited the earnest money and it was a matter of irrelevance that it was not successful in acquiring the land. Tribunal observed that having regard to the business of the assessee, which is the development of real estates, the participation in the tender represents commencement of one activity which would enable the assessee to acquire the land for development. The actual development of the land is immaterial for construing that business of the assessee had been set up. Thus income of assessee had to be assessed under the head 'business income' Held: When assessee in the present case was in a position to apply for the tender, borrowed money for interest albeit from its holding company and deposited the same with NGEF Ltd. on the same day, it shows that assessee's business had been set-up and it was ready to commence business. The finding of the Tribunal in the present case was a finding of fact and it could not be said that the finding was without any basis or material. Therefore, no, substantial question of law arise for consideration.

Income Tax Act, 1961 Section 14

IN The DELHI High Court