TMI Blog2021 (9) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the assessee during the period 31.03.2013 to 31.03.2015, therefore, we find no justification to take a different view and sustain any part of the disallowance of the assessee‟s claim for deduction of interest expenditure u/s 36(1)(iii) of the Act - CIT(A) had rightly observed that no part of the assessee‟s claim for deduction u/s 36(1)(iii) of interest expenditure could have been disallowed - Decided in favour of assessee. - ITA No.323/MUM/2020 - - - Dated:- 24-8-2021 - Shri S.Rifaur Rahman (Accountant Member) And Shri Ravish Sood (Judicial Member) For the Assessee : Shri Anuj Kisnadwala, A.R For the Revenue : Shri Gurbinder Singh, D.R ORDER PER RAVISH SOOD, J.M: The present appeal filed by the revenue is directed against the order passed by the CIT(A)-52, Mumbai, dated 24.10.2019, which in turn arises from the order passed by the A.O u/s 143(3) of the Income Tax Act, 1961 (for short Act‟), dated 13.12.2017. The revenue has assailed the impugned order on the following grounds before us: 1. Whether on the facts and circumstances of the case and in law, the Ld. C.I.T(A) was justified in deleting the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT(A) has carried the matter in appeal before us. At the very outset of the hearing of the appeal, it was submitted by the ld. Authorized Representative (for short A.R‟) for the assessee that the issues involved in the present appeal were squarely covered by the orders passed by the Tribunal in the assessee‟s own case for the preceding years. In order to buttress his aforesaid claim the ld. A.R had drawn our attention to the orders passed by the Tribunal in the case of the assessee for A.Y. 2012-13 in ITA No. 6686/Mum/2013, dated 31.10.2018, A.Y. 2013-14 and A.Y. 2014-15 in ITA Nos. 7288 7289/Mum/2017 and ITA No. 209 210/Mum/2018, dated 23.04.2019. Our attention was drawn by the ld. A.R to the relevant observations of the Tribunal qua the issues involved in the present appeal before us. 6. Per contra, the ld. Departmental Representative (for short D.R‟) relied on the assessment order. 7. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head closing inventories‟. During the course of assessment proceedings, the Assessing Officer (AO) asked the assessee to explain as to why the Annual Letting Value (ALV) of such unsold flats/units cannot be taxed as income from house property as per the provisions of section 22 of the Act. In response to it, the appellant filed a reply stating that it is holding unsold flats/units as stock-in-trade to earn business income and not rental income. The same cannot be taxed on the basis of ALV notionally because the company is an occupant and such an occupation is in the course of business as builder and developer. Also most of the flats/units are sold in near future or remains to be sold on account of non-approval etc. The appellant also submitted evidence in the form of booking memos etc. in support of its claim that the same is sold in near future. However, the AO was not convinced with the above explanation of the appellant and relying on the decision in the case of Ansal Housing Finance Leasing Co. Ltd. (2013) 354 ITR 180 (Del), worked out the ALV at ₹ 2,21,53,896/- as the ALV of unsold flats/units and added sum of ₹ 1,55,07,727/- under the head In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of completion of construction of the property is obtained from the competent authority, shall be taken to nil. Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. In view of the above amendment to section 23, we are not adverting to the case laws relied on by the Ld. Counsel and Ld. DR. In the instant case, the assessee is in the business of real estate development. The issue of taxability is with regard to unsold flats/units of ₹ 1,85,95,17,274/- held by the appellant under the head Closing Inventories‟. The AY is 2012-13. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 narrated hereinbefore, we set aside the order of the Ld. CIT(A) and allow the 1st 2nd grounds of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of the assesses claim for deduction of interest expenditure of ₹ 2,22,40,835/-. 10. The revenue being aggrieved with the order of the CIT(A) to the extent he had vacated the disallowance made by the A.O of the assessee‟s claim for deduction of interest expenditure u/s 36(1)(iii) of ₹ 2,22,40,835/- has carried the matter in appeal before us. At the very outset, it was submitted by the ld. A.R that the interest free advance given by the assessee company pertained to the period prior to 31.03.2013. In other words, it was the claim of the ld. A.R that no part of the interest free advances were given by the assessee company subsequent to A.Y 2013-14. Adverting to the facts involved in the case of the assessee for A.Y. 2012-13, it was submitted by the ld. A.R that the assessee‟s claim for deduction of interest expenditure was disallowed by the A.O while framing the assessment for the said year u/s 143(3) of the Act. It was submitted by the ld. A.R that thereafter the CIT(A) had after considering the availability of sufficient self-owned and interest free funds with the assessee company vacated the disallowance of the assessee‟s claim for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13-14 and A.Y. 2014-15 disallowed the assessee‟s claim for deduction of interest expenditure u/s 36(1)(iii) of the Act as was done in the original assessment order that was passed by his predecessor u/s 143(3) of the Act for the said years. It was, however, submitted by the ld. A.R that though the directions given by the Tribunal in ITA No. 6686/Mum/2016, dated 31.08.2018 for A.Y. 2012-13 were considered in the course of the set-aside proceedings by the A.O, however, the view therein taken by the Hon‟ble High Court in CIT Vs. Reliance Utilities Power Ltd. 313 ITR 340 (Bom) (as was referred by the Tribunal in its order for A.Y 2012-13 in ITA no. 6686/Mum/2016) that in case of availability of mixed funds the presumption of utilization of self owned/interest free amounts available with the assessee for giving interest free advances was lost sight of by the A.O while framing the set-aside assessment for both of the aforementioned years. Be that as it may, it was submitted by the ld. A.R that the A.O in the course of the set-aside assessment for A.Y. 2014-15 had categorically observed that the assessee had advanced the interest free loans in earlier years. In the backdrop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,35,100 11. Devesh Agarwal 5,00,000 5,00,000 12. Dinesh Mehta 9,00,000 9,00,000 - 13. Giviben Chheda 5,63,000 5,63,000 14. Hukamatraj Mehta 6,00,000 6,00,000 15. Kamlesh Daftary 5,94,740 5,94,740 16. Kishor M. Purohit 2,05,000 2,05,000 17. Madhubala M. Chheda 95,000 95,000 18. Mahdhu Mehta 15,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 13,17,28,440 9,00,000 13,08,28,440 As observed by us hereinabove, the fact that the interest free loans had been advanced by the assessee in the previous assessment years i.e relevant to the years ended 31.03.2005, 31.03.2007, 31.03.2009 and 31.03.2010, and the assessee‟s claim qua availability of sufficient owned funds and interest free funds for giving such interest free loans had been accepted by the A.O vide his order passed u/s 143(3) r.w.s 254 of the Act, dated 05.07.2019 for A.Y 2012-13, wherein it was observed by him as under: The return of income was e-filed on 28.09.2012 declaring total income of ₹ 8,34,40,265/-. The assessee filed a revised return of income on 17.08.2013 declaring total income at ₹ 8,71,49,682/-. Subsequently, notice u/s. 143(2) of the Income Tax Act, 1961 was issued on 08.08.2013 which was duly served upon the assessee company. Thereafter, assessment was completed u/s 143(3) of the Act on 12.03.2015 at an assessed income of ₹ 12,53,03,690/- after making addition/disallowance on account annual letable value of ₹ 1,55,07, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.03.2009 and 31.03.2010. In this regard, assessee has explained that reserves surplus, share capital and non-interest bearing funds were more when compared to non-interest bearing fund i.e friendly loans. The case of assessee was that interest was not disallowed in the abomvetinoed assessment years and hence interest cannot be disallowed u/s 36(1)(iii). Hence, the case of assessee was covered as per the ratio laid down by the Hon‟ble apex court in the case of CIT Vs. reliance Utilities Power Ltd. 313 ITR 34. Furthermore, the proceedings in respect of earlier years care completed u/s 245D(4) of the I.T. Act, 1961 by the Hon‟ble Income Tax Settlement Commission wherein there was no addition/disallowance with regards to interest u/s 36(1)(iii) of the Act. Looking into the scenario, the case of the assessee was covered by the abovementioned two Apex Court pronouncements, the case of the assessee was squarely covered and hence, there will be no disallowance of interest u/s 36(1)(iii) of the IT Act, 1961. In the backdrop of the aforesaid acceptance of the assessee‟s claim by the A.O while giving effect to the direction of the Tribunal, vide his order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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