9911796707
TMI Blog2019 (11) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... n confirming the version of the Assessing Officer that your appellant is having project in hand. 2. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer for treating the whole interest income of Rs. 26,37,87,842/ - as income of your appellant and without giving any deduction of the expenses incurred by your appellant for earning said interest . 3. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in capitalizing the whole expenditure as part of work-in-progress in spite of the fact that your appellant has no project in its hand and no expenditure which is required to be incurred for carrying out construction activities have been incurred till the date of filing of this appeal . 4. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in treating the entire interest income as income from other sources instead of income from business. 5. That the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tgage loan of Rs. 184 crores (spread over the period 07.02.2011 to 11.02.2011) from M/s Dewan Housing Finance Limited (for short 'DHFL'). As is prima facie discernible from the records, the aforesaid loan was raised by the assessee for a redevelopment project viz. project at Vile Parle, Premnagar CHS (Prop) located at Irla Tank Plot, S.V. Road, Vile Parle (West), Mumbai - 400 058. The loan was raised from DHFL against hypothecation of the aforesaid project property, which as stated by the assessee is owned by M/s Sigtia Construction Pvt. Ltd. Out of the loan of Rs. 184 crores raised by the assessee from DHFL, an amount aggregating to Rs. 183,81,00,000/- was advanced to two of its associate concerns viz. (i) M/s Sahana Construction Pvt. Ltd : Rs. 179,81,00,000/- ; and (ii) M/s Sigtia Construction Pvt. Ltd. : Rs. 4,00,00,000/-. As per the 'balance sheet' for the year ended 31.03.2011 the amount receivable by the assessee from the aforementioned two associate concerns was reflected in its 'books of accounts', as under:- S.No. Loans and Advances to Related parties Amount 1. M/s Sahana Construction Pvt. Ltd. Rs. 183,64,70,757/- (Dr.) 2. M/s Sigtia Construction Pvt. Ltd. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced to the aforesaid two concerns viz. (i). M/s Sahana Construction Pvt. Ltd. : Rs. 4,26,34,175/-; and (ii). M/s Sigtia Construction Pvt. Ltd. : Rs. 9,17,918/- The assessee after 'setting off' the interest of Rs. 4,14,20,434/- that was paid to DHFL against the interest income of Rs. 4,35,52,093/- had filed its return of income for A.Y. 2011-12, declaring its total income at Rs. 64,355/- under the head "Income from business". Return of income filed by the assessee was summarily accepted, vide intimation under Sec. 143(1), dated 07.01.2012. 4(i) Further, the assessee during the year under consideration i.e A.Y. 2012-13 had on 13.10.2011 also entered into a MOU with its another associate concern i.e. M/s Sahana Builders and Developers Pvt. Ltd. for jointly commencing construction of the latters SRA project at Sewree, Mumbai. As per the terms of the MOU, the associate concern i.e.M/s Sahana Builders and Developers Pvt. Ltd. was to obtain all permissions including the commencement certificate from the appropriate authorities before 30.06.2012. As is discernible from the MOU, after the aforesaid associate concern would obtain all permissions including the commencement certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards its capital asset commitment to M/s Sahana Builders and Developers Pvt. Ltd. and M/s Sigtia Construction Pvt. Ltd. was capitalized. Insofar the balance interest of Rs. 26,13,39,983/- was concerned, the same was claimed by the assessee as an expenditure against the interest income of Rs. 26,37,87,842/- that was received on the aforesaid interest bearing loans which were advanced to its various associate concerns. Accordingly, the assessee after claiming "set off" of the interest expenditure of Rs. 26,13,39,383/- and certain 'other expenses' of Rs. 17,23,648/- and amortization expense of Rs. 1,640/- as against the interest income of Rs. 26,37,87,842/-, had filed its return of income for A.Y. 2012-13 on 30.09.2012, declaring an income of Rs. 23,68,010/- under the head "Income from business". 