TaxTMI 
TaxTMI 
2025 (3) TMI 1775
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....Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of interest cost of Rs. 3,58,06,255/- without appreciating the facts that the borrowing cost of Rs. 3,58,06,255/- should not be incurred and allowable to be debit in P & L account if the project is already completed." 2. "Whether on the facts and in the circumstances of the case and in law the Ld. CITIA) was justified in deleting the disallowance of Rs. 1,13,53,417/- on account of capitalization of advertisement and marketing expenses without appreciating the fact that the expenses incurred by the assessee were not purely towards advertising its products but are deferred expenditure which are for expanding the business base arid propagating the brand name." 3. Grounds taken by the assessee in C.O. No. 275/MUM/2024 are reproduced as under: "1. On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the order of the Assessing Officer in respect of additions of Rs. 5,52,04,312/- made invoking the provisions of section 43CA of the Income Tax Act, 1961 on sale of immovable properties. The Ld. AO err....
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....ment. 5. On the issue relating to disallowance of interest cost, contention of assessee is that project undertaken had been completed for which occupancy certificate was received on 19.12.2016, relevant to Assessment Year 2017-18. According to the assessee, once the project is completed, capitalisation of finance cost to qualifying asset gets discharged and the same should be charged to profit and loss account as per Accounting Standard -16, issued by Institute of Chartered Accountants of India (ICAI). Thus, there cannot be capitalisation to work in progress for the year under consideration. On reference to facts of Assessment Year 2013-14 and 2014-15 made by the ld. Assessing Officer, assessee submitted that since the project was not completed during those years, addition was made on account of interest cost but was deleted at the appellate stage. 5.1. Revenue had gone into appeal before the Coordinate Bench of ITAT, Mumbai for Assessment Year 2013-14 and 2014-15 in ITA Nos. 8047/Mum/2019 and 7039/Mum/2018 which dealt with this issue, vide its order dated 12.07.2022. While dealing with this issue, Coordinate Bench took note of the accounting policy followed by the assessee f....
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....of Rs. 40,06,934/- out of the total interest cost on the basis of inflow, project out flow, cumulative funds utilization. As per the Guidance Note on Accounting for Real Estate transactions issued by ICAI, the project cost which are directly attributable to the project shall only be capitalized. (refer 2.2 project cost revised in 2012) wherein it has been clearly stated under (b) Borrowing cost" "in accordance with Accounting Standard-16, borrowing cost which are incurred directly in relation to the project or which are apportioned to a project". Only the cost which are directly attributable to the project should be capitalized to the cost of WIP and hence the assessee has debited the financial cost which are not directly attributable to the project. It is noted that the financial cost of Rs. 40,06,934/- out of the total Rs. 2,88,03,287/- has been capitalized and became part of the WIP since it was directly related to the project whereas the financial cost of Rs. 2,47,96,353/- was debited to the P & L account since it was not directly attributable to the project. We find that the AO was aware of the fact that assessee has capitalized only Rs. 40,06,934/- out of the total financial ....
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....wability of any deduction is to be decided based on the provisions of the Act. In the present case, since the funds were borrowed for the purpose of projects undertaken by the assessee, therefore, the interest paid on such borrowing is allowable under section 36(1)(iii) of the Act, in view of the aforesaid decision of Hon'ble jurisdictional High Court. Accordingly, the AO is directed to grant the deduction under section 36(1)(iii) of the Act in respect of the interest expenditure claimed by the assessee. As a result, ground No. 2 raised in assessee's appeal is allowed." 5.4. Ld. CIT(A) thus, by following the above referred decisions both by Hon'ble Jurisdictional High Court of Bombay and the Coordinate Bench, allowed the deduction of interest paid by the assessee on capital borrowed and deleted the addition so made. 6. In the given set of facts and circumstances and issue being already dealt in assessee own case for the preceding two years, as well as considering the decisions relied upon by ld. CIT(A) which covers the case of the assessee, we do not find any reason to interfere with the findings arrived at by the ld. CIT(A) in deleting the addition made by ld. As....
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....nate Bench in the case of ITO vs. Niche Health Option Pvt. Ltd., in ITA No.1373/Mum/2020 for Assessment Year 2014-15, dated 29.06.2022, wherein by taking note of the fact that Revenue had accepted the action of ld. CIT(A) for one Assessment Year and did not prefer any appeal before the Tribunal but preferred an appeal on the same issue in another Assessment Year, the Tribunal held that the issue is not maintainable in law and rejected the issue in limine. Thus, by following the decision in the case of Niche Health Option (supra) ground raised by the Revenue on this issue was dismissed as not maintainable. 8. Considering the facts on record and submissions made by the assessee as well as judicial precedents relied upon, both in the assessee's own case as well as well as that of Niche Health Option Pvt. Ltd. (supra) and Somnath Buildtech Pvt. Ltd. (supra), so also considering Guidance Note issued by ICAI dealing with treatment of such expenses for capitalisation, we are in agreement with the submissions so made by the assessee, more particularly, when the project had been completed in the year under consideration. The dispute is not on the genuineness of the expenses so incurred b....