ITO, New Delhi v. M/s Global Propmart Pvt. Ltd., New Delhi

ITA 2850/DEL/2010 | 2006-2007
Pronouncement Date: 19-08-2010 | Result: Dismissed

Appeal Details

RSA Number 285020114 RSA 2010
Assessee PAN EMBER2006D
Bench Delhi
Appeal Number ITA 2850/DEL/2010
Duration Of Justice 2 month(s) 11 day(s)
Appellant ITO, New Delhi
Respondent M/s Global Propmart Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 19-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 19-08-2010
Date Of Final Hearing 09-08-2010
Next Hearing Date 09-08-2010
Assessment Year 2006-2007
Appeal Filed On 08-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA VICE PRESIDENT A ND SHRI RAJPAL YADAV JUDICIAL MEMBER I.T.A NO. 2850/DEL/10 ASSTT. YEAR 2006-07 INCOME TAX OFFICER WARD-12(2) C.R. BLDG. NEW DELHI. VS. M/S. GLOBAL PROPMART PVT. LTD. 414 4 TH FLOOR DDA COMMERCIAL COMPLEX DISTRICT CENTRE JANAKPURI NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. MONA MOHANTY SR. DR. RESPONDENT BY: NONE PER RAJPAL YADAV JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT(A) DATED 11 TH MARCH 2010 PASSED FOR ASSTT. YEAR 2006-07. THE GR OUNDS OF APPEAL TAKEN BY THE REVENUE ARE NOT IN CONSONANCE W ITH RULE 8 OF ITAT RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NA TURE. IN BRIEF THE GRIEVANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED I N DIRECTING THE AO TO ALLOW THE CLAIM OF ASSESSEE FOR FINANCE CHARGES AND OTHER EXPENDITURE AS REVENUE EXPENDITURE. ITA NO. 2850/DEL-2010 ASSTT. YEAR 2006-07 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY HAS FILED ITS RETURN OF INCOME ON 22 ND NOVEMBER 2006 DECLARING A LOSS OF RS. 8 71 880/-. THE CASE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON T HE ASSESSEE. IN COMPLIANCE TO THE NOTICES SHRI ANIL SHRIVASTAVA CH ARTERED ACCOUNTANT APPEARED BEFORE THE AO FROM TIME TO TIME AND SUBMIT TED THE DETAILS. ON SCRUTINY OF THE ACCOUNTS LD. AO FOUND THAT ASSESSEE COMPANY WAS INCORPORATED ON 16 TH FEBRUARY 2005. ACCORDING TO THE MEMORANDUM OF ASSOCIATION IT WAS TO CARRY ON THE BUSINESS OF PURC HASE / SALE DEVELOPMENT / COLONIZATION OF LAND / IMMOVABLE PRO PERTY OF ALL KINDS AND CONSTRUCTION OF HOUSES BUILDING OR CIVIL WORK OF EVERY DESCRIPTION ON ANY LAND OF THE COMPANY OR UPON ANY OTHER LAND AND IMMOVABLE PROPERTY ETC. HOWEVER NO BUSINESS ACTIVITY WAS CARRIED ON BY THE ASSESSEE DURING THE YEAR. THE AO FURTHER FOUND THAT ASSESSEE COMPAN Y HAS RAISED CERTAIN INTER CORPORATE LOANS WHICH WERE UTILIZED T OWARDS THE PURCHASE OF LAND ON WHICH INTEREST OF RS. 8 11 151/- WAS PAID. THE ASSESSEE HAS ALSO DEBITED BANK CHARGES OF RS. 35 931/-. IT HAS D EBITED THE INTEREST PAYMENT IN THE PROFIT AND LOSS ACCOUNT AND CLAIMED IT AS A REVENUE EXPENDITURE. THE AO DISALLOWED THE CLAIM OF ASSESSE E ON THE GROUND THAT ASSESSEE COMPANY DID NOT COMMENCE ANY COMMERCI AL ACTIVITIES ITA NO. 2850/DEL-2010 ASSTT. YEAR 2006-07 3 AND THEREFORE THE FINANCIAL EXPENSES ARE TO BE CAPI TALIZED. HE MADE AN ADDITION OF RS. 8 66 230/-. 