Lanco Hills Technology Park Private Limited, Hyderabad V. Assistant Commisioner of Income Tax ,Circle 5(1), Hyderabad

ITA 174/Hyd/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7244 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2014-2015
• Appeal Filed On: 18-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: P.MURALI MOHANA RAO
• Keywords: Capital expenditure
• Section: 263; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ‘B’ BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER (Through Virtual Hearing) ITA No.174/Hyd/2021 (Assessment Year : 2014-15) M/s. Lanco Hills Technology Park Pvt. Ltd., Hyderabad. PAN AABCL 1228R .....Appellant. Vs. Asst. Commissioner of Income Tax, Circle 16(1), Hyderabad. .....Respondent. Appellant By : Shri P. Murali Mohana Rao (A.R.) Respondent By : Shri YVST Sai (D.R.) Date of Hearing : 16.11.2021. Date of Pronouncement : 30.11.2021. O R D E R Per Shri S.S. Godara, J.M. : This assessee’s appeal for Asst. Year 2014-15 arises from the Pr. Commissioner of Income Tax (Appeals)-4, Hyderabad’s order dt.30.03.2021 passed in case No.ITBA/REV/F/REV5/2020-21/1031896960(1) in proceedings under Section 263 of Income Tax Act, 1961 (‘the Act’). 2 ITA No.174/Hyd/2021 Heard both the parties. Case file perused. 2. We straight-away advert to the assessee's sole substantive grievance that PCIT herein had erred in law and on facts in directing the Assessing Officer to treat the assessee's interest expenditure adopted in the P&L Account to the tune of Rs.6811.51 lakhs (including Rs.2715.86 lakhs alleged to have incurred directly towards construction of SEZ property during the year ending as on 31.3.2014) as a capital item only. Relevant revisions direction to this effect read as under : “ 2. As per record, it is observed that as per Note 29 of Financial Statements for the year ended March 31, 2014, under the ‘Borrowing Costs’ you have stated that “Borrowing cost of Rs.6811.51 lakhs charged to the Profit and Loss Account, includes an amount of Rs.2715.86 lakhs which was incurred directly towards construction of SEZ Property during the year ended March 31, 2014”. As the amount of Rs.2715.86 lakhs pertains to construction of SEZ property, it needs to be capitalized and not allowable as revenue expenditure u/s.37(1). However, the said amount was neither added back in the 3 ITA No.174/Hyd/2021 4 ITA No.174/Hyd/2021 5 ITA No.174/Hyd/2021 6 ITA No.174/Hyd/2021 7 ITA No.174/Hyd/2021 8 ITA No.174/Hyd/2021 9 ITA No.174/Hyd/2021 10 ITA No.174/Hyd/2021 11 ITA No.174/Hyd/2021 3. Learned authorized representative has placed on record the corresponding 142(1) notice dt.1.7.2016 raising specific query(ies) of party-wise interest payment details followed by the assessee's reply dt.1.11.2016 to this effect. He thereafter quoted a catena of case law compiled in 2nd paper book running into 146 pages that such a detailed exercise undertaken by the Assessing Officer during 12 ITA No.174/Hyd/2021 scrutiny thereby not making any interest disallowance; does not attract section 263 revision jurisdiction in the given set of facts. 4. Learned CIT-DR has strongly supported the impugned revision direction mainly for the reason that the Assessing Officer had conducted inadequate enquiry qua the impugned interest issue. He sought to buttress the point that the legislature has inserted Explanation (2) to section 263(1) vide Finance Act, 2015 w.e.f. 1.6.2015 that an assessing authority has fail to examine the issue in proper perspective and therefore, the PCIT has rightly directed the Assessing Officer to disallow the interest amount in issue as capital expenditure only. 5. Coming to the assessee's argument that it has already succeeded in preceding and succeeding assessment years on the impugned interest disallowance in section 143(3) assessment appeal, Mr. Sai has specifically quoted 263 Explanation (1) clause (c) that the same had been 13 ITA No.174/Hyd/2021 “considered and decided” after the impugned revision directions. 6. We have given our thoughtful consideration to rival contentions. It is not in dispute that the learned PCIT herein has not directed the Assessing Officer to frame de novo assessment but to pass a consequential order disallowing the impugned interest amount itself being in the nature of capital expenditure only. There could be hardly any issue regarding settled legal proposition in light of Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) that assessment has to be both erroneous and causing prejudice to the interest of Revenue; simultaneously, before the CIT or the PCIT; as the case may be, invokes section 263 jurisdiction. There is yet another case law ITO Vs. DG Housing Projects Ltd. (2012) 343 ITR 323 (Del) defining the nature and scope of twin expressions “erroneous” and “prejudicial” to the interest of Revenue that it is not open for the CIT or PCIT to restore the matter once the assessing authority records any finding on merits. It is made clear 14 ITA No.174/Hyd/2021 that the PCIT’s directions in issue have reversed that assessment qua the interest issue on merits only. 7. We notice in this factual backdrop that the PCIT herein has himself undertaken a very detailed discussion to conclude that the assessee’s interest amount needs tobe capitalized only. There is nothing more left to the Assessing Officer to carryout qua consequential factual verification any more in other words any more. Faced with this situation only, we quote this tribunal’s co-ordinate bench order(s) in assessee's own case(s) involving ITA Nos.1125 & 1126/Hyd/2018 for Assessment Years 2007-08 and 2011- 12 dt.7.9.2021 deciding the instant issue against the department as under : “ 14. Coming to Assessment Year 2013-14 in ITA 1128/Hyd/2018, the assessee’s first and foremost substantive ground seeks to reverse interest disallowance incurred qua SEZ property under consideration amounting to Rs.11,81,00,000. The CIT(A)’s detailed discussion affirming the impugned disallowance reads as under : -- Space left intentionally – 15 ITA No.174/Hyd/2021 16 ITA No.174/Hyd/2021 17 ITA No.174/Hyd/2021 15. We have given our thoughtful consideration to rival pleadings against and in support of the impugned disallowance. The assessee’s only case is quotes Accounting Standard AS-16 issued by the Institute of Chartered Accounts of India. There is no denial of the fact that both the lower authorities hold the impugned interest as pertaining to the relevant fourth quarter only wherein there was no alleged active development as per the assessee's stand. The fact also remains that the learned lower authorities have not uttered even a slightest reason about the foregoing “Wakf” litigation’s “status quo order” (supra) constraining the assessee to suspend the real estate project 18 ITA No.174/Hyd/2021 development activity. Learned authorized representative vehemently contended before us that it was pendency of the Wakf proceedings as well as status quo order (supra) which primarily formed the main reason of suspension of the construction activity. Be that as it may, we are of the opinion that the foregoing AS-16 itself formed sufficient reason to claim its interest expenditure not under capital head on account of suspension of the construction activity. We thus accept assessee's instant former substantive ground.” We adopt the above detailed discussion in light of accounting standard AS-16 to conclude that the impugned interest expenditure deserves to be treated as a revenue item only. We thus reverse learned PCIT’s revision directions and restore the section 143(3) assessment as a necessary corollary. We thus accept the assessee's impugned substantive ground to this effect. No other ground has been pressed before us. 8. This assessee's appeal is allowed in above terms. Order pronounced in the open court on 30th Nov., 2021. Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) Accountant Member Judicial Member Hyderabad, Dt. 30.11.2021. * Reddy gp 19 ITA No.174/Hyd/2021 Copy to : 1. M/s. Lanco Hills Technology Park Pvt. Ltd., Plot No.4, Software Units Layout, Hitech City, Madhapur, Hyderabad-500 081 2. ACIT, Circle 16(1), Hyderabad. 3. Pr. C I T-4, Hyderabad. 4. CIT(Appeals) Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File. By Order Sr. Pvt. Secretary, ITAT, Hyderabad.