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TMI Blog2022 (10) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... ted its earning of interest income from ICDs, as business income which has been accepted by the Department as demonstrated by the Ld. Counsel from the records for AY 2012-13 and AY 2014-15. These facts have not been controverted by the Ld. Sr. DR by bringing any positive material on record. As relying on Chhangalal Khimji Co. Pvt. Ltd. [ 2015 (11) TMI 864 - ITAT MUMBAI ] we are inclined to accept the contentions of the assessee to hold the interest income of the assessee as business income. Ld. AO is accordingly, directed to treat the same as business income. Thus, grounds relating to this issue are allowed. Disallowance of interest expenses for the purpose of capitalization into the working in progress of the construction project - HELD THAT:- We noted that Ld. Counsel has evidently demonstrate from the cash flow statement that there were substantial funds available with it from the advance received on flat bookings amounting to Rs.32.18 Cr. out of which capital WIP has been of Rs.16.48 Cr. during the year under consideration leaving with surplus funds of Rs.15.70 Cr. Thus, interest expenses claimed by assessee is in respect of funds which were not deployed on the develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken by the assessee at Rajarhat, New Town, Kolkata which according to Ld. AO had to be capitalized with the cost of the project. Ld. AO noted in this respect that the unsecured loans taken by the assessee were utilized towards the capital work in progress and, therefore, the interest thereon cannot be allowed as an expenses and had to be capitalized with the cost of the project. Ld. AO also noted that assessee had earned an interest income of Rs.89,73,695/- duly reported in the audited P L Account from Williamson Services Ltd. against the Inter-corporate Deposit (ICD) advance to the said company. Ld. AO held this interest income as income from other sources u/s. 56(2) of the Act and thus completed the assessment at assessed income of Rs.89,73,695/-. Aggrieved, assessee went in appeal before the Ld. CIT(A), who despite detailed submissions made by the assessee, confirmed the addition/disallowance made by the Ld. AO. Aggrieved, the assessee is in appeal before this Tribunal. 5. Before us, Shri Soumitra Chowdhury, Advocate appeared on behalf of the assessee and Shri Biswanath Das, Sr. DR appeared on behalf of the revenue. 6. Before us, Ld. Counsel referred to the audited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. 6.3. Ld. Counsel stated that in the impugned year Ld. AO has wrongly re-characterized the interest income as income from other sources and disallowed the interest expenses towards capitalization of WIP in respect of construction project at Rajarhat, New Town. Ld. Counsel referred to the comparative chart of interest received/paid, other expenses for AY 2013-14 to AY 2017-18 to demonstrate that it has consistently reported its income from interest and claim of interest expenses as business income for which the returns have been filed accordingly and processed u/s. 143(1)/143(3) of the Act. The chart is reproduced as under: 7. Further, Ld. Counsel referred to the cash flow statement for the impugned year to demonstrate that assessee had interest free own funds which were utilized for the development of the project, forming part of the capital WIP. Ld. Counsel points out that during the year, there is an increase in advance received on flats bookings amounting to Rs.32.18 Cr. against which the increase in capital WIP for the Sunny Fort, Rajarhat project is of Rs.16.48 Cr., leaving the assessee with cash funds of Rs.15.70 Cr. From the said cash flow statement, Ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any positive material on record. Accordingly, we do not find any infirmity in the order of CIT(A) for directing the A.O. to treat the interest income as business income rather than income from other sources, Thus, he submitted that when in the Memorandum Articles of Association assessee is authorized to carry on business of money lending then the interest income should be treated as business income rather than income from other sources. 9. Per contra, Ld. Sr. DR submitted that reference to the immediately preceding year of AY 2012-13 is not in proper perspective as the issue before the Hon ble ITAT was on addition made u/s. 68 of the Act in respect of genuineness of loans. He further pointed out that since the project is within the development phase, the interest expense ought to be capitalized in the project cost which has been rightly disallowed by the Ld. AO and upheld by Ld. CIT(A). He placed strong reliance on the orders of the Ld. AO and Ld. CIT(A). 10. We have heard the rival contentions and perused the material available on record. Admittedly, the fact is that assessee has received incremental advance of flat bookings of Rs.32.18 Cr. during the year which has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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