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Order u/s.254(1)of the Income-tax Act,1961(Act) खंडपीठ केकेकेके अनुसार अनुसार PER Bench- खंडपीठ खंडपीठ खंडपीठ अनुसार अनुसार Challenging the orders,dated 30.01.2014 of CIT(A)-22,Mumbai the Assessee has filed appeals for the above mentioned two AY.s.raising various ground of appeal.During the course of hearing before us,the Authorised Representative(AR)stated that only ground no.1 and 7 for the AY. 2006 -07 were to be decided.Hence,rest of the grounds stand dismissed as not pressed.
ITA/2551/Mum/2014-AY.2006-07: Assessee-company,engaged in the business of real estate development,filed its return of income on 27.10.2006,declaring total income at Rs.(-)56.97 lakhs.The Assessing Officer(AO) completed the assessment,u/s.143(3) of the Act,on 29.08.2008,accepting the income filed by it.Vide order dated 28.03.2011,passed u/s.263 of the Act,the CIT directed to make further inquiries. While completing the assessment u/s.143(3)r.w.s 263 of the Act,the AO determined the income of the assessee at Rs.32,230/- and certain additions to its income.
2.Effective ground of appeal filed by the assessee is about commencement of the business during the year under appeal.During the assessment proceedings the AO found that the only income received by the assessee was interest income,amounting to Rs.9.68 lakhs,that it had booked expenses against the said income.The AO observed that no business income was found to be credited to the P&L A/c,that the interest income was not derived from any business activities.He directed the assessee to furnish explanation as to why the expenditure claimed by it should not be treated as pre- operative expenses and why same should not be capitalised.After considering the submissions of the assessee,he held that it was a subsidiary of Hindustan Construction Company Limited (HCCL),that during the year it had entered into agreement with the holding company for developing a plot of land,that it was the only business activity that was undertaken by the 2550-51/Mum/2014-HCCREPL assessee during the year,that till March,2006 no construction or re-development activity could have been commenced.He capitalised the expenses to the extent of Rs.56.92 lakhs with work in progress of Vikhroli Project.He taxed the interest income under the head income from other sources.
3.Aggrieved by the order of AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him detailed submissions were made and stated the Tribunal had while deciding the appeal for the AY.2007-08,sent back the issue to the file of the AO for making certain verification.After considering the assessment order and the arguments of the assessee,he held that no specific submissions were made by the assessee about commencement of the business,that business had not commenced during the year,that the interest earned by the assessee was out of parking surplus fund in the banks,that it was to be treated as pre- commencement income,that the Tribunal had not given clear finding about commencement of the project.
4.Before us,the Authorised Representative(AR)stated that the assessee had entered in to an land development agreement with HCCL on 29.09.2005 to develop a plot at Vikhroli,that it had appointed ICICI Property Services to conduct feasibility report,that on 03.06.2006 an application was made to Municipal Corporation for commencement certificate,that business had stared in the year under appeal,that the Tribunal had (ITA/4224/Mum/2011 dtd.04.01.2013)while adjudicating the appeal for the AY.2007-08 had given a clear finding that the business had already taken place,that while deciding the appeal for the AY.2011-12,the the FAA had allowed the expenditure following the order of the Tribunal of AY.2007-08,that the AO,while passing order u/s.143(3)r.w.s.254,had accepted that business had commenced and allowed the expenditure on similar fact and for the same project,that business would commence from the date of setting up of business and from earning of business income.Departmental Representative(DR)supported the order of the AO and FAA.
5.We have heard the rival submissions and perused the material before us.We find that the assessee had entered in to an agreement with its holding company to develop a plot of land,that the AO and FAA had held that business had not commenced during the year under appeal.We find that the Tribunal had restored back the matter to the file of the AO,while adjudicating the appeal for the AY.2007-08.We would like to reproduce the relevant part of the order and same reads as under: “5. After considering the submission and perusing the material on record, I found that this issue should go back to the file of the AO to examine the same afresh. I noted that no doubt, one project was going on, however, many projects were in pipe line. In is seen that the assessee had entered into various agreement of Urban development and entered into an agreement with the land owner for redevelopment of a prime property in the suburbs of Mumbai to conduct table survey, census of the occupants etc. at Vikroli. For this, various analysis were conducted by ICICI property services. The assessee made an application to Municipal Corporation of Greater Mumbai on 17.6.2006. It was further submitted that out of development expenses of Rs.76 crores, the expenses related to development of industrial park property were carried forward under work in progress in the balance sheet and which were not directly related to the said development activity were charged to profit and loss account. I further found that business was very much in existing and, therefore, it cannot be said that there was no business activity carried out by the assessee . If by any reason in various other proceedings, where working was in pipe line and working could not be started then also the expenses claimed on these activities are to be allowed in accordance with the business activities. Hence, I therefore, restore this issue to the file of the AO to examine afresh after affording opportunity of being heard to the assessee . The AO also verified that software expenses claimed by the assessee are incurred on 2550-51/Mum/2014-HCCREPL development of software or purchasing some parts of software and then will take a view that those expenses are capital in nature or revenue in nature. I order accordingly.” As the facts and circumstance for the year under appeal are identical to the facts of AY.2007-08, so,following the order for that year,we are remanding back the matter to the file of the AO.He is directed to afford a reasonable opportunity of hearing to the assessee before deciding the issue.Ground no.1 is decided in favour of the assessee,in part.