DCIT, Circle- 11(1), New Delhi V. HMS Real Estate Pvt. Ltd., New Delhi

ITA 3289/DEL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8887 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 07-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KUTOCH
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; Wholly owned subsidiary; Revenue expenditure; Capital expenditure
• Section: 37(1); 32; 37; 11

Judgement Text

1 ITA NO.3289/DEL/2018 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 3289/DEL/2018 ( A .Y 2012-13) DCIT CIRCLE- 11(1) NEW DELHI (APPELLANT) VS HMS REAL ESTATE PVT. LTD. 1 AD, VANDHANA BUILDING , 11, TOLSTOY MARG, NEW DELHI AACCH0745G (RESPONDENT) APPELLANT BY SH. AMIT KUTOCH, SR. DR RESPONDENT BY SH. SALIL AGGARWAL, SR. ADV, SH. R. P. MALL, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 19/2/2018 PASSED BY CIT(A)-4, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHETHER THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF REVENUE EXPENSES U/S 37(1) OF THE A CT CLAIMED IN RETURN OF INCOME OF RS. 1,00,17,751/- IGNORING THE FACT THAT THERE WAS NO (REVENUE FROM) BUSINESS INEXISTENCE CARRIED OUT DURING THE R ELEVANT ASSESSMENT YEAR. 3. THE ASSESSEE FURNISHED RETURN OF INCOME ON 1/11/ 2012 DECLARING LOSS OF RS.69,06,799/-. DURING THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT ASSESSEE COMPANY WAS INCORPO RATED ON 12/6/2008 AS A WHOLLY OWNED SUBSIDIARY OF HBT REAL ESTATE HOLDINGS LTD., MAURITIUS FOR THE DATE OF HEARING 17.12.2018 DATE OF PRONOUNCEMENT 27.12.2018 2 ITA NO.3289/DEL/2018 PURPOSE OF DEVELOPMENT AND CONSTRUCTION OF REAL EST ATE PROJECTS IN INDIA. IT HAS BEEN STATED THAT THE ASSESSEE HAD ENTERED INTO A ME MORANDUM OF UNDERSTANDING WITH SHYAM COMMUNICATIONS SYSTEM FOR THE PURPOSE OF BUILDING A PROJECT, SKYVIEW CORPORATE PARK (SCP) LO CATED ON NH-8, NEW DELHI. IT HAS BEEN ALSO NOTED THAT APPELLANT IS DEVELOPING MASTER-PLANNED CORPORATE COMMUNITY CALLED SKYVIEW CORPORATE PARK (SCP) IN SE CTOR 74A, NH-8, GURGAON, PHASE I OF THE DEVELOPMENT WHICH CONTAINS TWO IDENTICAL COMMERCIAL BUILDING OF NINE FLOORS. IN ITS ENTIRETY, THE 21 AC RE SKYVIEW CORPORATE PARK WILL COMPRISE OF 4 ADDITIONAL TOWERS WITH A TOTAL COMMER CIAL AREA OF OVER 1.9 MILLION SQUARE FEET. THE ASSESSING OFFICER FURTHER NOTED TH AT THOUGH THE ASSESSEE HAS NOT EARNED ANY REVENUE EXCEPT INTEREST OF RS. 31,10 ,952/-, HOWEVER TOTAL PROJECT EXPENSES HAVE BEEN CAPITALIZED TO CAPITAL W IP EXCEPT OF RS. 1,00,17,751/- TO THE EXTENT OF LOSS UNDER THE HEAD 'BUSINESS OR PROFESSION' WHICH WAS ALSO RELATED TO PROJECT AND HE, THEREFORE , PROPOSED TO SHOW CAUSE AS TO WHY NOT THESE EXPENSES OF RS. 1,00,17,751/- BE A LSO CAPITALIZED TO CAPITAL WIP. THE ASSESSEE FILED REPLY, THE ASSESSING OFFICE R OBSERVED THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ONLY INCOME THAT WAS EARNED BY THE ASSESSEE IS INTEREST INCOME AT RS.31,10,952/- AND NO REVENUE FR OM BUSINESS WAS OFFERED TO TAX. THE ASSESSING OFFICER HELD THAT THE ONLY BUSI NESS OF THE ASSESSEE IS BUILDING OF ONE PARK, AND, THEREFORE, ALL THE EXPEN SES DIRECT OR IN DIRECT SHOULD BE ACCOUNTED FOR AS CAPITAL WORK IN PROGRESS . THEREFORE, THE ASSESSING OFFICER DISALLOWED RS. 1,17,00,751/- AS REVENUE EX PENSES U/S 37(1) OF THE ACT. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE A SSESSEE. THE REVENUE IS BEFORE US. 6. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE EXPENSES INCURRED BY THE ASSESSEE IN RESPECT O F DEVELOPING AND BUILDING SKY VIEW CORPORATE PARK IN GURGAON, AS THESE EXPENS ES DIRECTLY RELATED TO THE PROJECT AND WAS NOT CAPITALIZED. THE ASSESSING OFF ICER RIGHTLY HELD THAT THE 3 ITA NO.3289/DEL/2018 ONLY BUSINESS OF THE ASSESSEE IS BUILDING THE SAID PARK AND, THEREFORE, ALL DIRECT AND IN DIRECT EXPENSES ARE ACCOUNTED AS FOR CAPITAL WORK IN PROGRESS. THEREFORE, THE ASSESSING OFFICER RIGHTLY DISALLOWED THE SAID EXPENSES AS REVENUE EXPENSES U/S 37(1) OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) IGNORED THESE FACTORS WHICH WAS OBSERVED BY THE ASSESSING OFFICER AND THE CASE LAWS REFERRED BY THE CIT(A) ARE NOT DIRECT LY RELATED TO THE CASE OF THE ASSESSEE. THE LD. DR RELIED UPON THE DECISION OF T HE HONBLE BOMBAY HIGH COURT IN CASE OF ALD AUTOMOTIVE PVT. LTD. VS. DCIT (2018) 254 TAXMANN 233 & ALSO REFERRED CASE OF VIDEO PLAZA VS. ITO THAT OF HONBLE CALCUTTA HIGH COURT BEING 385 ITR 404. 7. THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY W AS INCORPORATED ON 12.06.2008 AND IS A WHOLLY OWNED SUBSIDIARY OF HBT REAL ESTATE HOLDINGS LTD., MAURITIUS. THE AFORESAID COMPANY HAD BEEN INCORPORA TED FOR THE PURPOSE OF DEVELOPMENT AND CONSTRUCTION OF REAL ESTATE PROJECT S IN INDIA. THE AUTHORIZED CAPITAL OF THE ASSESSEE COMPANY IS RS. 2.65,00,000. IT HAD FURNISHED THE RETURNS OF INCOME FOR THE AYS 2009-10, 2010-11 AND 2011-12. FROM THE PERUSAL OF THE DETAILS TABULATED, THE LD. AR POINTE D OUT THAT IT HAD INCURRED CERTAIN EXPENDITURE AND CLAIMED THE SAME AS BUSINES S LOSS (FOR AY 2011-12) AND CARRIED FORWARD THE SAME TO BE SET OFF, WHICH B USINESS LOSS WAS ACCEPTED. HMS REAL ESTATE PRIVAE LIMITED ASSESSMENT YEAR EXPENDITURE INCURRED AND DEBITED TO THE PROFIT & LOSS A/C EXPENDITUR E INCURRED BEING COST OF THE PROJECT TREATMENT BY ASSESSEE TREAT MENT BY THE AO 2009-10 22,98,897 1,63 1, 63, ,60,75,339 NOT CLAIMED AS REVENUE EXPENDITURE WHILE COMPUTING TAXABLE INCOME POSITION ADOPTED BY ASSESSEE NOT CHALLENGED BY AO 4 ITA NO.3289/DEL/2018 2010-11 43,72,284 32, 32,92,65,75 6 NOT CLAIMED AS REVENUE EXPENDITURE WHILE COMPUTING TAXABLE INCOME POSI TION ADOPTED BY ASSESSEE NOT CHALLENGED BY AO 2011-12 1,28,07,638 9,3 9,39,12,933 CLAIMED AS REVENUE EXPENDITURE WHILE COMPUTING TAXABLE INCOME P POSITION ADOPTED BY ASSESSEE NOT CHALLENGED BY AO APART FROM THE AFORESAID BUSINESS LOSS, IT HAS ALSO INCURRED CAPITAL EXPENDITURE ON THE DEVELOPMENT OF PROJECT. THE SAID EXPENDITURE WHICH WAS DIRECTLY IN ADDITION TO THE PROJECT WAS CAPITALIZED. DURING THE INSTANT ASSESSMENT YEAR, THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 75,75,13, 050/- WHICH EXPENDITURE WAS DIRECTLY RELATABLE TO THE PROJECT AND WAS CAPIT ALIZED. HOWEVER APART FROM THE AFORESAID EXPENDITURE, IT HAD INCURRED RS. 1,19 ,36,566/- AS BUSINESS EXPENDITURE. THE DETAILS WHEREOF ARE AS BELOW:- SL NO. PARTICULARS AMOUNT 1 RENT RS.27,24,782/ - 2 INSURANCE RS.64,034/ - 3 REPAIRS AND MAINTENANCE RS.4,12,641/ - 4 LEGAL AND PROFESSIONAL FEE RS.6,00,238/ - 5 MARKETING EXPENSES RS.39,38,439/ - 6 PAYMENT OF AUDITORS 5,62,320/ - 7 DEPRECIATION 33,76,733/ - 8 FINANCE COST RS.2,57,379/ - THE EXPENDITURE INCURRED AS AFORESAID HAD BEEN DISA LLOWED BY THE AO WITHOUT APPRECIATING THAT THE BUSINESS HAD BEEN SET UP, WHE N THE ASSESSEE HAD 5 ITA NO.3289/DEL/2018 ENTERED INTO A JOINT DEVELOPMENT AGREEMENT. THE AFO RESAID AGREEMENT HAD BEEN ENTERED INTO BETWEEN THE ASSESSEE AND M/S SHYAM COM MUNICATION SYSTEMS, RAJIV MEHROTRA & SONS, MS. VIJAYA ARORA, MR. SUMIT ARORA AND MR. SURINDER MOHAN ARORA. THE SAID AGREEMENT IS DATED 08.09.2008 . IT WAS AGREED UNDER THE SAID AGREEMENT THAT THE ASSESSEE WILL FUND THE ENTIRE DEVELOPMENT COST AND WILL MANAGE THE CONSTRUCTION. IT IS THUS EVIDENT TH AT THE BUSINESS HAD COMMENCED SOON THE AFORESAID AGREEMENT HAD BEEN ENT ERED INTO. THE HIGH COURT OF DELHI IN THE CASE OF CIT VS. DHOOMKETU BUI LDERS AND DEVELOPMENT PVT. LTD. REPORTED IN 368 ITR 680, IN PARA 9 HAS HELD AS UNDE R: THE TRIBUNAL HAS OBSERVED THAT HAVING REGARD TO TH E BUSINESS OF THE ASSESSEE, WHICH IS THE DEVELOPMENT OF REAL ESTATES, THE PARTICIPATION IN THE TENDER REPRESENTS COMMENCEMENT OF ONE ACTIVITY WHICH WOULD ENABLE THE ASSESSEE TO ACQUIRE THE LAND FOR DEVELOPMENT. I F THE ASSESSEE IS IN A POSITION TO COMMENCE BUSINESS THAT MEANS THE BUSINE SS HAS BEEN SET UP. THE ACTS OF APPLYING FOR PARTICIPATION IN THE T ENDER, THE BORROWING OF MONIES FOR INTEREST FROM THE HOLDING COMPANY, THE D EPOSIT