The assessee company had filed return of income for relevant AY. During the assessment proceedings, AO observed that assessee company was a wholly owned subsidiary of HBT Real Estate Holdings Ltd., Mauritius for the purpose of development and construction of real estate projects in India. It 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 had been also noted that assessee was developing master-planned corporate community called Skyview Corporate Park (SCP) in Gurgaon. The AO further noted that though the assessee had not earned any revenue except interest of Rs. 31,10,952/-, however total project expenses had 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 AO observed that during the relevant year, the only income that was earned by the assessee was interest income and no revenue from business was offered to tax. The AO held that the only business of the assessee was building of one park, and, therefore, all the expenses direct or in direct should be accounted for as capital work in progress. Therefore, the AO disallowed Rs. 1,17,00,751/- as revenue expenses u/s 37(1) of the Act. The CIT(A) allowed the appeal of the assessee. The Revenue filed appeal, before the Tribunal.

Tribunal held that,

++ CIT(A) has given detailed reasons for passing order in favour of assessee. The Delhi High Court also in case of Dhoomketu Builders and Development Pvt. Ltd, 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 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.

(See 2019-TIOL-215-ITAT-DEL)