BIRLA INFRASTRUCTURE LTD ( EARLIER KNOWN AS BCI INTERNAITONAL LTD), MUMBAI V. ITO 1(1)(1),

ITA 1542/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88178 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 19-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: K SHIVARAM

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIVEK VARMA , JM ITA NO. 1542 / MUM/20 1 1 ( ASSESSMENT YEAR : 20 04 - 05 ) M/S BIRLA INFRASTRUCTURE LTD. (EARLIER KNOWN AS BCI INTERNATIONAL LTD.), 159, INDUSTRY HOUSE, CHURCHGATE RECLAMATION, MUMBAI - 400020 VS. ITO 1(1)(1), MUMBAI PAN/GIR NO. : A A BCB 2081 Q ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI K.SHIVARAM /REVENUE BY : SHRI PAVAN KUMAR BEERLA DATE OF HEARING : 19 / 11 /201 4 DATE OF PRONOUNCEMENT : 21 /01/2015 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 31 - 8 - 20 10 , FOR THE ASSESSMENT YEAR 20 04 - 05 , IN THE MATTER OF ORDER PASSED U/S. 14 3(3) OF THE I.T.ACT . 2. IN GROUND NO.1, ASSESSEE IS AGGRIEVED FOR DISALLOWANCE OF INTEREST OF RS. 21,77,370/ - . FACTS IN BRIEF ARE THAT ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON DEVELOPM ENT ON PROJECT COMPLETION METHOD. DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE COMPANY HAS DISCLOSED ITS INCOME ON COMPLETION METHOD OF JUHU PROJECT, WHEREIN FINANCIAL CHARGES - HAVE BEEN CLAIMED. IN THE ASSESSMENT ORDER, THE A.O. OBSERVED THAT THE ITA NO. 1542 /20 1 1 2 ASSESSEE IS RUNNING MATUNGA PROJECT WHEREIN WIP OF MATUNGA PROJECT I S RS.3, 15,89,734/ - . THE A.O. VERY SPECIFICALLY OBSERVED THAT THE APPELLANT COMPANY MERELY RECEIVED CREDIT OF ADVANCES FOR MATUNGA PROJECT OF RS.57,49,603/ - ONLY. IN ADDITION TO THIS, THE A.O. HAS TAKEN NOTE OF THE ASSESSEE COMPANY BALANCE SHEET, WHEREIN T HE A.O. NOTICED CAPITAL OF RS.IO LAKHS AND RESERVES & SURPLUS OF RS.19,20,442/ - ONLY. THUS, HE CONCLUDED THAT THE ASSESSEE COMPANY'S OWN FUND IS ONLY RS.29,20,422I - IN ADDITION TO ADVANCES RECEIVED AGAINST MATUNGA PROJECT OFRS.57,49,603/ - . THE A.O. VERY SP ECIFICALLY MENTIONED THAT ASSESSEE 'S BORROWING IS RS.3,28,35,307/ - FROM COMPANY MIS LAKSHMI PROPERTIES LTD. TO WHICH THE INTEREST OF RS. 70,40,236/ - HAS BEEN PAID. THE A.O. HAS VERY CATEGORICALLY MADE DETAILED ANALYSIS OF ASSESSEE 'S OWN FUND, CAPITAL AND R ESERVES AND SURPLUS, WIP OF MATUNGA PROJECT, BORROWINGS OF THE ASSESSEE 'S COMPANY AND ITS UTILIZATION IN DETAIL ON PAGE - 2 & 3 OF THE ASSESSMENT ORDER, WHICH IS BASED ON ASSESSEES OWN SUBMISSION, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE CO MPANY FOR THE YEAR ENDING 31.03.2004 AND THEREAFTER DISALLOWED INTEREST CLAIM OF RS.21,77,370/ - ON THE PLEA THAT SUCH INTEREST PERTAINS TO MATUNGA PROJECT WHICH WAS IN PROGRESS DURING THE YEAR AND PROFIT OF WHICH WAS NOT OFFERED FOR TAXATION DURING THE YEA R. 3. BY THE IMPUGNED ORDER AFTER CALLING REMAND REPORT, THE CIT(A) RECORDED A FINDING TO THE EFFECT THAT THE AO HAS TAKEN NOTE OF EVEN CASH FLOW STATEMENT AND AFTER DETAILED ANALYSIS OF THE SAME, THE AO HAS VERY SPECIFICALLY REPORTED THAT OUT OF THE TOT AL BORROWED FUNDS OF RS . 3 ,28, 35 . 