1 ITA No.3289/Del/2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `C' NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 3289/DEL/2018 ( A.Y 2012-13)
DCIT Vs HMS Real Estate Pvt. Ltd.
Circle- 11(1) 1 AD, Vandhana Building ,
New Delhi 11, Tolstoy Marg,
(APPELLANT) New Delhi AACCH0745G
(RESPONDENT)
Appellant by Sh. Amit Kutoch, SR. DR
Respondent by Sh. Salil Aggarwal, Sr. Adv,
Sh. R. P. Mall, Adv
Date of Hearing 17.12.2018
Date of Pronouncement 27.12.2018
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue against the order 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 Act 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 relevant 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 incorporated on 12/6/2008 as a
wholly owned subsidiary of HBT Real Estate Holdings Ltd., Mauritius for the
2 ITA No.3289/Del/2018
purpose of development and construction of real estate projects in India. It has
been stated that the assessee had entered into a Memorandum of
Understanding with Shyam Communications System for the purpose of
building a project, Skyview Corporate Park (SCP) located on NH-8, New Delhi.
It has been also noted that appellant is developing master-planned corporate
community called Skyview Corporate Park (SCP) in Sector 74A, NH-8,
Gurgaon, Phase I of the development which contains two identical commercial
building of nine floors. In its entirety, the 21 acre Skyview Corporate Park will
comprise of 4 additional towers with a total commercial area of over 1.9 million
square feet. The Assessing Officer further noted that though the assessee has
not earned any revenue except interest of Rs. 31,10,952/-, however total
project expenses have been capitalized to capital WIP 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 also capitalized to capital
WIP. The assessee filed reply, the Assessing Officer 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 from business was offered to
tax. The Assessing Officer held that the only business of the assessee is
building of one park, and, therefore, all the expenses 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 expenses u/s 37(1) of the Act.
5. Being aggrieved by the assessment order, the assessee filed appeal before
the CIT(A). The CIT(A) allowed the appeal of the assessee. 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 of Developing and Building
Sky View Corporate Park in Gurgaon, as these expenses directly related to the
project and was not capitalized. The Assessing Officer 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 directly related to the case of the
assessee. The Ld. DR relied upon the decision of the Hon'ble 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 Hon'ble Calcutta High Court
being 385 ITR 404.
7. The Ld. AR submitted that the assessee company was incorporated on
12.06.2008 and is a wholly owned subsidiary of HBT Real Estate Holdings Ltd.,
Mauritius. The aforesaid company had been incorporated for the purpose of
development and construction of Real Estate Projects 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 pointed out that it had incurred
certain expenditure and claimed the same as business loss (for AY 2011-12)
and carried forward the same to be set off, which business loss was accepted.
HMS REAL ESTATE PRIVAE LIMITED
Assessment Expenditure Treatment by
incurred and expenditur Treatment by
Year debited to the e incurred assessee the AO
Profit & Loss being cost
A/c of the
project
2009-10 22,98,897 1,631, 63, Not claimed as Position
,60,75,339 revenue expenditure adopted by
while computing assessee not
taxable income challenged by
AO
4 ITA No.3289/Del/2018
2010-11 43,72,284 32,32,92,65,75 Not claimed as Posi
6 revenue expenditure tion adopted by
while computing assessee not
taxable income challenged by
AO
2011-12 1,28,07,638 9,39,39,12,933 Claimed as revenue P Position
expenditure while adopted by
computing taxable assessee not
income 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 capitalized. 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 disallowed by the AO without
appreciating that the business had been set up, when the assessee had
5 ITA No.3289/Del/2018
entered into a joint development agreement. The aforesaid agreement had been
entered into between the assessee and M/s Shyam Communication 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 that the business had
commenced soon the aforesaid agreement had been entered into. The High
Court of Delhi in the case of CIT vs. Dhoomketu Builders and Development Pvt.
