Assistant Commissioner of Income Tax, Central Circle-1(4), Bengaluru V. M/s. Valmark Developers Pvt. Ltd, Bengaluru

ITA 2648/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4834 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: V SRINIVASN
• Keywords: Business income; Depreciation; Tax effect; Benefit of exemption; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.V VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K GARODIA, ACCOUNTANT MEMBER ITA NOS.2648 TO 2653 /BANG/2017 (ASST. YEAR 2009-10 TO 2014-15) THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(4), BENGALURU. . APPELLANT VS. M/S VALMARK DEVELOPERS PVT. LTD., NO.113/1, THE RESIDENCY, 10 TH FLOOR, RESIDENCY ROAD, BENGALURU. . RESPONDENT PAN AACCV4484G. APPELLANT BY : SHRI C.H SUNDAR RAO, CIT RESPONDENT BY : SHRI V SRINIVASN, ADVOCATE DATE OF HEARING : 4-04-2018 DATE OF PRONOUNCEMENT : 11-04-2018 O R D E R PER BENCH : ALL THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE COMMON ORDER DATED 27/9/2017 RELATING TO ASSESSMENT YEAR 2009-10 TO 20 14-15. WHEN THESE APPEALS WERE TAKEN UP FOR HEARING, IT WAS SUBMITTED THAT TH E TAX EFFECT INVOLVED IN ITA NOS.2648 TO 2652 WAS LESS THAN RS.10 LAKHS AND, THE REFORE, THOSE APPEALS BY THE ITA NOE.2648 TO 2653/ B/17 2 REVENUE HAVE TO BE DISMISSED AS NOT MAINTAINABLE IN VIEW OF THE CBDT CIRCULAR NO.21/2015 DATED 10/12/2015. 2. THE LD DR HOWEVER SUBMITTED THAT PARA 5 OF THE A FORESAID CIRCULAR WHICH READS AS FOLLOWS:- 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX E FFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTE D ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSES SEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSMENT YEAR, APPE AL, CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHIC H THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONET ARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RE SPECT OF ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WORDS, HENCEFORTH, APPEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER, IN CASE OF A COM POSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHICH INVOLV ES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHALL BE FILED IN RESPECT O F ALL SUCH ASSESSMENT YEARS EVEN IF THE 'TAX EFFECT' IS LESS T HAN THE PRESCRIBED OF THE YEAR(S) IN WHICH THE 'TAX EFFECT' EXCEEDS TH E MONETARY LIMIT PRESCRIBED. IN CASE WHERE A COMPOSITE ORDER/JUDGMEN T INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEAL T WITH SEPARATELY.' 