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2019 (9) TMI 37 - AT - Income TaxInterest Income - taxable as income from other sources u/s 56 or business income - interest income earned on parking of funds with banks - balance amount of interest income was earned on loans given to related party and others - HELD THAT:- In the instant case, the assessee is engaged in the business of constructing residential complexes and the assessee has failed to demonstrate any business compulsion nor did it show that the advancing of loans or depositing of money in fixed deposits are integral part of its business activities. Hence we are of the view that the Ld CIT(A) was justified in confirming the assessment of interest income as income of the assessee from income from other sources. Disallowance u/s 43B - assessee has made provision for approval fees payable for renewal of construction plan and electricity license, i.e., the approval fee was not actually paid during the year. - HELD THAT:- In the instant case, the assessee has made provision in the books of accounts for the Approval fee payable to the VUDA, which was the authority constituted by the State Government to regulate the development of City and large scale construction projects. It should be according its approval to the construction plans on the basis of parameters, rules and regulations prescribed by the State Government. Without the said approval, the assessee cannot carry out construction activities, meaning thereby, it is in the nature of statutory permission. By according approval for construction, in our view, no service is provided by VUDA. Accordingly we are of the view that the VUDA is performing a Statutory function only and hence the approval fee payable to it would fall under the category of “fees” stated in sec.43B of the Act. Accordingly we are of the view that the provision made for Approval fee payable to VUDA would fall under the ambit of sec. 43B of the Act. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the disallowance made u/s 43B of the Act. Since the assessee cannot carryout construction without plan approval, the approval fee cannot be considered as unascertained liability, since in the instant case, the assessee has provided for the amount computed as per the rules of VUDA. Revision of the amount cannot lead to the conclusion that the same is an unascertained liability. Accordingly, this observation of CIT(A) is set aside. Rightly pointed out by A.R, there is no estoppel against operation of law. Hence the assessee can contend legal issues even if had agreed for the addition before the AO. Before us, the assessee has raised an alternative claim that the amount disallowed u/s 43B should be reduced from the cost of work in progress. We have noticed that the assessee is under the stage of construction and it is offering income under percentage completion method. Hence the expenses incurred by the assessee are accumulated as work in progress. Since the alternative claim of the assessee requires examination, we modify the order passed by Ld CIT(A) on this issue and restore the same to the file of AO to examine the alternative claim of the assessee. Disallowance of de-recognised sales - HELD THAT:- AO did not have occasion to examine the quantum of de-recognised income, since he had rejected the same. We have noticed that the Ld CIT(A) has observed that the AO has mentioned in the assessment order of succeeding year that the claim of the assessee that it was not receiving payments in relation to the derecognized income was found to be incorrect. Hence, we are of the view that the quantum of de-recognised income claimed by the assessee requires verification at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore this issue to the file of the AO for the limited purpose of verifying the quantum of deduction claimed by the assessee towards de-recognising of sales and cost.
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