Ltd. reported in 368 ITR 680, in para 9 has held as under:
"The Tribunal has observed that having regard to the 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. If the assessee is in a
position to commence business that means the business has been set
up. The acts of applying for participation in the tender, the borrowing of
monies for interest from the holding company, the deposit of the
borrowed monies on the same day with NGEF Ltd. as earnest money
were all Acts which clearly establish that the business had been set up.
The commencement of real estate business would normally start with the
acquisition of land or immovable property. When an assessee whose
business it is to develop real estates, 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, that 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 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 Act does not speak of
commencement of the business, it speaks only of setting up of the
business. When the assessee, in the present case, was in a position to
apply for the tender, borrowed money for interest albeit from its holding
company and deposited the same with NGEF Ltd. on the same day, it
shows that the assessee's business had been set up and it was ready to
commence business. The learned senior standing counsel for the
Revenue would, however, state that till the land is acquired, the business
is not set up. The difficulty in accepting the argument 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 that 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 unacceptable position. The
other argument of the learned standing counsel for the Revenue that the
tax auditors of the assessee have themselves pointed out that the
assessee is yet to commence its business is also irrelevant because of the
distinction between the commencement of the business 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 admitted by the Assessing
Officer. However, the assessee had claimed the expenditure from the AY
2011-12 after it had fully commenced the business though it had set up the
business in the FY 2008-09 i.e. AY 2009-10. Thus, the Ld. AR submitted that
the CIT(A) has rightly allowed the appeal of the assessee.
8. We have heard both the parties and perused all the relevant material
available on record. The CIT(A) held as under:-
" Examination of the issue & Decision:-
I have considered the submissions made by the appellant and perused the
order of assessment and evidence placed on record. The undisputed facts are
that appellant was a company which has been incorporated under the
Companies Act, 1956 to inter-alia carry out development works as builders,
owners, lesser, managers, contractors etc. in respect of all kinds of building
whether residential, commercial houses etc. The appellant 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 of 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 assessment year, the
appellant furnished a return of income declaring loss of Rs. 69,06,799/- in
the following manner:-
Sr. Particulars Amount (Rs.)
No.
1 Interest income under the head `income 31,10,952
from other sources'
2 Less: expenditure claimed under the head 100,17,751
profits and gains from business or
profession
3 Net loss claimed 69,06,799
6.1 The Assessing Officer has denied the above claim of expenditure of
Rs.1,00,17,751/- by holding that the expenditure should have been
capitalized to the capital work in progress. It has been concluded by the AO
that since only business of the assessee is building of above mentioned
corporate park and therefore, all the expenses whether 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 expenses which were
incurred entirely for the purpose of running the general administration of the
business of the company have been debited to P&L account 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 has followed AS-10 issued by
ICAI in preparing its financial statements.
6.3 It is observed that the genuineness of the expenditure has not been
disputed and break-up of the expenditure incurred is as under:-
Nature of Amoun Remarks
expenses t
Rent 27,24, Th The said expenditure pertains to rent paid
for space occupied for setting up the
782 marketing centre of the company. The
company had taken an office space located
at 701, 7th 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 412.64 Th The said expenditure was incurred by the
assessee in relation to repair and
maintenance 1 maintenances carried out in marketing
centre including electricity and other
Others
maintenance expenses.
The said expenses not being directly
relatable to the project was debited to
profit and loss account.
The said expenditure was incurred by
Legal and 600,23 the assessee for seeking assistance from
professionals on various matters such as
professional 8
fee paid for filing of income tax return,
obtaining transfer pricing certificate and
9 ITA No.3289/Del/2018
other tax related queries. The said
fess expense not being directly relatable to
the project was debited to profit and loss
account.
Marketing 39,38, Th The said expenditure was incurred by the
assessee in relation to printing of
expenses 439 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 562,32 Th The said expenditure was incurred by the
assessee in relation to statutory audit
auditors 0 carried for the subject year.
The said expense not being directly
relatable to the project was debited to
profit and loss account.
Depreciation 16,95, Depreciation as per Income tax Act.
and 632
amortization
expenses
(Allowable u/s
32 of the Act.
