2007 (12) TMI 473 - AT - Income Tax

Summary

Issues involved: Confirmation of assessed income and interest under section 234B of the IT Act, 1961.

Confirmation of assessed income:
The appeal was filed against the order of the CIT(A) for the assessment year 2003-04. The primary issue was the confirmation of the assessed income at Rs. 4,99,260, opposed to the 'nil' income declared in the return. The assessee, a construction company, had entered into a development agreement with another company for a property in Mumbai. The agreement involved two phases - rehabilitation and sale. The AO added Rs. 4,99,264 to the income of the assessee for interest accrued as per the development agreement, which the CIT(A) confirmed. The assessee contended that due to legal restrictions and non-availability of Floor Space Index (FSI), the project could not be completed, resulting in no interest income materializing. The Tribunal agreed with the assessee, stating that no interest income accrued due to the project's unviability, and directed the deletion of the addition.

Interest under section 234B of the IT Act, 1961:
The issue of interest under section 234B was consequential to the first issue. Since the Tribunal decided in favor of the assessee regarding the confirmed income, the interest under section 234B was also decided in favor of the assessee. Consequently, the appeal of the assessee was allowed.