TMI Blog2018 (4) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities for adding the interest paid by assessee which was added in the work in progress during the years under consideration and has not been claimed as expenditure. Appeals of assessee are allowed. - ITA No.2134/Mum/2017, ITA No.2164/Mum/2017 And ITA No.2165/Mum/2017 - - - Dated:- 19-3-2018 - SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH JM For The Assessee : Shri Varun Bramhecha For The Revenue : Shri V. Justin ORDER PER R.C.SHARMA (A.M): These are appeals filed by assessee against the order of CIT(A)- 28, Mumbai dated 02/01/2017 for A.Y.2010-11, 2011-12 and 2012-13 in the matter of order passed u/s.143(3) / 143/3 r.w.s. 147 of the IT Act. 2. In all the years under consideration, assessee is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of the MOU the assessee exercised the option to get his money back and as per the letter dated 05.09.2011 assessee has received money back in September 2011. 5. We also found that in another MOU dated 06.06.2008 entered with Shanti Santosh Builder against purchase of 20000 sq. ft. of residential area in respect of building to be constructed on SRA Land at Indira Nagar, Jogeshwari bearing No. CTS No. 160A-1 of Village Majas and assessee has paid ₹ 10 Crores, however, on account-of various hurdles and delays in the project, the deal was cancelled and money has been received back by assessee firm on 05.09.2011. 6. In the year under consideration i.e. A.Y.2012-13 the assessee has filed its return of income declaring loss of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d builder, assessee had to make such sort of Investments in regular course of business for acquiring rights in the property and development right as the case may be. For this purpose the assessee had borrowed money from various lenders and paid to M/s Lakdawala Developers, Shanti Santosh Builder and M/s CENZER Reality. Hence all the expenses incurred by it including interest expenses till date have been added to the Cost of Work-in-progress which stands at ₹ 4,81,76,888/- as on 31.03.2016 as the Project has not moved ahead at all. 9. From the record we found that assessee has made interest payment towards 32 loan creditors. The party-wise breakup of Interest paid has been provided to the AO with the letter dated 19.03.2015 and 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r giving a reasonable amount of time for the project to commence, if nothing moves ahead it is better to exit the project rather than continue with the Investment. Assessee had taken a prudent business decision to quit from the project so as to get back his money so invested. In fact, the transactions are in course of business, funds were borrowed on interest and was utilized for the purpose of business. Under these facts and circumstances there is no valid reason to disallow such interest expenditure which were even not claimed as expenditure in the P L account but was added to work in progress. 11. Hon ble Calcutta High Court in the case of Tetron Commercial Ltd., vs. CIT (261 ITR 422) (Cal.) held as under:- Whether capital is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 14. Further more Hon'ble Supreme Court in the case of S A Builders v CIT (288 ITR 1) held that The expression 'commercial expediency' is an expression used is for the Section 37 that the expression 'for the purpose of business' includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. The expression 'commercial expediency' is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of obligation, yet is allowable as a business expenditure if it was incurred in grounds of commercial expediency. 15. Hon ble Delhi High 'Court in the case of Dalmia Cements held that once it is est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cost of development rights, rehabilitation costs, registration charges, stamp duty, brokerage costs and incidental expenses. b. Borrowing Costs - In accordance with Accounting Standard (AS) 16, Borrowing Costs which are incurred directly in relation to a project or which are apportioned to a project. c. Construction and development costs - These would include costs that relate directly to the specific project and costs that may be attributable to project activity in general and can be allocated to the project. 18. In accordance to the above Guidance Note, the Interest expenses incurred by the assessee have been added to the Closing Stock of Work in progress. Hence if this claim of expenditure is disallowed, it would resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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