Ascendas IT Park Chennai Ltd. v. Dy. CIT

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The Tax Publishers2016 TaxPub(DT) 2237 (Mad-HC) Ascendas IT Park Chennai Ltd. v. Dy. CIT INCOME TAX ACT, 1961 --Head of income--Business income or income from other sourcesInterest on deposits--Assessee-company was in the business of developing and leasing of properties of Hi Tech & IT office spaces. During the year, it carried on the business of developing an IT Park and filed return disclosing loss. The return was processed under section 143(1) and loss was accepted. Subsequently, AO issued notice under section 148 where AO had reason to believe that the expenses claimed by assessee in the pre-commencement period should be capitalized and interest on deposits taxable under the head 'Income from other sources'. Assessee submitted explanation with supporting evidence that the marketing division of assessee premises had commenced in previous year and consequently expenditure was charged to profit and loss account as Revenue in nature. AO passed re-assessment order by treating the interest on deposits as the income from other sources and raised a demand. AO had disallowed the claim of Revenue expenditure and treated same as prior period expenditure and interest income was separately taxed. *Held:* Assessee was carrying on the business in India including maintaining, establishing, developing and construction of commercial complex and residential building. Assessee had claimed set off on assumption that business had been set up and income had to be adjusted against the project cost. The main object as per MOA of the company was not acquisition of land. Assessee had knowledge of various expenditure incurred and identified that certain category of expenditure had characteristic of pre-operative expenses. The action of set off of interest income with expenditure was not permitted in the circumstances where assessee had not set up the business or commenced the business and also not submitted commencement of business certificate issued by Registrar of Companies. Therefore, AO was justified in assessing interest on deposits taxable under the head Income from other sources. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 2237 (Mad-HC)

Ascendas IT Park Chennai Ltd. v. Dy. CIT

INCOME TAX ACT, 1961

--Head of income--Business income or income from other sourcesInterest on deposits--Assessee-company was in the business of developing and leasing of properties of Hi Tech & IT office spaces. During the year, it carried on the business of developing an IT Park and filed return disclosing loss. The return was processed under section 143(1) and loss was accepted. Subsequently, AO issued notice under section 148 where AO had reason to believe that the expenses claimed by assessee in the pre-commencement period should be capitalized and interest on deposits taxable under the head 'Income from other sources'. Assessee submitted explanation with supporting evidence that the marketing division of assessee premises had commenced in previous year and consequently expenditure was charged to profit and loss account as Revenue in nature. AO passed re-assessment order by treating the interest on deposits as the income from other sources and raised a demand. AO had disallowed the claim of Revenue expenditure and treated same as prior period expenditure and interest income was separately taxed. Held: Assessee was carrying on the business in India including maintaining, establishing, developing and construction of commercial complex and residential building. Assessee had claimed set off on assumption that business had been set up and income had to be adjusted against the project cost. The main object as per MOA of the company was not acquisition of land. Assessee had knowledge of various expenditure incurred and identified that certain category of expenditure had characteristic of pre-operative expenses. The action of set off of interest income with expenditure was not permitted in the circumstances where assessee had not set up the business or commenced the business and also not submitted commencement of business certificate issued by Registrar of Companies. Therefore, AO was justified in assessing interest on deposits taxable under the head Income from other sources.