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TMI Blog2021 (1) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... nd shown as work in progress (WIP) which action of assessee has not been accepted by the AO and the AO has taxed the interest income under the head other income and taxed it. According to Ld. Advocate since the assessee has commenced the project, the interest expenditure should be netted with that of the interest received and only the net amount should be brought to tax. CIT(A) has noted that the assessee has commenced its project (Tarun nagar Project) and since the interest amount from the fixed deposits are intrinsically linked to the business/project which has admittedly commenced, therefore the interest expenditure need to be allowed u/s 36(1)(iii) and in that event only the net amount can be taxed [i.e. the interest received minu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues are common, the appeal for AY 2012-13 is taken as lead case and the decision on it will be followed in the other two appeals. 4. The Grounds of appeal raised by the assessee for AY 2012-13 reads as under: 1. The Ld. CIT(A), Guwahati-2, is legally not justified treating the interest income received from the Fixed Deposit created out of the loan Fund received from NEDFI. Hence, the impugned order in Appeal is not sustainable in law and liable to be set aside. 2. The Ld. CIT(A), Guwahati-2, committed an error in interpreting the provisions of Section 57(iii) of the IT Act, 1961 and failed to set off the interest income / receipt against the interest expenditure payable to NEDFI. Hence, the impugned order-in-Appeal is not sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder). According to AO, the interest income received by the assessee should be taxed and he accordingly taxed it. 8. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who confirmed the order of the AO by observing as under: I have gone through the above submissions of the Appellant and have considered the facts and evidences on record. In the present appeal the Appellant has raised two grounds of appeal. However, both these grounds impugn the disallowance of interest claimed by the Appellant with respect to the loan from North Eastern Development Finance Corporation Ltd (NEDFI). The Appellant has stated that the loan availed by the Appellant from NEDFI was used by it for sourcing the FDRs. It was on these FDRs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred wholly and exclusively for the purpose of earning the said interest income. It is noted that the claim of the Appellant that the said interest income was required to be netted and be either reduced or increased from the cost of capital WIP would have been permissible had the business of the Appellant not commenced. In this case, as would be noted in the subsequent paras, the Appellant had received substantial amounts of advances against the booking of spaces and, thus, it is undisputed that the business of the Appellant had commenced and, therefore, it is clear that the inierest income was required to be taxed and cannot be allowed to be set-off with the interest cost [Refer the judgment of the Hon'ble Apex Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 3 crores (approximately) from NEDFI (financial institution in North East). However, according to Ld. Advocate, some local dispute arose which led to litigation and the project during these assessment years became stand-still. Therefore, according to him, though the project commenced, by acquiring and having taken the approval from GMDA, the flats could not be constructed at the project site due to lis-pendens. And since ₹ 3 crores was borrowed from NEDFI for the project (Tarun nagar), though the project got stalled, the assessee had to incur recurring cost of borrowing to the lender/NEDFI. In such a scenario, the assessee in order to reduce the cost of borrowing had deposited loan amount in Punjab Sindh Bank as well as in Assam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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