Gujarat Growth Centres Devlopment Corporation Ltd., Gandhinagar V. The Dy. CIT., Circle-1(1), Gandhinagar

ITA 959/AHD/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 56998 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-12-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 19-04-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Rule of consistency

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD , .. !'#, $ BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNTANT MEMBER ./ ITA NO.959/AHD/2006 & ./ ITA NO.1675/AHD/2007 & ' ('/ ASSESSMENT YEAR:2002-03 & ' ('/ ASSESSMENT YEAR:2003-04 GUJARAT GROWTH CENTRES DEVELOPMENT CORPORATION LTD. BLOCK NO.5, 4 TH FLOOR, UDHYOG BHAVAN, GANDHINAGAR PAN NO.AAACG6988Q & & & & / V/S . INCOME TAX OFFICER, WARD-2, GANDHINAGAR )*/ APPELLANT .. +,)*/ RESPONDENT & '- . / / ASSESSEE BY SHRI A. C SHAH, AR +,)* . / /BY REVENUE SHRI SEMIR TEKRIWAL, SR-DR &0 . 1$ /DATE OF HEARING 08-12-2011 2!( . 1$ /DATE OF PRONOUNCEMENT 19 -01-2012 3 3 3 3 / / / / ORDER .. !'#, $ /PER A.K.GARODIA, ACCOUNTANT MEMBER:- BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME-TAX ( APPEALS)-GANDHINAGAR DATED 21-02- 2006 FOR ASSESSMENT YEAR 2002-03 AND DATED 23-02-20 07 FOR ASSESSMENT YEAR 2003-04. SINCE THE ISSUE INVOLVED IS SIMILAR, BOTH THESE APP EALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ONLY ISSUE INVOLVED IN BOTH THE YEARS IS REGARDI NG ASSESSING INTEREST INCOME AS INCOME FROM OTHER SOURCES AND DISALLOWANCE OF VARIO US EXPENSES AND DEPRECIATION CLAIMED BY THE ASSESSEE IN BOTH THE YEARS. IN A.Y 2002-03 T HE AMOUNT OF INTEREST INCOME ASSESSED ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 2 AS INCOME FROM OTHER SOURCES IS RS.18,94,699/- AND DEDUCTION DISALLOWED ON ACCOUNT OF EXPENDITURE IN THAT YEAR IS RS.20,94,175/- AND DEPR ECIATION DISALLOWED IN THAT YEAR IS RS.2,70,291/-. SIMILARLY, IN AY 2003-04, THE INTERE ST INCOME ASSESSED AS INCOME FROM OTHER SOURCES IS RS.20,81,474/- AND EXPENDITURE DISALLOWE D IN THIS YEAR IS RS.15,37,327/- AND DEPRECIATION DISALLOWED IN THIS YEAR IS AT RS.2,54, 100/-. 3. SINCE THE FACTS ARE IDENTICAL IN BOTH YEARS, WE NARRATE THE FACTS FOR A.Y 2002-03 WHICH ARE NOTED BY LD. CIT(A) IN PARA-2.1 TO 2.1.9 OF HIS ORDER FOR A.Y 2002-03. THE SAME ARE REPRODUCED HEREINBELOW:- 2.1 THE APPELLANT COMPANY WAS .SET UP FOR ESTABLISHM ENT OF INFRASTRUCTURE FACILITY FOR NEW INDUSTRY. FOR THE ASSESSMENT YEAR 2002-03, THE APPELLA NT FILED RETURN OF INCOME ON 30/10/2002 DECLARING TOTAL INCOME OF RS.3,94,174/- U/ S. 1158JB. IN THE REGULAR COMPUTATION, THE APPELLANT COMPANY CLAIMED BUSINESS LOSS AMOUNTING T O RS.6,63,262/-. THE ASSESSING OFFICER OBSERVED THAT THE APPELLANT COMPANY RECEIVED :HE FOLLOWING INCOME: 1. CONSULTANCY CHARGES RS. 26,763 2. OTHER INCOME RS. 300 3. SALE OF BID DOCUMENTS RS. 1,20,000 (AP PLICATION FORMS) 4. INTEREST INCOME RS.18,94,699 5. CREDIT BALANCES WRITTEN OFF RS. 13,564 RS.20,55.426 2.1.2 AS AGAINST THE ABOVE, A TOTAL SUM OR RS.20,94,175 7- TOGETHER WITH DEPRECIATION OF RS.2,70,29L/- WAS CLAIMED AS DEDUCTIBLE. ACCORDING TO THE APPELLANT, COMMERCIAL ACTIVITIES WERE STARTED FROM JUNE 1993 AND IT WAS ELIGIBLE FOR DE DUCTION OF ALL REVENUE EXPENSES. THE ADMINISTRATION, OVERHEAD AND OTHER EXPENSES WERE ACCORDI NGLY CLAIMED AS DEDUCTION IN COMPOUTING INCOME. 