DCIT, KOLKATA V. FORUM IT PARKS PRIVATE LIMITED, KOLKATA

ITA 1241/KOL/2024

AI Insights

The case involves appeals by the Revenue against the orders of the CIT(A) for the assessment years 2011-12 and 2012-13, concerning the disallowance of interest expenses on unsecured loans by the Assessing Officer (AO). The AO had disallowed the interest expenses amounting to 4,17,85,850/-, noting that the assessee had advanced interest-free loans to group companies while claiming interest on unsecured loans. The CIT(A) reversed the AO's decision, finding that the interest expenses were part of the capital work-in-progress and not claimed in the profit and loss account. The Tribunal upheld the CIT(A)'s decision, agreeing that the AO had not rejected the books of account under section 145(3) and that the interest expenses were correctly added to the capital work-in-progress.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786442 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJA SENGUPTA
• Assessee Lawyers: SOUMITRA CHOUDHURY
• Keywords: Rejection of books of accounts
• Section: 143(3); 153A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI DUVVURU RL REDDY, VP AND SHRI RAJESH KUMAR, AM ITA Nos.1240 & 1241/KOL/2024 (Assessment Years: 2011-12 & 2012-13) DCIT, Kolkata 5th Floor, Room No.516, 110, Shantipally, Aayakar Bhawan Poorva, Kolkata-700107 West Bengal Vs. Forum IT Parks Private Limited, Kolkata 4/1, Red Cross Place, Dalhousie, Kolkata-700001,West Bengal (Appellant) (Respondent) PAN No. AABCF0730C Assessee by : Shri Soumitra Choudhury, AR Revenue by : Shri Raja Sengupta, DR Date of hearing: 21.08.2025 Date of pronouncement: 20.11.2025 O R D E R Per Rajesh Kumar, AM: These are appeals preferred by the Revenue against the orders of the Commissioner of Income-tax (Appeals), Kolkata-21(hereinafter referred to as the “Ld. CIT(A)”]even dated 22.11.2023 for A.Ys. 2011- 12 & 2012-13. 02. At the outset, we observe from the appeal folder that there are delays of 124 days and 129 days for A.Y. 2011-12 and 2012-13 respectively in filing the appeals by the department and in support of this a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay may be condoned being Printed from counselvise.com Page | 2 ITA No.1240 & 1241/KOL/2024 Forum IT Parks Private Limited; AYs 2011-12 & 2012-13 for bonafide reasons. The ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeals for hearing. 03. As the facts and circumstances are similar in both the appeals of the Revenue, hence, they are clubbed and decided together, First we will take ITA No.1240/KOL/2024 and will decide the issue accordingly. ITA No. 1241/KOL/2024 04. The only issue raised by the Revenue in the various grounds of appeal is against the deletion of ₹4,17,85,850/- as made by the ld. AO by disallowing the interest expenses on unsecured loans. 05. The facts in brief are that a search action u/s 132(1) of the Act was carried out in the business premises of the assessee. The notice u/s 153A of the Act was issued on 17.06.2013, which was complied with by filing the return of income on 20.08.2011, disclosing loss of ₹1,45,027/-. Thereafter, notice u/s 143(2) and 143(1) of the Act along with questionnaire were issued. The assessee replied the same. The ld. AO observed that the assessee company claimed interest on secured loans amounting to ₹3,52,29,372/- and interest on unsecured loan of ₹46,24,495/-. The ld. AO noted that the loan was taken from the Forum Project Holding Pvt. ltd. a majority shareholder of the assessee company. The ld. AO further noted that the assessee advanced money / deposits to group companies M/s Forum Project Pvt. Ltd. amounting to ₹53.25 crores and Forum Project Holding Pvt. ltd. amounting to ₹24.00 crores, without charging any interest from these companies. Accordingly, show cause notice was issued on 11.02.2014, asking the assessee as to why the interest paid on unsecured loans may not be disallowed. The assessee replied the said Printed from counselvise.com Page | 3 ITA No.1240 & 1241/KOL/2024 Forum IT Parks Private Limited; AYs 2011-12 & 2012-13 show cause notice. The assessee company engaged Forum Projects Pvt. ltd for management and execution of its project at Bantala IT SEZ vide project management agreement dated 27.12.2007. In terms of the said agreement the assessee provided interest free refundable mobilization amount of ₹32.25 crores to enable the project manager for setting up critical infrastructure, capital and construction equipment and other initial setting of cost. The said amount is refundable and spread over stipulated period as agreed in the agreement. The