3. ACCORDING TO THE LEARNED DR, IF THE ORDER OF THE CIT(A) IS A COMPOSITE ORDER INVOLVING MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR ARE INVOLVED APPEAL CAN BE FILED IN RESPECT OF ALL SUCH ASSESSMENT YEARS EVEN IF THE TAX EFFECT IS LESS THAN THE PRESC RIBED LIMIT FOR SOME OF THE ASSESSMENT YEARS COMPRISED IN THE COMPOSITE ORDER O F THE APPELLATE AUTHORITY. THE LEARNED DR POINTED OUT THAT THE CIT(A) IN THE PRESE NT CASE HAS PASSED A COMMON ORDER FOR SEVERAL AYS AND TAX EFFECT IN ONE OF THE AY I.E., AY 13-14 IS MORE THAN RS.10 LACS AND THEREFORE THE APPEALS FOR ALL THE AY S SHOULD BE HELD TO BE FALLING WITHIN THE EXCEPTION CONTAINED IN PARAGRAPH 5 OF TH E CIRCULAR REFERRED TO ABOVE. ITA NOE.2648 TO 2653/ B/17 3 4. THE LD COUNSEL FOR THE ASSESSEE, HOWEVER, POINTE D OUT THAT PARAGRAPH 5 OF THE CIRCULAR ON WHICH THE LD DR PACED RELIANCE IN SUPPO RT OF HIS CONTENTION THAT THE APPEALS OF THE REVENUE ARE NOT HIT BY THE CIRCULAR NO.21/2015 IS SIMILAR TO PARAGRAPH 5 ISSUED BY THE CBDT VIZ., CIRCULAR NO.3/2012 WHICH WAS THE CIRCULAR ISSUED BY THE CBDT PRESCRIBING MONETARY LIMITS FOR FILING APPEALS BEFORE TRIBUNAL. THIS CIRCULAR WAS IN FORCE PRIOR TO THE ISSUANCE OF CBDT CIRCULAR NO.21/2015. HE BROUGHT TO OUR NOTICE THAT PARAGRAPH 5 OF CBDT CIRCULAR NO.3/2012 HAD COME UP FOR CONSIDERATION BEFORE THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT, CENTRAL CIRCULAR VS. PSI HYDRAULICS (2014) 226 TAXMAN 34 (KAR). IN THE AFORESAID DECISION, HONBE KARNATAKA HIGH COURT HELD MERELY BECAUSE THE ORDER OF THE CIT(A) IS CONSOLIDATED ORDER PASSED FOR SEVERAL YEARS TAX EFFECT SHOULD NO T BE SEEN FOR EACH AY SEPARATELY. THE HONBLE KARNATAKA HIGH COURT HELD THAT PARAGRAP H 5 OF CIRCULAR NO.3/2013 WAS DISCRIMINATORY AND OFFENDED ARTICLE 14 OF THE CONST ITUTION OF INDIA. THE HONBLE HIGH COURT FINALLY HELD THAT EVEN THOUGH THE CUMULA TIVE TAX EFFECT IN A COMMON ORDER PASSED BY CIT(A) FOR SEVERAL YEARS IS MORE TH AN 10 LAKHS BUT IF THE INDIVIDUAL TAX EFFECT IN EACH ASSESSMENT YEAR IS LESS THAN THE MONETARY LIMIT PRESCRIBED IN CIRCULAR NO.3/2011, THE SAME SHOULD BE HELD TO BE NOT MAINTAINABLE. HE THEREFORE SUBMITTED THAT THE TAX EFFECT FOR EACH AY SHOULD BE SEEN SEPARATELY AND IN THAT EVENT THE APPEALS FOR THE OTHER AYS EXCEPT AY 2013-14, WO ULD BE NOT MAINTAINABLE AS THE TAX EFFECT WAS ADMITTEDLY LESS THAN RS.10 LACS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IS DIR ECTLY ON THE POINT AND WAS RENDERED IN IDENTICAL CIRCUMSTANCES. PARA 5 OF THE CIRCULAR NO.3/2011 CONSIDERED BY THE HONBLE KARNATAKA HIGH COURT IS IN PARI MATERIA SAME AS PARA 5 OF CIRCULAR NO.21/20115. FOR THE SAKE OF READY REFERENCE, WE G IVE BELOW THE RELEVANT PARAGRAPHS OF HONBLE KARNATAKA HIGH COURT ON THIS ISSUE. .PER CONTRA, SRI K.V. ARAVIND, LEARNED COUNSEL FO R THE APPELLANTS REFERS TO PARA 5 OF CIRCULAR NO. 3/2011, WHICH READ S THUS:- ITA NOE.2648 TO 2653/ B/17 4 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX E FFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CA SE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSME NT YEAR, APPEAL, CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EX CEEDS