Appeal Details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 0331 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 4 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-01-2013
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Assessment Year
2007-2008
Appeal Filed On
06-09-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTA NT MEMBER I.T.A.2635/AHD/2010 A. Y. 2007-08 WITH I.T.A.2706/AHD/2011 A. Y. 2008-09 THE D.C.I.T., GANDHINAGAR APPELLANT VS. GUJARAT PORT INFRASTRUCTURE DEVT. CO. LTD. 6 TH FLOOR, GMB BHAVAN, SECTOR-10A, GANDHINAGAR PAN-AAACG7916J RESPONDENT DEPARTMENT BY : SHRI T.SHANKAR, SR. D.R. ASSESSEE BY : SHRI VIRK H.P. SINGH, A.R. DATE OF HEARING : 22.01.2013 DATE OF PRONOUNCEMENT : 22.01.2013 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THESE ARE REVENUES APPEAL AGAINST THE SEPARATE OR DER OF LD. CIT(A), DATED 24.06.2010 AND 26.08.2011. 2. BOTH THE APPEALS BELONG TO THE SAME ASSESSEE, TH EY WERE HEARD TOGETHER, THEREFORE, FOR THE SAKE OF CONVENIENCE TH EY ARE BEING DISPOSED OF BY PASSING THIS CONSOLIDATED ORDER. 3. DURING THE ASSESSMENT YEAR 2007-08 THE A.O. OBSE RVED THAT IN THE PROFIT AND LOSS ACCOUNT ASSESSEE HAS SHOWN THE FOLLOWING INCOME: INTEREST ON SSNNL DEPOSITS RS.13,81,343/- INTEREST ON GSFS DEPOSITS RS.88,14,112/- MISCELLANEOUS INCOME RS. 85,000/- SITTING FEES RS. 500/- TOTAL RS.1,02,80,955/- I.T.A.2635/AHD/2010, A. Y. 2007-08 WITH I.T.A.2706/AHD/2011, A. Y. 2008-09 2 A.O. HOLDING THAT SINCE THE ASSESSEE COMPANY HAS NO T COMMENCED ITS BUSINESS DURING THE YEAR UNDER APPEAL, DISALLOWED T HE EXPENDITURE IN VIEW OF THE RATIO LAID DOWN BY HONBLE SUPREME COUR T IN THE CASE OF TUTICORIN ALKALIES CHEMICALS AND FERTILIZERS LTD., 227 ITR 172 AND TOTAL INCOME OF THE ASSESSEE WAS COMPUTED AT RS.1,02,80,9 55/-. ON SIMILAR LINES ASSESSEE WAS ASSESSED AT RS.1,54,15,1 00/- FOR THE A.Y. 2008-09. 4. IN APPEAL LD. CIT(A) FOLLOWING THE EARLIER ORDER S OF THE I.T.A.T. IN ASSESSEES OWN CASE HELD THAT ASSESSEES BUSINESS H AS BEEN SET UP AND THEREFORE THE A.O. HAS TO ALLOW ALL THE EXPENDI TURE AS REVENUE EXPENDITURE AND ALSO ALLOW THE SET-OFF OF LOSSES IN ACCORDANCE WITH LAW. 5. BEFORE US, BOTH THE PARTIES AGREED THAT THE ISS UE INVOLVED IN THESE APPEALS IS NOW COVERED BY THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT VIDE TAX APPEAL NO.2139, 2140 TO 2143 OF 2009 DATED 31.01.2012 IN ASSESSEES OWN CASE WHEREIN FOLLOWIN G WAS HELD:- 14. ON THE BASIS OF SUCH MATERIALS, IF WE REVERT B ACK TO THE DECISION OF THE TRIBUNAL UNDER CHALLENGE WE NOTICE THAT THE TRIBUNAL HAD COME TO THE CONCLUSION THAT THE ASSESS EE HAD SET UP ITS BUSINESS. WE ARE OF THE OPINION THAT TH E TRIBUNAL COMMITTED NO ERROR. AS ALREADY NOTED, THE MAIN OBJ ECTS OF THE COMPANY INCLUDED WIDE VARIETY OF SUBJECTS PRINC IPALLY CONCERNED WITH THE DEVELOPMENT OF MINOR PORTS IN AN D OUTSIDE STATE OF GUJARAT. THIS COULD BE DONE BY AC TING AS PROMOTERS, ORGANIZERS, MANAGERS AND DEVELOPERS OF T HE PORTS OR ALSO THROUGH ENTERING INTO JOINT VENTURE UNDERTA KING. THE SUBSIDIARY OBJECTIVE, INCIDENTAL