DCIT, New Delhi V. M/s. Deltaland Real Estate Pvt. Ltd., New Delhi

ITA 758/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81943 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI AND SHRI J.SUDHAKAR REDDY, J.M AND SHRI C.M. GARG, JM ITA NO: 758/DEL/2013 AY : - 2007-08 DCIT, VS. M/S. DELTALAND REAL E STATE PVT. LTD. CIRCLE 10(1) 1-E, NAAZ CIN EMA COMPLEX, NEW DELHI. JHANDEWALAN EXTENSION, NEW DELHI. (PAN AACCD2528H) (APPELLANT) (RESP ONDENT) APPELLANT BY :S/ SHRI R.S. SINGHVI & SATYAJIT GOEL, CA RESPONDENT :SMT PARMINDER KAUR, SR. DR O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRE CTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 6.11.20 12 FOR THE ASSESSMENT YEAR 2007-08. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENG AGED IN THE BUSINESS OF REAL ESTATE AND OTHER ALLIED ACTIVITIES. THE ASSESSEE COMPANY F ILED ITS RETURN OF INCOME ON 2.11.2007 DECLARING TOTAL LOSS AT RS. 39,32,323/-. IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT, THE ASSESSING OFFICER HAS HELD THAT THERE WERE NO BUSINESS ACTIVITIES DURING THE YEAR, THEREFORE, INTEREST PAI D ON BORROWED CAPITAL OF RS. 39,32,322/- WAS NOT A BUSINESS EXPENSE. IT WAS HELD BY THE ASSESSING OFFICER THAT SINCE ASSESSEE HAS NOT STARTED ITS BUSINESS ACTIVIT IES, THEREFORE, ALL EXPENSES CLAIMED BY THE ASSESSEE WERE TREATED AS PRE-OPERATIVE EXPEN SES. ITA N O. 758/DEL/2013 AY 2007-08 DCIT VS .DELTALAND R EAL ESTATE PVT. LTD.. 2 3. THE ISSUE THAT ARISES FOR ADJUDICATION IS W HETHER THE ASSESSEE HAS SET UP HIS BUSINESS OR NOT. THE AO WAS OF THE VIEW THAT THE A SSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY IN THE YEAR UNDER CONSIDERATION. 4. BEFORE THE LD. CIT(A), THE ASSESSEE CONTEN DED THAT THE MOMENT THE ASSESSEE HAS PURCHASED LAND FOR BUSINESS PURPOSES, BUSINESSE S OF THE ASSESSEE HAS COMMENCED. THE FIRST APPELLATE AUTHORITY AGREED WIT H THE ASSESSEE AND GRANTED RELIEF. 5. AGGRIEVED THE REVENUE IS IN APPEAL ON THE FOLLOWING GROUND :- 1. WHETHER THE CIT(A) UNDER THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW WAS JUSTIFIED IN ALLOWING THE EXPENSES LIKE INT EREST, BANK CHARGES, AUDIT FEES, FILING FEES AND LEGAL & PROFESSIONAL EXPENSES AS REVENUE EXPENDITURE INSTEAD OF PRE OPERATIVE EXPENDITURE AS ASSESSED BY THE ASSESSING OFFICER, SINCE NO BUSINESS ACTIVITIES HAD BEEN CARRIED OUT T HE ASSESSEE? 6. WE HAVE HEARD SMT. PARMINDER KAUR, SR. DR ON BEHALF OF THE REVENUE AND SHRI R.S. SINGHAVI AND SHRI SATYAJIT GOEL ON B EHALF OF THE ASSESSEE. 7. ON A CAREFUL CONSIDERATION OF THE FACTS A ND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDER S OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS :- 7.1 ASSESSEE IS ENGAGED IN THE BUSINESS OF REA L ESTATE DEVELOPMENT. IT HAS PURCHASED LAND DURING THE FINANCIAL YEAR 2005-06. BUSINESS IN REAL ESTATE, INVOLVING LAND CAN BE EITHER BY PURCHASE AND SALE OF LAND I.E . TRADING IN LAND OR BY WAY OF PURCHASE DEVELOPMENT AND THEREAFTER SELLING OF THE DEVELOPED LAND EITHER AS A WHOLE OR IN SMALLER UNITS, BY WAY OF PLOTTING ETC. THE MO MENT THE ASSESSEE PURCHASES LAND AND TREATS IT AS ITS STOCK-IN-TRADE, THEN IT CAN BE SAID THAT THE BUSINESS OF THE ASSESSEE IS SET UP. ITA N O. 758/DEL/2013 AY 2007-08 DCIT VS .DELTALAND R EAL ESTATE PVT. LTD.. 3 8. KEEPING IN VIEW THE ABOVE DISCUSSION, AS TH E ASSESSEE IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND AS ALREADY PURCHASED CE RTAIN LAND THE INTEREST EXPENDITURE ON ACQUIRING THE LAND SHOULD BE ALLOWED AS REVENUE EXPENDITURE FOR THE REASON THAT A) THE ASSESSEE HAS COMMENCED BUSINESS ACTIVITY BY ACQUIRING LAND B) THE LANDS IN QUESTION ARE STOCK IN TRADE OF THE ASS ESSEE. 9. IF IT WAS A CASE OF ACQUISITION OF IMMOVABLE PROPERTY THE QUESTION OF CAPITALISATION OF THE INTEREST EXPENDITURE WOULD AR ISE. BUT THE CASE ON HAND THE LAND PURCHASE IS THE STOCK IN TRADE OF THE DEVELOPER I.E . THE ASSESSEE AND IS DISCLOSED AS SUCH IN HIS BALANCE SHEET. THE LD. CIT(A) ALSO RELI ED ON THE JURISDICTIONAL DECISIONS IN THE CASE OF CIT VS. COMMISSIONER OF IN COME-TAX V. HUGHES ESCORTS COMMUNICATIONS LTD. [2009] 311 ITR 253 (DEL) [2007] AND IN THE CASE OF CIT VS. WHIRPOOL OF INDIA LTD. 318 ITR 347 (SC). 10. IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE FINDINGS OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH NOVEMBER, 2014. SD/- SD/- (C.M.GARG) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 5 TH NOVEMBER, 2014 *VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT(A); 5. DR; ITA N O. 758/DEL/2013 AY 2007-08 DCIT VS .DELTALAND R EAL ESTATE PVT. LTD.. 4 6. GUARD FILE BY ORDER ASST. REGISTRAR