OF THE BORROWED MONIES ON THE SAME DAY WITH NGEF LTD. AS E ARNEST MONEY WERE ALL ACTS WHICH CLEARLY ESTABLISH THAT THE BUSI NESS HAD BEEN SET UP. THE COMMENCEMENT OF REAL ESTATE BUSINESS WOULD NORM ALLY START WITH THE ACQUISITION OF LAND OR IMMOVABLE PROPERTY. WHEN AN ASSESSEE WHOSE BUSINESS IT IS TO DEVELOP REAL ESTATES, IS IN A POS ITION TO PERFORM CERTAIN ACTS TOWARDS THE ACQUISITION OF LAND, THAT WOULD CL EARLY SHOW THAT IT IS READY TO COMMENCE BUSINESS AND, AS A COROLLARY, THA T IT HAS ALREADY BEEN SET UP. THE ACTUAL ACQUISITION OF LAND IS THE RESUL T OF SUCH EFFORTS PUT IN BY THE ASSESSEE; ONCE THE LAND IS ACQUIRED THE ASSE SSEE MAY BE SAID TO HAVE ACTUALLY COMMENCED ITS BUSINESS WHICH IS THAT OF DEVELOPMENT OF REAL ESTATE. THE ACTUAL ACQUISITION OF THE LAND MAY BE A FIRST STEP IN THE COMMENCEMENT OF THE BUSINESS BUT SECTION 3 OF THE A CT DOES NOT SPEAK OF COMMENCEMENT OF THE BUSINESS, IT SPEAKS ONLY OF SET TING UP OF THE BUSINESS. WHEN THE ASSESSEE, IN THE PRESENT CASE, W AS IN A POSITION TO APPLY FOR THE TENDER, BORROWED MONEY FOR INTEREST A LBEIT FROM ITS HOLDING COMPANY AND DEPOSITED THE SAME WITH NGEF LTD. ON TH E SAME DAY, IT SHOWS THAT THE ASSESSEE'S BUSINESS HAD BEEN SET UP AND IT WAS READY TO COMMENCE BUSINESS. THE LEARNED SENIOR STANDING COUN SEL FOR THE REVENUE WOULD, HOWEVER, STATE THAT TILL THE LAND IS ACQUIRED, THE BUSINESS IS NOT SET UP. THE DIFFICULTY IN ACCEPTING THE ARGU MENT IS THAT AN ASSESSEE MAY NOT BE SUCCESSFUL IN ACQUIRING LAND FOR A LONG PERIOD OF TIME THOUGH 6 ITA NO.3289/DEL/2018 HE IS READY TO COMMENCE HIS BUSINESS IN REAL ESTATE AND THAT WOULD RESULT IN THE EXPENSES INCURRED BY HIM THROUGHOUT T HAT PERIOD NOT BEING COMPUTED AS A LOSS UNDER THE HEAD 'BUSINESS' ON THE GROUND THAT HE IS YET TO SET UP HIS BUSINESS. THAT WOULD BE AN UNACCE PTABLE POSITION. THE OTHER ARGUMENT OF THE LEARNED STANDING COUNSEL FOR THE REVENUE THAT THE TAX AUDITORS OF THE ASSESSEE HAVE THEMSELVES POINTE D OUT THAT THE ASSESSEE IS YET TO COMMENCE ITS BUSINESS IS ALSO IR RELEVANT BECAUSE OF THE DISTINCTION BETWEEN THE COMMENCEMENT OF THE BUSINES S AND SETTING UP OF THE SAME. IN VIEW OF THE AFORESAID, THE LD. AR SUBMITTED THAT THE ASSESSEE COMMENCED THE BUSINESS IN THE YEAR 2009-10 WHICH IS ALSO ADMI TTED BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSEE HAD CLAIMED THE EXPE NDITURE FROM THE AY 2011-12 AFTER IT HAD FULLY COMMENCED THE BUSINESS T HOUGH IT HAD SET UP THE BUSINESS IN THE FY 2008-09 I.E. AY 2009-10. THUS, T HE LD. AR SUBMITTED THAT THE CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE AS SESSEE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- EXAMINATION OF THE ISSUE & DECISION:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPEL LANT AND PERUSED THE ORDER OF ASSESSMENT AND EVIDENCE PLACED ON RECORD. THE UNDISPUTED FACTS ARE THAT APPELLANT WAS A COMPANY WHICH HAS BEEN INCORPO RATED UNDER THE COMPANIES ACT, 1956 TO INTER-ALIA CARRY OUT DEVELOP MENT WORKS AS BUILDERS, OWNERS, LESSER, MANAGERS, CONTRACTORS ETC. IN RESPE CT OF ALL KINDS OF BUILDING WHETHER RESIDENTIAL, COMMERCIAL HOUSES ETC. THE APP ELLANT HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. SHYAM COMMUNICATION SYSTEMS AND RAJIV MEHROTRA & SONS (HUF), MS. VIJAYA ARORA, MR. SUMIT ARORA AND MR. SURINDER MOHAN ARORA FOR DEVELOPING LAND OWNED BY THE OWNERS AND LOCATED AT SECTOR- 74A, GURGAON, HARYANA. SUBSEQUENT TO THE ENTERING O F AFORESAID AGREEMENT, 7 ITA NO.3289/DEL/2018 THE APPELLANT HAS UNDERTAKEN CONSTRUCTION WORK AND CAPITALIZED EXPENDITURE IN ACCORDANCE WITH ACCOUNTING STANDARD-10 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. FOR THE INSTANT ASS ESSMENT YEAR, THE APPELLANT FURNISHED A RETURN OF INCOME DECLARING LO SS OF RS. 69,06,799/- IN THE FOLLOWING MANNER:- SR. NO. PARTICULARS AMOUNT (RS.) 1 INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES 31,10,952 2 LESS: EXPENDITURE CLAIMED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION 100,17,751 3 NET LOSS CLAIMED 69,06,799 6.1 THE ASSESSING OFFICER HAS DENIED THE ABOVE CLAIM O F EXPENDITURE OF RS.1,00,17,751/- BY HOLDING THAT THE EXPENDITURE SH OULD HAVE BEEN CAPITALIZED TO THE CAPITAL WORK IN PROGRESS. IT HAS BEEN CONCLUDED BY THE AO THAT SINCE ONLY BUSINESS OF THE ASSESSEE IS BUILDIN G OF ABOVE MENTIONED CORPORATE PARK AND THEREFORE, ALL THE EXPENSES WHET HER DIRECT OR INDIRECT SHOULD BE ACCOUNTED FOR AS CAPITAL WORK IN PROGRESS AND ARE NOT ALLOWABLE AS REVENUE EXPENDITURE UNDER SECTION 37(1) OF THE ACT ON THE GROUND THAT THERE IS NO REVENUE FROM BUSINESS IN THE INSTANT ASSESSMENT YEAR. 6.2 THE CRUX OF THE APPELLANT'S SUBMISSION IS THAT EXP ENSES WHICH WERE INCURRED ENTIRELY FOR THE PURPOSE OF RUNNING THE GE NERAL ADMINISTRATION OF THE BUSINESS OF THE COMPANY HAVE BEEN DEBITED TO P&L AC COUNT AND ARE ALLOWABLE U/S 37 OF THE ACT. EXPENSES RELATED TO PROJECT WERE CAPITALIZED TO THE COST OF 8 ITA NO.3289/DEL/2018 THE PROJECT. IT WAS SUBMITTED THAT THE APPELLANT HA S FOLLOWED AS-10 ISSUED BY ICAI IN PREPARING ITS FINANCIAL STATEMENTS. 6.3 IT IS OBSERVED THAT THE GENUINENESS OF THE EXPENDI TURE HAS NOT BEEN DISPUTED AND BREAK-UP OF THE EXPENDITURE INCURRED I S AS UNDER:- NATURE OF EXPENSES AMOUN T REMARKS RENT 27,24, 782 TH THE SAID EXPENDITURE PERTAINS TO RENT PAID FOR SPACE OCCUPIED FOR SETTING UP THE MARKETING CENTRE OF THE COMPANY. THE COMPANY HAD TAKEN AN OFFICE SPACE LOCATED AT 701, 7 TH FLOOR, TIME TOWER, M.G. ROAD, GURGAON ON LEASE. THE SAID EXPENSE NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. INSURANCE 64,034 TH THE SAID EXPENDITURE WAS INCURRED BY THE COMPANY FOR SEEKING FIRE, BURGLARY, ALL RISK INSURANCE POLICY FROM BAJAJ ALLIANZ IN RESPECT OF MARKETING CENTRE OF THE COMPANY. THE SAID EXPENSES NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. REPAIRS AND MAINTENANCE OTHERS 412.64 1 TH THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE IN RELATION TO REPAIR AND MAINTENANCES CARRIED OUT IN MARKETING CENTRE INCLUDING ELECTRICITY AND OTHER MAINTENANCE EXPENSES. THE SAID EXPENSES NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. LEGAL AND PROFESSIONAL 600,23 8 THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR SEEKING ASSISTANCE FROM PROFESSIONALS ON VARIOUS MATTERS SUCH AS FEE PAID FOR FILING OF INCOME TAX RETURN, OBTAINING TRANSFER PRICING CERTIFICATE AND 9 ITA NO.3289/DEL/2018 FESS OTHER TAX RELATED QUERIES. THE SAID EXPENSE NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. MARKETING EXPENSES 39,38, 439 TH THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE IN RELATION TO PRINTING OF BROCHURES, AUDIO VIDEO MODELS, ETC. FOR ATTRACTING CUSTOMERS. THE SAID EXPENSE NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. PAYMENT TO AUDITORS 562,32 0 TH THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE IN RELATION TO STATUTORY AUDIT CARRIED FOR THE SUBJECT YEAR. THE SAID EXPENSE NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. DEPRECIATION AND AMORTIZATION EXPENSES (ALLOWABLE U/S 32 OF THE ACT. 16,95, 632 DEPRECIATION AS PER INCOME TAX ACT. FINANCE COSTS 257,37 9 THI THIS INCLUDES FOREIGN EXCHANGE LOSS OF 1 NR 2367,714 AND INTEREST EXPENSE OF 19,665 CHARGED BY BANK. THE SAID EXPENSE NOT BEING DIRECTLY RELATABLE TO THE PROJECT WAS DEBITED TO PROJECT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. 