TMI Blog2016 (11) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The AO is directed to exclude the same from the taxable income of the assessee. See case of Lucknow Development Authority, Gomti Nagar, Lucknow [2013 (9) TMI 570 - ALLAHABAD HIGH COURT] Ad hoc disallowance of 56% of the development expenses - Held that:- When the matter was taken up before the first appellate authority, the same was dismissed without addressing the contention of the assessee that no reason whatsoever was mentioned in the assessment order for making this disallowance. As the AO has failed to give any reason whatsoever, for disallowing 56% of the development expenses, and as the ld.CIT(A) failed to address this issue, the disallowance in question is hereby deleted and this ground of the assessee is allowed. - ITA Nos.5455 to 5457/Del/2010 - - - Dated:- 29-9-2016 - SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri Kapil Goel, Advocate For The Department : Shri S.K. Jain, Sr. DR ORDER PER J. SUDHAKAR REDDY, AM: All these appeals are filed by the assessee for the assessment years 2003-04, 2004-05 and 2005-06 are directed against the orders of the CIT(A) dated 31.8.2010. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the closing stock, but, has not disturbed the valuation of opening stock and hence, such action is bad in law. He relied on the decision of the Hon ble Bombay High Court in the case of Lokhandwala Construction, 131 Taxman 810 , the decision of the B Bench of the ITAT Delhi in ITA No.2677/Del/2011 for assessment year 2006-07 in the case of DLF Ltd., Order dated 11th March, 2016, as well as the decision of the ITAT Kolkata B Bench, in ITA No.1101/Kol/2012, Order dated 19th February, 2014 in the case of Cellica Developers Pvt. Ltd ., and submitted that in all these cases, under similar circumstances, the expenditure incurred on loans borrowed, were allowed as revenue expenditure and was not capitalized to the value of closing stock. 6. The ld. DR, on the other hand, opposed the contentions of the assessee and submitted that the issue for adjudication is not whether the amount in question is allowable u/s 36(1)(iii) or not and that the only issue is whether the interest incurred on loans taken was to be considered for the purpose of valuation of closing stock or not. He submitted that the expenditure is relatable to the closing stock and hence, both the AO as well as the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had undertaken the Project of construction of flats under the Kandivali Project. Therefore, the loan was for obtaining stock-in-trade. That, the Kandivali Project constituted the stock-in-trade of the assessee. That, the Project did not constitute a fixed asset of the assessee. In this case, we are concerned with deduction under Section 36(1)(iii). Since the assessee had received loan for obtaining stock-in-trade (Kandivali Project), the assessee was entitled to deduction under Section 36(1)(iii) of the Act. That, while adjudicating the claim for deduction under Section 36(1)(iii) of the Act, the nature of the expense - whether the expense was on capital account or revenue account -was irrelevant as the Section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That, the utilization of the capital was irrelevant for the purposes of adjudicating the claim for deduction under Section 36(1)(iii) of the Act (See judgment of the Bombay High Court in the case of Calico Dyeing and Printing Works v. CIT, Bombay City-II, reported in 34 ITR 265). In that judgment, it has been laid down that where an assessee claims deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n pursuance of this Notification cannot be treated as belonging to the authority and that the receipt is not taxable in nature. He also relied on the decisions of the co-ordinate Bench G of the Tribunal in ITA No.131 and 132/Del/2009 for the AY 2003-04 and 2005-06 in the case of Saharanpur Development Authority vs. ACIT, Order dated 8th April, 2010, wherein the fund received has been held as not taxable as income of the assessee. The ld. DR relied upon the order of the AO as well as the CIT(A) and submitted that the amounts have been received by the assessee from the Government of UP for incurring of certain expenditure to develop infrastructure, and, merely because certain restrictions have been placed on the application and utilization of the income, it cannot be said that the receipt in question is not income. He distinguished the case law relied upon by the assessee. 13. After hearing rival contentions, we find that the jurisdictional High Court in the case of Lucknow Development Authority, Gomti Nagar, Lucknow (supra), has observed as follows:- From the record, it also appears that the authority had been maintaining infrastructure, development and reserve fund (IDAR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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