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2018 (10) TMI 673 - AT - Income TaxBusiness expenditure - amount paid for acquiring rights in the plot - nature of interest paid on borrowings - The assessee is engaged in business of real estate developments and construction. The assessee has carried the cost of the said I T Park being developed/constructed by the assessee as inventories/project work-in-progress. Held that:- The borrowings made by the assessee on which interest expenditure were incurred were all mainly directed towards working capital for development/construction of the aforesaid I T Park including acquisition cost of the plot of land and also acquiring rights from the erstwhile JV partners. The assessee is continuously debiting interest cost to the carrying cost of inventories/project work-in-progress. The assessee debited ₹ 95,17,500/- towards interest for borrowing wrt acquisition costs for acquiring interest of erstwhile JV partners namely M/s Om Metals Limited and M/s Well Wisher Constructions and Finance P. Ltd. in the carrying cost of inventories/project work-in-progress during the year under consideration. The Revenue treated the entire transaction as sham and hence this interest also got disallowed. The Mumbai- tribunal has consistently since AY 2006-07 to 2011-12 has held the aforesaid transactions for acquisition of rights from erstwhile JV partners by the assessee in 50 acres of plot of land allotted by MIDC in Navi Mumbai for settin up I T Park and consequently payment of interest as genuine transaction allowable as business deduction while computing income. Decided in favor of assessee.
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