Thi This includes foreign exchange loss of 1 NR
Finance Costs 257,37 2367,714 and interest expense of 19,665
charged by bank.
9
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 capitalized in the instant year.
10 ITA No.3289/Del/2018
The issue therefore, arises is whether such expenditure as incurred and
claimed, genuineness of which is not in dispute is eligible for deduction as
revenue expenditure. The basis adopted by the Assessing Officer that there is
no income in the instant year is not relevant test for determining the
allowability of expenditure claimed by the appellant company. The Apex Court
in the case of CIT(A) vs. Rajendra Prasad Mody reported in 115 ITR 519 has
held as under:
"What s. 57(iii) requires is that the expenditure must be laid out or
expended wholly and exclusively for the purpose of making or earning
income. It is the purpose of the expenditure that is relevant in
determining the applicability of s. 57(iii) and that purpose must be
making or earning of income. S. 57(iii) does not require that this purpose
must be fulfilled in order to qualify the expenditure for deduction. It does
not say that the expenditure shall be deductible only if any income is
made or earned. There is in fact nothing in the language 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 shape 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 section, 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 identical 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 same terms as s. 57(iii),
Bose J., speaking on behalf of the court, observed:
"It is not necessary to show that the expenditure was a profitable one or
that in fact any profit was earned."
It is indeed difficult to see how, after this observation of the court, there
can be any scope for controversy in regard to the interpretation of s.
57(iii).
11 ITA No.3289/Del/2018
It is also interesting to note that, according to the revenue, the
expenditure would disqualify for deduction only if no income results
from such expenditure in a particular assessment year, but if there is
some income, howsoever small or meager, the expenditure would be
eligible for deduction. This means that in a case where 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 income, 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 indeed be a strange
and highly anomalous result and it is difficult to believe that the
legislature could have ever intended to produce such 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 an outgoing and
income would be credited as a receipt and the resulting 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. And the ultimate
income or loss would be found. We fail to appreciate how expenditure
which is otherwise a proper expenditure can cease to 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 requirement of proper
accounting and the interpretation of s. 57(iii) cannot be different. The
deduction of the expenditure cannot, in the circumstances, be held to
be conditional upon the making or earning of the income.
It is true that the language of s. 37(1) is a little wider than that of s.
57(iii), but we do not see how that can make any difference 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 phraseology 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 constricted meaning not
warranted by the language of the section and, in fact, 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-remunerative is none
the less a proper deduction, if wholly and exclusively made for the
purposes of the trade. It does not require the presence 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/2014, the facts of the
case were that a company was engaged in the business 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 claimed as expenses in the
profit and loss account being administrative expenses and not directly related
to the project. It was submitted by the taxpayer that such expenses were
required to be incurred even if no project was going 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 under:
"All the expenses directly attributable to the project were charged to the
construction work in progress account and only those administrative
expenses which were necessary for maintenance of basic 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 activity 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 Assessing Officer to allow
the office rent also along with audit fees and filing fee and compute the
income accordingly. In the result, the assessee's appeal is allowed."
