Tax Tribunal Rules in Favor of Assessee in Appeal Against CIT Order

The appeal against the order of the Ld. CIT(A)-III Baroda dated 22-02-2010, involving the addition of Rs. 14,13,600 and interest disallowance of Rs. 13,62,808, was decided in favor of the assessee. The Tribunal upheld the deletion of the addition of Rs. 14,13,600, as the assessee was deemed a developer and not a contractor, making AS-7 inapplicable. Additionally, the interest disallowance of Rs. 13,62,808 was also deleted, as there were no borrowings with payable interest. The Revenue's appeal was dismissed in both instances.

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Issues involved: Appeal against order of Ld. CIT(A)-III Baroda dated 22-02-2010 regarding addition of Rs. 14,13,600 and interest disallowance of Rs. 13,62,808.

Addition of Rs. 14,13,600:
The assessee, engaged in sale/purchase of TDR and construction activity, showed WIP at Rs. 1,99,97,296 without profit, claiming project completion method. AO rejected this, applying 8% profit rate on booking advance of Rs. 1,76,70,003. Ld. CIT(A) deleted the addition based on precedent where it was held that the assessee, a developer, not a contractor, so AS-7 not applicable. Tribunal upheld this, stating AS-9 applies, as no construction activity was carried out. Revenue's appeal dismissed.

Interest disallowance of Rs. 13,62,808:
AO disallowed interest paid to M.C.G.M. and on advances, citing lack of interest charged on loans given. Ld. CIT(A) deleted disallowance, noting no interest paid on loans and no diversion of interest-bearing funds. Tribunal upheld this, as no borrowings with interest payable existed. Revenue's appeal dismissed.

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