TMI Blog2019 (5) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... n was put to use in the Assessment Years in question. Mere purchase of the land in the Years in question out of the borrowed capital does not entitle the Assessee to claim such interest paid on borrowed capital as a deductible expenditure in the present Assessment Years merely on the basis of method of accounting prescribed u/s 145A which was brought in the statute to undo the effect of the decision of the Delhi High Court which quashed the CBDT Notification finding it to be ultra vires. The method of accounting provided for valuation of inventory u/s 145A does not determine the allowability of the expenditure. The Proviso to Section 36(1), which says that such claim of deduction will be allowed in the Assessment Years, when it was put to use, will override the provisions contained in Section 145A. Since the position of law and the inter play of the above provisions are very clear, we do not find any substantial question of law to be arising in the present case for our consideration. - Decided against assessee. - Tax Case Appeal Nos.245, 247 and 248 of 2019 - - - Dated:- 22-4-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956 as it has not received any income from these projects during the impugned A.Ys. The most important aspect is that the impugned project is still in project stage during the impugned assessment years and hence this business is yet to commence its operations. Further, it has not claimed such interest as an expenditure in A.Ys 2007-08 2008-09. However, for A.Ys. 2010-11 onwards, it is claiming such interest expenditure that too, in the computation memo, i.e., outside the books of account. The Lower authorities rejected the assessee's claim as it is neither in accordance with the Accounting Standards nor with the statutory provisions of the Income Tax Act. The assessee challenges it. Let us examine this claim as under. ... .... .... 7.4 If we apply the above ratio to the facts of this case, as discussed supra, it is clear that the accounting practice followed by the assessee in its books of account, are in consonance with the general principles of accountan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom a single segment, namely, lease of land and properties constructed thereon till the end of A.Y. 2015-16, it is clear that the impugned investments are still in project stage. Therefore, it is not known as to on what basis the assessee has undertaken all these changes in these assessment years that too in the income computation memo for the purposes of tax payment which is outside the books of accounts. Thus, when the entire facts and circumstances of this case are considered in its totality, it is clear that the impugned expenditure incurred by the assessee is in capital in nature. The accounting practice followed by the assessee in its books of account, are in consonance with the general principles of accountancy as certified by their Auditors and the book results were also certified to give a true and fair view in conformity with the applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956 are also in accordance with the provisions of the Act read with section 36(1)(iii). Therefore, the assessee has not made out a case in these appeals. Hence, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the provisions of Section 145A, prior to 1.4.2017, are quoted below for ready reference:- 145A. Method of accounting in certain cases - Notwithstanding anything to the contrary contained in Section 145-- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head Profits and gains of business or profession shall be-- (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation.-- For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment; (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessee has also not claimed before us or before the Authorities below that the land in question was put to use in the Assessment Years in question. Mere purchase of the land in the Years in question out of the borrowed capital does not entitle the Assessee to claim such interest paid on borrowed capital as a deductible expenditure in the present Assessment Years merely on the basis of method of accounting prescribed under Section 145A of the Act, which was brought in the statute to undo the effect of the decision of the Delhi High Court which quashed the CBDT Notification finding it to be ultra vires. 8. The method of accounting provided for valuation of inventory under Section 145A of the Act does not determine the allowability of the expenditure. The Proviso to Section 36(1), which says that such claim of deduction will be allowed in the Assessment Years, when it was put to use, will override the provisions contained in Section 145A of the Act. Since the position of law and the inter play of the above provisions are very clear, we do not find any substantial question of law to be arising in the present case for our consideration. 9. Thus, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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