2 1.3 ASSESSING OFFICER OBSERVED THAT AS PER SCHEDULE L PART 8(1) FORMING PART OF NOTES ON ACCOUNTS ATTACHED TO THE ACCOUNTS THAT THE APPELLANT COMPAN Y PAID RS.28,69,41,2LO/- TO GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION TOWARDS SETT ING UP GROWTH CENTRES AT VAGRA, GADHIDHAM, PALNPUR. THE ABOVE PAYMENTS WERE SHOWN U NDER THE HEAD 'LOANS AND ADVANCES'. THE DETAILS OF EXPENDITURE REGARDING THE ABO VE PAYMENTS WERE PENDING FINALIZATION BETWEEN THE COMPANY AND GUJARAT INDUST RIAL DEVELOPMENT CORPORATION. IN THE ABSENCE OF SUCH DETAILS, THE AMOUNT OF ADVANCE WAS SHO WN UNDER THE HEAD CURRENT ASSETS (LOANS AND ADVANCES). NO ACCOUNTING ENTRIES WERE PASSED IN THE BOOKS OF ACCOUNTS IN RESPECT OF THE ABOVE EXPENDITURE. ASSESSING OFFICER ALSO NOTICED THAT VIDE PART A(4) OF THE NOTES ON ACCOUNTS, THE APPELLANT HAD STATED THAT LAND DEVELOPMEN T AND 55% OF THE ATTRIBUTABLE COST OF THE DEVELOPMENT OF THE GROWTH CENTRES WAS TREATED AS D EVELOPMENT EXPENSES AND THE SAME WAS CLASSIFIED UNDER THE HEAD CURRENT ASSETS AS STOCK IN TRADE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE APPELLANT HAD NOT COMMENCED THE B USINESS AND THEREFORE THE INTEREST EARNED WAS TAXABLE AS INCOME UNDER THE HEAD ' OTHER SOURCES ' FOLLOWING THE PRINCIPLE LAID DOWN BY THE HON'TIE SUPREME COURT IN THE CASE OF TUTI CORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V/S. CIT (227 ITR 172). ASSESSING OFFICER ALSO NOTE D THAT FOR A.Y. 1998-99, CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN ASSESSING INCOME UNDER THE HEAD ' OTHER SOURCES ' HOLDING THAT THE APPELLANT COMPANY WAS ONLY IN THE PROCESS OF SETTING UP OF THE GROWTH CENTRES AND THE ABOVE ACTIVITY WAS PURELY OF P RE-OPERATIVE 2.1.4 THE APPELLANT EXPLAINED BEFORE THE ASSESSING OF FICER THAT-THE COMPANY WAS INCORPORATED ON 11/02/1992 AND IT HAD STARTED COMMER CIAL ACTIVITY FROM JULY 1993. THE APPELLANT COMPANY HAD APPOINTED GIDC FOR ESTABLISHMEN T OF INFRASTRUCTURE FACILITIES AT VAGRA, BHARUCH, PALANPUR, MAMI SITES. THE LAND WAS PURCHASE D AND OTHER PAYMENTS LIKE ELECTRICITY, WATER SUPPLY, ETC. WERE MADE BY GIDC ON BEHALF OF TH E APPELLANT. ADVANCES TO THE TUNE OF RS.18.69 CRORES WERE PAID TO GIDC AGAINST EXPENDITURE I NCURRED BY THEM. THE FINAL STATEMENT ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 3 OF ACCOUNT FOR THE EXPENDITURE WAS YET TO BE SETTLED AND ACCORDINGLY ACCOUNTING ENTRIES WERE NOT PASSED IN APPELLANTS BOOKS. IT WAS FURTHER POINTE D OUT THAT THE EXPENDITURE INCURRED ON DEVELOPMENT OF DIFFERENT GROWTH CENTRES WERE SHOWN U NDER THE HEAD STOCK-IN-TRADE IN THE BALANCE SHEET. APPELLANT HAD GIVEN DEPOSIT TO GUJARA T ELECTRICITY BOARD FOR POWER FACILITIES. IT WAS ARGUED THAT ONCE THE COMPANY HAD PURCHASED LAND FO R DEVELOPMENT OF GROWTH CENTRES AT DIFFERENT PLACES, GIVEN DEPOSIT TO GE AND INCURRED OT HER EXPENSES FOR INFRASTRUCTURE FACILITIES, COMMERCIAL ACTIVITIES HAD ALREADY COMMENCED FROM JULY 1 993. THE ADMINISTRATIVE AND OTHER EXPENSES WERE REVENUE IN NATURE. THE FACT THAT PART OF SUCH EXPENDITURE WAS CAPITALIZED IN THE BOOKS DID NOT ALTER ITS CHARACTER.. ACCORDING ENTRI ES DID NOT DETERMINE THE DEDUCTIBILITY OR OTHERWISE OF EXPENDITURE UNDER I.T. ACT. IN THE CONTE XT, THE EXPENDITURE WAS TO BE ALLOWED. 2.1.5 APPELLANT FURTHER ARGUED THAT DURING A.Y 1995 -96, THE EXPENDITURE WAS SHOWN AS REVENUE AND THE CLAIM WAS ALLOWED. THUS, ASSESSING OFFI CER HAD ACCEPTED THE FACT OF COMMENCEMENT OF BUSINESS FROM JULY 1983. IT WAS NOT OP EN TO GIVE A DIFFERENT FINDING ON FACTS IN THE PRESENT ASSESSMENT YEAR. 2.1.6 A FURTHER ARGUMENT RAISED WAS THAT THERE WAS A CHANGE IN THE SET OF FACTS. DURING FINANCIAL YEAR 1999-2000, APPELLANT STARTED THE PROC ESS OF SETTING THE PLOTS AT VAGRA. IN THE ABOVE PROCESS, THE COMPANY RECEIVED SCRUTINY FEES AND AD VANCE FROM PROSPECTIVE CUSTOMERS. DURING FINANCIAL YEAR 2002-03, THE APPELLAN T RECEIVED DOWN PAYMENT AND DEPOSIT FROM PROSPECTIVE CUSTOMERS AT MITHIROHAR, GANDHIDHAM. TH E CIT(A) HAD OBSERVED IN THE APPELLANT ORDER FOR ASSESSMENT YEAR 1998-99 THAT BUSINESS ACTIVITY WOULD COMMENCE ONLY WHEN THE ASSESSEE STARTS EXPLOITATION OF ITS CAPITAL ASS ETS . IT WAS ARGUED THAT THE EXPLOITATION OF ASSETS STARTED IN ASSESSMENT YEAR 2000-2001 AND THER EFORE THE ADMINISTRATIVE AND OTHER EXPENSES WERE ELIGIBLE TO BE TREATED AS REVENUE EXPEND ITURE. 