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2020 (2) TMI 73 - ITAT MUMBAITaxability of interest earned from time deposits - whether it is taxable under the head income from other sources or it can be reduced from capital work-in-progress, when the funds are inextricably linked with project funds ? - HELD THAT:- The co-ordinate bench of ITAT, Mumbai ‘G’ bench in assessee’s own case for AY 2011-12 had considered an identical issue and after considering relevant facts and also by following another co-ordinate bench decision, in the case of Infrastructure Development Company of Rajasthan Ltd. vs DCIT [2016 (9) TMI 957 - ITAT JAIPUR] held that interest earned from time deposits kept out of surplus funds available to the assessee out of project funds is deductable from the capital working progress We are of the considered view that interest earned from time deposits kept in banks out of surplus funds of project is rightly reduced from capital work-in-progress. Therefore, we direct the Ld. AO to delete additions made towards interest income under the head income from other sources. Disallowances of expenses u/s 37(1) - assessee had incurred total expenditure under the head other expenses - HELD THAT:- In this case, the Ld.CIT(A) after considering the nature of expenditure and its relevance for maintaining the corporate status of the assessee has allowed director’s fees and audit fees on the ground that the above mentioned expenses are required to be incurred to maintain the corporate status of the assessee. The balance expenditure has been disallowed, on the ground that they are not related to maintaining the corporate status of the assessee. The assessee has furnished details of expenditure, as per financial statements prepared for the year. Ongoing through, the nature of expenditure debited into the profit and loss account under the head other expenses, we find that they are all general expenses, which are not directly related to maintain the corporate status of the assesee. Therefore, we are of the considered view that the Ld.CIT(A) was right in allowing only director’s fees and audit fees out of total expenditure debited under the head other expenditure and disallowed balance amount, on the ground that they are not related maintaining the corporate status of the assessee. Insofar as, alternate ground of the assesee that if, the claim of the deduction is not accepted towards said expenditure, then the said sum may be added to capital work-in-progress. No doubt, the assessee is entitled for deduction towards certain expenditure incurred, either as revenue expenditure or if said expenditure is not in the nature of revenue expenditure, the same needs to be capitalized to work-in-progress. Since, we held that remaining expenditure is not in the nature of revenue expenditure, which could be allowed u/s 37(1), the Ld. AO is directed to add the balance expenditure to capital work-in-progress account.
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