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2023 (1) TMI 124 - AT - Income TaxComputing income in case of transfer of asset (other than capital asset) being land and/or building - Special provision for full value of consideration for transfer of assets other than capital assets in certain cases - Applicability of provision of section 43CA - whether there is transfer land or building by the Assessee to the tenant? - Whether providing carpet area in the re-developed building to the tenants cannot be taken into the purview of Section 43CA ? - HELD THAT:- Provisions of Section 43CA would be attracted in case of transfer of land or building or both, the issue that arises for consideration is whether there is transfer land or building by the Assessee to the tenant. In our view whether allotment of area to a tenant/occupant on under a redevelopment project would result in transfer of land or building held as stock-in-trade would depend upon the facts and circumstances of each case that would require examination of the contractual arrangement between the owner, landlord, tenant, co-operative housing society and the developers. Coming to the facts of the present case, it is admitted position that the Assessee had undertaken redevelopment of the Old Building. Assessee was not the owner or either the land or the Old Building. On carrying out the redevelopment work the Assessee would have received some area in the new building in his capacity as the Developer. In order to resolve the deadlock the Assessee agreed to settle for a lesser area in the meeting held on 07.08.2006 which was attended by Deputy Chief Engineer, MBR&RB who also signed the minutes of the meeting in this official capacity. In absence of any violation of specific provision of Maharashtra Housing & Area Development Act, 1976 having been brought to our notice, we are not inclined to accept the contention of Revenue that the allotment of additional area to the tenants was contrary to law. The amount of area to be given to the tenants was agreed upon and finalized when the minutes of the meeting held on 07.08.2006 were recorded since Annexure “A” to the minutes of the meeting clearly provided for the details of the unit in the new building and the carpet area to be allotted to each tenant. Thus, the additional area that was allotted to tenants could not be considered as stock-in-trade for the Assessee as the Assessee was never entitled to hold/sale the same. We concur with the CIT(A) that the area allotted to the tenants (including the additional area) cannot be regarded as stock-in-trade of the Assessee and therefore, the provisions of Section 43CA would not be attracted. In view of the aforesaid, we decline to interfere with the order passed by the CIT(A) on this issue. Ground No. 1 raised by the Revenue is, therefore, dismissed. Deduction of interest expenditure of INR u/s 36(1)(iii) - HELD THAT:- Assessee has been following project completion method and had capitalized all cost relating to construction till part completion certificate was obtained during the previous year 2014-15 relevant to the AY 2015-16. Though the Assessee has not offered any profits to tax during the Assessment Year 2016-17, deduction for interest of INR 1,55,42,291/- has been claimed by the Assessee as period cost under Section 36(1)(iii) of the Act. We note that the Assessee has undertaken only one redevelopment project. It is not disputed that interest cost is directly related to the project As per Accounting Standards 7 on Construction Contracts and Accounting Standard 16 on Borrowing Cost, the borrowing cost having direct nexus with the project needs to be treated as project cost and capitalized. Appeal of Revenue is dismissed.
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