CLOVER DEVELOPERS P.LTD, MUMBAI V. ACIT 10(3), MUMBAI

ITA 4073/MUM/2012

• Counselvise Citation: 407319914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Condonation of delay
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 4073/M/1 2 ASSESSMENT YEAR: 2009 - 10 M/S. CLOVER DEVELOPERS PVT. LTD. FLAT NO.12, 1 ST FLOOR, PLOT NO.5 41/C, ASHOK BUILDING, EDENWALLA ROAD, MATUNGA, MUMBAI 400 019 PAN: AAACG1925B VS. ASSISTANT COMMISSIONER OF INCOME TAX 10(3), AAYAKAR BHAVAN, CHURCHGATE, MUMBAI (APPELLANT) (RESPONDENT) ASSES SEE BY : SHRI K. GOPAL REVENUE BY : SHRI SANJEEV JAIN DATE OF HEARING : 04.12.13 DATE OF PRONOUNCEMENT : 24.01.14 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) D ATED 28.02.12 RELEVANT TO ASSESSMENT YEAR 2009 - 10. 2. THERE IS A DELAY OF 17 DAYS IN PREFERRING THE PRESENT APPEAL BEFORE THIS T RIBUNAL. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY WHICH HAS NOT BEEN OPPOSED BY THE LD. DR ALSO. IN VIE W OF THE FACTS MENTIONED IN THE APPLICATION, THE DELAY OF 17 DAYS IN FILING THE APPEAL IS HEREBY CONDONED. 3 . THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : 1. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ADDITION AND CAL CULATION OF THE CAPITALIZATION OF INTEREST AT RS.76,04,210/ - WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE AND APPLICABLE LAWS. ITA NO. 4073/M/12 M/S. CLOVER DEVELOPERS P. LTD. 2 2. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GIVING DIRECTION TO DISPOSE OFF APPLICATION U/S. 154 IN RESPECT OF ADDITION OF DEPRECIATION OF RS.77,95,403/ - INSTEAD OF DEDUCTION OF THE SAME FROM THE TOTAL INCOME THOUGH HE HIMSELF SHOULD HAVE DISPOSED OFF THE SAME. 3. THE APPELLANT RESERVES THE RIGHT TO ADD, TO ALTER, OR AMEND THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT , CONSTRUCTION & GENERATION OF ELECTRICITY THROUGH WIND MILLS . THE A SSESSEE DEBITED INTEREST PAYMENT OF RS.1,02,87,081/ - TO ITS PROFIT AND LOSS ACCOUNT D URING THE ASSESSMENT YEAR UNDER CONSIDERATION . AO FOUND THAT ASSESSEE HAD CAPITALIZED COST OF CONSTRUCTION AMOUNTING TO RS.9,40,48,565/ - TOWARDS CAPITAL WORK IN PROGRESS FOR ITS OWN OFFICE PREMISES. AO FURTHER NOTED THAT NO INTERE ST EXPENDITURE HAD BEEN CAPITALIZED ALTHOUGH THE CAPITAL WIP WAS A PART OF THE TOTAL COST INCURRED BY THE ASSESSEE FOR CONSTRUCTION OF PROJECT IN QUESTION. HE ALSO NOTED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION , SECURED AND UNSECURED LOAN HAD IN CREASED BY RS.1.95 CRORES. HE FURTHER FOUND THAT THE ASSESSEE HAD NOT ESTABLISHED THAT BORROWED FUNDS WERE NOT UTILIZED FOR CAPITAL WIP , HENCE HE CALCULATED RATIO OF CAPITAL WIP TO THE TOTAL FUND AT 73.92% AND MADE DISALLOWANCE OF RS.76,04,210/ - OUT OF T HE TOTAL INTEREST PAID. 5 . IN APPEAL BEFORE THE CIT(A) , ASSESSEE SUBMITTED THAT IT HAD TAKEN LOAN FOR WINDMILL THAT SHOULD BE EXCLUDED AND INTEREST OF RS.19,80,431/ - EARNED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION SHOULD BE SET OFF AGAINST INTER E ST PAID . HOWEVER, CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE OBSERVING THAT NO