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TMI Blog2019 (11) TMI 1670X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is penal in nature, the same is covered in favour of the assessee by the judgment of the coordinate bench of the ITAT in the case of M/s Ferrous Township Pvt. Ltd. [ 2017 (9) TMI 1947 - ITAT DELHI] whereby it was held that interest payable on EDC charges is not penal in nature. Such expenditure should form part of the work-in-progress - As seen that, this interest is in respect of outstanding EDC charges payable for a project the realization of which has already taken place in earlier years - interest is on an amount outstanding and payable for the services availed in respect of the project which stands already completed and sold in earlier years - such an interest cannot form part of the work-in-progress. The interest payment on the ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EDC is business expenditure without considering the fact that the EDC is payable by the developer to the Government Authority for works related to housing project and therefore it would constitute part of cost of such project. 4. That the grounds of appeal are without prejudice to each other. 5. That the appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal." 2. The facts in brief are that assessee company filed its return of income for the assessment year under consideration on 24.09.2010 declaring a loss of ₹ 2,89,14,506/-. The AO during the course of the assessment raised the issue of the deduction on account of interest of ₹ 2,46,24,237/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as part of the cost of the project of the assessee and need to be carried forward as stock i.e. work-in-progress and the same will be recoverable from the buyers. The Ld. DR contended that the assessee is carrying on the business as developer and such expenses incurred though may be revenue in nature but the same need to be considered as part of the project and the entire cost of the project will be deductible against the sales. 5. In reply the Ld. Counsel for the assessee submitted that the interest payment is towards payment of EDC which the assessee company is required to pay to the HUDA. These payments are part of the business expenditure and interest on such is also business expenditure and cannot be considered to be pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of interest in respect of the EDC charges outstanding and payable to HUDA. The AO has disallowed the same considering it penal in nature and also on the reasoning that such expenditure should form part of the work-in-progress as assessee is a developer and deduction of same will be available against the sale of the project. The CIT (A) has held that such expenditure is not penal in nature and the interest expenditure pertains to the current year and is revenue in nature. As regards the first issue whether such expenditure is penal in nature, the same is covered in favour of the assessee by the judgment of the coordinate bench of the ITAT in the case of M/s Ferrous Township Pvt. Ltd. vs. DCIT ITA No. 5812/Del/2015 dated 06.09.2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's claim was to be allowed - Held, yes [para 5] [in favour of assessee]" 8. Keeping in view of the facts and circumstances of the case and respectfully following the precedent, as aforesaid, we are of the considered view that the facts and circumstances of the case of the assessee's case is exactly the similar and identical to the decision of the Hon'ble High Court in the case of CIT vs. Enchante Jewellery Ltd. (Supra). Therefore, respectfully following the aforesaid decision of the Hon'ble Delhi High Court in the case of CIT vs. Enchante Jewellery Ltd. (Supra), the addition of ₹ 4,26,000/- confirmed by the Ld. CIT(A) out of interest payable in EDC charges terming the same as penal in nature is hereby deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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