PRINCIPAL COMMISSIONER OF INCOME TAX 2 V. GUJARAT INTERNATIONAL FINANCE TECH-CITY CO. LTD.

TAXAP/278/2019

AI Insights

The case revolves around a tax appeal by the Principal Commissioner of Income Tax against Gujarat International Finance Tech-City Co. Ltd., concerning the assessment year 2012-13. The primary issues were the disallowance of certain expenses and the claim of depreciation on assets. The Income Tax Appellate Tribunal had earlier upheld the CIT(A)'s decision, which favored the assessee, stating that the business was set up and operational during the relevant period, allowing for the claimed deductions and depreciation. The High Court, referencing the decision in Saurashtra Cement and Chemical Ltd. Vs. CIT, agreed with the lower authorities' findings and dismissed the appeal.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 746104 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 15-07-2019
• Assessment Year: misc
• Other Referred Cases: Saurashtra Cement and Chemical Ltd. Vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: MAUNA BHATT
• Keywords: Business commencement; Depreciation; Disallowance; Income Tax; Tax appeal
• Section: 32; 37(1); 260A; 3

Judgement Text

"C/TAXAP/278/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 278 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus GUJARAT INTERNATIONAL FINANCE TECH-CITY CO. LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 15/07/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) Page 1 of 5 C/TAXAP/278/2019 JUDGMENT This Tax Appeal under Section 260A of the Income Tax Act, 1961, is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad \"A\" Bench, Ahmedabad, in the ITA No.1177/Ahd/2016 for the A.Y.2012-13 dated 30/11/2018 2. The Revenue has proposed the following two questions of law :- (A) \" Whether the Appellate Tribunal has erred in law and on facts in upholding the order of the CIT(A) deleting the disallowance of Rs 2,40,18,801/- made under section 37(1) r.w.s 3 of the Act, without properly appreciating the facts of the case and the material brought on record ?\" (B) \" Whether the Appellate Tribunal has erred in law an don facts in upholding the order of the CIT(A) deleting the disallowance of Rs 1,11,38,327/- made under section 32 r.w.s 3 of the Act, without properly appreciating the facts of the case and the material brought on record ?\" 3. With regard to the first question, as proposed by the Revenue is concerned, the finding of fact recorded by the Tribunal is as under : \" The nature of business of the assessee company was to design, develop, finance, construct, operate and maintain Gujarat International FInance Tech. City (Gift City). The company had engaged specialised consultant to undertake various studies for the development of the gift project which included detailed amster plant, architectural and engineering design including concept design of building and infrastructure, context, study, talent assessment study, Page 2 of 5 C/TAXAP/278/2019 JUDGMENT skills, demand supply study, demand assessment and feasibility, ICT master plan and design for building ICT infrastructure, real estate and market assessment, soil investigation etc. The assessee has submitted that all these studies had taken place before 31st March, 2011. The assessee company has also obtained various approvals and clearance for implementation of the project as elaborated in detail in finding of he CIT(A) as supra in this order. The assessee company has also issued Letters of Intent to various contractors in respect of carrying out work related to its business such as notice to commerce work for construction, operation and maintenance of water pumping station for water supply to GIFT zone, notice to commence work for power supply arrangement for GIFT project and notice to commence work for pipe network for bore-well connection for GIFT project. The assessee has also submitted work completion certificates of these contractors. During the course of assessment year 2012-2013, the assessee company has prepared its profit and loss account for the first time since tis operation disclosing interest document fees, license fees, scrutiny fees and water charges and claimed deduction of various administrative office expenses. Subsequently, the assessee company has also claimed deduction of depreciation by filing revised return of income. The learned CIT(A) has also referred the decision of Saurashtra Cement and chemical Ltd. Vs. CIT of the jurisdictional High Court wherein its is held that the business would commence when the activity which is first in point of time and which necessarily precede the other activity is started. It is dear from the decision of jurisdictional High Court that as soon as activity which is an Page 3 of 5 C/TAXAP/278/2019 JUDGMENT essential activity in the course of carrying on the business or which in other words is a business activity is started the assessee must be held to have commenced the business. The nature of business of the assessee company was to develop various common facilities and the material facts as elaborated in this order substantiate that the business of the assessee company was set up during the year under consideration. We observe that all these evidences clearly demonstrate that the business of the assessee had been set during the year under consideration in the light of he above fact and the detailed findings of the CIT(A), we do not find any error int he decision of the learned CIT(A), therefore, this ground of Appeal of the revenue is dismissed. 4. So far as the second question, as proposed by the Tribunal is concerned, the finding of fact recorded by the Tribunal is as under : \" Regarding claim of depreciation, it is established that the business of the assesseee company was actually commenced in the assessment year 2012-13, therefore, the learned CIT(A) has rightly adjudicated that the assessee company was entitled to claim depreciation on account of plant and machinery which includes office equipment and vehicle, computer, computer software and furniture, fixture used for the purpose of business. Therefore, we do not find any merit in this ground of appeal of the revenue. Accordingly this ground of appeal of the revenue is also dismissed.\" Page 4 of 5 C/TAXAP/278/2019 JUDGMENT 5. Thus, the Tribunal, while concurring with the findings recorded by the CIT(A), has observed that having regard to the materials on record it can be said that the business of assessee had been set up and that the only thing was that the assessee was not able to generate any income out of the same. The CIT(A), as well as the Tribunal, have placed reliance on the decision of this Court in the case of Commissioner of Income Tax Vs Saurashtra Cement And Chemical 1971 (91) ITR 170 Guj. In Saurashtra Cement (supra), this Court, explaining the meaning of \"business\", held that \"business\" connotes a continuous course of activities, which go to make up the business, need not be started simultaneously in order that the business may commence. The business would commence when the activity which is first in point of time and which must necessarily precede all other activities, is started. 6. In the over all view of the matter we see no error not to speak of any error of law, could be said to have been passed by the Tribunal. 7. In the result this Appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) MARY VADAKKAN Page 5 of 5 "