THE MONETARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WORDS, HENCEFORTH, APPEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER, IN CASE OF A COM POSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHICH INVOLV ES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHALL BE FILED IN RESPECT O F ALL SUCH ASSESSMENT YEARS EVEN IF THE 'TAX EFFECT' IS LESS T HAN THE PRESCRIBED OF THE YEAR(S) IN WHICH THE 'TAX EFFECT' EXCEEDS TH E MONETARY LIMIT PRESCRIBED. IN CASE WHERE A COMPOSITE ORDER/JUDGMEN T INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEAL T WITH SEPARATELY.' 17. IN CASE OF AN ASSESSEE, WHERE COMMON ORDER IS P ASSED IN RESPECT OF MORE THAN ONE ASSESSMENT YEAR, WHICH INV OLVES COMMON ISSUES EVEN IF IN ONE OF THE ASSESSMENT YEARS THE T AX EFFECT IS MORE THAN RS. 10 LAKHS, IRRESPECTIVE OF THE FACT THAT IN RESPECT OF OTHER ASSESSMENT YEARS WHICH IS PART OF THE COMMON ORDER, THE TAX EFFECT IS LESS THAN RS. 10 LAKHS, THE REVENUE IS ENTITLED TO FILE APPEAL EVEN IN RESPECT SUCH ASSESSMENT YEARS WHERE THE TAX EFFE CT IS LESS THAN RS. 10 LAKHS. HOWEVER, IN CASE WHERE THERE IS NO CO MMON ORDER AND AN ORDER IS PASSED ONLY IN RESPECT OF AN ASSESS MENT, YEAR AND THE TAX EFFECT THEREIN IS LESS THAN RS. 10 LAKHS, T HE REVENUE CANNOT FILE THE APPEAL. 18. ON THOROUGH SCRUTINY OF PARA 5 OF THE CIRCULAR NO. 3/2011, WE FIND THAT THERE APPEARS TO BE A GLARING DISCRIMINAT ION OFFENDING THE SPRIT OF ARTICLE 14 OF THE CONSTITUTION. IN THE CAS E OF A COMMON ORDER PASSED IN RESPECT OF ONE OR MORE ASSESSMENT Y EAR/YEARS, IF THE TAX EFFECT IS LESS THAN RS. 10 LAKHS, THE ASSES SEE IS NOT ENTITLED TO BENEFIT OF EXEMPTION AND THE REVENUE IS NOT DEBARRE D FROM FILING AN APPEAL, EVEN THOUGH THE TAX EFFECT IN RESPECT OF ON E OR MORE ASSESSMENT YEARS IS LESS THAN RS. 10 LAKHS. IN OTHE R WORDS, THE REVENUE CAN FILE AN APPEAL AGAINST ALL THE ASSESSME NT ORDERS WHICH IS A PART OF THE COMMON ORDER, IRRESPECTIVE OF THE FACT, WHETHER FOR ONE OF THE ASSESSMENT YEAR/YEARS, THE TAX EFFECT IS LESS THAN RS. 10 LAKHS. HOWEVER, IF IT IS A SOLITARY ORDER AND TAX E FFECT IS LESS THAN ITA NOE.2648 TO 2653/ B/17 5 RS. 10 LAKHS, THE ASSESSEE IS ENTITLED TO THE BENEF IT OF EXEMPTION AND THE REVENUE CANNOT FILE THE APPEAL. 19. THE PARA-5 OF THE CIRCULAR IS HIGHLY DISCRIMINATORY . AFTER ALL THE BUNCHING AND CLUBBING OF CASES AND PASSING COMM ON ORDERS IS A PROCEDURE ADOPTED FOR CONVENIENT DISPOSAL OF T HE CASES BY THE COURT OR QUASI JUDICIAL AUTHORITY. THE ASSESSEE HAS NO SAY IN THE MATTER OF CLUBBING OF CASES AND PASSING OF COMMON O RDERS. MERELY BECAUSE THE AUTHORITY CONCERNED FOR JUDICIAL CONVENIENCE, CLUBS THE CASES AND PASS COMMON ORDER, THE ASSESSEE SHOULD NOT BE DENIED OF THE BENEFIT OF CIRCULAR-3/2011 WHEN TH E TAX EFFECT FOR THE ASSESSMENT YEAR/YEARS THE TAX EFFECT IS LESS TH