payment of ₹21.00 crores to Forum Projects Pvt. ltd in the form of performance deposit in terms of the above agreement and interest free deposits of ₹24.00 crores to Forum Project Holding Pvt. ltd. were given pursuant to tripartite agreement between Form IT parks, Forum Projects Pvt. ltd and K2B Commercial executed on 27.12.2007. The assessee submitted before the ld. AO that interest free advance / deposits were given as per the above agreement and accordingly, the same is to be allowed as part of capital work-in- progress. However, explanation of the assessee was rejected by the ld. AO and interest amounting to ₹4,17,85,850/- which comprises of ₹3,52,29,372 + ₹65,56,478/- was disallowed and capital work in progress were reduced to that extent. 06. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by observing and holding as under:- “So, interest free refundable mobilization amount of Rs.32.25 crores was paid to enable the project manager for setting up critical infrastructure, capital and construction equipment and other initial setting of cost, and that the said amount was refundable and spread over stipulated period as agreed in the agreement, Performance deposit of Rs.21 crores, mentioned that the project manager is always ready and capable of services as per agreement but on account of delay commencernent of project it could not render any services and Interest free deposit of Rs.24 crores to Forum Holding Project Pvt. Ltd. was given pursuant to tripartite agreement between Assessee, Forum Projects Holdings and K28 Commercial dated 27.12.2007. The fact that the above-mentioned payments were made as per the tripartite agreement Printed from counselvise.com Page | 4 ITA No.1240 & 1241/KOL/2024 Forum IT Parks Private Limited; AYs 2011-12 & 2012-13 between Assessee, Forum Projects Holdings and K2B Commercial dated 27.12.2007 has not been disputed by the AO. The contention of the AO is that assessee's interest-bearing loan funds had been diverted as interest free loans given and therefore the AO prima facie observed that the interest paid on such loans was not allowable. The appellant in its submission has furnished documentary evidences to substantiate that interest earned on unsecured loans by M/s Forum Project Holdings Pvt. Ltd and M/s Saraf Agencies Pvt. Ltd were offered to tax by the said concerns. On perusal of the assessment order and the documents submitted by the appellant, it is observed that the appellant is following completed contract method, which allows all revenue and expense recognition to be deferred until the completion of a contract. Therefore, such interest expenses were in actuality not claimed and were part of the capital WIP. To disallow such interest expenses which were part of Capital Work in Progress, the AO was required to reject the books of account u/s 145(3). The AO has however disallowed the said interest expenses without rejecting the books of account u/s 145(3). Owing to the said reason, the action of the AO cannot be sustained and stands deleted. These grounds are therefore allowed. Ground 7 is general in nature and needs no adjudication.” 07. After hearing the rival contentions and perusing the materials available on record, we find that the ld. CIT (A) has passed a very reasoned and speaking order holding that the assessee is following project completion contract method which allows revenue and expenses recognition to be deferred until the completion of a project/contract. The ld. CIT (A) noted that the interest expenses were not actually clamed and were in fact added to the capital work- in-progress. Therefore, the ld. CIT (A) rightly recorded the finding that the ld. AO should have rejected the books of accounts u/s 143(3) of the Act, which is not been done and accordingly, deleted the addition. We are in full agreement with the conclusion drawn by the ld. CIT (A). Accordingly, the appeal of the Revenue is dismissed by upholding the order of ld CIT(A). Printed from counselvise.com Page | 5 ITA No.1240 & 1241/KOL/2024 Forum IT Parks Private Limited; AYs 2011-12 & 2012-13 ITA No. 1241/KOL/2024 08. The issue raised in this appeal is similar to one as decided by us in ITA No. 1240/KOL/2024. Accordingly, our decision would, mutatis mutandis, apply to this appeal of revenue in ITA No. 1241/KOL/2024 as well. Hence, the appeal of Revenue in ITA No. 1241/Kol/2024 is dismissed. 09. In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 21.11.2025. Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE PRESIDENT) (ACCOUNTANT MEMBER) Kolkata, Dated: 21.11.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "