2013 (11) TMI 1792 - AT - Income Tax

Summary

Issues involved: Appeal against order of Ld. CIT(A)-III Baroda dated 22-02-2010 regarding addition of Rs. 14,13,600 and interest disallowance of Rs. 13,62,808.

Addition of Rs. 14,13,600:
The assessee, engaged in sale/purchase of TDR and construction activity, showed WIP at Rs. 1,99,97,296 without profit, claiming project completion method. AO rejected this, applying 8% profit rate on booking advance of Rs. 1,76,70,003. Ld. CIT(A) deleted the addition based on precedent where it was held that the assessee, a developer, not a contractor, so AS-7 not applicable. Tribunal upheld this, stating AS-9 applies, as no construction activity was carried out. Revenue's appeal dismissed.

Interest disallowance of Rs. 13,62,808:
AO disallowed interest paid to M.C.G.M. and on advances, citing lack of interest charged on loans given. Ld. CIT(A) deleted disallowance, noting no interest paid on loans and no diversion of interest-bearing funds. Tribunal upheld this, as no borrowings with interest payable existed. Revenue's appeal dismissed.