2022 (11) TMI 766

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.... of Income Tax, Central Circle 7(3), Mumbai (hereinafter referred to as ld. AO). Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. 2. The only identical issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the disallowance of interest expenses which in the opinion of the ld. AO is capital in nature, in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessment order in this case has been passed in the name of M/s Lodha Buildcon Private Limited u/s 143(3) of the Act dated 29.03.2016. This name was changed to MMR Social Housing Private Limited with effect from 06.12.2018. Subsequently this company got merged with Macrotech Developers Limited vide merger order dated 20.04.2022 passed by the Hon'ble National Company Law Tribunal (NCLT) Mumbai, effective from 30.04.2022 having appointed date as 01.04.2021. The assessee had duly intimated the fact of the aforesaid merger vide letter dated 24.06.2022. In view of these facts, the present appella....

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....he year of incurrence thereof as it admittedly pertains to the stock in trade of the assessee. The assessee relied on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs Lokhandwala Construction Ind. Ltd reported in 260 ITR 579 (Bom) in support of its contentions. On the contrary, the ld. AO relied on the decision of Special Bench of Mumbai Tribunal in the case of M/s Wall Street Construction Ltd reported in 102 TTJ 505 (Mum) (SB) and disallowed the interest of Rs 5,00,78,994/- by capitalizing it to work in progress. 4.1. We find that the ld. CIT(A) had granted relief to the assessee by placing reliance on the decision of this tribunal in assessee's own case in ITA No. 1310/Mum/2021 for Asst Year 2014-15 dated 08.04.2022. Before us, the ld. DR vehemently relied on the decision of Special Bench of this Tribunal as referred supra and also submitted that the decision of Hon'ble Jurisdictional High Court in the case of Lokhandwala Construction referred supra is not applicable relied upon by the ld. AR is factually distinguishable. In view of this, we deem it fit to address the applicability of decision of Lokhandwala Construction to the facts of the present case.....

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.... The only activity carried on by the assessee is development of residential project named as 'Casa Royale' at Thane. b) The loan borrowed by the assessee from Bank and from group concerns was utilized only for the purpose of residential project. Hence utilization of borrowed funds for the purpose of business is not in dispute. c) The project constitutes stock in trade of the assessee. d) Interest is paid on the project of the assessee which is held as stock in trade of the assessee. 4.5. We find that all these factors had been considered by this tribunal in assessee's own case for Asst Year 2014-15 in ITA No. 1310/Mum/2021 dated 08.04.2022, apart from factually distinguishing the heavy reliance placed by the ld. DR on the decision of Special Bench in the case of Wall Street Construction. The facts prevailing in that case, the judgements relied upon by both the parties and the decision rendered by this tribunal for Asst Year 2014-15 are as under:- 5. The Assessing Officer vide order dated 28 December 2016 passed under section 143(3) of the Act disagree with the submission made by the assessee and held that the assessee has not followed the corr....

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....iven similar treatment and thus the expenses should be allowed in the year in which the corresponding income is offered to tax. 9. We have considered the rival submissions and perused the material available on record. In the present case, the assessee has followed percentage of completion method for the purposes of recognising the revenue from its project. We find that in similar facts and circumstances, the Co-ordinate Bench of Tribunal in CIT v/s National Standard Private Limited in ITA No.3048/Mum./2019 vide order dated 5 April 2021 dismissed the appeal filed by the Revenue and allowed the claim of deduction under section 36(1)(iii) of the Act, by observing as under: "4.2 The Ld. CIT(A), after noticing the ratio of decisions of Hon'ble Bombay High Court in CIT V/s Lokhandwala Construction Ind. Ltd. (260 ITR 0579), decision of Tribunal in M/s. Ashish Builders Private Ltd. (ITA No.310/M/ 2012); Rohan Estates (ITA ITA No.3048/Mum/2019 M/s. National Standard India Private Limited Assessment Year: 2013-14 No.7200/Mum/ 2010) & Pune Tribunal in M/s Kolte Patil Developers Ltd. concurred with assessee's submissions and held as under:- 5.7. From the abov....

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....onsideration of material facts, it is quite evident that the assessee was following percentage of completion method of accounting to recognize revenue from operations as against the case law of Tribunal Special Bench in M/s Wall Street Construction Limited (102 TTJ 505) which deal with a case wherein the assessee was following completed contract method and therefore, the said decision was not applicable to the facts of the case, as rightly held by learned first appellate authority. 6. Proceeding further, it is undisputed fact that the assessee was engaged in real estate construction and had borrowed capital for business purposes. No other diversion of income has been alleged by Ld. AO. As noted by Ld. CIT(A), the interest was paid to debenture holders, financial institutions as well as unsecured loan creditors and the loan was utilized for business purposes. The funds were borrowed for the purpose of construction and have gone into the projects of the assessee which constitute assessee's stock-in-trade and not capital asset. In view of these clear cut findings, the adjudication of Ld. CIT(A) could not be faulted with. Another important fact is that the assessee has fol....