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2022 (10) TMI 1093 - AT - Income TaxCorrect head of income - treatment of interest income - income from other sources OR business income claimed by the assessee - HELD THAT:- Admittedly, the fact is that assessee has received incremental advance of flat bookings of Rs.32.18 Cr. during the year which has been duly reported in the audited financial statement. Also it is fact on record that there is an increase of capital WIP in respect of development of construction project of Sunny Fort, Rajarhat of Rs.16.48 Cr. during the year. These facts itself evidently demonstrate that assessee had substantial own funds which were interest free and were utilized by it in its financing activities which were in terms of objects mentioned in its Memorandum of Association (supra). It is also a fact that assessee has not completed its development project and earned any income out of the same during the year. Income earned during the year by the assessee is on intercorporate deposit with Williamson Services Ltd. as interest income. We also note that assessee has consistently reported its earning of interest income from ICDs, as business income which has been accepted by the Department as demonstrated by the Ld. Counsel from the records for AY 2012-13 and AY 2014-15. These facts have not been controverted by the Ld. Sr. DR by bringing any positive material on record. As relying on Chhangalal Khimji & Co. Pvt. Ltd. [2015 (11) TMI 864 - ITAT MUMBAI] we are inclined to accept the contentions of the assessee to hold the interest income of the assessee as business income. Ld. AO is accordingly, directed to treat the same as business income. Thus, grounds relating to this issue are allowed. Disallowance of interest expenses for the purpose of capitalization into the working in progress of the construction project - HELD THAT:- We noted that Ld. Counsel has evidently demonstrate from the cash flow statement that there were substantial funds available with it from the advance received on flat bookings amounting to Rs.32.18 Cr. out of which capital WIP has been of Rs.16.48 Cr. during the year under consideration leaving with surplus funds of Rs.15.70 Cr. Thus, interest expenses claimed by assessee is in respect of funds which were not deployed on the development project but were otherwise available to the assessee in its financing activities. Accordingly, from this factual matrix, we find that Ld. AO is not justified in disallowing the claim of interest expense and treating it for capitalization in the project cost. Accordingly, we direct the Ld. AO to allow the claim of interest expenses. Appeal of the assessee is allowed.
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