SEPARATE ACCOUNT WAS MAINTAINED FOR THE WINDMILL BY THE ASSESSEE AND THE INTEREST EARNED HA D NO NEXUS WITH THE CAPITAL WIP. HE THEREFORE UPHELD THE DISALLOWANCE MA DE BY THE AO. ITA NO. 4073/M/12 M/S. CLOVER DEVELOPERS P. LTD. 3 6 . BEFORE US, THE LD. AR HAS SUBMITTED THAT THE INTEREST PAID ON THE LOAN FOR WINDMILL HAS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. HE HAS ALSO SUBMITTED THAT THE INTEREST EARNED DURING THE COURSE OF BUSINESS IS REQUIRED TO BE SET O FF AGAINST THE INTEREST PAID. SO FAR THE CAPITALIZATION OF THE INTEREST FOR THE EXPENDITURE INCURRED TOWARDS CAPITAL WIP IS CONCERNED, THE LD. AO HAS NOT CORRECTLY COMPUTED THE SAME. HE HAS RELIED UPON THE COMPUTATION/ CALCULATION METHOD AS DEMONSTRATED IN HIS LETTER DATED 27.2.2012 PLACED AT PAGES 19 TO 22 OF THE PAPER BOOK BEFORE US. ON THE OTHER HAND THE LD. D .R. HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND HAV E ALSO GONE THROUGH THE RECORD. SO FAR THE INTEREST PAID FOR LOAN ON WINDMILL AND THE INTER E ST EARNED DURING THE COURSE OF BUSINESS IS CONCERNED, IF THE SAME IS RELATED TO OR HAS NEXUS OR PAID OR EARNED, AS THE CASE MAY BE, IN THE COURSE OF BUSINESS OF THE ASSESSEE, THE INTEREST PAID IS REQUIRED TO BE EXCLUDED AND INTEREST EARNED IS REQUIRED TO BE SET OFF FROM THE TOTAL INTEREST EXPENDITURE FOR THE PURPOSE OF COMPUTING THE CAPITALIZATION OF THE CAPITAL WIP. THE ASSESSEE HAS PLACED ON FILE THE COMPUTATION/ CALCULATION M ETHOD VIDE LETTER DATED 17.12.2012. SO KEEPING IN VIEW THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO TO VERIFY ABOUT THE CLAIM OF THE ASSESSEE R EGARDING THE INTEREST PAID ON THE LOAN FOR WINDMILL AND INTEREST EARNED DURING THE COURSE OF BUSINESS AND IF THE SAME IS RELATED TO OR HAS NEXUS OR PAID OR EARNED, AS THE CASE MAY BE, IN THE COURSE OF BUSINESS OF THE ASSESSEE, THEN TO EXCLUDE THE INTERES T PAID AND SET OFF THE INTEREST EARNED FROM THE TOTAL INTEREST EXPENDITURE WHILE COMPUTING THE CAPITALIZATION OF THE CAPITAL WIP. THE A O WILL ALSO GO THROUGH THE COMPUTATION/CALCULATIONS SUBMITTED BY THE ASSESSEE AND WILL GIVE DUE ITA NO. 4073/M/12 M/S. CLOVER DEVELOPERS P. LTD. 4 OPPORTUNITY TO THE ASSE SSEE TO PRESENT ITS CASE THEN TO DECIDE THE SAME ON MERITS BY WAY OF A SPEAKING ORDER. 8 . AS REGARDS THE ADDING OF DEPRECIATION OF RS.77,95,403/ - , AS HA S BEEN CLAIMED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL THAT AN APPLICATION UNDER SECTION 154 WAS FILED BY IT ON THE SAME ISSUE BEFORE THE AO . L D. CIT(A) NOTED THAT THE SAID ISSUE WAS NOT DISCUSSED BY THE AO AND HENCE HE DIRECTED THE AO TO DISPOSE OFF THE APPLICATION. SINCE THE SAID APPLICATION HAS NOT YET BEEN DECIDED BY THE AO, WE DIRECT THAT THE SAME BE ALSO DECIDED ALONG WITH THE ISSUE RESTORED TO THE FILE OF THE AO AS OBSERVED ABOVE, PREFERABLY WITHIN 90 DAYS OF THE RECEIPT OF COPY OF THIS ORDER. 9 . T HE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.01.2014 . SD/ - SD/ - ( P.M. JAGTAP ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.01.2014 * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.