13 ITA No.3289/Del/2018
6.6 Similar view has been expressed in the case of Arkaaye Builders &
Development (P) Ltd. vs. ITO in ITA No. 3552/Del/2011. The facts of the case
are that assessee was engaged in the business of buying, selling, acquiring,
constructing, re-constructing, and developing land, building etc. along with
trading, import, export, growing, developing and farming 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 business activity was earned
by the assessee during the year. While passing the order, the assessing
officer held that there is no business activity carried out by the assessee and
hence disallowed the administrative expenses and depreciation claimed by
the assessee should be disallowed. The same view was upheld by the CIT(A)
and he agreed that the disallowance of depreciation and administrative
expense is justified. The Tribunal decided in Favour of the appellant holding
that only business income can prove the existence of 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 business. 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 criteria to prove that the
business activities are there. But concurrence of expenses 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 collaboration agreement in
14 ITA No.3289/Del/2018
assessment year 2009-10 and therefore, setting up of 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 income, project being
incomplete, general expense are disallowable is contrary to well settled legal
principles. It is the setting up of business which is relevant for allowing
expenses and not the actual commencement of business. The business of the
appellant is to earn rental income from commercial mall and construction of
mall is essential for that. I find that construction was in full swing which is
evident by the fact that capital work in progress as 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 completed by the group outside
India, to market its product though audio visual media and other such
activities. Under such factual matrix, it is not possible 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 the construction activity have
been claimed as revenue expenses by the assessee. In our view the assessee
has set up its business and the expenditure on revenue account has to be
allowed and was rightly allowed by the first appellate authority. It is well
settled that expenditure has to be allowed on setting up of the business and
they might be a gap between the date on which the business 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 previous year,
prior to the commencement of the business but after the setting up of its
business, which two dates need not be the same, would be deductible as
revenue expenses. In this case, while making distinction between the setting
up and commencement of a business the Hon'ble Court has relied upon the
Bombay High Court in Western India Vegetables Products Ltd. In this case,
the Bombay High Court, which was in this case dealing with the
corresponding provision of the Indian Income-tax Act, 1922, then explained
the distinction between the concepts of 'commencement' and 'setting up' of a
business :
". . . It seems to us, that the expression 'setting up' means, as is defined in
the Oxford English Dictionary, 'to place on foot' or '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 which is commenced
and all expenses incurred after the setting up of the business and before
the commencement of the business, all expenses during the interregnum
would be permissible deductions under section 10(2). . . ."
6.11. In the case of Sarabhai Management Corpn. Ltd. [1976] 102 ITR 25
(Guj.), the Hon'ble Gujarat High Court has held that the business commences
with the first activity for acquiring by purchase or otherwise immovable
property. There may be an interval between the setting 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 the case of Sarabhai
Management Corpn. Ltd. (supra) has been affirmed by the Hon'ble Supreme
Court in the case of CIT v. Sarabhai Management Corpn. Ltd. [1991] 192 ITR
151, where the Hon'ble Supreme Court went a step ahead that even the
activities at a preparatory stage are also admissible. It is well settled that all
the expenses incurred after the business had been set up are allowable as
business deduction under section 37 of the Act. There may be interval
between the setting up of the business and the actual commencement of the
business but all the expenses incurred during the interval of setting up of the
business and the commencement of the business are also permissible for
deduction as so held in the above referred decisions.
6. 13. Thus, it is clear that it is now well settled law that, once business is
set up expenditure is allowable as business expenditure, as has also been
held by another judgment of Jurisdictional High Court in the case of CIT vs.
Dhoomketu Builders & Development Pvt. Ltd. 216Taxmann 76.
6.14. As discussed above, there remains no doubt that the appellant's
business was set up and the year under assessment falls in the interval
between the setting up of business and commencement of business and
following the principles established by above discussed judicial decisions on
the issue, I am of the view that in the facts and circumstances of the case,
AO's order disallowing expenditure of Rs.1,00,17,151/- claimed as revenue
expenditure and capitalizing the same to CWIP is not justified. The said
expenditure is held to be allowable as business expenditure u/s 37 of the Act
and accordingly, addition of Rs.1,00,17,751/- is deleted. Grounds raised in
this regard are therefore allowed.
The CIT(A) has given detailed reasons and the case laws referred by the
Ld. DR do not apply in the present case as the facts of those cases are
different and the ratio laid down is also not applicable in the present
17 ITA No.3289/Del/2018
circumstances. Besides that the Hon'ble 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 estates, 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, that 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 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 Act does not speak of commencement of the
business, it speaks only of setting up of the business. The ratio laid down in
Dhoomketu Builders and Development (supra) is squarely applicable in the
present case. Thus, there is no need to interfere with the findings of the CIT(A).
Hence, appeal of the Revenue is dismissed.
8. In result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 27th 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 17.12.2018
dictating Member
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. 27.12.2018
PS/PS
Date on which the final order is uploaded on the 27.12.2018
website of ITAT
Date on which the file goes to the Bench Clerk 27.12.2018
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
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