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TMI Blog2022 (4) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and thereby excluding the indirect expenses such as office employees salary, administrative expenses and marketing selling expenses is as per the recognized principles of accounting and as such the claim of the assessee deserves to be allowed. We hold accordingly. The additions made by the lower authorities on this issue are hereby ordered to be deleted. Case of the assessee is on better footing as the assessee was carrying out different projects though at the same location, hence it was not a case of single project. Even otherwise the resultant income from the project is a loss even after capitalisation of expenditure by the AO to work in progress. Hence, there is no tax implication, so far as the year under consideration is concerned and the loss otherwise also has to be carried forward. Under such circumstances, it cannot be said that the assessee has adopted the above stated accounting method to avoid tax on income for the year under consideration. The assessee, thus, has followed the accounting method which has been consistently followed by it and which is as per the recognized principles of accounting. - Decided against revenue. Taxability of interest of income on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r>Shri M.Balaganesh, Accountant Member And Ms. Kavitha Rajagopal, Judicial Member For the Assessee : Shri Vijay Mehta & Shri Anuj Kisnadwala For the Revenue : Shri Ravinder Sindhu ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.5065/Mum/2019 for A.Y.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-47, Mumbai in appeal No.CIT(A)-47/10036/2017-18 dated 13/05/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/06/2017 by the ld. Dy. Commissioner of the Income Tax, Central Circle-1(2), Mumbai (hereinafter referred to as ld. AO). 2. The Revenue has raised the following grounds:- 1.Whether on the facts and circumstances of the case and in law, the C1T(A) was right in deleting disallowance made by the AO with regard to the business expenditure of ₹ 7,65,94,120/- debited to Profit & Loss account and to carry forward the same to the construction Work-in-Progress relying on the decision M/s. Hiranandani Palace Garden Pvt. Ltd. even though the Department has filed appeal u/s 260A of the Act in the case before High Court on the issue vide ITAXL/ 1257/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 115,55,66,080 have been shown as Project Work in progress. The balance expenses which are administrative in nature and not directly related with the project amounting to ₹ 7,65,94,120/- have been debited in the Profit & Loss Account. Net loss as per Profit & Loss Account has been shown at ₹ 7,48,81,635/- and after adjusting allowable and disallowable expenses, the net business loss is computed at ₹ 7,12,81,458/-. 3.3. The entire details of business expenses claimed by the assessee were duly submitted before the ld. AO. The assessee also pleaded that the entire financial statements have been prepared by it in accordance with accounting standards prescribed by the Institute of Chartered Accountants of India, more particularly, the Accounting Standards (AS)-2 on "valuation of inventories" and AS-7 of "Construction Contracts". The assessee also pleaded that the income tax return has been filed by it in consonance with provisions of Section 145A of the Act . The assessee also placed reliance on the Guidance Note on "Accounting for real estate transactions" issued by the Institute of Chartered Accountants of India (ICAI) wherein it has been specifically poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d raised by the Revenue for A.Y.2015-16 was raised before this Tribunal in A.Y.2014-15 also. The relevant operative portion of the said Tribunal order is reproduced hereunder:- "8. We have heard the rival submissions and perused the material available on record. The sole disputed issue emphasised by the Ld. DR that the CIT(A) has granted relief to the assessee by treating the expenses debited to profit and loss account as the revenue expenditure whereas the Assessing Officer in the assessment proceedings has made elaborate discussions on the facts and treated such expenditure as part of the capital work in progress. The CIT(A) has relied on the decision of the Co-ordinate Bench of the Hon'ble Tribunal in the group companies case and allowed the relief. Whereas, the Revenue has not accepted the decision of the ITAT and challenged before Jurisdictional High Court of Bombay in appeal u/s.260A of the Act. Whereas the Ld. AR has supported the order of the Id. CIT(A) and relied on the group company decision of the Hon'ble Tribunal. We consider it appropriate to refer to the observations of the CIT(A) at page 11 para 8.3. to 8.4. which is read as under:- "8.3. I have noted that a simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties have submitted that the issue is squarely covered by the above decision of the Tribunal. We find that rather the case of the assessee is on better footing as the assessee was carrying out different projects though at the same location, hence it was not a case of single project. Even otherwise the resultant income from the project is a loss even after capitalisation of expenditure by the AO to work in progress. Hence, there is no tax implication, so far as the year under consideration is concerned and the loss otherwise also has to be carried forward. Under such circumstances, it cannot be said that the assessee has adopted the above stated accounting method to avoid tax on income for the year under consideration. The assessee, thus, has followed the accounting method which has been consistently followed by it and which is as per the recognized principles of accounting. In view of the above discussion of the matter and following the above decision of the Tribunal for the sake of consistency, this issue is decided in favour of the assessee." 8.4 Thus, this issue is covered in favour of the Appellant by the order of the Hon'ble ITAT, Mumbai in the case of M/s Hir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade fixed deposits with banks and derived interest income thereon only to recover the interest expenditure paid by it on the loans borrowed by it for the purpose of business. Hence, the interest income squarely partakes the character of business income. Admittedly, the business income from construction projects would be offered in the year of project completion of the project followed by the assessee. This interest income of ₹ 23,62,179/- would go to reduce the closing work in progress of construction project carried out by the assessee, which has been done by the assessee in the return of income. Hence, no fault could be attributed in the accounting treatment and the income tax treatment given by the assessee. We find that the decision of the Hon"ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., referred to supra is factually distinguishable as in that case, the business itself had not commenced and interest income from fixed deposits had been earned before the commencement of business. Hence, the reliance placed by the ld. DR on the said decision does not advance the case of the Revenue. 5.1. We also find that the very same issue was subject ..... X X X X Extracts X X X X X X X X Extracts X X X X
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