TaxTMI 
TaxTMI 
2018 (3) TMI 67
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....ed in (i) confirming the action of the Assessing Officer (AO) in reducing the amount of Work-In-Progress (WIP) by Rs. 1,10,02,425/- incurred towards brokerage and (ii) confirming the action of the AO in reducing the amount of WIP by Rs. 7,35,52,483/- being interest incurred on loan borrowed towards the project. 3. Briefly stated, the facts of the case are that the AO found during the course of assessment proceedings that the appellant had debited Rs. 96,93,12,794/- as expenditure on project completed. As per the details, it debited Rs. 1,10,02,425/- as 'brokerage on lease' and Rs. 2,33,36,658/- as 'interest account' and Rs. 5,02,15,825/- as 'interest on loan'. The appellant had paid the brokerage amount of Rs. 1,10,02,425/- to C B Richards....
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....rom income under the head 'Income from house property', capitalizing the same interest to WIP would result into dual claim of the same amount. Therefore, the AO reduced Rs. 7,35,52,483/- from WIP. Thus he restricted the expenditure done on project completed during the year to Rs. 88,47,57,886/-. 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) has held that once the aspect of income having been earned from house property is found, deductions have to be limited to those which are specified in section 24. The expenditure of brokerage on lease is not one of the qualifying expenditures. Therefore, the Ld. CIT(A) confirmed the disallowance of brokerage done by the AO and also the reduction ....
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....P of 'Knowledge Park' building'. The appellant required funds to complete the construction of the building so that the units could be sold/leased at an early date and therefore, borrowed funds for the same. Interest on borrowed funds for the project is certainly a cost incurred for the project and need to be added to the total WIP. The Ld. counsel further submits that the appellant has claimed deduction of the interest from the license fees received while computing the income under the head ''Income from house property'. Further, the appellant has added the same to WIP of the building 'Knowledge Park' and the same also will be fully allowable as cost. As the premises have been constructed and developed for lease purposes, rent and compens....
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....he Ld. DR submits that WIP is an item of business transaction and the AO has computed the WIP with regard to the business transaction of the appellant. Since the expenses have already been claimed u/s 24(b), it cannot be claimed as business expenses subsequently. Therefore, the AO has rightly reduced the amount from the business WIP which will form part of business project costs in future. It is stated by him that the appellant can always account the interest expenses in the cost of acquisition of property for the purpose of capital gains u/s 48 of the Act even if the same is not shown in WIP as proof of such expenses is evident from the fact that it has been claimed u/s 24(b) of the Act. The Ld. DR also distinguishes on facts the decision....
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....n mixed income arising out of profits and gains of business and real estate as well as income from house property. Under such circumstances, usual statutory deduction as allowable under different heads had to be taken note of. The types of business being carried on by the assessee is to be found from articles of associations and also from the audit report. Section 14 provides for several heads of income. Usual statutory deduction as allowable under different heads has to be taken note of. Income from house property is one such heads whereas gains from business and profession is another head. Section 24 of the Act is applicable when the income in exclusively derived from house property as mentioned in section 22. 7.1 Broadly stated the issu....
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....ise and * The cost can be measured reliably. * Other borrowing cost should be expensed in the period in which they are incurred * When the carrying amount or the expected ultimate cost of the qualifying asset exceeds the recoverable amount, the carrying amount is written off or written down in accordance with AS-28 (Impairment of Assets) * The amount of borrowing cost to be capitalized depends upon- - Type of borrowed funds - Expenditure on qualifying assets - Period taken to complete the acquisition construction or production - Income from temporary investments of borrowings pending their expenditure on qualifying assets. 7.5 The Hon'ble Supreme Court in the case of Challapalli Sugars Ltd v CIT [1975] 98 ITR 167 (S....