2013 (1) TMI 964 - AT - Income Tax

Summary

Issues involved: Appeal against CIT(A) order regarding inclusion of expenditure in WIP and treatment of software expenses as capital in nature, and treatment of interest income as income from other sources.

Expenditure in WIP and software expenses: The assessee, engaged in construction business, declared Nil income but was assessed at &8377;1,20,910. The AO disallowed &8377;93,68,007 expenses, including &8377;6,00,355 software expenses, as they were not related to the ongoing project. CIT(A) upheld AO's decision. However, ITAT found that multiple projects were in the pipeline, and expenses related to development of industrial park property were carried forward under WIP. ITAT directed AO to reexamine the issue considering the business activities and nature of software expenses.

Interest income treatment: The AO treated interest income of &8377;1,20,912 as income from other sources, earned on FDR. CIT(A) affirmed this decision. ITAT observed that netting of interest paid and earned was not considered, and there was no independent source of interest income. ITAT ordered reexamination of this issue, suggesting it may be related to WIP.

Conclusion: Ground No.5 was not pressed, and the appeal was allowed in part for statistical purposes. The ITAT directed the AO to reevaluate both issues, emphasizing the need to consider the business activities and nature of expenses.