2016 (11) TMI 1673 - AT - Income Tax

Capitalisation of revenue expenditure - CIT(A) noticed that the assessee has incurred these expenditure as per contractual obligation in the joint venture project as per the agreement entered and held that the entire claim if allowable as revenue expenditure - HELD THAT - As pointed out to us that the order passed by the ld. CIT(A) in A.Y. 2009-10 was challenged by the Revenue by filing appeal before the Tribunal and the Tribunal 2016 (6) TMI 1399 - ITAT MUMBAI has upheld the view taken by the ld. CIT(A). As gone through the order passed by the co-ordinate Bench of this Tribunal and noticed that identical issue was considered by the Tribunal in para 14 of its order. We further noticed that the Tribunal upheld the view taken by the ld. CIT(A) in para 14.4 of its order. Consistent with the view taken therein we uphold the order passed by the ld. CIT(A) on this issue. - Decided against revenue. Disallowance of part of interest expenditure by treating the same as relating to WIP - CIT(A) noticed that he has considered an identical issue in A.Y. 2009-10 and has accepted the claim of the assessee and accordingly by following the same the ld. CIT(A) set aside the order passed by the A.O. on this issue - HELD THAT - As decided in own case 2016 (6) TMI 1399 - ITAT MUMBAI issue decided against revenue Addition of notional interest to the rental income - A.O. took a view that notional interest on interest free deposit is required to be considered as part of rental income in order to arrive at a fair market value of rent u/s 23(1)(a) - A.O. computed the interest @ 12% on the interest free deposits and added the same to the rental income declared by the assessee - CIT-A Deleted the same by following his decision rendered for A.Y. 2009-10 - HELD THAT - We have gone through the order passed by the co-ordinate Bench of this Tribunal for A.Y. 2009-10 2016 (6) TMI 1399 - ITAT MUMBAI and noticed that an identical issue was discussed by the Tribunal in para No. 7 of its order and in para No. 7.3 of the order the Tribunal has upheld the view taken by the ld. CIT(A). We have also noticed that the ld. CIT(A) has followed the decision rendered by the Hon ble Delhi High Court in the case of Asian Hotel Ltd. 2007 (12) TMI 274 - DELHI HIGH COURT Accordingly we uphold the order passed by the ld. CIT(A) in this year also on this issue. Assessment of hire charges under the head income from house property - HELD THAT - We noticed that the tribunal has rendered this decision 2016 (6) TMI 1399 - ITAT MUMBAI wherein it was observed that the amenities provided by the assessee constituted an integral part of the premises i.e. it was seen that the amenities provided by the assessee consisted of electrical panels AHU rooms and fire control system water tanks elevator etc. In view of the above the Tribunal has accepted the view of the ld. CIT(A) that these amenities constitute integral part of the house property. Since there is no change in facts consistent with the view taken by the Tribunal in AY 2009-10 we uphold the order passed by the ld. CIT(A) in this year also on this issue.

Summary

Issues:
1. Capitalisation of revenue expenditure
2. Capitalization of interest expenditure
3. Addition of notional interest to rental income
4. Assessment of hire charges under income from house property

Capitalisation of Revenue Expenditure:
The appeal by the Revenue challenged the capitalization of revenue expenditure of Rs. 49.98 lakhs related to a joint venture project. The Assessing Officer (A.O.) treated these expenses as part of the joint venture project and capitalized them. However, the Commissioner of Income Tax (CIT-A) allowed the claim as revenue expenditure based on contractual obligations. The CIT(A) referred to a previous year's decision and ruled in favor of the assessee. The Tribunal upheld the CIT(A)'s decision, citing consistency with previous rulings.

Capitalization of Interest Expenditure:
The next issue involved the disallowance of interest expenditure related to a joint venture project. The A.O. disallowed part of the interest claimed by the assessee, attributing it to the project. The assessee argued that the interest was for earning rental income and not solely for the joint venture. The CIT(A) accepted the assessee's claim based on a previous year's decision. The Tribunal upheld the CIT(A)'s decision, maintaining consistency with previous rulings.

Addition of Notional Interest to Rental Income:
The A.O. added notional interest on interest-free deposits to the rental income to determine fair market value. The CIT(A) deleted this addition, citing a decision by the Hon'ble Delhi High Court. The Tribunal upheld the CIT(A)'s decision, referencing a similar ruling in a previous year.

Assessment of Hire Charges:
The last issue pertained to the assessment of hire charges for amenities provided to licensees. The A.O. assessed it under income from other sources, but the CIT(A) directed it to be assessed under Income from House Property. The Tribunal upheld the CIT(A)'s decision, emphasizing that the amenities provided were integral to the house property.

In conclusion, the Tribunal dismissed the Revenue's appeal for the assessment year 2010-11, upholding the CIT(A)'s decisions on all issues presented. The judgments were consistent with previous rulings and legal interpretations, resulting in the dismissal of the appeal.