5. During the course of the assessment proceedings it was observed by the A.O, that the assessee had credited the interest income of Rs. 26,37,87,842/- in its profit and loss account for the year under consideration. It was observed by the A.O that out of the loan of Rs. 184 crores that was raised by the assessee from DHFL an amount of Rs. 94,12,62,248/- was advanced against capital asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Sec. 36(1)(iii) of the Act, only upon starting of the business, and till such date it was to be capitalized as a pre-operative expense. Accordingly, the A.O called upon the assessee to explain as to why the interest income of Rs. 26,37,87,842/- may not be treated as its income from 'other sources' and the expenses including interest expenditure aggregating to an amount of Rs. 30,64,74,215/- be not treated as pre-operative expenses, and the 'set off' of the same be denied in accordance with the scheme of taxation provided by the Act. In reply, it was submitted by the assessee that it did not have any projects in hand till date and had only entered into agreements with two parties viz. (i) M/s Sigtia Construction Pvt. Ltd.; and (ii) M/s Sahana Builders and Developers Pvt. Ltd. for future projects which were also subsequently cancelled. It was further brought to the notice of the A.O, that the interest paid on the amount which was advanced to the aforementioned two parties was already capitalized. It was the claim of the assessee, that as the interest received was a part of its business, hence the same was to be treated as its 'business income' and the corresponding interest paid wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus taxable under the residuary head i.e. income from 'other sources'; (vi) that, the interest expenditure and other expenses aggregating to Rs. 26,30,65,271/- were business expenses which were required to be capitalized as pre-operative expenses till the income starts coming from the project; (vii) that, as the business of the assessee had yet not started, therefore, there could be no computation of business income or loss in the hands of the assessee during the year under consideration; (viii) that, interest earned by an assessee before production or commencement would be assessed separately under the head income from 'other sources'; (ix) that, as the case of the assessee for the immediately preceding year i.e. A.Y. 2011-12 was not subjected to scrutiny assessment, hence its claim that in the said year the "set off" of interest expenditure against the interest income was allowed had no weightage and did not merit acceptance; and (x) that, the alternative claim of the assessee for deduction of the interest expenditure under Sec. 57(iii) could not be accepted, as the same pertained to a loan which having been raised for a business purpose could only be allowed as a deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee from DHFL was not utilized for its business purpose, hence the interest paid on such loan was rightly held by the A.O as not deductible under Sec. 36(1)(iii). Further, it was observed by the CIT(A), that as the assessee had not commenced the construction activity during the year, therefore, till the completion of the project, may be partially, the interest paid could not be held as deductible under Sec. 36(1)(iii). In fact, it was observed by him, that as the assessee had not made the interest payment on capital borrowing for the purpose of its business, therefore, the interest paid on the same would not be deductible under Sec. 36(1)(iii). Further, it was observed by the CIT(A), that as per the proviso to Sec. 36(1)(iii) as the interest paid in respect of capital borrowed for acquiring an asset, whether capitalized in 'books of account' or not, was not to be allowed as a deduction for the period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, therefore, the interest on the loan of Rs. 184 crores borrowed by the assessee from DHFL for undertaking the construction activities would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany to another, which included the interest bearing loans given and also non-interest bearing loans/advances/capital advances, therefore, the interest paid on the loan raised by the assessee from DHFL could not be held as having a nexus with the loans/advances on which interest income had been earned. It was observed by the CIT(A), that the interest of Rs. 26,13,39,983/- paid by the assessee to DHFL could not be held as laid out or expended for the purpose of earning the interest income. Further, it was observed by the CIT(A), that though the assessee had claimed to have capitalized interest of Rs. 4.34 crores which was around 4.61% per annum on the amount of Rs. 94.12 crores that was given by the assessee to two of its associate concerns towards capital commitment, however, the interest that was paid on the loan raised from DHFL was @ 16.25% per annum. Accordingly, it was observed by the CIT(A), that the disparity in the interest that was capitalized and that which was paid by the assessee to DHFL revealed that the assessee had also not correctly capitalized the interest expenditure in its 'books of accounts'. It was also observed by the CIT(A), that as the assessee had not fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted by the Ld. A.R,that total income of the assessee company was from the interest received on the amounts advanced to its associate concerns. Apart there from, it was submitted by the ld. A.R that 90 percent of the assets of the assessee company were advanced as loans and advances to the associate concerns. The Ld. A.R in order to fortify his claim that the redevelopment project at Vile Parle, Prem Nagar CHS (prop) for which loan was raised by the assessee from DHFL against the hypothecation of the project property belonged to its associate concern i.e. M/s Sigtia Construction Pvt. Ltd., had drawn our attention to the loan application form that was filed with DHFL (Page 10 of APB). Further, the Ld. A.R also drew our attention towards the respective "affidavits" of Sh. Dinesh Naik, director of the assessee company (Page 33 of APB) and that of Sh. Shiv Kumar Singh, director of M/s Sigtia Construction Pvt. Ltd. (Page 36 of APB), wherein the said respective persons had duly deposed that M/s Sigtia Construction Pvt. Ltd. was the developer of the aforesaid redevelopment project at Vile Parle, Prem Nagar CHS (prop), and the assessee company had neither carried out any project sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he realm of its business activities. In support of his aforesaid contention the Ld. A.R relied on the order of the ITAT, Mumbai, "C" Bench in the case Preimus Investments and Finance Ltd. Vs. DCIT-3(2), Mumbai (ITA No. 4879/Mum/2012, dated 13.05.2015). The Ld. A.R further drawing support from the order of the ITAT, Bengaluru "B" Bench in the case of ITO Vs. Bank Note Paper Mill India (P) Ltd. (2016) 56 ITR (Trib) 266 (Bang) submitted, that the Tribunal relying on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC) and CIT Vs. Karnal Co-operative Sugar Mills Ltd. (2000) 243 ITR 2 (SC), had observed, that as the interest income earned by the assessee by temporarily parking the share capital meant for meeting the capital expenses in bank deposits was inextricably linked to its capital expenditure, therefore, it was proper to reduce such income from the pre-operative expenses rather than treating it as an item of revenue. The Ld. A.R drawing support from the aforesaid judicial pronouncements submitted, that in case the redevelopment project at Vile Parle, Prem Nagar CHS (prop) was to be held as the project of the assessee, then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome earned on such bank deposits or amounts given by way of temporary loans for the time being the same were not required for construction purpose would be the business income of the assessee and cannot be assessed as its income from other sources. The Ld. A.R also relied on the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. PHIL Corporation Ltd. & Anr (2011) 202 Taxman 368 (Bom). It was submitted by the Ld. A.R that in the aforesaid case the interest paid on the overdraft account in respect of the funds which were utilized for making investment in shares of a subsidiary company to acquire control over the said subsidiary was held as allowable under Sec. 36(1)(iii) of the Act. It was submitted by the Ld. A.R, that now when 100 percent of the income of the assessee company was from the interest received on the loans and advances given to its associate concerns and 90 percent of the total funds had been ploughed in such advancing of interest bearing loans, therefore, it could safely be concluded that the assessee was involved in money lending business. In support of his aforesaid contention the Ld. A.R relied on the judgment of the Hon'ble High Court of Bombay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Ld. D.R that as the business of the assessee had yet not commenced during the year under consideration, therefore, the lower authorities had rightly concluded that the claim for deduction of interest of Rs. 26,13,39,983/- paid by the assessee to DHFL and its associate concern viz. M/s Skylark Buildcom Pvt. Ltd. was not allowable as a deduction under Sec. 36(1)(iii). The Ld. D.R relied on the orders of the lower authorities. The Ld. D.R further relied on the judgment of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (1997) 227 ITR 172 (SC). It was submitted by the Ld. D.R, that in the absence of a direct nexus between the interest received and the amounts borrowed by the assessee from DHFL, it was rightly held by the lower authorities that the assessee would also not be eligible for claim of deduction of the interest paid on the aforesaid loans under Sec. 57(iii) of the Act. 11. The Ld. A.R rebutting the contentions advanced by the counsel for the revenue submitted, that as the paid up capital of the assessee company was only Rs. 1 lac, and the only source of funds were the "borrowed funds" that were raised from DHFL and its asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate concerns was to be assessed under the head 'income from other sources', then whether the assessee was eligible for claim of deduction of the interest paid to DHFL and its associate concern on such borrowed funds which were invested with its associate concerns under Sec. 57(iii) of the Act. 13. As is discernible from the 'Memorandum of Association' (for short 'MOA'), the assessee company was incorporated on 11.01.2010. The main object of the assessee company was to carry on the business of a builder, developer and trading in residential, commercial and industrial properties in India and abroad. As can be gathered from the records, the assessee had not set up its business either during the year under consideration or in the subsequent years as are there before us. We shall first deal with the contentions of the ld. A.R on the basis of which he had tried to impress upon us that the assessee had commenced its business during the year under consideration. It is averred by the ld. A.R that as the assessee in pursuance of its 'Objects' had provided interest bearing loans to its associate concerns, therefore, it can safely be concluded that it had commenced its business during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing of money, it could safely be concluded that the substantial part of the assesses business consisted of money lending business. In sum and substance, it is the claim of the ld. A.R that pursuant to assessing of the 'Interest income' as the assesse's income from the business of 'money lending', the 'interest paid' on the borrowed funds would be allowed as a business expenditure in its hands. We are unable to persuade ourselves to subscribe to the aforesaid claim of the ld. A.R. As observed by us hereinabove, now when the assessee had not yet commenced its business of a builder, developer and trading in residential, commercial and industrial properties, as provided in its main object, therefore, its claim that the business of the assessee was to be taken as having been commenced, for the reason, that it had embarked upon certain incidental objects on a standalone basis de hors its main object, does not merit acceptance. Insofar the aforesaid judicial pronouncements relied upon by the ld. A.R are concerned, we find, that the same are distinguishable on facts. As is discernible from a perusal of the respective judicial pronouncements, those were rendered in respect of concerns whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '; and (ii) that, as the business of the assessee had not commenced, therefore, the interest paid by the assessee to DHFL and M/s Skylark Buildcon Private Limited would not be eligible for claim of deduction under Sec. 36(1)(iii) of the Act. As the business of the assessee had not commenced during the year, therefore, in our considered view the interest income received by the assessee from its associate concerns has rightly been held to be liable to be assessed under the head 'other sources'. Before adverting any further and answering the second issue, we may herein observe that certain issues having a strong bearing on the adjudication of the same would require to be addressed first. As is discernible from the orders of the lower authorities, they had proceeded with an observation that the assessee had raised the loan from DHFL for its project viz. redevelopment of Vile Parle, Premnagar CHS Ltd. (proposed) at Irla Tank plot, S.V Road, Vile Parle (West), Mumbai. In fact, we find, that in the course of the assessment proceedings the A.O had u/s 133(6) procured the "loan application form" from DHFL. On a perusal of the loan application form, it was observed by the A.O that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In order to substantiate his aforesaid claim, the ld. A.R had drawn our attention to Page 259 - 299 of the assesses 'Paper book' (for short 'APB') i.e a letter dated 01.07.2015 that was addressed by the assessee to the CIT(A).The ld. A.R took us through the relevant extract of the aforesaid letter at Page 260 of the 'APB', wherein the aforesaid fact was categorically stated by the assessee. Also, the ld. A.R had taken us through a letter dated 04.01.2016 that was filed with the CIT(A) (Page 300-301 of 'APB') wherein the aforesaid fact was reiterated. Ld. A.R had also drawn our attention to a similar claim that was raised by the assessee vide its letters/submissions filed before the A.O and the CIT(A) in the course of the respective proceedings for A.Y 2013-14 to A.Y 2015-16 before them. We also find that in order to substantiate the fact viz. (i). that, M/s Sigtia Construction Pvt. Ltd. was the developer of the aforesaid redevelopment project at Vile Parle, Prem Nagar CHS (prop); and (ii). that, that the assessee company had neither carried out any project since its incorporation, an "affidavit" of Sh. Dinesh Naik, director of the assessee company, dated 17.11.2017 (Page 254 of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no interest in the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) cannot be summarily accepted and would require to be verified by the A.O. At this stage, we may herein observe, that though the aforesaid claim of the assessee was raised before the lower authorities, however, they had failed to address the issue in the right perspective. As observed by us hereinabove, the A.O after procuring the "loan application form" from DHFL u/s 133(6) of the Act, had observed, that the assessee applicant had applied for a loan of Rs. 184 crores at an interest rate of 16.25% per annum for their project i.e, redevelopment of Vile Parle Prem Nagar CHS Ltd.(proposed) at Irla Tank Plot, S.V Road, Vile Parle (west), Mumbai - 400 058. Also, the CIT(A) in his order had endorsed the view taken by the A.O and had observed that the loan was obtained for the project of the appellant comprising redevelopment project at Vile Parle, Mumbai. In fact, the CIT(A) while declining to accept the claim of the assessee that it had not acquired any asset, had observed, that the said claim was not acceptable since the asset can be in form of tangible and intangible nature and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing heavy chemicals, had for the purpose of setting up its factories taken certain loans from various banks and financial institutions. Some part of the surplus funds (out of the borrowed funds) which were not immediately required by the company were invested in short term deposits with banks. Interest amounting to Rs. 2,92,440/- was received by the assesse on the deposits lying with the bank. As the company had incurred a sum of Rs. 1,13,06,068/- as and by way of interest and finance charges, the same were capitalised along with other pre-production expenses. It was the claim of the assessee that the interest income (on bank deposits) of Rs. 2,92,440/- should go to reduce the pre-production expenses (including interest and finance charges). It is in the backdrop of the aforesaid facts that the Hon'ble Apex Court had observed viz. (i). that, the question of adjustment of interest payable by the company against the interest earned by it will depend upon the provisions of the Act; (ii). that, the expenditure would have been deductible as incurred for the purpose of business if the assesses business had commenced, which however was not so in the case before them; (iii). that, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy as to whether the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) belongs to M/s Sigitia Construction Pvt. Ltd., or to the assessee. In order to make necessary verifications the A.O shall call for the records of the assessee and M/s Sigitia Construction Pvt. Ltd. Also, necessary verifications may be carried out by the A.O from DHFL; Slum Rehabilitation Authority, Mumbai; Municipal Authority of Greater Mumbai etc.. Apart therefrom, the A.O in the course of the 'set aside' proceedings would remain at a liberty to make any such other verifications as he may deem fit. 19. We shall now advert to the observations of the lower authorities as regards the maintainability of the alternative claim of the assessee, that in case the 'Interest received' from the associate concerns was to assessed as its income under the head "Other sources", then deduction of the interest paid to DHFL and its associate concern viz. M/s Skylark Buildcon Pvt. Ltd., on the interest bearing funds borrowed from them was to be allowed as a deduction under Sec. 57(iii) of the Act. To sum up, it is the claim of the assessee that the 'Interest paid' on the borrowed funds has to be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,94,65,000/- and was capitalized in its 'books of accounts' worked out to 4.61% p.a, whereas the amount was borrowed by the assessee from DHFL at 16.25% p.a. On the basis of his aforesaid observations, it was concluded by the CIT(A) that the assessee had suppressed the amount of interest relatable to the amount given to its associate concerns towards its capital asset commitment. 20. We have given a thoughtful consideration to the issue pertaining to the entitlement of the assessee towards its alternative claim of deduction of 'Interest paid' to DHFL and its associate concern viz. M/s Skylark Buildcom Pvt. Ltd. as against the 'Interest received' on the amounts advanced to its associate concerns. For a fair appreciation of our observations, the same are being segregated into two parts, as under: (A). SITUATION 1 : If on the basis of verifications carried out by the A.O in the course of the 'set aside' proceedings, it emerges, that the project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) belongs to the assessee, then the 'Interest paid' on the loan raised from DHFL for the said project would be capitalised as a pre-operative expense, which would thereafter be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the borrowings and the amounts advanced to the associate concerns. Insofar, the view taken by the CIT(A), that the assessee had raised the loan from DHFL for undertaking the construction activities of its business as builders and developers is concerned, we may herein observe, that the said observation is prima facie misconceived and misplaced. A perusal of the DHFL loan application, letter of the Slum Rehabilitation Authority dated 25.01.2011 and also other documents to which our attention has been drawn by the ld. A.R in the course of hearing of the appeal, though not conclusively, but prima facie reveals that the aforesaid project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) for which loan was raised by the assessee from DHFL belongs to M/s Sigitia Construction Pvt. Ltd. and not to the assessee. Be that as it may, for verifying the factual position the matter has been restored to the file of the A.O. As observed by us hereinabove, we may herein reiterate for the sake of clarity and to dispel any doubt, that in case it emerges that the project viz. redevelopment project at Vile Parle, Prem Nagar CHS (prop) belongs to the assessee, then the view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mainly advanced to M/s Sahana Construction Pvt. Ltd., was disclosed as repaid. During the year under consideration the assessee had given/advanced an amount aggregating to Rs. 179.47 crores, viz. (i). advance against capital asset commitment : Rs. 94.12 crores; and (ii). interest bearing loans and advances to associate concerns: Rs. 85.35 crores. As observed by us hereinabove, the interest expenditure correlating to amount of Rs. 94.12 crores viz. given towards capital asset commitment to associate concerns viz. (i). M/s Sigitia Construction Pvt. Ltd : Rs. 40,17,97,428/-; and (ii). M/s Sahana Builders and Developers Pvt. Ltd.: Rs. 53,94,65,000/- was capitalized by the assessee. As against the interest bearing loans of Rs. 85,35,75,400/- advanced to its associate concerns the assessee had received 'Interest income' of Rs. 26,37,87,842/-. In our considered view, as long as it is established that the 'Interest paid' by the assessee on the loans raised from DHFL as per the mandate of Sec. 57(iii) was an expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning of the 'Interest income' from the associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited. The Ld. A.R has filed before us a 'Chart', wherein it is claimed that the interest bearing loan aggregating to Rs. 17,29,27,728/- received from M/s Skylark Buildcom Private Limited was advanced by way of interest bearing loans to its associate concerns during the year under consideration. As the claim of the assessee requires to be verified in the backdrop of the facts projected in the 'Chart' filed by the assessee before us, therefore, in all fairness we restore the matter to the file of the A.O. The A.O is directed to verify the veracity of the claim of the assessee that the amount received by it as interest bearing loans from M/s Skylark Buildcom Private Limited was utilised for providing interest bearing advances to its associate concerns. In case the aforesaid claim of the assessee is found to be in order and as per the mandate of Sec. 57(iii), then the A.O shall allow deduction of the 'Interest paid' by the assessee to M/s Skylark Buildcom Private Limited against the correlating 'Interest income' received by it from its associate concerns. Needless to say, the assessee in support of his aforesaid claim shall provide the requisite documents as would be called for by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 57(iii) of the 'Interest paid' on the said loan as against the 'interest received' from the associate concerns, or not. Accordingly, in terms of our aforesaid observations the matter is restored to the file of the A.O for fresh adjudication. 26. The appeal of the assessee is partly allowed for statistical purposes in terms of our aforesaid observations. A.Y. 2013-14 Appeal No. 318/Mum/2019 27. We shall now advert to the appeal filed by the assessee for A.Y. 2013-14. The assessee has assailed the order of the CIT(A) for A.Y. 2013-14 by raising the following grounds of appeal before us : "1 That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the version of the Assessing Officer that your appellant is having project in hand. 2. