9911796707
TMI Blog2020 (8) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... wing grounds of appeal relating to Assessment Year 2007-08:- l. "That the Commissioner of Income Tax (Appeals)-VII, New Delhi has grossly erred on facts and in the circumstances of the case in holding that the interest expenditure of Rs. 59,43,36,188/- on loons taken for purchase of stock in trade comprising of land should be capitalized as work in progress and the same are not allowable as expenditure in the present year following Special Bench decision of Mumbai Tribunal in the case of Wall Street Construction Ltd. vs. JCIT(2006) 101 ITD 156( Mum.) (S6)/[2006] 102 TT J (Mumbai) (SB). 2. That the Commissioner of Income Tax (Appeals)-VII, New Delhi has grossly erred on facts and in the circumstances of the case In holding that administrative and statutory nature of expenditure on electricity & water charges, insurance, legal & professional charges, audit fees, misc. expenses, telephone expenses and preliminary expenses totaling at Rs. 10,62,688 should be capitalized as work in progress and the same are not allowable as expenditure in the present year following Special Bench decision of Mumbai Tribunal in the case of Wall Street Construction Ltd. vs. JCIT(2006) 101 ITD 156( Mum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not. 8. Briefly, in the facts of the case, the assessee company was incorporated on 25.08.2005. The object of the assessee concern was to carry on the business of real estate. The assessee had claimed in Assessment Year 2006-07 that it has commenced its business, once it had made investment in purchase of land for setting up of projects at Sonepat and also advanced money for investment in purchase of Man Singh Road property. While completing the assessment for assessment year 2006-07, the Assessing Officer had observed that the assessee had failed to adduce any evidence with regard to commencement of its business activities. Further the assessee had earned interest on loan and advances which were given to different entities and also bank interest on FDRs, the Assessing Officer held that since no business activity was carried on during the year, no business income or loss could be computed in the hands of the assessee. Hence, the interest income which was claimed to be business income and was set off against interest expenditure was assessed as income from other sources and no benefit of interest paid was allowed in the hands of the assessee. The interest expenditure was held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure of Rs. 18.64 Crores, which was directly relatable to the said transactions of Man Singh Property should also have been recovered from the sister concern; in any case, the claim of expense because of the aforesaid interest expenditure of Rs. 18.64 Crores is illogical. He stressed that the AO may be allowed to examine the aforesaid matter. 12. The Ld. AR for the assessee pointed out that since the assessee wanted funds for the project at Sonepat, hence, there was necessity to liquidate the advance paid against acquisition of the Man Singh Road Property. He further pointed out that the aforesaid interest expenditure is duly allowable as business expenditure. 13. We have heard the rival contentions and perused the records. The assessee was engaged in carrying on real estate activities, under which along with other parties had made investment in the land at Sonepat, which was held as stock in trade by the assessee. The aforesaid activities were started in Assessment Year 2006-07 and the Tribunal (supra) had noted that steps were taken by the assessee for the commencement of the business and, after deliberating upon the issue in paras 12 to 14 and relying on the ratio laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee also stand decided in the favour of the assessee and same is dismissed." 15. Vide para 22, the Tribunal also has held that the interest income is to be assessed as business income and to be set off of against interest expenditure and para 22 read as under:- "22. The last issue raised vide ground no.5 is taxability of interest income, which we have already held as business income; even otherwise the said interest income needs to be set up of against interest expenditure as funds have been borrowed by the assessee and only surplus borrowed funds have been invested in bank FDRs. Accordingly, the ground no. 5 raised by the assessee is allowed." 16. The present assessment was made in the hands of the assessee, following the same reasoning as in Assessment Year 2006-07 both by the Assessing Officer and the CIT(A), since the issues have already been decided by the Tribunal in earlier year in assessee's own case, we hold that as the business of the assessee had already commenced in Assessment Year 2006-07, then the interest expenditure and all other expenses both administrative and other expenses are to be allowed as business expenditure. The interest income is to be taxed as busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
