The Tax Publishers2020 TaxPub(DT) 3262 (Del-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Substantial activities were carried out by assessee since the date of incorporation which culminated in raising loans, making investment in purchase of land, which was reflected as stock-in-trade and also advancing loans to associate concerns for purchasing different pieces of land, in order to fulfil condition of Land Bank of 100 Acres or more, to develop township and entering into development agreement at the close of year, therefore, assessee could be said to have not only set up its business but also commenced its business during the previous year itself. Hence, administrative and other expenses could not be disallowed as pre-operative expenses.

Business expenditure - Administrative and other expenses - AO alleging non-commencement of business by assessee - Assessee having carried out

Assessee, a real estate company, claimed deduction of administrative and other expenses. AO held the same to be pre-operative expenses on the ground of no commencement of business by assessee. Assessee pleaded that once it had made investment in purchase of land for setting up of projects at Sonepat and also advanced money for investment in purchase of property, it had duly commenced business. Held: Substantial activities were carried out by assessee, since the date of incorporation which culminated in raising loans, making investment in purchase of land, which was reflected as stock-in-trade and also advancing loans to associate concerns for purchasing different pieces of land, in order to fulfil condition of Land Bank of 100 Acres or more, to develop township and entering into development agreement at the close of year, therefore, assessee could be said to have not only set up its business but also commenced its business during the previous year itself. Hence, administrative and other expenses could not be disallowed as pre-operative expenses.

Relied:Western India Vegetable Products Ltd. v. CIT (1954) 26 ITR 151 (Bom.) : 1954 TaxPub(DT) 84 (Bom-HC), CIT v. Saurashtra Cement and Chemical Industries Ltd. (1973) 91 ITR 170 (Guj.) : 1973 TaxPub(DT) 307 (Guj-HC), Dhoomketu Builders & Development (P.) Ltd. v. Asstt. CIT (2014) 368 ITR 680 (Del.) : 2013 TaxPub(DT) 1760 (Del-HC) and CIT v. Arcane Developers (P) Ltd. (2014) 368 ITR 627 (Del.) : 2015 TaxPub(DT) 143 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08

IN THE ITAT, DELHI BENCH

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