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2022 (4) TMI 1469 - AT - Income TaxAddition u/s 36(1)(iii) - interest expenditure incurred during the year - assessee has considered the interest component in the work in progress - contentions of the Ld. AR that the assessee is following the mercantile method of accounting and the revenue recognition is as per the project completion method of Accounting Standard of ICAI. But the A.O. was not satisfied with the explanations and disallowed the claim and added to the work in progress.- As per assessee interest expenses have been claimed as deduction in the year of incurrence and the interest is periodic cost and the claim has to be allowed u/s 36(1)(iii) - CIT(A) has considered the assessee’s submissions on the interest capitalization and is of the opinion that it is a recurring issue and dealt on the jurisdictional High Court and the Honble Tribunal decisions and directed the A.O. to delete the addition and allowed the grounds of appeal of the assessee HELD THAT:- As held in the assessee’s group company M/s Palava Developers Pvt Ltd and Lodha Developer [2020 (4) TMI 842 - ITAT MUMBAI] since the revenue could not controvert the findings of the Ld.CIT(A) that the project constructed by the assessee for which the loans have been taken is not a stock in trade and also the other findings of the Ld.CIT(A), we do not find any valid reason to interfere with the findings of the Ld.CIT(A) and accordingly we sustain the order of the Ld.CIT(A) on this issue Also in M/S. NATIONAL STANDARD PVT. LTD. [2021 (4) TMI 1308 - ITAT MUMBAI] it is 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 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 - DR could not controvert the findings of the CIT(A) on this disputed issue with any new cogent evidence/ material information to take a different view. Accordingly we do not find any infirmity in the order of the CIT(A) -Decided against revenue.
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