TaxTMI 
TaxTMI 
2020 (4) TMI 27
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....gs before learned CIT(A) had arisen from assessment order dated 13.12.2017 passed by learned Assessing Officer (hereinafter called "the AO") u/s.143(3) of the Income-tax Act, 1961 (hereinafter called "the Act"). 2. The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Chennai (hereinafter called "the Tribunal") read as under:- "1. The Learned Commissioner of Income Tax (Appeals) is not justified in confirming the disallowance of Rs. 62,21,334/- allegedly as-interest on amounts borrowed for acquisition of assets when the alleged assets are stock in trade of the appellant, 2. The Learned Commissioner of Income Tax (Appeals) has no basis to conclude construction of flats i....
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....dings as fixed assets which is opposed to facts on record. 9. In any event the order of CIT (A) is devoid of merits, bereft of facts and made without due regard to the facts and circumstances of the case at the law applicable thereto. 10. For these grounds and for such other grounds that may be adduced at the time of hearing, it is prayed that the order of the Commissioner of Income Tax (Appeals) be modified accordingly". 3. The assessee is engaged in business of construction of building. The assessee had claimed interest expenses of Rs. 62,21,334/- as deduction while computing income for the year under consideration u/s.36(1)(iii) of the 1961 Act. The AO observed that assessee has obtained interest bearing loans from b....
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....nterest expenses be not disallowed , for which, show cause notice was issued by AO to the assessee. The assessee in reply submitted that these five projects are ongoing projects and are yet to be completed. The details submitted to that effect by the assessee is as under: (a) Sri Annamalai Tower only ground floor completed (other 4 floors yet to be completed). (b) Nataraja Residency - 15 Units (14 completed). (c) Easwar Residency - 9 Units (8 completed (sold earlier 1 + 3 units this year) - (Rental income admitted for admitted for 4 units). (d) Kannan Residency - 9 units (3 sold in earlier years) - 6 units rental income admitted. 5. The assessee also agreed with disallowance of the interest as under: ....
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....ing as under: "5. Adjudication: 5.1 The appellant had claimed Rs. 62,21,334/- as interest expenses under section 36(l)(iii) of the IT Act. As per above section, any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession whether capitalized in the books of accounts or not for any period beginning from the date on which the capital was borrowed from acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. 5.2 It has been found by the AO that the loan outstanding in the case of appellant was Rs. 4,28,12,344/- as on 31/3/2015. The appellant had paid Rs. 62,21,334/- as interest fo....
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....ion. Appellant's claim that some units were completed is not with any evidence and the appellant is not following the percentage completion method to claim the benefit of capitalization for each project. As detailed in page 4 of the assessment order, the appellant had not given any proof regarding the completion and also there was no proportionate rental income offered. 5.5 AO has rightly rejected the claim of Rs. 44,89,250/- as notional income offered by the appellant to explain the source of own funds. Subsequent withdrawal of such a disclosure for taxation has no relevance on the issue at hand. 5.6 Interest paid on capital borrowed for setting up a new unit in same line of business, before it is put to use, is to be....
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....is required to follow percentage completion method. 10. We have considered rival contentions and perused the material on record. We have observed that assessee is engaged in business of construction of building as a real estate business. The assessee is undertaking five projects during the year under consideration. The projects are for construction of flats which are at various stage of completion and are held as inventory for sale purposes and hence these 'ongoing projects' are on revenue field and are current assets held by assessee . The assessee has borrowed interest bearing loans from banks and other parties, on which interest expenses has been incurred to the tune of Rs. 62,21,334/- which was charged to Profit and Loss Account and ....