TaxTMI 
TaxTMI 
2018 (4) TMI 694
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....rd perused. Facts in brief are that assessee is a partnership firm engaged in the business activity of construction and development of residential and commercial buildings. The firm was incorporated on 01/10/2005. The assessee had one on-going project during the year at Wadala. The firm had also given Advance towards Purchase of property to M/s Cenzer Reality and M/s Shanti & Santosh Builders in FY 09-10. The assessee has paid Rs. 1 Crore to M/s Lakdawala Developers P Ltd for acquiring development right under SRA scheme of the property at Wadala, Mumbai. For the same an MOU was also entered on 14.02.2008 which was submitted to the AO. The project at Wadala was under Green zone therefore, stuck for want of Environmental clearance till date (....
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....id for AY 2012-13 on the plea that agreement under which advance was given had been cancelled. The AO also reopened the assessment u/s 147 for AY 10-11 & 11-12. After reopening, the AO added interest so paid in these two years also. 7. The addition of interest was confirmed by CIT(A), in all the three years under consideration, against which assessee is in further appeal before us. 8. We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that assessee is in the business activity of construction and development residential and commercial buildings is a partnership firm. During the scrutiny assessment proceedings'. AO observed that the assessee has paid Rs. 1 Crore to M....
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.... claimed as expenditure in the years under consideration and was left to be claimed as expenditure when sales take place as per the Matching Concept of Income and Expenditure. 10. We had also gone through the terms of the MOU so entered by the assessee firm, we found that the construction activity could not be started due to environmental clearance and other permissions, deals were cancelled subsequently 3 years later. The AO disallowed the interest expenditure treating the same as not in the course of current business of the assessee which is the development of the property at Wadala. We do not find any justification for the disallowance so made by the AO. Assessee had submitted all necessary details and supporting evidences before the AO....
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....enditure. Where assessee was in real estate business, interest paid on borrowed capital invested in immovable properties was allowable as deduction." 12. Hon'ble Bombay High Court in the case of CIT v/s Lokhandwala Constructions Inds. Ltd (260 ITR 579)(Bom.) held as under:- "While adjudicating the claim for deduction u/s 36(1)(iii), the nature of the expenses, whether the expenses are on capital account or revenue account is irrelevant. On the facts the assessee undertook two fold activities. It bought and sold flats. Secondly the assessee was also engaged in construction business. As the loan was taken for obtaining stock in trade the assessee was entitled to deduction u/s 36(l)(iii)". 13. Hon'ble Bombay Tribunal in ITA No.623/Mum/20....
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....Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its proflt. The income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. 16. From the material placed on record, we found that assessee has brought on record all the evidences to the effect that funds were borrowed for the purpose of business and investment was made for the purpose of business only and subsequently due to adverse market conditions the project did not materialise and the assessee was co....
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....s Cost to the future years and not been claimed as expenditure for this year. Since the amount is not at all debited to the Profit & Loss A/c, the addition of the Interest Paid to the income of assessee firm by the Assessing Officer is bad in law. 19. Pune Tribunal in the case of Gera Developments Pvt. Ltd., vs. JCIT (2014) (ITA No.598/PN/2013) held as under:- "There is no dispute to the proposition that the said payment has not been claimed as a revenue expenditure while computing the income chargeable under the head 'Profits and gains of business or profession' in this year and therefore the same would not fall for consideration in section 40(a)(i) of the Act. Thus, by adverting to the aforesaid short point, we do not find any ....