6.4 IT IS ALSO NOTED THAT THE APPELLANT HAD CLAIMED AN EXPENDITURE OF RS. 1,19,36,566/- OUT OF TOTAL EXPENDITURE OF RS. 23,94 ,85,537/- AND BALANCE EXPENDITURE OF RS. 22,75,48,971/- HAVE BEEN CAPITAL IZED IN THE INSTANT YEAR. 10 ITA NO.3289/DEL/2018 THE ISSUE THEREFORE, ARISES IS WHETHER SUCH EXPEND ITURE AS INCURRED AND CLAIMED, GENUINENESS OF WHICH IS NOT IN DISPUTE IS ELIGIBLE FOR DEDUCTION AS REVENUE EXPENDITURE. THE BASIS ADOPTED BY THE ASSES SING OFFICER THAT THERE IS NO INCOME IN THE INSTANT YEAR IS NOT RELEVANT TEST FOR DETERMINING THE ALLOWABILITY OF EXPENDITURE CLAIMED BY THE APPELLAN T COMPANY. THE APEX COURT IN THE CASE OF CIT(A) VS. RAJENDRA PRASAD MODY REPO RTED IN 115 ITR 519 HAS HELD AS UNDER: 'WHAT S. 57(III) REQUIRES IS THAT THE EXPENDITURE M UST BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING INCOME. IT IS THE PURPOSE OF THE EXPENDITURE THAT I S RELEVANT IN DETERMINING THE APPLICABILITY OF S. 57(III) AND THA T PURPOSE MUST BE MAKING OR EARNING OF INCOME. S. 57(III) DOES NOT RE QUIRE THAT THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITU RE FOR DEDUCTION. IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIBLE ON LY IF ANY INCOME IS MADE OR EARNED. THERE IS IN FACT NOTHING IN THE LAN GUAGE OF S. 57(III) TO SUGGEST THAT THE PURPOSE FOR WHICH THE EXPENDITURE IS MADE SHOULD FRUCTIFY INTO ANY BENEFIT BY WAY OF RETURN IN THE S HAPE OF INCOME. THE PLAIN NATURAL CONSTRUCTION OF THE LANGUAGE OF S. 57 (III) IRRESISTIBLY LEADS TO THE CONCLUSION THAT TO BRING A CASE WITHIN THE SECT ION, IT IS NOT NECESSARY THAT ANY INCOME SHOULD IN FACT HAVE BEEN EARNED AS A RESULT OF THE EXPENDITURE. IT MAY BE POINTED OUT THAT AN IDENTICA L VIEW WAS TAKEN BY THIS COURT IN EASTERN INVESTMENTS LTD. V. CIT F1951 ] 20 ITR 1, 4 (SC), WHERE INTERPRETING THE CORRESPONDING PROVISION IN S . 12(2) OF THE INDIAN I.T. ACT, 1922, WHICH WAS IPSISSIMA VERBA IN THE SA ME TERMS AS S. 57(III), BOSE J., SPEAKING ON BEHALF OF THE COURT, OBSERVED: 'IT IS NOT NECESSARY TO SHOW THAT THE EXPENDITURE W AS A PROFITABLE ONE OR THAT IN FACT ANY PROFIT WAS EARNED.' IT IS INDEED DIFFICULT TO SEE HOW, AFTER THIS OBSER VATION OF THE COURT, THERE CAN BE ANY SCOPE FOR CONTROVERSY IN REGARD TO THE I NTERPRETATION OF S. 57(III). 11 ITA NO.3289/DEL/2018 IT IS ALSO INTERESTING TO NOTE THAT, ACCORDING TO T HE REVENUE, THE EXPENDITURE WOULD DISQUALIFY FOR DEDUCTION ONLY IF NO INCOME RESULTS FROM SUCH EXPENDITURE IN A PARTICULAR ASSESSMENT YE AR, BUT IF THERE IS SOME INCOME, HOWSOEVER SMALL OR MEAGER, THE EXPENDI TURE WOULD BE ELIGIBLE FOR DEDUCTION. THIS MEANS THAT IN A CASE W HERE THE EXPENDITURE IS RS. 1,000, IF THERE IS INCOME OF EVEN RE. 1, THE EXPENDITURE WOULD BE DEDUCTIBLE AND THERE WOULD BE RESULTING LOSS OF RS. 999 UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. BUT IF THERE IS NO INC OME, THEN, ON THE ARGUMENT OF THE REVENUE, THE EXPENDITURE WOULD HAVE TO BE IGNORED AS IT WOULD NOT BE LIABLE TO BE DEDUCTED. THIS WOULD I NDEED BE A STRANGE AND HIGHLY ANOMALOUS RESULT AND IT IS DIFFICULT TO BELIEVE THAT THE LEGISLATURE COULD HAVE EVER INTENDED TO PRODUCE SUC H ILLOGICALITY. MOREOVER, IT MUST BE REMEMBERED THAT WHEN A PROFIT AND LOSS ACCOUNT IS CAST IN RESPECT OF ANY SOURCE OF INCOME, WHAT IS ALLOWED BY THE STATUTE AS PROPER EXPENDITURE WOULD BE DEBITED AS A N OUTGOING AND INCOME WOULD BE CREDITED AS A RECEIPT AND THE RESUL TING INCOME OR LOSS WOULD BE DETERMINED. IT WOULD MAKE NO DIFFERENCE TO THIS PROCESS WHETHER THE EXPENDITURE IS X OR Y OR NIL, WHATEVER IS THE PROPER EXPENDITURE ALLOWED BY THE STATUTE WOULD BE DEBITED . EQUALLY, IT WOULD MAKE NO DIFFERENCE WHETHER THERE IS ANY INCOME AND IF SO, WHAT, SINCE WHATEVER IT BE, X OR Y OR NIL, WOULD BE CREDITED. A ND THE ULTIMATE INCOME OR LOSS WOULD BE FOUND. WE FAIL TO APPRECIAT E HOW EXPENDITURE WHICH IS OTHERWISE A PROPER EXPENDITURE CAN CEASE T O BE SUCH MERELY BECAUSE THERE IS NO RECEIPT OF INCOME. WHATEVER IS A PROPER OUTGOING BY WAY OF EXPENDITURE MUST BE DEBITED IRRESPECTIVE OF WHETHER THERE IS RECEIPT OF INCOME OR NOT. THAT IS THE PLAIN REQUIRE MENT OF PROPER ACCOUNTING AND THE INTERPRETATION OF S. 57(III) CAN NOT BE DIFFERENT. THE DEDUCTION OF THE EXPENDITURE CANNOT, IN THE CIRCUMS TANCES, BE HELD TO BE CONDITIONAL UPON THE MAKING OR EARNING OF THE IN COME. IT IS TRUE THAT THE LANGUAGE OF S. 37(1) IS A LITTL E WIDER THAN THAT OF S. 57(III), BUT WE DO NOT SEE HOW THAT CAN MAKE ANY DI FFERENCE IN THE TRUE INTERPRETATION OF S. 57(III). THE LANGUAGE OF S. 57 (HI) IS CLEAR AND UNAMBIGUOUS AND IT HAS TO BE CONSTRUED ACCORDING TO ITS PLAIN NATURAL MEANING AND MERELY BECAUSE A SLIGHTLY WIDER PHRASEO LOGY IS EMPLOYED IN ANOTHER SECTION WHICH MAY TAKE IN SOMETHING MORE , IT DOES NOT MEAN THAT S. 57(III) SHOULD BE GIVEN A NARROW AND CONSTR ICTED MEANING NOT WARRANTED BY THE LANGUAGE OF THE SECTION AND, IN FA CT, CONTRARY TO SUCH LANGUAGE. 12 ITA NO.3289/DEL/2018 THIS VIEW WHICH WE ARE TAKING IS CLEARLY SUPPORTED BY THE OBSERVATIONS OF LORD THANKERTON IN HUGHES V. BANK OF NEW ZEALAND (1938] 6 ITR 636, 644 (HL). WHERE THE LEARNED LAW LORD SAID: 'EXPENDITURE IN COURSE OF THE TRADE WHICH IS UN-REM UNERATIVE IS NONE THE LESS A PROPER DEDUCTION, IF WHOLLY AND EXCLUSIV ELY MADE FOR THE PURPOSES OF THE TRADE. IT DOES NOT REQUIRE THE PRES ENCE OF A RECEIPT ON THE CREDIT / SIDE TO JUSTIFY THE DEDUCTION OF AN EXPENSE.' 6.5 IN THE CASE OF AB MULTIPLEX V. ACIT ITA NO. 739/D/2 014, THE FACTS OF THE CASE WERE THAT A COMPANY WAS ENGAGED IN THE BUSINES S OF BUILDER AND DEVELOPERS. ITS COMMERCIAL PROJECT 'CORPORATE SUIT' WAS UNDER CONSTRUCTION. THE EXPENSES DIRECTLY RELATED TO PROJECT WERE ADDED TO THE INVENTORIES (PROJECT UNDER CONSTRUCTION (AS PER ITS ACCOUNTING POLICIES) . HOWEVER, CERTAIN EXPENSES LIKE OFFICE REMUNERATION AND ROC FILING FEE WERE CL AIMED AS EXPENSES IN THE PROFIT AND LOSS ACCOUNT BEING ADMINISTRATIVE EXPENS ES AND NOT DIRECTLY RELATED TO THE PROJECT. IT WAS SUBMITTED BY THE TAXPAYER TH AT SUCH EXPENSES WERE REQUIRED TO BE INCURRED EVEN IF NO PROJECT WAS GOIN G ON AND NO BUSINESS WAS BEING CARRIED ON DURING THE YEAR. THE AO HELD THAT ONCE ASSESSEE DID NOT HAVE ANY BUSINESS INCOME AND THUS, NO BUSINESS WAS CARRIED OUT BY THE ASSESSEE DURING THE YEAR., THE TRIBUNAL HELD AS UND ER: 'ALL THE EXPENSES DIRECTLY ATTRIBUTABLE TO THE PROJ ECT WERE CHARGED TO THE CONSTRUCTION WORK IN PROGRESS ACCOUNT AND ONLY THOS E ADMINISTRATIVE EXPENSES WHICH WERE NECESSARY FOR MAINTENANCE OF BA SIC INFRASTRUCTURE OF THE COMPANY, WERE CLAIMED BY ASSESSEE IN PROFIT AND LOSS ACCOUNT. UNDER SUCH CIRCUMSTANCES, I FAIL TO UNDERSTAND AS TO HOW A FINDING HAS BEEN ARRIVED BY AUTHORITIES BELOW THAT NO BUSINESS ACTIV ITY WAS CARRIED OUT BY ASSESSEE. THE OFFICE RENT CLAIMED BY ASSESSEE WAS A NECESSARY BUSINESS EXPENDITURE AND, THEREFORE, COULD NOT BE DENIED TO ASSESSEE. I, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AS SESSING OFFICER TO ALLOW THE OFFICE RENT ALSO ALONG WITH AUDIT FEES AND FILI NG FEE AND COMPUTE THE INCOME ACCORDINGLY. IN THE RESULT, THE ASSESSEE'S A PPEAL IS ALLOWED.' 13 ITA NO.3289/DEL/2018 6.6 SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE OF ARKA AYE BUILDERS & DEVELOPMENT (P) LTD. VS. ITO IN ITA NO. 3552/DEL/20 11. THE FACTS OF THE CASE ARE THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF BU YING, SELLING, ACQUIRING, CONSTRUCTING, RE-CONSTRUCTING, AND DEVELOPING LAND, BUILDING ETC. ALONG WITH TRADING, IMPORT, EXPORT, GROWING, DEVELOPING AND FA RMING OF AGRICULTURAL PRODUCTS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED AGRICULTURAL INCOME AND OTHER INCOME (I.E. INTEREST ON FDR, RENTAL INCOME, PROFIT ON SALE OF MUTUAL FUND). NO INCOME FROM BUSI NESS ACTIVITY WAS EARNED BY THE ASSESSEE DURING THE YEAR. WHILE PASSING THE ORDER, THE ASSESSING OFFICER HELD THAT THERE IS NO BUSINESS ACTIVITY CAR RIED OUT BY THE ASSESSEE AND HENCE DISALLOWED THE ADMINISTRATIVE EXPENSES AND DE PRECIATION CLAIMED BY THE ASSESSEE SHOULD BE DISALLOWED. THE SAME VIEW WA S UPHELD BY THE CIT(A) AND HE AGREED THAT THE DISALLOWANCE OF DEPRECIATION AND ADMINISTRATIVE EXPENSE IS JUSTIFIED. THE TRIBUNAL DECIDED IN FAVOU R OF THE APPELLANT HOLDING THAT ONLY BUSINESS INCOME CAN PROVE THE EXISTENCE O F BUSINESS IS NOT CORRECT. THE RELEVANT PORTION OF THE ORDER IS AS UNDER:- 'IT MAY BE TRUE THAT THE BUSINESS RECEIPTS ARE NOT THERE BUT IT CANNOT BE SAID THAT THE BUSINESS ACTIVITIES ARE NOT THERE.... IT WAS FURTHER SUBMITTED THAT PRIOR CONDITION TO BE SATISFIED ANY BUSINESS ACTIVITY IS TO FIRST INVEST AND SPEND FOR THE BUSIN ESS. INCOME WILL GENERATE THEREAFTER ONLY. IN A PARTICULAR YEAR INCOME MAY BE THERE AND MAY NOT BE THERE. OCCURRENCE OF SOME INCOME IS NOT THE CRITERI A TO PROVE THAT THE BUSINESS ACTIVITIES ARE THERE. BUT CONCURRENCE OF E XPENSES FOR THE PURPOSE OF BUSINESS IS CERTAINLY THE CRITERIA TO ESTABLISH THAT THE BUSINESS ACTIVITIES ARE THERE .' 