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TMI Blog2025 (3) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... s - Disallowance of loan processing fee by treating the same as capital in nature - HELD THAT:- In the instant case the assessee has failed to prove that the loan processing fees was the revenue expenditure CIT(A) relying the decision of the Bilt Power Ltd. New Delhi [2015 (3) TMI 319 - ITAT DELHI] rightly held that the loan processing fees expenses is capital in nature. Thus we find that the assessee has failed to prove that loan processing fees was the revenue expenditure. Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsibility Rs58,20,602/- 4. Addition u/s 56(2) (viib) of the Act Rs 19,98,70,555/- 4. Aggrieved the order of the AO the assessee has filed the appeal before the Ld CIT(A), who vide his order 24-09-2020 partly allowing the appeal, deleted the addition made by AO u/s 56(2) (viib) of the Act and rest was confirmed. Being aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before the Tribunal. Ground No. 1 in general in nature and does not require any specific adjudication. In Ground No. 2 and 3: Addition on account of commission paid on sale of Flat bookings Rs 3,18,63,611/- & Disallowance of expenses incurred on selling and promotions Rs 63,44,468/-. 5. The Ld. Counsel for the assessee has submitted that genuineness of the expenses has not been doubted by the AO or Ld CIT(A). He has further submitted that selling costs cannot be attributed to contract activity and cannot be allocated to a contract and are excluded from the cost of construction contract. He also submitted that the observation of the lower authorities that expenses which are directly related to the construction project of the assessee can't be allowed as expenses, as long as revenue is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such the claim of the assessee deserved to be allowed. In the case of M/s Hiranandani Palace Gardens P. Ltd. Mumbai Vs. the Assistant commissioner of Income Tax (OSD) Mumbai 2015(12) TMI 1649- ITAT Mumbai the Co-ordinate bench held as under : "6. We have heard the rival contentions and gone through the records. The Ld. counsel for the assessee has relied upon the "Expert Advisory Committees Report (EAC) on applicability of revised AS 7 to enterprises under taking the construction activities on their own account as a venture commercial nature" (copy placed at page 49 & 50 of paper book) wherein it has been stated the revised AS-7 shall not be applicable to the builders undertaking the commercial activity on the own and it was also stated that the work in progress shall constitute inventory for the builders a shall be valued as per AS-2 issued by the Institute of Chartered Accountant of India (ICAI). The L Counsel has further submitted that the assessee has accordingly followed the Accounting Stand -2 for determining the work in progress. He has further brought our attention to para 13 of As wherein it has been mentioned that the following expenses have to be excluded from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation." 9. The Ld. Counsel, therefore, has contended that the assessee has been regularly following the method of accounting recognized by the accounting principles to value the inventory. The assessee had followed the same method of valuing the inventory in preceding year as well as in succeeding years. Even in the assessment year 2010-11, it has debited and claimed the identical nature of expenses which had been accepted as deductible expenses in assessment order passed u/s 143(3) of the I.T. Act. The assessee being regularly following the accounting method duly recognized by the accounting principles and guidelines as stated above and in view of the provisions of section 145A has rightly claimed the proportionate salary expenses, administrative expenses and selling expenses as revenue expenditure. The Ld. counsel has further contended that the Special Bench decision of the Tribunal relied upon by the lower authorities in the case of "Wall Street Construction Ltd. Vs JCIT [101 ITD 156] is relating to interest expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting and 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. 6. Both the Ld. representatives of the 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 aboves de was carrying out different projects though at the same locations 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 t 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 accounting. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routine business expense claimed as revenue in nature. In fact, CIT(A) gave finding with respect to disallowance of interest and depreciation that "none of the loans related to incomplete towers shown as CWIP as the appellant has yet to make payment for such suppliers" i.e. loans were not utilized for construction of telecom towers. In view of this finding, expense related to loan cannot be capital in nature and allowable as revenue expenditure. These contentions of the Ld. AR are acceptable as the funding is required in business necessities from time to time and these expenses are regular business expenses claimed by the assessee." 12. The Ld. Sr DR submitted that loan processing fee is a onetime expenses which is capital in nature. She also submitted that both the lower authorities rightly held that loan processing fees is capital in expenses in nature. 13. In the instant case the assessee has failed to prove that the loan processing fees was the revenue expenditure The Ld. CIT(A) relying the decision of the Bilt Power Ltd. New Delhi vs Department of Income Tax, rightly held that the loan processing fees expenses is capital in nature. The ld CIT(A) observed in his order as und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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