Income Tax Act, 1961

Section 56

Income from other sources - Chargeability - Income earned during pre-commencement period of business -

Assessee was carrying on the business of fertilisers and urea and all classes and kinds of chemicals including petrochemicals and plastics. During the course of assessment proceedings, AO found that business of assessee was not commenced during the year and treated the declared income of the assessee as other income and disallowed the expenses claimed by assessee on that ground. Held: In Carefour WC&C India (P.) Ltd. v. Deputy Commissioner of Income-Tax [ITA No. 42/2014 (Order, dt. 22-9-2014) : (2015) 368 ITR 692 (Del) : 2015 TaxPub(DT) 0152 (Del-HC)] it was held that merely because actual sales and purchase of products did not happen during the subject financial year, which was not a necessary condition/activity in order to hold a business was set up, it could not be said that business was not set-up. Assessee did not set up business in the relevant assessment year and, therefore, income earned by assessee on investment had to be treated as income from other sources. Thus, AO was directed to treat the income from interest as other income, and complete the assessment. Alternative claim of the assessee under section 35D becomes academic

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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