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The Tax Publishers Ascendas IT Park Chennai Ltd. v. Dy. CIT [ITA No. 1256/Mds/2015, dt. 4-5-2016] : 2016 TaxPub(DT) 2237 (Mad-HC) Commencement of business cut off and interest taxation prior to commencement *Facts:* Assessee was in the business of developing and leasing of Hi Tech and IT parks. During the assessment year the assessee had capitalized certain expenditure and offset the interest against the same. The case was reopened in a reassessment the interest was taxed as income from other sources. The assessees plea was that when they acquire the land the project business is said to have commenced, subsequent expenditure to this is revenue expenditure. Since the operations had commenced the expenses post commencement was allowable expenditure and the interest income which arose prior to construction was to be offset against the pre-operative expenses. This was negated by the Commissioner (Appeals). On further appeal: Held against the assessee that the interest was taxable as income from other sources. The main objective of the company is not acquiring of land, that is only one activity thus the said activity alone cannot be construed as business having commenced. To that extent the expenses also cannot be allowed. Tuticorin Alkali Chemicals & Fertilizer Ltd. v. CIT 227 ITR 172 (SC) applied. Note: The investment income did not possibly have any inextricable nexus to the project pre-operative/fund sourcing also the same being of circulating capital considering the nature of the business was possibly why the decision was thus held.

The Tax Publishers

Ascendas IT Park Chennai Ltd. v. Dy. CIT [ITA No. 1256/Mds/2015, dt. 4-5-2016] : 2016 TaxPub(DT) 2237 (Mad-HC)

Commencement of business cut off and interest taxation prior to commencement

Facts:

Assessee was in the business of developing and leasing of Hi Tech and IT parks. During the assessment year the assessee had capitalized certain expenditure and offset the interest against the same. The case was reopened in a reassessment the interest was taxed as income from other sources. The assessees plea was that when they acquire the land the project business is said to have commenced, subsequent expenditure to this is revenue expenditure. Since the operations had commenced the expenses post commencement was allowable expenditure and the interest income which arose prior to construction was to be offset against the pre-operative expenses. This was negated by the Commissioner (Appeals). On further appeal:

Held against the assessee that the interest was taxable as income from other sources. The main objective of the company is not acquiring of land, that is only one activity thus the said activity alone cannot be construed as business having commenced. To that extent the expenses also cannot be allowed.

Tuticorin Alkali Chemicals & Fertilizer Ltd. v. CIT 227 ITR 172 (SC) applied.

Note: The investment income did not possibly have any inextricable nexus to the project pre-operative/fund sourcing also the same being of circulating capital considering the nature of the business was possibly why the decision was thus held.