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2021 (4) TMI 1308 - AT - Income TaxInterest disallowance u/s 36(1)(iii) - assessee had borrowed funds from bank and group entities and paid aggregate interest - Assessee claimed deduction of net interest from business income in statement of computation of income on the reasoning that interest expenditure was periodic cost and hence, an allowable deduction u/s 36(1)(iii) - going by Accounting Standard 7 issued by Institute of Chartered Accountants of India (ICAI), AO opined that expenses directly related to the project were to be debited to cost of project and could be claimed as deduction only in the year in which corresponding income of the project was credited in Books of Accounts and offered to tax - HELD THAT:- It is quite evident that the assessee was following percentage of completion method of accounting to recognize revenue from operations as against the case law of Tribunal Special Bench in M/s Wall Street Construction Limited. [2005 (9) TMI 228 - ITAT BOMBAY-F] which deal with a case wherein the assessee was following completed contract method and therefore, the said decision was not applicable to the facts of the case, as rightly held by learned first appellate authority. As undisputed fact that the assessee was engaged in real estate construction and had borrowed capital for business purposes. No other diversion of income has been alleged by Ld. AO. As noted by Ld. CIT(A), the interest was paid to debenture holders, financial institutions as well as unsecured loan creditors and the loan was utilized for business purposes. The funds were borrowed for the purpose of construction and have gone into the projects of the assessee which constitute assessee’s stock-in-trade and not capital asset. In view of these clear cut findings, the adjudication of Ld. CIT(A) could not be faulted with. Another important fact is that the assessee has followed consistent accounting treatment to charge interest expenditure in the accounts. Therefore, the ground thus raised by the revenue stand dismissed. Set-off of brought forward losses - HELD THAT:- This ground would also not survive in view of the fact that the provisions of Sec.79 were not applicable to the assessee since assessee is a company in which public is substantially interested. This fact could not be controverted by revenue before us. Therefore, this ground also stands dismissed.
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