TO THE MAIN OBJECT S ALSO ENVISAGED THE COMPANY TO WORK AND ACT AS AGENT OF T HE GOVERNMENT, MUNICIPAL LOCAL BOARDS, RAILWAY CONTRAC TORS ETC. I.T.A.2635/AHD/2010, A. Y. 2007-08 WITH I.T.A.2706/AHD/2011, A. Y. 2008-09 3 15. IN FURTHERANCE OF SUCH OBJECTS, PRINCIPAL AS WE LL AS ANCILLARY, THE ASSESSEE COMPANY HAVING ENTERED INTO A JOINT VENTURE WITH ANOTHER COMPANY, WHICH WAS DEVELOPING PORTS AT MUNDRA, IT CANNOT BE STATED THAT THE BUSINESS OF THE COMPANY WAS NOT SET UP. 16. IT IS NOT IN DISPUTE THAT ANY EXPENSE INCURRED PRIOR TO THE SETTING UP OF A BUSINESS WOULD NOT BE A PERMISSIBLE DEDUCTION. IN THE CASE OF PREM CONDUCTORS PVT. LTD . VS. COMMISSIONER OF INCOME-TAX, GUJARAT-1 REPORTED IN [ 1977] 108 ITR 65, THE DIVISION BENCH OF THIS COURT RELYIN G ON AND REFERRING TO THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF WESTERN INDIA VEGETABLE PRODUCTS LTD. VS. C IT (SUPRA) OBSERVED THAT FOR DECIDING WHEN A COMPANY C OULD BE SAID TO HAVE SET UP ITS BUSINESS, WHAT THE COURT HA S TO CONSIDER IS WHETHER THE BUSINESS OF THE ASSESSEE CO NSISTS OF DIFFERENT CATEGORIES AND WHETHER THE ACTIVITY, WHIC H WAS STARTED EARLIER IS SAID TO HAVE BEEN THE ESSENTIAL PART OF THE BUSINESS ACTIVITY OF THE ASSESSEE. THE COURT HELD AND OBSERVED AS UNDER:- THUS, IT IS CLEAR IN THE LIGHT OF THE DECISIONS OF THIS HIGH COURT IN SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES CASE [1973] 91 ITR 170 (GUJ) AND SARABHAI MANAGEMENT CORPORATION LTD.S CASE [1976] 102 ITR 25(GUJ) THAT WHAT THE COURT HAS TO CONSIDER IS, WHETHER THE BUSINESS OF THE ASSESSEE CONSISTS O F DIFFERENT CATEGORIES AND WHETHER THE ACTIVITY WHICH WAS STARTED EARLIER THAN THE ACTUAL COMMENCEMENT OF THE PRODUCTION IN THE INSTANT CASE COULD BE SAID TO HAVE BEEN AN ESSENTIAL PART OF THE BUSINESS ACTIVIT Y OF THE ASSESSEE. THE COMPANY CAN BE SAID TO HAVE SET UP ITS BUSINESS FROM THE DATE WHEN ONE OF THE CATEGORIES OF ITS BUSINESS ACTIVITY IS STARTED AND IT IS NOT NECESSARY THAT ALL THE CATEGORIES OF ITS BUSINE SS ACTIVITIES MUST START EITHER SIMULTANEOUSLY OR THAT THE LAST STAGE MUST START BEFORE IT CAN BE SAID THAT TH E BUSINESS WAS SET UP. AGAIN, AS BHAGWATI C.J. HAS EMPHASIZED IN SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES CASE [1973] 91 ITR 170 (GUJ), THE TEST TO BE APPLIED IS AS TO WHEN A BUSINESSMAN WOULD REGARD A BUSINESS AS BEING COMMENCED AND THE APPROACH MUST BE FROM A COMMONSENSE POINT OF VIEW. 17. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENT, TH E FINDINGS OF THE TRIBUNAL AND OUR OBSERVATIONS MADE HEREINABO VE, WE SEE NO REASON TO INTERFERE. WE MAY ALSO NOTICE THA T IN THE EARLIER YEARS, THE CASE OF THE ASSESSEE THAT IT HAD SET UP THE BUSINESS WAS NOT QUESTIONED BY THE ASSESSING OFFICE R. I.T.A.2635/AHD/2010, A. Y. 2007-08 WITH I.T.A.2706/AHD/2011, A. Y. 2008-09 4 6. RESPECTFULLY FOLLOWING THE ABOVE, THE APPEALS FI LED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22.01.2013 SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD
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