2.1.7. ASSESSING OFFICER EXAMINED THE ARGUMENTS AND O BTAINED DETAILS REGARDING THE VARIOUS ACTIVITIES CARRIED OUT TILL THE END OF THE RELEVANT P REVIOUS YEAR. HE HELD THAT THE ACTIVITY OF THE COMPANY DURING THE YEAR WAS ONLY OF A PRE-OPERATIVE NATURE AND COMMENCEMENT OF BUSINESS COULD BE SAID TO HAVE STARTED ONLY WHEN IT STARTED E XPLOITATION OF THE PROJECT. THE OBJECT OF THE COMPANY WAS TO SET UP GROWTH CENTRES AND THEREAFTER TO EXPLOIT THEM. IT WAS THE SECOND LIMB OF ACTIVITY WHICH PROVIDED FOR REGULAR BUSINESS ACTIVITY. T HE APPELLANT WAS BUILDING CAPITAL FORM-1. T. S. -7 NOTICE OF DEMAND UNDER SECTION 156 OF T HE INCOME-TAX ACT, 1961 STATUS.........CO .. .'...................................... PAN/GIR NO.AAACG6 988Q TO GUJARAT GROWTH CENTRE DE. CO-OP. LTD. 4 TH FLOOR, UDHYOG BHAVAN BLOCK NO.5, SEC-II, GANDHINAGAR 1. THIS IS TO GIVE YOU NOTICE THAT FOR THE ASSESSMENT Y EAR. 2002-03, A SUM OF RS.8,94,233 DETAILS OF WHICH ARE GIVEN ON THE REVERSE, HAS BEEN D ETERMINED TO BE PAYABLE BY YOU. ' 2. THE AMOUNT SHOULD BE PAID TO THE MANAGER, AUTHO RIZED BANK/STATE BANK OF INDIA./RESERVE BANK OF INDIA AT GANDHINAGAR WITHIN THIRTY DAYS OF THE SERVICE OF THIS NOTICE. THE PREVIOUS APPROVAL OF THE DEPUTY COMMISSIONER OF INCOME-TAX HAS B EEN OBTAINED FOR ALLOWING A PERIOD OF LESS THAN 30 DAYS FOR THE PAYMENT OF THE ABOVE SUM. A CHALLAN IS ENCLOSED FOR THE PURPOSE OF PAYMENT. 3. IF YOU DO NOT PAY THE AMOUNT WITHIN THE PERIO D SPECIFIED ABOVE, YOU SHALL BE LIABLE TO PAY SIMPLE INTEREST AT ONE AND ONE-HALF PER CENT FOR EVE RY MONTH OR PART OF A MONTH FROM THE DATE COMMENCING AFTER END OF THE PERIOD AFORESAID IN ACCORD ANCE WITH SECTION 220(2) 4. IF YOU DO NOT PAY THE AMOUNT OF THE TAX WITHI N THE PERIOD SPECIFIED ABOVE, PENALTY (WHICH MAY BE AS MUCH AS THE AMOUNT OF TAX IN ARREAR) MAY BE IMPOSED UPON YOU AFTER GIVING YOU A REASONABLE OPPORTUNITY OF BEING HEARD IN ACCORDANCE W ITH SECTION 221. ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 4 5. IF YOU DO NOT PAY THE AMOUNT WITHIN THE PERI OD SPECIFIED ABOVE, PROCEEDINGS FOR THE RECOVERY THEREOF WILL BE TAKEN IN ACCORDANCE WITH SECTIO NS 222 TO 229,231 AND 232 OF THE INCOME-TAX ACT, 1961. 6. IF YOU INTEND TO APPEAL AGAINST THE ASSESSMENT/FIN E/PENALTY, YOU MAY PRESENT AN APPEAL UNDER PART A OF CHAPTER XX OF THE INCOME-TAX ACT, 196 1, TO THE DEPUTY COMMISSIONER (APPEALS) OF INCOME-TAX/COMMISSIONER OF INCOME-TAX (A PPEALS)WITHIN THIRTY DAYS OF THE RECEIPTS OF THIS NOTICE, IN FORM NO. 35, DULY STAMPED A ND VERIFIED AS LAID DOWN IN THAT FORM. 7. THE AMOUNT HAS BECOME DUE AS A RESULT OF THE ORD ER OF THE DEPUTY COMMISSIONER(APPEALS) OF INCOME-TAX/ DEPUTY COMMISSIONER OF INCOME-TAX/COMMISSIONER OF INCOME-TAX (APPEALS)/CHIEF COMMISSIONER OR COMMISSIONER OF INCOME- LAX................................................ ..UNDER SECTION..................................... ................. OF THE INCOME-TAX ACT, 1961. IF YOU INTEND TO APPEAL AGAINST THE AFORESAID ORDER, YOU MAY PRESENT AN. APPEAL .UNDER PART B OF CHAPTER XX OF T HE SAID ACT TO THE INCOME-TAX APPELLATE TRIBUNAL .GANDHINAGAR........... WITHIN SIXTY DAYS OF THE RECEIPT OF THAT ORDER, IN FORM NO. 36,DULY STAMPED AND VERIFIED AS LAID DOWN IN THAT FORM. N OTES DELETE INAPPROPRIATE PARAGRAPHS AND WORDS. 