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer for treating the whole interest income of Rs. 29,92,92,585/- as income of your appellant and without giving any deduction of the expenses incurred by your appellant for earning said interest. 3. That the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest bearing loans which were raised by it from DHFL and its associate concern i.e. M/s Skylark Buildcon (Pvt.) Ltd. As the assessee during the year had utilized part of the interest bearing funds amounting to Rs. 15,42,00,000/- for purchase of shares of M/s Mythili Properties Pvt. Ltd., therefore, interest expenditure of Rs. 42,00,000/- attributable to the amount utilized for making investment in purchase of shares was capitalized by the assessee. Accordingly, the balance amount of interest paid amounting to Rs. 29,90,32,756/- was claimed by the assessee as an expense against the interest income earned by it on the loans which were advanced to its associate concerns. 28. The A.O while framing the assessment, being of the view, that the interest expenditure of Rs. 29,90,94,952/- and other expenses of Rs. 1,17,988/- incurred by the assessee formed part of the cost of its project which had yet not commenced, therefore, capitalized the same as a part of the project cost. As such, the A.O assessed the interest received by the assessee amounting to Rs. 29,92,92,585/- as its income from 'Other sources' and declined the claim of deduction of the interest paid on loans amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion activities have been incurred till the date of filing of this appeal. 4. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in treating the entire interest income as income from other sources instead of income from business. 5. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer in not allowing any expenditure as business expenditure including claim of payment of interest u/s. 36(1)(iii) or u/s. 37(1) of the Income Tax Act. 6. Without prejudice of above, the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirmi ng the order of the Assessing Officer in not allowing deduction u/s. 57(iii) of the Income Tax Act, 1961 in respect of expenditure incurred in earning the interest income. 7. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in not considering the evidences filed by way of affidavit along with necessary documentary proofs while decidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter in appeal before us. We find that as the facts and the issue involved in the present appeal remains the same as were there before us in the appeal of the assessee for A.Y. 2012-13 in ITA No. 317/Mum/2019, therefore, our order therein passed shall apply mutatis mutandis for disposal of the present appeal of the assessee for A.Y. 2014-15 in ITA No. 319/Mum/2019. 36. The appeal of the assessee is partly allowed for statistical purposes in terms of our aforesaid observations. A.Y. 2015-16 Appeal No. 320/Mum/2019 37. We shall now advert to the appeal filed by the assessee for A.Y. 2015-16. The assessee has assailed the order of the CIT(A) for A.Y. 2015-16 by raising the following grounds of appeal before us: "1 That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the version of the Assessing Officer that your appellant is having project in hand. 2. That the Commissioner of Income Tax (Appeals) has erred in law as well as under the circumstances of the case in confirming the order of the Assessing Officer for treating the whole interest income of Rs. 29,92,92,585/- as income of your appellant and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns. Further, during the year under consideration, the assessee had paid interest amounting to Rs. 29,85,08,798/- on the interest bearing loans which were raised by it from DHFL and its associate concern i.e. M/s Skylark Buildcon (Pvt.) Ltd. Accordingly, the interest of Rs. 29,85,08,798/- paid by the assessee was claimed as an expense against the interest income of Rs. 28,54,71,491/-that was earned by it on the loans which were advanced to its associate concerns. 38. The A.O while framing the assessment was of the view that as the interest expenditure of Rs. 29,85,08,798/- and other expenses of Rs. 31,70,760/- incurred by the assessee formed part of the cost of its project which had yet not commenced, therefore, he capitalized the same as a part of the project cost. As such, the A.O assessed the interest received by the assessee amounting to Rs. 28,54,71,491/- as its income from 'Other sources', and declined its claim of deduction of the interest paid on loans amounting to Rs. 29,85,08,798/- and other expenses of Rs. 31,70,760/- against the aforesaid interest income of Rs. 28,54,71,491/-. Accordingly, the A.O assessed the income of the assessee at Rs. 28,54,71,491/- as agai ..... 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