9911796707
TMI Blog2023 (7) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... peal has raised the following substantive grounds of appeal: "1. On the facts and circumstances of the case, the Learned CIT(A) erred in upholding the contention of the Assessing Officer, regarding disallowance of interest of Rs. 7,07,06,250/- claimed in Profit and Loss Account and Capitalizing in Inventory of work-in-progress. 2. On the facts and circumstances of the case, the Learned CIT(A) erred in not appreciating that Accounting Standards are relevant for the preparation of Financial Statement, not for allowability of interest expenses incurred for the purpose of business and allowable Under Section 36(1)(iii) of the Act. 3. That the Learned CIT(A) did not consider the submission of the Appellant that Tax Accounting Standards a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant craves leave to add, amend or alter any of the grounds of the appeal." I.T.A. No. 3153/DEL/2018 (A.Y. 2012-13) 4. Brief facts of the case are that the assessee company is engaged in the business of Real Estate Activity for executing Group Housing Project as a financing partner. For AY 2012-13, it has filed its return of income declaring a loss of Rs. 7,97,95,666/- in the computation of income. Assessment proceedings were initiated against the assessee and the assessment order was passed u/s 143(3) read with Section 144C of the Act dated 23.03.2016. The AO made an addition on account of arm's length adjustment of interest u/s 92CA(3) of the Act amounting to Rs. 7,07,06,250/- and disallowance of interest amounting to Rs. 8,44,36, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject as income. It further submitted that the assessee company raised 75,00,00,000/- and used the entire amount for the purpose of business as the same has been advanced to JDA Partner Ram Prastha Promoters and Developers Pvt. Ltd. for execution of real asset projects and in the said process no capital has come in existence. Therefore, the finding of the A.O. that the assessee has not recognized revenue in the profit and loss account in the year under consideration cannot be a ground for disallowance of interest claimed as business expenses under the head "income from business". The ld. Counsel further submitted that the assessee cannot recognize revenue during the process of civil project since the customers are paying installments of boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of Rs. 7,07,06,250/-. The Ld. CIT(A) deleted the addition u/s 92CA(3) of Rs. 7,07,06,250/- and sustained the disallowing of interest of Rs. 8,44,36,408/- (wrongly stated as 1,37,30,158/-). 12. The assessee paid a total interest of Rs. 9,37,50,000/- to Decolexus Ltd. on Compulsorily Convertible Debentures of Rs. 75,00,00,000/-. Of this, the assessee capitalized interest of Rs. 93,13,592/- proportionately in work-in-progress on construction activities (as per Schedule of Project Implementation Expenses) and an amount of Rs. 8,44,36,408/- was claimed in Profit and loss Account. 13. It is the specific case of the assessee the Assessee had used the entire Rs.75 Crores for the purpose of business as the same has been advanced to JDA partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognition. The ld. DRP upheld the action of the AO disallowing interest expenses in the year but allowed the assessee to set off the interest expenses as and when the revenue is recognized for the purposes of taxation. 17. Under the matching concept, revenue and income earned during an accounting period, irrespective of actual cash in-flow, is required to be compared with expenses incurred during the same period, irrespective of actual out-flow of cash. In the instant case, it is an admitted position that the assessee has not offered revenue from the project to tax on the grounds that it is the first year of operations and less than 15% of the project is completed. Therefore, applying the matching principle, the interest incurred needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2013-14) 20. Both parties have agreed that the facts of AY 2013-14 are similar to those of AY 2012-13 and the Assessee has raised the identical grounds of Appeal in the present Appeal as well. 21. Since we have remanded the matter to the file of the AO for Assessment Year 2012-13 with a direction to verify whether the expenditure incurred and claimed in the nature of interest is for completion of the project (on which no income has been offered for tax during the year) or for buying a capital asset or for any other business activity and accordingly applying the law, the same direction mutatis mutandis applies to AY 2013-14. 22. In the result, the appeal in I.T.A. No. 7197/DEL/2017 (A.Y. 2013- 14) filed by the assessee is allowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
