TMI Blog2019 (6) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... Construction Inds. Ltd. [2003 (1) TMI 93 - BOMBAY HIGH COURT ] - In view of the above, we allow the claim of the assessee. Addition of undisclosed interest income - interest received on FDRs maintained with HDFC Bank Ltd. and that with ICICI Bank Ltd. - as contended that this interest income receipt was on account of funds received on account of corpus funds and society deposits from the flat purchasers - HELD THAT:- The bank deducts tax at source on the interest income earned on the fixed deposit taken from the society deposit and corpus fund account. Interest on the fixed deposits pertaining to and received on account of the assessee's own fixed deposit is duly declared and credited in the profit and loss account. However, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act ). 2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing finance charges claimed on processing of loan by assessee as business expenses amounting to ₹ 40,03,250/-. 3. Briefly stated facts are that the assessee is engaged in the business of building and developing of real estates. The assessee is following project completion method of accounting for computing income. The AO noticed from the profit and loss account filed by assessee along with return of income as on 31.03.2010 that the assessee has debited a sum of ₹ 40,63,250/- under the head finance expenses. The bifurcation of the above finance charges relates to loan processing charges of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing case laws including decisions of the Supreme Court. India Cement Ltd. versus Commissioner of Income Tax, 60 ITR 52(SC). DCIT versus Paramount Hotel Ltd. 76 ITD 25 ITAT Mumbai (SMC). But the AO has not accepted the claim of assessee and disallowed the claim of expenses of finance expenses of ₹ 40,63,250/-. Aggrieved, assessee came in appeal before CIT(A). The CIT(A) confirmed the action of the AO vide para 5.1 and 5.2 as under: - 5.1 Admittedly, the assessee follows Project Completion Method for taxation of its income from various housing projects. Admittedly, working capital loan has been sanctioned for a new housing project and any income from this new project has not been offered for taxation during the year, neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e argued that the assessee is consistently following substantial Project Completion Method of accounting of Expenses on employee s remuneration, professionals consultancy fees relating to business in general, administration expenses. insurance expenses, electricity repairs maintenance interest expenses (including finance charges comprising of loan processing fees, registration charges ore) are all periodic cost debited to general profit loss account year to year and the same have been allowed year to year after due scrutiny. The loan processing charges and other related expenses which disallowance is the subject matter of appeal are fixed cost for the year which had to be incurred irrespective of the loan being disbursed or utilized. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The learned Counsel for the assessee before us filed the details of interest received on FDRs maintained with HDFC Bank Ltd. and that with ICICI Bank Ltd. It was contended that this interest income receipt was on account of funds received on account of corpus funds and society deposits from the flat purchasers. We noted from the facts that the said corpus funds and society deposit is required to be handed over to the society on formation of the co-operative society. The sums received on account of society deposit and corpus fund is deposited in a separate bank account maintained for Society deposit and Corpus fund. The said funds belong to the society and the same are held by the assessee company in fiduciary capacity and the said funds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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