6.7. THE ONLY TEST IS WHETHER BUSINESS HAS SET UP. FURTHER, IT IS NOT IN DISPUTE THAT APPELLANT HAD ENTERED INTO A COLLABORA TION AGREEMENT IN 14 ITA NO.3289/DEL/2018 ASSESSMENT YEAR 2009-10 AND THEREFORE, SETTING UP O F BUSINESS CANNOT BE DISPUTED. 6.8 I HAVE CAREFULLY LOOKED INTO THE LEGAL AND FACTUAL ASPECTS OF THE CASE. THE STAND OF THE AO THAT IN ABSENCE OF ANY BUSINESS INC OME, PROJECT BEING INCOMPLETE, GENERAL EXPENSE ARE DISALLOWABLE IS CON TRARY TO WELL SETTLED LEGAL PRINCIPLES. IT IS THE SETTING UP OF BUSINESS WHICH IS RELEVANT FOR ALLOWING EXPENSES AND NOT THE ACTUAL COMMENCEMENT OF BUSINES S. THE BUSINESS OF THE APPELLANT IS TO EARN RENTAL INCOME FROM COMMERCIAL MALL AND CONSTRUCTION OF MALL IS ESSENTIAL FOR THAT. I FIND THAT CONSTRUCTIO N WAS IN FULL SWING WHICH IS EVIDENT BY THE FACT THAT CAPITAL WORK IN PROGRESS A S ON 31/03/2011 WAS RS.181.92 CRORES AND AS ON 31/03/2012 AT RS.204.04 CRORES. A MARKETING CENTRE HAS BEEN SET UP TO DISPLAY PROJECTS COMPLETE D BY THE GROUP OUTSIDE INDIA, TO MARKET ITS PRODUCT THOUGH AUDIO VISUAL ME DIA AND OTHER SUCH ACTIVITIES. UNDER SUCH FACTUAL MATRIX, IT IS NOT PO SSIBLE TO INFER THAT APPELLANT'S BUSINESS WAS NOT SET UP. 6.9 IN ACIT VS ASF LINSIGNIA SEZ PVT. LTD. IN ITA NO. 6732 & 6733/DEL/2014 A.Y. 2010-11 & 2011-12, DELHI BENCH 'A' DATED 15/09 /2017, IT WAS HELD THAT 'THE EXPENSES WHICH ORE NOT DIRECTLY LINKED WITH TH E CONSTRUCTION ACTIVITY HAVE BEEN CLAIMED AS REVENUE EXPENSES BY THE ASSESSEE. I N OUR VIEW THE ASSESSEE HAS SET UP ITS BUSINESS AND THE EXPENDITURE ON REVE NUE ACCOUNT HAS TO BE ALLOWED AND WAS RIGHTLY ALLOWED BY THE FIRST APPELL ATE AUTHORITY. IT IS WELL SETTLED THAT EXPENDITURE HAS TO BE ALLOWED ON SETTI NG UP OF THE BUSINESS AND THEY MIGHT BE A GAP BETWEEN THE DATE ON WHICH THE B USINESS IS SET UP AND THE 15 ITA NO.3289/DEL/2018 DATE OF COMMENCEMENT OF THE BUSINESS.' 6.10 IN THE CASE OF CIT VS HUGHES ESCORTS COMMUNICATION [2009] 311 ITR 253, IT HAS BEEN HELD THAT THE EXPENSES INCURRED IN THE PRE VIOUS YEAR, PRIOR TO THE COMMENCEMENT OF THE BUSINESS BUT AFTER THE SETTING UP OF ITS BUSINESS, WHICH TWO DATES NEED NOT BE THE SAME, WOU LD BE DEDUCTIBLE AS REVENUE EXPENSES. IN THIS CASE, WHILE MAKING DISTIN CTION BETWEEN THE SETTING UP AND COMMENCEMENT OF A BUSINESS THE HON'BLE COURT HAS RELIED UPON THE BOMBAY HIGH COURT IN WESTERN INDIA VEGETABLES PRODU CTS LTD. IN THIS CASE, THE BOMBAY HIGH COURT, WHICH WAS IN THIS CASE DEALI NG WITH THE CORRESPONDING PROVISION OF THE INDIAN INCOME-TAX AC T, 1922, THEN EXPLAINED THE DISTINCTION BETWEEN THE CONCEPTS OF 'COMMENCEME NT' AND 'SETTING UP' OF A BUSINESS : '. . . IT SEEMS TO US, THAT THE EXPRESSION 'SETTING UP' ME ANS, AS IS DEFINED IN THE OXFORD ENGLISH DICTIONARY, 'TO PLACE ON FOOT' O R 'TO ESTABLISH', AND IN CONTRADISTINCTION TO 'COMMENCE'. THE DISTINCTION IS THAT WHEN A BUSINESS IS ESTABLISHED AND IS READY TO COMMENCE BUSINESS THEN IT CAN BE SAID OF THAT BUSINESS THAT IT IS SET UP. BUT BEFORE IT IS READY TO COMMENCE BUSINESS IT IS NOT SET UP. BUT THERE MAY BE AN INTERREGNUM, THERE MAY BE AN INTERVAL BETWEEN A BUSINESS WHICH IS SET UP AND A BUSINESS W HICH IS COMMENCED AND ALL EXPENSES INCURRED AFTER THE SETTING UP OF T HE BUSINESS AND BEFORE THE COMMENCEMENT OF THE BUSINESS, ALL EXPENSES DURI NG THE INTERREGNUM WOULD BE PERMISSIBLE DEDUCTIONS UNDER SECTION 10(2) . . . .' 