TaxTMI 
TaxTMI 
2013 (6) TMI 827
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....stances of the case and in law the Ld CIT(A) erred in allowing the appeal of the assessee on the issue of disallowance of Rs. 15,84,783/- made by the Assessing Officer on account of interest expenses. 2. The brief facts of the case are that the assessee is a builder and developer. The return of income was filed at a net loss of Rs. 20,18,990/-. The case of the assessee was selected for scrutiny under CASS system. During assessment proceedings, the Assessing Officer observed that assessee had shown sales consideration of Rs. 54,94,000/- in the P&L Account and from the perusal of agreements for sale of properties, he observed that the value of sale consideration declared by the assessee and value adopted for stamp duty purposes was different and therefore vide order sheet entry dated 10.12.2010 the assessee was show caused as to why circle rate be not adopted as the sale consideration along the lines of section 50C of the Income Tax Act, 1961. The assessee in its reply dated 16.12.2010 submitted that provisions of section 50C were not applicable to the assessee as the sales related to stock in trade and was not capital asset. The Assessing Officer held that application of provisio....
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....struction during the year under consideration. No part of this property was sold during the year." The assessee company has also debited interest of Rs. 16,75,411/- in P&L A/c as per following details:- 1. Vijaya Bank Rs. 57,295/- amount used for running the present business. 2. ICICI Bank Rs. 90,658/- paid on car loan, 3. HDFC Banbk Rs. 7938/- amount used for running of the business. 4. On unsecured Loans. Rs. 15,19,250/- loan taken to run the business. Thus in view of the above assessee company has itself capitalized Rs. 1,25,14,759/- and debited only Rs. 16,75, 411/- to P&L A/c. The interest capitalized was for the period prior to the project being ready for sale and was considered as part of the cost of the project. The above treatment is in consonance with guidelines laid down for distinction between capital revenue and revenue expenditure." 5. The Assessing Officer, however, did not accept the submission of assessee and made the addition of Rs. 15,84,483/- being interest paid on unsecured loans by holding as under:- "The submission of the assessee has been examined and can not be accepted....
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....ficer's query had submitted complete details of opening and closing stock of inventory and due to a clerical over-sight incorrectly referred to floor-wise area as a saleable area of opening stock of various projects. It was further submitted that weight adjusted area mentioned was for allocation of cost of land to various floors of a particular project and which method of allocation had been consistently followed by the assessee. A reconciliation statement stating that there is no difference in land area was also filed before Ld CIT(A). With regard to third addition of Rs. 15,84,483/- the Ld AR submitted that interest expenditure was incurred bona fide for meeting the business needs of the appellant company and company had already commenced its business and therefore the disallowance of interest by the Assessing Officer was unjustified. The Ld CIT(A) on the basis of various submissions and after going through the relevant material deleted the additions made by the Assessing Officer by holding as under:- "I have considered the various submissions of the Ld AR of the appellant and the discussion in the assessment order. Section 50C is a deeming provision as per which:- ....
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....es which were Part of stock in trade arose on account of the fact that the appellant has used weight adjusted factors for properties at different floors (100% for ground floor 60% each for basement, 1st and 2nd floors, 42% for 3rd floor etc.) for the purpose of allocation of land cost and consequent valuation of the properties by applying the rate per sq. ft. The appellant also stated that this method of valuation had been followed by it in the earlier years also on which no adverse view had been taken by that department. I am in agreement with the appellant that once a particular method of valuation of opening and closing stock had been adopted by it year after year (i.e. assigning of weight factors to properties on floors other than the ground floor) which had been accepted by the department, no addition on this account can be made to the income of the appellant during the year under appeal. As regards the property on 6th floor in Nipun Tower, it has been submitted that the same was sold for Rs. 2,50,000/- during the year which value is included in the sale consideration and that copy of the sale deed was furnished before the Assessing Officer as well as before me. In the light o....
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....area constructed and area sold starting from assessment year 2004-05 were placed and in view of this he argued that Ld CIT(A) had rightly deleted the addition. 13. As regards ground No.3, the Ld AR submitted that appellant had already capitalized interest of Rs. 1,25,,14,759/- being interest on loans directly used for purchase of property and which was still under construction during the year and interest of Rs. 16,75,411/- on account of interest was paid on loans used for running the business and therefore the Ld CIT(A) had rightly deleted the addition. 14. We have duly considered the rival contentions and gone through the record carefully. According to the asessee, it is engaged in the business of Real Estate Development and on sale of stock, section 50C is not applicable. The Assessing Officer has confronted the assessee for showing reasons as to why sale consideration has been shown even lower than the sale value adopted for the purpose of registration of the sale deed. It was contended by the assessee that section 50C is not applicable. The Ld. Assessing Officer has observed that he is not applying section 50C for determining the true sale value of the property. He took ....