3. ON APPEAL IT WAS CONTENDED BY THE ASSESSEE THAT AO HAS MISREAD AND MISCONSTRUED THE BUSINESS OPERATIONS OF THE ASS ESSEE. THE ONE OF THE OBJECT OF THE ASSESSEE COMPANY IS TO CARRY ON THE BUSINESS OF PURCHASE AND SALE OF LAND/ IMMOVABLE PROPERTY. IN O RDER TO CARRY OUT THIS OBJECT ASSESSEE COMPANY HAS PURCHASED LAND AT HYDE RABAD VALUING RS. 20054385/- WHICH HAS BEEN SHOWN AS STOCK IN TRA DE IN THE BOOKS OF THE COMPANY. SIMILARLY IT HAD MADE ADVANCE PAYMENT OF RS. 5153750/- TOWARDS PURCHASE OF LAND AT PUNE. ACCORDING TO THE ASSESSEE IT HAD COMMENCED ITS BUSINESS BY ACQUIRING THE LAND. THERE FORE THE CONCLUSION OF THE AO THAT ASSESSEE COMPANY HAS NOT COMMENCED C OMMERCIAL ACTIVITIES DURING THE YEAR UNDER ASSESSMENT IS TOTA LLY INCORRECT. THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS BEFORE THE LD. CIT(A) :- CIT VS. ESPN SOFTWARE INDIA PVT. LTD. {2008} 301 IT R 368 CIT VS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (1973) 91 ITR 170 (GUJ.) CIT VS. SARABHAI MANAGEMENT CORPORATION LTD. (1991) 192 ITR 151 (SC) & COCHIN INTERNATIONAL AIRPORT LTD. VS ACIT EMAKULAM ITA NO. 45 & 46 / COCH/2000 DATED 30.01.20 04. 4. LD. CIT(A) HAS GONE THROUGH THE RECORD CAREFULLY AND OBSERVED THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENT IT HAS BEEN HELD THAT THE CONCEPT OF SET UP OF BUSINESS IS DIFFERENT FROM THE COMMENCEMENT OF ITA NO. 2850/DEL-2010 ASSTT. YEAR 2006-07 4 BUSINESS UNDER THE INCOME TAX ACT. BOTH SET UP OF BUSINESS AND COMMENCEMENT OF BUSINESS CAN HAPPEN ON THE SAME DAT E OR THERE MAY BE A TIME GAP BETWEEN THE TWO. ONCE THE BUSINESS IS SET UP AND EVEN IF COMMENCEMENT OF BUSINESS HAS YET NOT STARTED ALL TH E EXPENSES INCURRED THEREFROM WILL BE TREATED AS BUSINESS EXPE NSE. LD. CIT(A) MADE A REFERENCE TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD . (S UPRA). ACCORDING TO THE LD. CIT(A) ASSESSEE HAS ESTABLISHE D THE SET UP OF BUSINESS. IT HAS ALSO DEMONSTRATED THAT ITS BUSINES S ACTIVITY HAS COMMENCED ON THE DATE ON WHICH IT HAS MADE PAYMENT FOR PURCHASE OF LAND. THE LD. FIRST APPELLANT AUTHORITY IN THIS WAY ALLOWED THE EXPENSES TO THE ASSESSEE AS REVENUE EXPENDITURE. 5. IN RESPONSE TO THE NOTICE OF HEARING NO-ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTANCE OF LD. DR WE HAVE GONE THROUGH THE RECORD CAREFULLY AND PROCEED TO DECIDE THE APPEAL EX PARTE QUA THE ASSESSEE. LD. DR RELIED UPON THE ORDER OF T HE AO. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). BECAUSE LD. CIT(A) HAS RECORDED A FINDING OF FACT THAT ASSESSEE HAS COMMENCED THE BUSINESS DU RING THE YEAR. THE COMMENCEMENT OF THE BUSINESS IS DISCERNABLE FROM TH E FACT THAT IT HAS PURCHASED A LAND AT HYDERABAD AND MADE ADVANCE PAYM ENT FOR A PLOT OF ITA NO. 2850/DEL-2010 ASSTT. YEAR 2006-07 5 LAND AT PUNE. THE LAND AT HYDERABAD HAS BEEN SHOWN AS STOCK IN TRADE. THE ONE OF THE OBJECT OF THE ASSESSEE COMPANY IS TO UNDERTAKE PURCHASE AND SALE OF LAND. THUS FROM THE PURCHASE O F LAND AT TWO PLACES IT IS ESTABLISHED THAT BUSINESS ACTIVITY HAS BEEN C OMMENCED. CONTRARY TO THIS FINDING OF FACT ORDER OF THE AO IS SILENT. HE SIMPLY OBSERVED THAT ASSESSEE COMPANY DID NOT COMMENCED ANY COMMERCIAL A CTIVITIES. LD. DR EXCEPT PUTTING RELIANCE UPON THE ORDER OF AO COU LD NOT BRING ANY MATERIAL TO OUR NOTICE WHICH CAN PERSUADE US TO TAK E A DIFFERENT VIEW THAN THE ONE TAKEN BY THE LD. CIT(A). IN VIEW OF TH E ABOVE DISCUSSION WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.8.2010. [G.E. VEERABHADRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER DATED: VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT