TaxTMI 
TaxTMI 
2018 (7) TMI 953
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....nterest expenditure amounting to Rs. 6,98,342/incurred towards 'Lucky Shoppe' acquired as stock in trade ?" 2. This appeal relates to Assessment Year 1988-89. 3. The appellant is a partnership firm and engaged in construction activity. The appellant filed its return of income for the subject Assessment Year declaring an income of Rs. 15,280/. Subsequently revised return of income was filed by the appellant declaring a loss of Rs. 2.30 Lakhs. In the revised return, the appellant had claimed amount of Rs. 9.52 Lakhs as interest expenditure allowable under Section 36(1)(iii) of the Act and an amount of Rs. 2.16 of interest was capitalized. During the course of assessment proceedings on being so called upon by the Assessing Officer, t....
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.... the taxable income of Rs. 7.76 Lakhs. 4. Being aggrieved with the Assessment Order dated 31.3.1993, the appellant filed an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 19.7.1993 the CIT(A) found that interest paid on land was being allowed as revenue expenditure in the earlier Assessment Years and it was only in the subject Assessment Year that the Assessing Officer for the first time treated the same as work in progress and capitalized the same. The CIT(A) held that the interest paid on the loan taken for the purpose of its stock-in-trade i.e., plot of land for the 'Lucky Shoppe' project has to be allowed as expenditure to determine its income. In support reliance was placed on the decision of th....
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....llowable as a deduction. In any case, it is submitted that prior to Assessment Year 2004-05, interest under Section 36(1)(iii) of the Act was allowable as deduction in respect of any amount paid as interest for the purpose of its business irrespective of it being on capital or revenue account. 7. On the other hand, Mr. Pinto the learned counsel for the Respondent supports the impugned order on the ground that interest of Rs. 6.98 Lakhs has been correctly disallowed. This on the basis of the finding of fact by the Tribunal that no work has commenced on the plot of land relating to Lucky Shoppe. Consequently, leading to the conclusion that interest amounts paid towards acquisition of Lucky Shoppe plot of land can be allowed as expenditure, a....
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....stances as held by the CIT(A), the same has to be allowed as revenue expenditure. However, the Tribunal in the impugned order has completely ignored the above findings and applied the test of the Assessing Officer namely that it is only if work is commenced on Lucky Shoppe project, would the same be allowed as revenue expenditure and not otherwise. This specifically on the basis of the manner in which accounts are maintained by the Appellant. In fact Mr.Pinto also supports the impugned order on the basis of the manner of accounting followed by the Appellant. As held by the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. v. CIT 82 ITR 363 the entries in the books of accounts will not determine the assessee's entitlement to deducti....
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....eduction under Section 36(1)(iii) of the Act. This is so as it was incurred for the purposes of its business. 10. Mr. Pinto's submission is that the deduction under Section 36(1)(iii) of the Act will not be available as no income has been earned in respect of Lucky Shoppe project. We are unable to appreciate this submission. It is an undisputed position that the appellant-assessee has filed return of income declaring income under the head income from business. The appellant has various projects executing construction projects and, therefore, interest expenditure is to be allowed as deduction to arrive at profits and gains of business or profession of builders carried out by the Appellants. It is not a case where the only project of the....