AN RS. 10 LAKHS. THEREFORE, IT IS TO BE HELD THAT WHETHER IT IS A SO LITARY ORDER OR COMMON ORDER, THE ASSESSEE SHOULD HAVE THE BENEFIT OF THE TAX EFFECT LESS THAN RS. 10 LAKHS AND IN ALL SUCH CASES WHETHER IT IS A PART OF THE COMMON ORDER OR A SOLITARY ORDER, THE R EVENUE WILL NOT BE ENTITLED TO FILE AN APPEAL . (EMPHASIS SUPPLIED) 6. IN VIEW OF THE AFORESAID DECISION OF HONBLE KAR NATAKA HIGH COURT, WE HOLD THAT THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2009-10 TO 2012-13 BEING ITA NO.2648 TO 2651 AND FOR ASSESSMENT YEAR 2014-15 BEI NG ITA 2653/B/2017 ARE DISMISSED FOR REASON THAT THE TAX EFFECT IN THESE A PPEALS ARE LESS THAN RS.10 LAKHS AND, THEREFORE, SUCH APPEALS ARE NOT MAINTAINABLE IN VI EW OF CBDT CIRCULAR NO.21/2015. ITA NO.2652/BANG/2017 (ASSESSMENT YEAR 2013-14) 7. AS FAR AS THIS APPEAL OF THE REVENUE IS CONCERNE D, THE GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS:- 1. THE ORDER OF THE LEARNED DEPUTY COMMISSIONER O F INCOME TAX, CENTRAL CIRCLE-1(4) IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, EQUITY, WEIGHT OF EVID ENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. (I) THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING THE BUSINESS LOSS FOR THE YEAR UNDER RE FERENCE AMOUNTING TO RS.46,74,561/-. ITA NOE.2648 TO 2653/ B/17 6 (II) THE LEARNED ASSESSING OFFICER ERRED IN TREATI NG THE AMOUNTS TRANSFERRED TO WORK-IN-PROGRESS AS A ME RE OPERATIONAL LOSS AND NOT A LOSS ARISING IN THE COUR SE OF BUSINESS. 3. FOR THE ABOVE AND OTHER GROUNDS OF APPEAL URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT PRAYS THAT THE RELIEF SOUGHT FOR MAY BE GRANTED AND JUSTICE RENDER ED. 8. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF REAL ESTATE DEVELOPMENT. IT ALSO ENGAGED IN TRADING OF TDR(TRA NSFER DEVELOPMENT RIGHT). THE ASSESSEE DID NOT DERIVE ANY INCOME DURING THE FINAN CIAL YEAR 2012-13. THE AO NOTICED THAT IN THE PROFIT AND LOSS ACCOUNT, THE AS SESEE HAS DEBITED EXPENDITURE OF RS.51,47,140/- INCURRED UNDER VARIOUS HEADS NAMELY DEPRECIATION AMORTIZATION EXPENSES, OTHER EXPENSES ETC. THE AO WAS OF THE VI EW THAT SINCE THERE IS NO REVENUE EARNED DURING THE RELEVANT PREVIOUS YEAR AS WELL AS IN THE PAST, THE EXPENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT SHOULD NOT B E ALLOWED AS A DEDUCTION. 9. IN RESPONSE TO THE QUERY OF THE AO IN THIS REGA RD, THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND HAS VENTURED INTO DEVELOPMENT OF REAL ESTATE PROJECT. VARIOUS ACTIVITIES WERE CAR RIED OUT DURING THE YEAR, OF WHICH BEING IN NATURE OF REVENUE EXPENDITURE ARE ACCOUNTE D IN PROFIT AND LOSS ACCOUNT. THESE EXPENDITURES ARE INCURRED IN THE COURSE OF A BUSINESS, MEANING THERE IS A BUSINESS IN EXISTENCE. IT WAS SUBMITTED THAT ONCE A BUSINESS IS FOUND TO HAVE BEEN SET UP AS A MATTER OF FACT, EXPENSES OF REVENUE N ATURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ARE ALLOWAB LE. THE ASSESSEE POINTED OUT THAT IT HAD ACQUIRED LAND AND THUS COMMENCED ITS ACTIVIT Y OF BUSINESS. IT WAS SUBMITTED THAT THE ASSESSEE INCURRED VARIOUS OPERATING AND AD MINISTRATIVE EXPENSES. THESE EXPENSES ARE NOT CONNECTED TO PROJECT AND RELATES T O DAY TO DAY ADMINISTRATIVE EXPENSES WHICH IS CLAIMED AS EXPENDITURE. THE EXPEN SES CONNECTED TO PROJECT HAVE BEEN TRANSFERRED TO WORK-IN-PROGRESS ACCOUNT. THE ASSESSEE THUS SUBMITTED THAT THE BUSINESS OF THE ASSESSEE HAD BEEN SET UP AND ALL EX PENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT WERE REVENUE EXPENDITURE AND THEREFORE THE LOSS CLAIMED BY THE ITA NOE.2648 TO 2653/ B/17 7 ASSESSEE HAS TO BE ALLOWED. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS AS TO WHEN A BUSINESS CAN BE CONSIDERED AS HAVING BEEN SE T UP AND WHEN A BUSINESS IS SET UP, ALL REVENUE EXPENDITURE HAVE TO BE ALLOWED AS D EDUCTION IN COMPUTING INCOME FROM BUSINESS. CIT V.. DHOOMKETU BUILDERS AND DEVELOPMENT PVT. LTD . (TS - 190- HC 2013(DEL) CIT V. SARABHAI MANAGEMENT CORPORATION (1991, 192 I TR 151 SC) CIT VS SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (1973) 91 ITR 170 9. THE AO HOWEVER, HELD THAT BUSINESS OF REAL ESTAT E CAN BE CONSIDERED AS SET UP ONLY WHEN PROPERTIES ARE ACQUIRED AND DEVELOPMENT I S CARRIED OUT THEREON. THE AO HELD THAT MERELY ACQUIRING LAND CANNOT BE EQUIVALEN T TO SETTING UP BUSINESS OF REAL ESTATE DEVELOPMENT. THE AO ACCORDINGLY TREATED THE BUSINESS LOSS DECLARED BY THE ASSESSEE OF RS.46,74,561/- AS INCORRECT AND TREATED THE INCOME OF THE ASSESSEE AS NIL. IT IS UNDISPUTED THAT THE LOSS DECLARED BY THE ASSE SSEE IN THE RETURN OF INCOME IS ONLY BECAUSE OF THE REVENUE EXPENDITURE CLAIMED IN THE P & L ACCOUNT. THE AO TREATED THE BUSINESS LOSS OF THE ASSESSEE AS NIL AND REFUSE D TO ALLOW CARRY FORWARD OF BUSINESS LOSS AS CLAIMED BY THE ASSESSEE. 10. ON APPEAL BY THE ASSESSEE, THE CIT(A) HELD THA T THE BUSINESS WAS SET UP AND THE ASSESSEE WAS ENTITLED TO CLAIM ALL REVENUE EXPENSES AND COMPUTED ITS BUSINESS INCOME ACCORDINGLY. IN COMING TO THE AFORESAID CON CLUSION, THE CIT(A) RELIED ON THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF BANGALORE GOA ESTATE PVT. LTD., IN ITA NO.988/BANG/2014 DATED 31/8/2015. 11. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE H AS PREFERRED PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NOE.2648 TO 2653/ B/17 8 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD DR RELIED ON THE ORDER OF THE AO. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A).WE HAVE GIVEN CAREFUL CONSIDERATION TO THE RIVAL SUBMISSION S. BEFORE US, THE ASSESSEE HAS CITED THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF BANGALORE GOA ESTATE PVT. LTD., IN ITA NO.988/BANG/2014 DATED 31.08.201 WHEREIN IT WAS HELD AS UNDER: '10. WE HAVE HEARD BOTH SIDES OF THE ARGUMENT AND P ERUSED THE MATERIAL ON RECORD AND LEARNED ASSESSING OFFICER HA S RELIED ON THE JUDGMENT OF HON 'BLE SUPREME COURT M/S. TUTICOR IN ALKALI CHEMICALS AND FERTILIZERS LTD., (SUPRA) WHILE EVALU ATING THIS CASE WITH THE PRESENT CASE. WE FIND THAT THE MAJOR QUEST ION IS WHEN A BUSINESS CAN BE CONSIDERED AS SET UP AND COMMENCED. THE CONCEPT OF SET UP AND COMMENCEMENT WILL DIFFER INDU STRY TO INDUSTRY. M/S. TUTICORIN ALKALI CHEMICALS AND FERTI LIZERS LTD. (SUPRA) WAS A MANUFACTURING CONCERN. SETTING UP AND COMMENCEMENT IN CASE OF THE REAL ESTATE BUSINESS IS ENTIRELY DIFFERENT. THE CONCEPT OF SETUP AND COMMENCEMENT AR E DIFFERENT. THE FIRST IS CAPACITY TO START ITS EARNING CAPACITY WHEREAS THE LATTER IS ACTUAL COMMERCIALIZATION OF THE BUSINESS. NORMALLY, A MANUFACTURING BUSINESS REQUIRES TURNAROUND TIME OF LESS THAN SIX MONTHS, WHEREAS A REAL ESTATE BUSINESS MAY REQUIRE MORE THAN ONE ACCOUNTING YEAR. 11. WE FIND THAT THE CASE OF DHOOM KETU (SUPRA) OF HON'BLE DELHI HIGH COURT IS SIMILAR TO THE RELEVANT CASE IN HAND. WE ARE OF THE VIEW THAT THE COMMENCEMENT OF REAL ESTATE BUSINESS WILL START WITH ACQUISITION OF LAND PROPERTY, BY AN ASSESSEE WHOSE INTENTION IS DEVELOP IT AND DO REAL ESTATE. ASSESSEE HAD SPENT C ONSIDERABLE SUM FOR DEVELOPING THE PIECE OF LAND. THIS WOULD CL EARLY SHOW THAT IT HAD SET UP THE BUSINESS...... 13. IT IS CLEAR FROM THE DECISION OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF DHOOM KETU (SUPRA) THAT BUSINESS OF REAL ESTATE DEV ELOPER CAN BE CONSIDERED AS SET UP WHEN PROPERTIES ARE ACQUIRED. IN THE CASE OF TH E ASSESSEE, THE AO HAS ACCEPTED THE FACT THAT THE ASSESSEE HAS ACQUIRED PROPERTIES FOR THE PURPOSE OF DEVELOPMENT. THEREFORE THE BUSINESS OF THE ASSESSEE OUGHT TO HAV E BEEN CONSIDERED AS HAVING BEEN SET UP. ALL REVENUE EXPENSES HAVE THEREFORE TO BE ALLOWED AS DEDUCTION IN COMPUTING INCOME FROM BUSINESS. RESPECTFULLY FOLLO WING THE VIEWS EXPRESSED BY ITA NOE.2648 TO 2653/ B/17 9 THE HON'BLE ITAT, IT IS HELD THAT THE ACQUISITION O F LANDS FOR PURPOSES OF REAL ESTATE DEVELOPMENT WOULD AMOUNT TO SETTING UP AND COMMENCE MENT OF BUSINESS AND THE EXPENSES CLAIMED BY THE APPELLANT ARE ALLOWABLE. W E FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(A). THE APPEAL FOR AY 13 -14 IS DISMISSED. 14. IN THE RESULT, ALL THE APPEALS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL, 2018 . SD/- SD/- (A.K GARODIA) (N.V VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 11/4/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETARY, ITAT, BAN GALORE ITA NOE.2648 TO 2653/ B/17 10 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P.S... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT.. 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..