AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1063
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....d the same to the construction Work-in-Progress relying on the decision M/s. Hiranandani Palace Garden Pvt. Ltd. even though the Department has filed appeal u/s 260A of the Act in the case before High Court on the issue vide ITAXL/ 1257/2016 dated 14.09.2016. 2. "Whether on the facts and circumstances of the case and in law, the CIT(A) was right in treating interest income of Rs. 23,62,179,/- earned by the assessee on fixed deposits placed with bank out of temporary surplus in business as 'Business Income" as against "Income from Other Sources" relying on the decision of ITAT in the case of M/s. Hiranandani Palace Garden Pvt. Ltd. even though the Department has filed appeal u/s.260A of the Act in the case before High Court on the issue vide ITAXL/1257/2016 dated 14/09/2016. 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a private limited company engaged in the business of real estate development. The return of income was filed by the assessee for A.Y.2015-16 on 29/09/2015 declaring total loss of Rs. 7,12,59,752/-. The assessment was completed u/s.143(3) of the Act on 30/06/2017 assessing total income at Rs. 23,83,88....
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....ee also placed reliance on the Guidance Note on "Accounting for real estate transactions" issued by the Institute of Chartered Accountants of India (ICAI) wherein it has been specifically pointed out that the following costs should not be considered as part of construction cost and development cost if they are material: (a) General administration costs; selling cost; (b) Depreciation of idle plant and equipment; (c) Cost of unconsumed or uninstalled material delivered at site; and (d) Payment made to sub-contractors in advance of work performed. Thus, as per the above guidelines, the administrative and selling expenses have been specifically excluded from the cost of inventory for work for closing WIP. Further as per AS-7 vide paragraph 19 it has been mentioned that the general administrative cost and selling cost does not constitute the cost of the project. Therefore, as per Guidance note, AS-2 and even AS-7, the general administrative expenses and selling expenses are not project cost and are to be charged to the profit and loss account in the very same year in which they are incurred. 3.4. Despite the aforesaid submissions, the ld. AO proceeded to disallow the entire a....
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....n of the Hon'ble Tribunal. We consider it appropriate to refer to the observations of the CIT(A) at page 11 para 8.3. to 8.4. which is read as under:- "8.3. I have noted that a similar issue had come up for adjudication before the Hon'ble ITAT Mumbai Bench "H" in one of the group concern of the Appellant. The Hon'ble ITAT, Mumbai "H" Bench in ITA No. 4579/M/2013 in the case of M/s Hiranandani Palace Gardens P. Ltd. Vs ACIT(OSD), Circle 3(1), Mumbai for the A.Y. 2009-10, vide order dated 30.12.2015 had held as under:- "11. We have considered rival contentions and carefully gone through the orders of the authorities below. The percentage completion method of accounting has been regularly followed by the assesses. In the succeeding assessment year 2010- 11, the AO has accepted the deductibility of the identical nature of expenses in the assessment order passed u/s 143(3) of the IT. Act. We agree with contention of the Id. Counsel for the assessee that the employee cost refers to salary paid to the employees who are looking after the administration of office and not directly related to construction of the project but is part of the administrative expenses. Similarly, the of....
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....r of the assessee." 8.4 Thus, this issue is covered in favour of the Appellant by the order of the Hon'ble ITAT, Mumbai in the case of M/s Hiranandani Palace Gardens P. Ltd., referred supra. Accordingly, the Ground No. 1 of the present appeal is allowed. 9. The Ld. DR could not controvert the findings of the CIT(A) with any cogent material or new tangible information and relied on the officer order. We find the CIT(A) has dealt on the provisions facts, Accounting standards and the Co-ordinate Bench decision of this Hon'ble Tribunal in the group companies case and granted the relief and passed a reasoned order .We respectfully fallow the judicial precedence and are not inclined to interfere with the order of the CIT(A) and uphold the same and dismissed the grounds of appeal of the Revenue. 4.1. Respectfully following the aforesaid decision, the ground No.1 raised by the Revenue is dismissed. 5. With regard to the taxability of interest of income on fixed deposits amounting to Rs. 23,62,179/-, we find that the same was invested out of surplus funds available with the assessee. Admittedly, the surplus funds had been generated by the assessee out of its business. Hence, i....
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.... placed by the ld. DR on the said decision does not advance the case of the Revenue. 5.1. We also find that the very same issue was subject matter of adjudication by this Tribunal in the case of DCIT vs. Saudela Constructions Pvt. Ltd., in ITA No.5058-5061/Mum/2019 dated 29/10/2021 wherein it was held as under:- "12. The issue raised in ground No.5 is against the deletion of Rs. 55,04,550/- by Ld. CIT(A) as added by the AO on account of interest income on fixed deposits. 13. The facts in brief are that during the year under consideration the assessee earned income by way of interest on fixed deposits of Rs. 55,04,550/- which was reduced from project work in progress . According to the AO the said interest income should be taxed as income from other sources and accordingly a show cause notice was issued. The assessee replied the show cause notice by submitting that the assessee has raised huge funds and there is a gap between raising of funds and deployment of funds. During the intervening period these funds are to be kept in the fixed deposits in order to reduce the interest cost of borrowings. The assessee submitted that the income from these fixed deposits are directly due t....