2023 (7) TMI 493

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.... appeals through various grounds is against the lower authorities holding that the interest cost should not be capitalized for the purpose of cost of acquisition of investments made in the subsidiary in form of Share Capital. The assessee is a builder engaged in the business of real estate. The assessee filed the return of income for A.Y. 2012-13 on 30/09/2012 declaring a loss of Rs.9,95,03,032/- and for A.Y. 2014-15, the return was filed on 30/09/2014 declaring a total income at Nil. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the course of hearing, the Assessing Officer noticed that the assessee had capitalized the interest on borrowings by adding the same to the investment made in....

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....itted that for the purpose of income tax in the computation of income also the assessee has not claimed this as an allowable expenditure. Therefore, the Ld.AR argued that the lower authorities holding that the interest should not be capitalized is not warranted since there has not been any taxable event concerning the cost of acquisition that has happened in the years under consideration for the Revenue to hold so. 5. The Ld.DR, on the other hand, vehemently argued that the interest on money borrowed for investment in share capital cannot be capitalized and be part of cost of acquisition. Ld.DR also drew our attention to the fact that the assessee for the earlier years have not capitalized the interest and has done only during the years ....

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....there is an impact to the amount offered to tax by the assessee during the years under consideration. In other words, when in the years under consideration there is no taxable event that is adversely affected by the capitalization of interest by the assessee in the books of accounts, the CIT(A) / AO cannot hold that the interest capitalized cannot be part of the cost of acquisition. The impugned capitalization is merely an accounting treatment and does not have any impact on the income offered to tax during the years under consideration. 7. We also notice that the assessee is not aggrieved by the treatment as held by the lower authorities since there is no addition / disallowance arising out of the order of the CIT(A). Therefore, we will....