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TMI Blog2018 (3) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. We direct the appellant to file the relevant accounts/documents before the AO. - ITA No. 5081/MUM/2017 - - - Dated:- 26-2-2018 - SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) For The Assessee : Mr. Chetan A. Karia, AR For The Revenue : Mr. M.C. Omi Ningshen, DR ORDER PER N.K. PRADHAN, AM This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-28, Mumbai and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the Act ). 2. The ground raised by the appellant is that the Ld. CIT(A) erred in (i) confirming the action of the Assessing Officer (AO) in reducing the amount of Work-In-Progress (WIP) by ₹ 1,10,02,425/- incurred towards brokerage and (ii) confirming the action of the AO in reducing the amount of WIP by ₹ 7,35,52,483/- being interest incurred on loan borrowed towards the project. 3. Briefly stated, the facts of the case are that the AO found during the course of assessment proceedings that the appellant had debited ₹ 96,93,12,794/- as expenditure on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f brokerage on lease is not one of the qualifying expenditures. Therefore, the Ld. CIT(A) confirmed the disallowance of brokerage done by the AO and also the reduction of the same amount on project completed during the year. 4.1 In respect of the disallowance of interest of ₹ 7,35,52,483/- made by the AO, the Ld. CIT(A) found it strange that the appellant has capitalized cost of asset and again claimed the same as deduction under the head Income from house property . This leads to double deduction has held in the case of Escorts Ltd. v. UOI (1993) 199 ITR 43 (SC). Following the above judgment, the Ld. CIT(A) upheld the order of the AO. 5. Before us, the Ld. counsel of the appellant submits that the assessee is a registered partnership firm. The main activities of the firm are construction and development of properties. During the year under consideration, the appellant had carried on and completed construction of project Knowledge Park . During the year, the appellant had earned lease income from units. It is submitted by him that the appellant had hired certain professionals to sell the units in stock and it had to pay fees to these professionals for the services ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is submitted that the interest paid by the appellant is finance cost for construction of Knowledge Park building and is allowable as deduction from Income from house property and as cost to building also. 6. Per contra, the Ld. DR supports the order of the Ld. CIT(A). In respect of the claim of interest expenses of ₹ 7,35,52,483/- the Ld. DR submits that WIP is an item of business transaction and the AO has computed the WIP with regard to the business transaction of the appellant. Since the expenses have already been claimed u/s 24(b), it cannot be claimed as business expenses subsequently. Therefore, the AO has rightly reduced the amount from the business WIP which will form part of business project costs in future. It is stated by him that the appellant can always account the interest expenses in the cost of acquisition of property for the purpose of capital gains u/s 48 of the Act even if the same is not shown in WIP as proof of such expenses is evident from the fact that it has been claimed u/s 24(b) of the Act. The Ld. DR also distinguishes on facts the decision in Shri C. Ramabrahman (supra) relied on by the Ld. counsel. 7. We have heard the rival submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from house property of ₹ 5,031,349/-, business loss of ₹ 2,909,265/- and interest income of ₹ 97,060/- As evident from the above computation of total income, the appellant derives income not only from house property but also from business. 7.3 Now we discuss the relevant Accounting Standard (AS) issued by the Institute of Chartered Accountants of India, which has persuasive value. As per AS-10, costs of fixed assets to include purchase price, non-refundable duties and taxes and all costs required bringing the fixed assets to its working condition for its intended use. Any change in cost- e.g. refund of duties, Government grant etc. to be adjusted in cost of fixed assets. Subsequent expenditure to be capitalized only if they result in the benefits more than the previously assessed standard of performance. 7.4 As per AS-16, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset (should be capitalized as part of the cost of that asset). Other borrowing costs should be recognized as an expense (i.e. charged off to P L account) in the period in which they are incurred. Capitalization should be done on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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