3 07/ - FROM LAKSHRNI PROPERTIES LTD., THE APPELLANT HAS UTILIZED ITA NO. 1542 /20 1 1 3 ONLY 1 CRORE TOWARDS REPAYMENT OF INTER CORPORATE DEPOSITS. HE ALSO TRIED TO PROVE VERY SPECIFICALLY IN ITS REPORT DATED 11/03/2010 THAT RS.2,01,35,307 / - ONLY W AS UTILIZED TOWARDS JUHU PROJECT. FURTHER TO THAT, I ALSO INTEND TO POINT OUT THAT ASSESSEE 'S THIS CONTENTION THAT LOAN BORROWED FROM HDFC OF RS. 1 ,15,00,000 / - WAS ONLY UTILIZED FOR MATUNGA PROJECT AGAINST TOTAL WIP OF RS. 3, 15,89,734 / - IS NOT TENABLE. HAVIN G PERUSED T HE TERM LOAN AGREEMENT DATED 23/ 01/04 BETWEEN THE ASSESSEE COMPANY AND H D FC, IT IS EVIDENT THAT MERELY RS . 40 LACS WAS GIVEN TO THE ASSESSEE COMPANY AS ON 23/01 / 04 VIDE CHEQUE NO .0483409 BY HDFC WHEN THE REMAINING LOAN 75 LACS WAS DISBURSED TO TH E ASSESSEE COMPANY IS NOT EVIDENT FROM THE DETAILS FILED BY THE ASSESSEE . IN ADDITION TO THIS, THE A.O.'S REPORT CLEARLY SUGGEST THAT THE ASSESSEE COMPANY WAS HAVING ITS CAPITAL AND RESERVES AND SURPLUS TO RS.29,20,422/ - ONLY, WHERE AS WIP OF MATUNG A PROJE CT WAS RS .3,15,89,734/ - . ACCORDINGLY, CIT(A) UPHELD THE DISALLOWANCE OF CLAIM OF INTEREST, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AS WELL AS ORDER OF THE LOWER AUTHORITIES AND THE REMAND REPORT SENT BY THE A O AND FOUND THAT T HE A.O. HAS VERY CATEGORICALLY ANALYZED WIP, THE SOURCE AVAILABLE FOR INVESTMENT BY THE ASSESSEE COMPANY. IN VIEW OF ALL THESE FACTS AND SUBMISSION AVAILABLE, THE CIT(A) OBSERVED THAT THE A.O. WAS JUSTIFIED IN AL LOCATING EXPENSES OF RS.21 ,77,3 70 / - ON MATUNGA PROJECT AS INTEREST COST, WHICH DESERVES TO BE ALLOCATED IN THIS ACCOUNT I.E. MATUNGA PR OJECT . IN VIEW OF THE FACT THAT THE ASSESSEE WAS OFFERING INCOME ON THE COMPLETION OF THE PROJECT AND ONCE THE INTEREST COST IS ATTRIBUTED TO THE M ATUNGA PROJECT, ITA NO. 1542 /20 1 1 4 WHICH DESERVES TO BE ADDED IN THE AMOUNT OF WORK - IN - PROGRESS OF MATUNGA PROJECT. W E FOUND THAT THE MATUNGA PROJECT HAS BEEN COMPLETED IN THE ASSESSMENT YEAR 2007 - 08. ACCORDINGLY, WE DIRECT THE AO TO INCREASE OPENING BALANCE OF WORK - IN - PROGR ESS OF MATUNGA PROJECT FOR THE ASSESSMENT YEAR 2007 - 08 AND TO ALLOW CLAIM OF DEDUCTION WHILE COMPUTING PROFIT OF MATUNGA PROJECT FOR THE ASSESSMENT YEAR 2007 - 08. WE DIRECT ACCORDINGLY. 5. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF RS. 2,54,500/ - AS PRIOR PERIOD EXPENSES. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FOUND THAT THE AO IN ITS ASSESSMENT ORDER HAS STATED THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSES INCURRED BY M/S LAKSHRNI PROPERTIES LTD. PRIOR TO ENTERING INTO THE DEVELOPMENT AGREEMENT WITH IT. 1. PATKI & DADARKAR TECH CONSULTANTS P.LTD 1,75,700 PAID IN 1993 2. N.B.DHARMADHIKARI 55,000 PAID IN 1996 & 1997 3. M.G.MEMANI 23,800 PAID IN 1998 2,54,500 SINCE THE ABOVE E XPENSES RELATE TO THE PERIOD PRIOR TO THE DATE OF DEVELOPMENT AGREEMENT WITH M/ S. LAKSHMI PROPERITES LTD, THE ASSESSEE WAS NOT HAVING ANY LEGAL LIABILITY OF RS.2,54,500/ - TOWARDS M/ S. LAXMI PROJECTS . THE CIT(A) HAS ALSO CONFIRMED THE FINDING OF AO. ACCORD INGLY, NO INTERFERENCE IS REQUIRED IN THE ORDER OF CIT(A) CONFIRMING DISALLOWANCE OF RS. 2,54,500/ - . 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES . ITA NO. 1542 /20 1 1 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST JANUARY . 201 5 . 21 ST JAN,201 5 SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMB AI ; DATED 21 / 01/201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//