2. IF YOU WISH TO PAY THE AMOUNT BY CHEQUE, THE CHEQU E SHOULD BE DRAWN IN FAVOUR OF THE MANAGER, AUTHORIZED BANK/STATE BANK OF INDIA/RESERVE BANK OF INDIA. 3.IF YOU INTEND TO SEEK EXTENSION OF TIME FOR PAYMENT OF THE AMOUNT OR PROPOSE TO MAKE THE PAYMENT BY INSTALLMENTS, THE APPLICATION FOR SUCH EXT ENSION, OR AS THE CASE MAY BE, PERMISSION TO PAY BY INSTALLMENT, SHOULD BE MADE TO T HE ASSESSING OFFICER EXPIRY OF THE PERIOD SPECIFIED IN PARAGRAPH 2. ANY REQUEST RECEIVED AFTER THE EXPIRY OF THE SAID PERIOD WILL NOT BE ENTERTAINED IN VIEW OF THE SPECIFIC PROVISIONS OF SECTI ON 220(3). ASSETS AND WAS ONLY IN THE PROCESS OF SETTING UP OF BUSINE SS. THE ASSETS WERE YET TO BE EXPLOITED. THE MISCELLANEOUS RECEIPTS DID NOT CONSTITUT E INCOME EARNED OUT OF EXPLOITATION OF ASSETS. 2.1.8. ASSESSING OFFICER ALSO REFERRED TO THE CLAIM THAT GROWTH CENTRES IN PLACES LIKE VAGRA HAD ALREADY BEEN COMPLETED. HE REFERRED TO THE MINUTES OF THE BOARD MEETING HELD ON 05/03/2002 WHICH STATED THAT THE VAGRA CENTRE WAS UNDER COMMISSION ING STAGE. THE COMMENTS ON THE WORKING OF THE COMPANY AS GIVEN IN THE ANNUAL REPORT FO R THE YEAR 2001-02 WERE ALSO REFERRED TO BY ASSESSING OFFICER TO SHOW THAT THE OTHER GROWTH CENTRES AT GANDHIDHAM, PALANPUR AND MIYANI WERE BEING SET UP AND THE WORKS W ERE UNDER PROGRESS. ACCORDINGLY THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT NO GROWTH CENTRE WAS COMPLETELY SET UP. THE APPELLANT WAS ONLY IN THE PROCESS OF SETTING UP OF BUSINESS AND ACQUIRING CAPITAL ASSETS. NO PLOT WAS SOLD AND THERE WAS NO EXPLOITATION OF ANY C APITAL ASSTD. THERE WAS NO INCOME TO BE COMPUTED UNDER THE HEAD BUSINESS AND THE INTEREST INCOME WAS LIABLE TO BE TAXED UND ER THE HEAD OTHER SOURCES . 2.1.9 REGARDING THE CLAIM THAT THE FINDING OF FACT FO R A.Y 1995-96 WAS APPLICABLE TO THE PRESENT YEAR. ASSESSING OFFICER OBSERVED THAT THE PR INCIPLE OF RES JUDICATA DID NOT APPLY TO TAX PROCEEDINGS AND THERE WAS NO COMPULSION TO ADHERE TO THE MISTAKE OR OMISSION IN A.Y 1995- 96. ACCORDINGLY THE ARGUMENT OF THE APPELLANT IN TH IS REGARD WAS REJECTED. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL B EFORE US. 5. IT IS SUBMITTED BY THE LD. AR OF THE ASSESSEE TH AT THIS VERY ISSUE WAS BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 1998-99 TO 2001-02 IN ITA NO.434/AHD/2004, 2244/AHD/2006, 2245/AHD/2007 AND 2246/AHD/2006 DATED 16-11-2007 ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 5 AND AS PER THIS TRIBUNAL ORDER, THE ISSUE WAS DECID ED BY THE TRIBUNAL AGAINST THE ASSESSEE BUT THIS TRIBUNAL ORDER SHOULD NOT BE FOLLOWED BECA USE LETTER DATED 27-01-005 ISSUED BY GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION (GIDC FO R SHORT) TO THE ASSESSEE-COMPANY WAS PRODUCED BEFORE THE ASSESSING OFFICER IN THIS YEAR FOR THE FIRST TIME. HE SUBMITTED THE COPY OF THIS LETTER AT PAGE-16 OF THE PAPER BOOK. HE ALSO S UBMITTED THAT COMMENCEMENT OF BUSINESS HAS NO RELATION WITH ALLOTMENT OF PLOTS. HE ALSO SU BMITTED THAT EXPLOITATION OF ASSET IS RELEVANT FOR CAPITAL ASSET BUT IN THE PRESENT CASE, NO CAPIT AL ASSET WAS ACQUIRED AND ASSET ACQUIRED WAS STOCK-IN-TRADE OF THE ASSESSEE AND HENCE, EXPLO ITATION OF ASSET IS NOT RELEVANT. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH CO URT RENDERED IN THE CASE OF CIT V. E. FUNDS INTERNATIONAL INDIA 162 TAXMAN 1 (DEL). HE ALSO PLACED RELIANCE ON THE FOLLOWING JUDGMENTS:- A) SARABHAI MANAGEMENT CORPORATION LTD. V. CIT (1976) 102 ITR 25 (GUJ) B) CIT V. SARABHAI MANAGEMENT CORPORATION LTD.(1991) 192 ITR 151 (SC) 6. HE ALSO SUBMITTED THAT FACTS OF THESE CASES ARE IDENTICAL. IT WAS ALSO SUBMITTED THAT JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V. CIT (1997) AS REPORTED IN 227 ITR 172 (SC) IS NOT APPL ICABLE IN THE PRESENT CASE BECAUSE IN THAT CASE, ISSUE WAS INVOLVED REGAR DING ACQUISITION OF CAPITAL ASSET AND NOT STOCK-IN-TRADE AS IN THE PRESENT CASE. ONE MORE SUB MISSION WAS MADE THAT COMMENCING OF BUSINESS IS A FUNDAMENTAL ASPECT WHICH IS ACCEPTED IN A.Y 1995-96 BY WAY OF ASSESSMENT ORDER U/S.143(3) AND ALSO IN A.YS 1996-97 AND 1997- 98 BY WAY OF ORDER U/S. 143(1). IT IS ALSO SUBMITTED THAT ASSESSMENT ORDER FOR A.Y 1998-99 WAS PASSED ON 29-12-2000 BUT NO ACTION HAS BEEN TAKEN BY THE REVENUE TO REOPEN THE ASSESSM ENT ORDER FOR A.YS1996-97 AND 1997- 98 THOUGH THE TIME-LIMIT WAS AVAILABLE FOR DOING SO AND THEREFORE, AS PER THE PRINCIPLE OF CONSISTENCY, NO DIFFERENT VIEWS SHOULD BE TAKEN IN CONTRADICTION TO THE VIEW TAKEN IN A.YS 1995-96 TO 1997-98. 7. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLAC ED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF RADHASOAMI SATSANG V. CIT (1992) AS REPORTED IN 193 ITR 321 (SC). 8. AS AGAINST THIS, LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. HE ALSO SUBMITTED THAT ISSUE INVOLVED IS SQUARELY COVE RED IN FAVOUR OF REVENUE BY THE TRIBUNAL ORDERS IN ASSESSEES OWN CASE FOR A.YS 1998-99 TO 2 001-02 AND HENCE, THE ORDERS OF LD. CIT(A) SHOULD BE CONFIRMED IN BOTH THE YEARS. ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 6 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS, PERUSED TH E MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND TRIBUNA LS ORDER IN ASSESSEES OWN CASE FOR A.YS 1998-99 TO 2001-02. WE HAVE ALSO GONE THROUGH THE V ARIOUS JUDGMENTS CITED BY LD. AR OF THE ASSESSEE. WE FIND THAT TRIBUNAL ORDER IN EARLIE R FOUR YEARS I.E. A.Y 1998-99 TO 2001-02 IS AGAINST THE ASSESSEE AND NO CASE HAS BEEN MADE OUT THAT THERE IS A DIFFERENCE IN FACTS IN THE PRESENT TWO YEARS. THE RELEVANT PARA OF THE TRI BUNAL ORDER IS PARA-6 , WHICH IS REPRODUCED BELOW:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENTS RELIED ON BY THE LEARNED AR OF THE ASSE SSEE. IN THE CASE OF PREM CONDUCTORS PVT. LTD. V. CIT , HONBLE HIGH COURT CONSIDERED THE DECISION IN THE C ASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES AND SARABHAI MANAGEMENT CORPORATION LTD. (SUPRA) AND HAS LAID DOWN THE TEST TO BE APPLIED IN ORDER TO DETERM INE AS TO WHETHER THE BUSINESS HAS COMMENCED. THE RELEVANT PORTION OF THE SAID JUDGMENT IS QUOTED HERE UNDER: '10. THUS, IT IS CLEAR IN THE LIGHT OF THE DECISIONS O F THIS HIGH COURT IN SAURASHTRA CEMENT & CHEMICAL INDUSTRIES'. CASE (SUPRA} AND SARABHA I MANAGEMENT CORPORATION LTD 'S CASE (SUPRA) THAT WHAT, THE COURT HAS TO CONSID ER IS, WHETHER THE BUSINESS OF THE ASSESSEE CONSISTS OF DIFFERENT CATEGORIES AND WHETHER TH E 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 ACTIVITY 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 START ED AND IT IS NOT NECESSARY THAT ALL THE CATEGORIES OF ITS BUSINESS ACTIVITIES MUST START EITHER SIMULTANEOUSLY OR THAT THE LAST STAGE MUST START BEFORE IT CAN BE SAI D THAT THE BUSINESS WAS SET UP. AGAIN, AS BHAGWATI C.J., HAS EMPHASIZED IN SAURASHTRA CEM ENT & CHEMICAL INDUSTRIES' CASE (SUPRA), 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.' THE FACTS OF THE PRESENT CASE ARE NOW EXAMINED IN THE LIGHT OF THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. WHILE DEALING WITH THE IS SUE AS TO THE CLAIM OF COMMENCEMENT OF BUSINESS, THE CIT(A), VIDE PARAGRAPH 3.10 OF THE AP PELLATE ORDER, HAS OBSERVED AS UNDER : '3.10. WITH REGARD TO APPELLANT'S CLAIM OF COMMENCEMENT OF BUSINESS, I FIND THAT THE EVIDENCES AND FACTS OF RECORD INDICATED THAT ACTIVITY O F THE APPELLANT-CORPORATION DURING THE RELEVANT PREVIOUS YEAR WAS ONLY OF A PRE-OPERATIVE NATU RE AND COMMENCEMENT OF BUSINESS WOULD START ONLY WHEN THE APPELLANT-CORPORATION STA RTS EXPLOITATION-OF THE PROJECT. THE MEMORANDUM OF ASSOCIATION CLEARLY PROVIDE FOR SUCH ACT IVITY AS HAS ALSO BEEN EMPHASIZED BY THE LEARNED COUNSEL FOR THE APPELLANT BY REFERRING T O CLAUSE 11(1) & 11(D) OF THE MEMORANDUM OF ASSOCIATION. A PERUSAL OF MEMORANDUM OF ASSOCIATI ON CLEARLY INDICATES THAT THE OBJECT OF THE APPELLANT-CORPORATION WAS TO SET UP THE GROWTH CEN TRES AND THEREAFTER TO EXPLOIT THE SAME. IT IS THE SECOND LIMB OF THE OBJECT, WHICH PROVIDES FO R REGULAR BUSINESS ACTIVITY, WHEREIN THE APPELLANT-CORPORATION WILL INTERACT WITH OTHER PARTI ES FOR GENERATION OF REVENUE AND FOR EXPLOITATION OF GROWTH CENTRES SO SET UP BY THE APPEL LANT. IT IS APPARENT THAT THE PROCESS OF SETTING UP THE GROWTH CENTRES WAS PURELY AN ACTIVITY OF PRE-OPERATIVE NATURE. IN THIS REGARD RELIANCE MAY BE PLACED ON THE DECISION OF CALCUTTA HI GH COURT IN THE CASE OF RADHADEVI JALAN V. CIT (1951) 20 ITR 176 WHEREIN THE HON'BLE HIGH C OURT HELD THAT FOR AN ACTIVITY TO BE TREATED AS AN ADVENTURE IN NATURE OF TRADE, IT MUST BE SHOWN TO HAVE SOME CONTINUOUS ACTIVITY AIMED AT PRODUCING PROFIT. WITH REGARD TO RELIANCE PLACED B Y THE ID. COUNSEL FOR THE APPELLANT ON CLAUSE 11(1) AND 11(D) OF MEMORANDUM OF ASSOCIATION, I AM TO POINT OUT THAT THE SAME CANNOT BE RELIED UPON TO CONCLUDE THAT THERE WAS COMMENCEMENT OF REGULAR BUSINESS ACTIVITY OF THE ASSESSEE. THE HON'BLE PATNA HIGH COURT IN THE CASE OF SITALPORE SUGAR WORKS LTD V. CIT (1954) 25 ITR 549, CLEARLY HELD THAT MERELY FOR THE REASON THAT THE ACTIVITY OF THE COMPANY WAS COVERED BY MEMORANDUM OF ASSOCIATION, IT COULD NOT B E CONCLUDED THAT THE ACTIVITY WAS A BUSINESS ACTIVITY. FROM THE NOTES ON ACCOUNTS FOR FINANCI AL YEAR 2001-02 AS CONTAINED PART B ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 7 OF SCHEDULE 1 TO THE ACCOUNTS, IT COULD BE SEEN THAT EVEN AS ON 31 ST MARCH, 2002, NO GROWTH CENTRE WAS COMPLETELY SET UP AND THE APPELLANT HAD ONL Y MADE PAYMENT OF RS.18,69,41,210 TO GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION FOR THE PURPOSE OF SETTING UP OF GROWTH CENTRES AND THAT THE SAME WAS SHOWN UNDER THE HEAD LOANS AND ADVANCES AND EVEN THE DETAILS OF EXPENDITURE WERE PENDING FINALIZATION BETWEEN THE A PPELLANT-CORPORATION AND THE GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION. CONSIDERING THE A BOVE AND THE PROJECT OF THE APPELLANT CORPORATION, I AM OF THE VIEW THAT THE ACTIVITY OF T HE APPELLANT-CORPORATION DURING THE PREVIOUS YEAR WAS SOLELY IN THE NATURE OF SETTING UP BUSINESS AND ACQUIRING CAPITAL ASSETS AND THE BUSINESS ACTIVITY WOULD COMMENCE ONLY THEREAFTER WHEN THE APPELLANT STARTS EXPLOITATION OF ITS CAPITAL ASSETS.' THE FACTS AS RECORDED BY THE CIT(A) IS NOT DISPUTED BY T HE ASSESSEE. THE ACTIVITY OF THE ASSESSEE-CORPORATION DURING THE RELEVANT PREVIOUS YEAR WAS ONLY OF A PRE-OPERATIVE NATURE AND COMMENCEMENT OF BUSINESS WOULD START ONLY APPELLANT-C ORPORATION STARTS EXPLOITATION OF THE PROJECT, THE CIT(A) HAS DEALT WITH THIS ISSUE EL ABORATELY IN HIS ORDER AND RIGHTLY CONCLUDED THAT THE ACTIVITY OF THE ASSESSEE CORPORATION DURING TH E YEARS UNDER CONSIDERATION WAS SOLELY IN THE NATURE OF SETTING UP BUSINESS AND ACQUIRING CAPIT AL ASSETS AND THE BUSINESS ACTIVITY WOULD COMMENCE ONLY THEREAFTER WHEN THE ASSESSEE STARTS E XPLOITATION OF ITS CAPITAL ASSETS. WE MAKE THE ORDER OF THE CIT(A) AS PART OF OUR ORDER . WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE APPEALS OF THE ASSESSEE. 