6.11. IN THE CASE OF SARABHAI MANAGEMENT CORPN. LTD. [19 76] 102 ITR 25 (GUJ.), THE HON'BLE GUJARAT HIGH COURT HAS HELD THA T THE BUSINESS COMMENCES WITH THE FIRST ACTIVITY FOR ACQUIRING BY PURCHASE O R OTHERWISE IMMOVABLE PROPERTY. THERE MAY BE AN INTERVAL BETWEEN THE SETT ING UP OF THE BUSINESS AND THE COMMENCEMENT OF THE BUSINESS. ALL EXPENSES INCURRED DURING THAT INTERVAL ARE ALSO PERMISSIBLE FOR DEDUCTION. 16 ITA NO.3289/DEL/2018 6. 12. THE DECISION OF HON'BLE GUJARAT HIGH COURT IN T HE CASE OF SARABHAI MANAGEMENT CORPN. LTD. (SUPRA) HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. SARABHAI MANAGEMENT COR PN. LTD. [1991] 192 ITR 151, WHERE THE HON'BLE SUPREME COURT WENT A STEP AH EAD THAT EVEN THE ACTIVITIES AT A PREPARATORY STAGE ARE ALSO ADMISSIB LE. IT IS WELL SETTLED THAT ALL THE EXPENSES INCURRED AFTER THE BUSINESS HAD BEEN S ET UP ARE ALLOWABLE AS BUSINESS DEDUCTION UNDER SECTION 37 OF THE ACT. THE RE MAY BE INTERVAL BETWEEN THE SETTING UP OF THE BUSINESS AND THE ACTU AL COMMENCEMENT OF THE BUSINESS BUT ALL THE EXPENSES INCURRED DURING THE I NTERVAL OF SETTING UP OF THE BUSINESS AND THE COMMENCEMENT OF THE BUSINESS ARE A LSO PERMISSIBLE FOR DEDUCTION AS SO HELD IN THE ABOVE REFERRED DECISION S. 6. 13. THUS, IT IS CLEAR THAT IT IS NOW WELL SETTLED LAW THAT, ONCE BUSINESS IS SET UP EXPENDITURE IS ALLOWABLE AS BUSINESS EXPENDI TURE, AS HAS ALSO BEEN HELD BY ANOTHER JUDGMENT OF JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. DHOOMKETU BUILDERS & DEVELOPMENT PVT. LTD. 216TAXMA NN 76. 6.14. AS DISCUSSED ABOVE, THERE REMAINS NO DOUBT THAT TH E APPELLANT'S BUSINESS WAS SET UP AND THE YEAR UNDER ASSESSMENT F ALLS IN THE INTERVAL BETWEEN THE SETTING UP OF BUSINESS AND COMMENCEMENT OF BUSINESS AND FOLLOWING THE PRINCIPLES ESTABLISHED BY ABOVE DISCU SSED JUDICIAL DECISIONS ON THE ISSUE, I AM OF THE VIEW THAT IN THE FACTS AND C IRCUMSTANCES OF THE CASE, AO'S ORDER DISALLOWING EXPENDITURE OF RS.1,00,17,15 1/- CLAIMED AS REVENUE EXPENDITURE AND CAPITALIZING THE SAME TO CWIP IS NO T JUSTIFIED. THE SAID EXPENDITURE IS HELD TO BE ALLOWABLE AS BUSINESS EXP ENDITURE U/S 37 OF THE ACT AND ACCORDINGLY, ADDITION OF RS.1,00,17,751/- IS DE LETED. GROUNDS RAISED IN THIS REGARD ARE THEREFORE ALLOWED. THE CIT(A) HAS GIVEN DETAILED REASONS AND THE CAS E LAWS REFERRED BY THE LD. DR DO NOT APPLY IN THE PRESENT CASE AS THE FAC TS OF THOSE CASES ARE DIFFERENT AND THE RATIO LAID DOWN IS ALSO NOT APPLI CABLE IN THE PRESENT 17 ITA NO.3289/DEL/2018 CIRCUMSTANCES. BESIDES THAT THE HONBLE DELHI HIGH COURT ALSO IN CASE OF DHOOMKETU BUILDERS AND DEVELOPMENT PVT. LTD. (SUPRA) HELD THAT WHEN AN ASSESSEE WHOSE BUSINESS IT IS TO DEVELOP REAL ESTAT ES, IS IN A POSITION TO PERFORM CERTAIN ACTS TOWARDS THE ACQUISITION OF LAND, THAT WOULD CLEARLY SHOW THAT IT IS READY TO COMMENCE BUSINESS AND, AS A COROLLARY, THA T IT HAS ALREADY BEEN SET UP. THE ACTUAL ACQUISITION OF LAND IS THE RESULT OF SUCH EFFORTS PUT IN BY THE ASSESSEE; ONCE THE LAND IS ACQUIRED THE ASSESSEE MA Y BE SAID TO HAVE ACTUALLY COMMENCED ITS BUSINESS WHICH IS THAT OF DEVELOPMENT OF REAL ESTATE. THE ACTUAL ACQUISITION OF THE LAND MAY BE A FIRST STEP IN THE COMMENCEMENT OF THE BUSINESS BUT SECTION 3 OF THE ACT DOES NOT SPEAK OF COMMENCEMENT OF THE BUSINESS, IT SPEAKS ONLY OF SETTING UP OF THE BUSIN ESS. THE RATIO LAID DOWN IN DHOOMKETU BUILDERS AND DEVELOPMENT (SUPRA) IS SQUAR ELY APPLICABLE IN THE PRESENT CASE. THUS, THERE IS NO NEED TO INTERFERE W ITH THE FINDINGS OF THE CIT(A). HENCE, APPEAL OF THE REVENUE IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DECEMBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/12/2018 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 18 ITA NO.3289/DEL/2018 ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 17.12.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.12.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 2 7 . 12.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 7 . 12.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 7 . 12.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER