TaxTMI 
TaxTMI 
2019 (5) TMI 1274
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 260A of the Act raising the following purported substantial questions of law arising from the order of the Income Tax Appellate Tribunal dated 27.6.2018 for the Assessment Years 2010-2011 to 2012-2013:- "i) Whether in the circumstances of the case, the Tribunal was right in law in holding that the claim of Interest Expenditure was utilized in the business of the Assessee? ii) Whether the Tribunal was right in law in holding that the impugned interest expenditure is Capital in nature since the assessee has in its books, included the interest portion related to the impugned projects as its work in progress in its books, and claimed them as a deduction in the income computation memo for the purposes of tax payments? ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The most important aspect is that the impugned project is still in project stage during the impugned assessment years and hence this business is yet to commence its operations. Further, it has not claimed such interest as an expenditure in A.Ys 2007-08 & 2008-09. However, for A.Ys. 2010-11 onwards, it is claiming such interest expenditure that too, in the computation memo, i.e., outside the books of account. The Lower authorities rejected the assessee's claim as it is neither in accordance with the Accounting Standards nor with the statutory provisions of the Income Tax Act. The assessee challenges it. Let us examine this claim as under. ... .... .... 7.4 If we apply the above ratio to the facts of this case, as di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by their Auditors and the book results were also certified to give a true and fair view in conformity with the applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Indian Companies Act, 1956. The assessee has capitalized the interest portion related to the impugned projects during the period in A.Ys. 2008-09 and 2009-2010 in its books but did not claim such interest in the income computed for the purposes of tax payment for these assessment years. For period relevant to assessment years 2010- 11 to 2012-13, though the assessee has capitalized the interest portion related to the impugned projects in its books, it claimed them as an expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rect in their decisions that the assessee's claim through the income computation memo, is neither in accordance with the Accounting Standards nor with the statutory provisions of the Income Tax Act. Therefore, the corresponding grounds of the assessee fail for all these assessment years. 7.6 Since the assessee's claim is rejected for these A.Ys. the income if any, admitted by the assessee during these assessment years or in the subsequent years on reversal of interest claimed as deduction in the impugned years in the memo of computation of income, on due verification, be not charged to tax." 3. Learned counsel for the Appellant-Assessee, Mr.Vijayaraghavan urged before us that since the Assessee is engaged in the business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessment Years 2010-11 to 2012-13 in the case of the Assessee. Therefore, the provisions of Section 145A, prior to 1.4.2017, are quoted below for ready reference:- "145A. Method of accounting in certain cases - Notwithstanding anything to the contrary contained in Section 145-- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be-- (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the method of accounting followed by the Assessee, whether such interest on borrowed capital is capitalised in the books of account or not, the deduction of the same can be allowed only in the year in which such asset was first put to use and since admittedly, the Assessee has not sold the land in question or used it even by developing the plots in the Assessment Years in question, therefore, the land in question cannot be said to have been put to use in these years and thus, no such deduction can be allowed. 7. Having heard the learned counsel for the parties, we are of the opinion that there is considerable force in the submission of the learned Senior Standing Counsel for the Revenue. The Proviso to Section 36(1) of the Act incor....