10. FROM THE ABOVE ORDER, WE FIND THAT TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF PREM CONDUCTORS PVT. LTD. V. CIT (1977) AS REPORTED IN 108 ITR 654 (GUJ) IN WHICH THE JUDGMENT RENDERED IN THE CASE OF CIT V. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES (1973) AS REPORTED IN 91 ITR 107 (GUJ) WAS CONSIDERED. NOW THE ONLY DIFFERENCE IN FACTS BEING POINTED OUT BY LD. AR IS THAT THE LETTER DATED 27-01-2005 WAS SUBMITTED BEFORE THE ASSESSING OFFICER IN THE PRESENT YEAR FOR THE FIRST TIME. COPY OF THIS LETTER IS AVAILABLE ON PAGE-16 OF PAPER BOOK IN WHICH IT IS STATED BY GIDC THAT NECESSARY INFRASTRUCTURE LIKE ROAD, WATER SUPP LY, TELEPHONE EXCHANGE BUILDINGS WERE COMPLETED IN 1997-98 AND ALL INFRASTRUCTURE AT GUJA RAT GROWTH CENTRE DEVELOPMENT CORPORATION LTD. WERE MADE AVAILABLE AND HENCE THE LAND IS AVAILABLE FOR ALLOTMENT. IN CONTRADICTION TO THIS LETTER OF GIDC, IT IS NOTED B Y LD. CIT(A) IN HIS ORDER WHICH IS REPRODUCED BY THE TRIBUNAL IN THIS EARLIER ORDER THAT EVEN ON 31-03-2002, NO GROWTH CENTRE WAS COMPLETLY SET UP AND THE ASSESSEE HAD ONLY MADE PAYMENT OF RS . 1869.41 LAKH TO GDIC FOR THE PURPOSE OF SETTING UP OF GROWTH CENTRE AND THAT SAM E WAS SHOWN UNDER THE HEAD LOANS AND ADVANCES AND EVEN DETAILS OF EXPENDITURE WERE PEND ING FINALIZATION BETWEEN ASSESSEE- CORPORATION AND GIDC. HENCE, IN OUR CONSIDERED OPIN ION, THIS LETTER DATED 27-01-2005 DOES NOT MAKE ANY CHANGE IN FACTS DURING THESE TWO YEARS ALSO AND HENCE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT TWO Y EARS. 11. NOW, WE EXAMINE THE APPLICABILITY OF VARIOUS JU DGMENTS CITED BY LD. AR OF THE ASSESSEE. THE FIRST JUDGMENT CITED IS OF THE HONBL E DELHI HIGH COURT RENDERED IN THE CASE OF E FUNDS INTERNATIONAL INDIA (SUPRA). IN THAT CASE, THE DECISION OF HONBLE DEL HI HIGH COURT IS ON THE BASIS THAT THE ASSESSEE HAD TAKEN ALL STEPS NECESSARY TO OBTAIN BUSINESS INCLUDING EFFORTS FOR MARKETING ITSELF AND ON THIS BASIS, IT WAS NOTED THAT THE ASSESSEE HAS COMMENCED ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 8 BUSINESS IN THE RELEVANT PREVIOUS YEAR BUT IN THE P RESENT CASE, NO SUCH FACTS IS BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT ASSESSEE HAS TA KEN ALL STEPS NECESSARY TO OBTAIN BUSINESS INCLUDING EFFORTS FOR MARKETING AND THEREF ORE, THIS JUDGMENT OF HONBLE DELHI HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE. SECOND JUDGMENT CITED IS OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF SARABHAI MANAGEMENT CORPORATION LTD. (SUPRA) AND WE FIND THAT THIS DECISION IS NOT APPLICABLE IN THE PR ESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE ASSESSMENT YEAR UNDER CONSIDERATION WAS 1965-66 AND THE RELEVANT ACCOUNTING YEAR WAS THE YEAR ENDING ON 31 ST MARCH, 1965. THE FACTS OF THAT CASE ARE THAT THE MAIN OBJECT OF THE ASSESSEE-COMPANY WAS TO ACQU IRE IMMOVABLE PROPERTY AND TO GIVE IT OUT EITHER ON LEAVE AND LICENCE BASIS OR LEASE AS R ESIDENTIAL OR, IN THE ALTERNATIVE, BUSINESS ACCOMMODATION, WITH ALL APPURTENANT AMENITIES INCLU DING THE AMENITIES OF STORAGE, WATCH AND WARD FACILITIES, CANTEENS, REFRESHMENT ROOMS, E TC. A BUNGALOW TOGETHER WITH THE APPURTENANT COMPOUND AT AHMEDABAD WAS PURCHASED BY THE ASSESSEE-COMPANY ON MARCH, 28, 1964, UNDER A REGISTERED SALE DEED FOR OVER RS. 8 LAKHS. THEREAFTER, BUILDING REPAIRS, REWIRING, INSTALLATION OF LIFT, ETC., WERE CARRIED ON BY THE ASSESSEE-COMPANY FOR THE PURPOSE OF CONVERTING THE RESIDENTIAL ACCOMMODATION TO BUSINES S AND STORAGE ACCOMMODATION. THE ASSESSEE CLAIMED THAT IT WAS IN A POSITION TO OFFER SERVICES TO LICENCEES ON AND FROM OCTOBER, 1964 AND THEREFORE, CLAIMED THAT EXPENDITURE OF RS. 48,004/- WHICH WAS INCURRED BY IT BETWEEN OCTOBER 1, 1964, AND MARCH 31, 1965. IN THE PRESENT CASE, THE FACTS ARE TOTALLY DIFFERENT. THE ASSESSEE IS NOT IN A POSITION TO ALL OT THE PLOTS TO ITS CUSTOMERS AND THEREFORE, THIS JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IS OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE. THE THIRD JUDGMENT CITED BY LD. AR OF THE ASS ESSEE WAS RENDERED BY HONBLE APEX COURT IN THE CASE OF SARABHAI MANAGEMENT CORPORATION LTD. (SUPRA) AS PER WHICH, THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SARABHAI MANAGEMENT CORPORATION LTD. (SUPRA) WAS AFFIRMED. SINCE, WE HAVE ALREADY SEEN THAT THIS JUDGMENT OF HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE, IT DOES NOT MAKE ANY DIFFERENCE THAT THIS JUDGMENT WAS DULY AFFIRMED BY HONBLE APEX COURT. REGARDING THIS CONTENTION THAT PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED AND RELIANCE ON THE JUDGMENT OF HONBE APEX COURT RENDERED IN THE CASE OF RADHASOAMI SATSANG (SUPRA), WE WOULD LIKE TO OBSERVE THAT SINCE THERE IS ALREADY A TRIBUNAL DECI SION IN ASSESSEES OWN CASE FOR A.YS 1998-99 TO 2001-02, IT CANNOT BE SAID THAT TRIBUNAL SHOULD TAKE A CONTRARY VIEW ON THE BASIS THAT A DIFFERENT VIEW WAS TAKEN BY THE ASSESSING OF FICER IN SOME EARLIER YEARS. THE EXITING TRIBUNAL DECISION IS FOR THOSE YEARS WHICH ARE AFTE R EARLIER YEARS IN WHICH THE VIEW TAKEN BY THE AO WAS IN FAVOUR OF ASSESSEE AND HENCE, EVEN IF THIS CLAIM WAS TO BE MADE REGARDING PRINCIPLE OF CONSISTENCY, THE SAME SHOULD HAVE BEEN MADE BEFORE THE TRIBUNAL WHEN THE EARLIER APPEALS WERE BEING DECIDED BY THE TRIBUNAL IN THE YEAR 2007 BUT NOW, THIS PLEA HAS NO RELEVANCE. RELIANCE WAS PLACED BY LD. AR OF THE ASSESSEE ON VARIOUS JUDGMENTS OF ITA NO.959/AHD/2006 & 1675/AHD/2007 A.YS. 02-03 & 03-04 GGCDC LTD. V. ITO WD-2, GNG PAGE 9 DIFFERENT HIGH COURTS AND TRIBUNAL IN FAVOUR OF ARG UMENT OF PRINCIPLE OF CONSISTENCY BUT THE SAME ARE NOT RELEVANT BECAUSE THIS CLAIM REGARDING PRINCIPLE OF CONSISTENCY CANNOT BE ENTERTAINED IN THE APPEALS IN THE PRESENT YEARS BEC AUSE THE TRIBUNAL HAS ALREADY TAKEN A VIEW IN EARLIER FOUR YEARS AND WE ARE SIMPLY FOLLOW ING THE EXISTING TRIBUNAL ORDER IN ASSESSEES OWN CASE. 12. AS PER ABOVE DISCUSSION, WE HAVE SEEN THAT ISSU E INVOLVED IN THESE TWO APPEALS IS SQUARELY COVERED IN FAVOUR OF REVENUE AND AGAINST T HE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR A.YS 1998-99 TO 2001-02 AND WE COULD NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT TWO YEARS AND HENCE, BY RESPECTFULLY FOLLOWING THE PRECEDENT, WE DECIDE THE ISSUE AGAINST THE ASSESSEE IN THE PRE SENT TWO YEARS ALSO. 13. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE DIS MISSED. 4 3 . 2!( '&5 19 / 01/ 201 2 ! $ 9 . 0 THIS ORDER PRONOUNCED IN OPEN COURT ON 19/01/ 201 2. SD/- SD/- ( ) ($ ) (MUKUL KR. SHRAWAT) (A.K.GA RODIA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, *DKP 3 3 3 3 . .. . +< +< +< +< =<( =<( =<( =<( / COPY OF ORDER FORWARDED TO:- 1. )* / APPELLANT 2. +,)* / RESPONDENT 3. ? / CONCERNED CIT 4. ?- / CIT (A) 5.