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TMI Blog2013 (10) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. The learned CIT(A) erred in holding that processing charges are to be allowed as revenue expenditure. 3. Brief facts of the case are that the assessee is engaged in business of real estate, technical consultancy and advisers for construction. For the A.Y. 2007-08, the assessee filed its return of income on 13.9.2007 declaring income of Rs. 99,04,050. The Assessing Officer completed the assessment u/s. 143(3) of Income-tax Act, 1961 determining the total income at Rs. 3,25,39,481. The Assessing Officer while determining this income made the following reasons: (a) Disallowance of expenditure on account of interest - Rs. 2,18,78,331 (b) Disallowance of expenditure on term loan processing charges - Rs. 7,56,500 4. The assessee availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Mandal, near Hyderabad and which has been shown as fixed asset in Schedule VI of the Balance Sheet. Being so, the interest on borrowings used for the purpose of acquisition of fixed asset is to be considered as cost of fixed assets in view of the insertion of the proviso to section 36(1)(iii) of the Act w.e.f. 1.4.2004. Regarding the disallowance of processing charges on the loan taken, he submitted th same arguments. 7. The learned AR submitted that the assessee company, M/s. Nivee Property Developers (P) Ltd., is engaged in the business of construction and development of buildings and residential apartments. During the year under consideration, the assessee company had filed its return of income declaring total income of Rs. 99,04,650/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent by no due certificate issued by HDFC Limited. (b) The loan from the HDFC Limited for the amount of Rs. 25.00 Crores was repaid by August 2009 as evident by no due certificate issued by HDFC Limited. 9. The AR further submitted that the assessee-company had repaid the above said loans from its business proceedings and the company had following sales turnover and profit for the financial year 2006-07, 2007-08, 2008-09 & 2009-10. Financial year Total Turnover 2006-07 13,56,24,641 2007-08 19,75,11,886 2008-09 17,80,91,646 2009-10 5,24,24,784 10. We have heard both the parties and perused the material on record. In this case, the assessee availed loan of Rs. 7.5 crores from HDFC Bank which was used for the purpose of constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan has been availed by the assessee for the purpose of construction of the project. In other words, it is for working of the assessee company and it cannot be said that the loan was availed for the purpose of acquisition of land. Even otherwise, if the loan amount used for the purpose of its project, it cannot be said that the assessee used the fund for acquisition of fixed asset. The land on which the assessee is constructing the building is to be treated as business asset of the assessee company. Being so, in our opinion, the CIT(A) is justified in allowing the claim of the assessee towards the interest and processing charges incurred on loan. The proviso to section 36(1)(iii) cannot be applied to the facts of the present case. We ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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