Tewari and Gangahar Infrastructure Pvt. Ltd., New Delhi V. ACIT, Circle- 25(2), New Delhi

ITA 4605/DEL/2018

AI Insights

The case involves Tewari and Gangahar Infrastructure Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) - IX, New Delhi, concerning the assessment year 2014-15. The primary issue was the disallowance of interest on secured loans amounting to Rs. 28,80,527, which the assessee claimed was incurred for business purposes. The Assessing Officer had treated these interest expenses as capital in nature, attributing them to ongoing development projects, and thus disallowed them. The Tribunal examined whether these interest expenses should be capitalized with the cost of the development project or treated as revenue expenses. After considering the submissions and precedents, the Tribunal concluded that the interest expenses were rightly claimed as revenue expenditure by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121676 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-09-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 20-06-2018
• Other Referred Cases: CIT vs. Lokhandwala Construction Inds. Ltd. (2003) 260 ITR 579 (Bom)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 27; 15; 201; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.4605/DEL/2018 Assessment Year 2014-15 Tewari and Gangahar Infrastructure Pvt. Ltd. Tewari House, 11 B/8, Pusa Road, New Delhi. Vs. ACIT, Circle-25(2), New Delhi. TAN/PAN: AACCT2615F (Appellant) (Respondent) Appellant by: Shri Manish Malik, Adv Shri Pankaj Jain, ITP Respondent by: Shri Anuj Garg, Sr.DR Date of hearing: 13 09 2023 Date of pronouncement: 20 09 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he c a p ti o n e d a p pe a l h as b e e n fi le d b y t he a ss es se e ag ai n s t t h e or d e r o f t h e C o mm i ss io ne r o f In co me T a x (A pp ea l s) - IX , N e w D e l hi [‘ C IT (A ) ’ in s h o rt ] d a t e d 3 1. 0 5 . 20 1 8 ar is i n g f ro m the a ss e s s me n t or d e r d a t e d 2 9 . 1 2. 2 0 1 6 pa sse d b y t he A sse s si ng O ff ic e r ( A O ) un de r S ec t i on 1 4 3( 3 ) o f t he I nc o m e T a x A c t, 1 96 1 ( t he A c t) c on c e r n i n g A Y 201 4- 1 5. 2. A s pe r t h e g ro un d s o f a p p ea l , t he a ss e ss e e h a s cha l l e n ge d t he di s a l l o w a n c e o f i n t e re st o f s e c u r e d l oa n st at e d t o b e i n c u r r ed f o r t h e pu r po se s o f b u s i ne s s a mo u n t i ng t o R s. 28, 8 0, 5 2 7 / -. 3. B ri e f l y s ta t e d, t h e a ss es se e f i l e d r e t ur n o f i nco m e de c l ar in g l os s o f Rs . 3 3, 22 , 0 7 0 / - for t h e A s se ss m e n t Y e a r 2 01 4-1 5 i n q u e s t io n. I.T.A. No.4605/Del/2018 2 Th e re t ur n so fi l e d w as su b j e c te d t o sc r u t i n y a s se ss m e nt . I n t he c ou r s e o f t h e sc ru t i ny a ss es s m e n t , th e A ss es si n g O ffi c e r i nt e r al i a ob s er ve d t h a t t he a sse ss e e - c o mp a ny i s in t h e pr oc e ss o f de v e l op in g a gr i c ul t ur a l l a nd l o c at e d at a n o u t sk i r t o f A mr i t sar for t h e p u r p os e s o f re si de n t i a l co l o n y h a v i n g t w o p r o j e c t s n a m e l y , Me ga p ro j e c t an d G lo ba l P ro j e c t. T h e a s se ss ee - co mp an y ha s o bt ai ne d se c ur e d l o a n fr o m N BF C n a me l y, Re l i an ce C a p it a l Lt d . to c o m p l e t e t he pr oj e c t s i n ha nd a n d h a s i n c urr ed i n t e r e st o n su c h l o a n t ak en fo r t h e p ur po se s o f d ev e l o p m en t o f l a nd i n t he y e a r 20 0 8. T he A ss e s si ng O f fi c e r th us ob s er ve d t h a t t he i n te re st e x p e n se s t o t he t u ne o f R s. 2 8, 80 , 5 2 7 / - a r e a tt ri b u t a b l e t o t he on g oi ng d ev el o p m e n t p r oj e ct s a nd t hu s ar e c a pi t a l i n n a tu r e a n d h en c e w ro n g l y cl a i me d t o b e i n r e v e n ue fi e l d. T he i nt er e s t e xp en se s a r e t hu s di sa l l o w e d. 4. A g gri e v e d, t he a ss e ss e e p r e f e r re d a p pe a l b e f or e th e CI T( A ). Th e C IT (A ) how e v e r d e c l i ne d fo r a n y r e l i e f . 5. F u rt h e r a g gr i ev ed , t he a s se sse e h a s k n oc k e d t h e d oo r o f t he Tr i bu n a l . 6. W h e n t h e ma t te r w a s c al l e d for h e ar i n g, t h e l d . c o u n se l f or t h e a ss es se e a t t h e o u t se t r e f er re d t o t h e s a n c t i o ne d le t te r fr o m t he N BF C, R el i a nc e C a p i t a l L t d . t o s ub mi t t ha t th e c o mpa n y h a s ob t a i ne d l ic e n se f o r d e v el op me nt o f M E G A Ci t y fr o m P u nj ab U r b a n D ev e l o p m e n t A u t h o ri t y ( P U D A ) fo r d ev e l o p m en t o f 1 2 1. 08 a c r e s o f l an d a n d t he a fo r e s a id l oa n fro m Re l i a nc e Ca p it a l Lt d . w a s u t i l iz e d fo r d is b u r s e m e n t a ga i ns t d e m a nd n ot e ra i s e d b y P U D A. Th e M EG A Ci t y P r oj e ct w a s t h e o nl y p r o j e c t a t t h e r e l e va nt ti m e a n d t h e o t h e r pr o j e c t na m e l y , G lo ba l C i t y h ad n o t c o m me nc e d, t he l o a n w as th us sol e l y u t i l iz e d f o r M EG A Ci ty P r o j ec t . I n t hi s b ac kd r op , t h e l d. c ou n s el fur t h e r s u b m i t t e d t ha t t h e a sse ss e e h a s g e ne ra t e d r e v e n ue i nc o m e fr o m th e s a l e o f i nv e n t o r y i n M E G A Ci t y P r oje c t a n d h a s I.T.A. No.4605/Del/2018 3 be e n du ly ac c o un t ed a s i nc o m e fr o m r e v e n u e o pe r a t i on s. T h e c or r e sp on d i ng i n t e r e st c o st at t r i b u t ab l e a nd li nk ed t o su c h r e v e n ue i nc o m e w a s t hu s r i gh tl y c l a i me d as re v e n u e e x pe nd itu r e . T he l d. c ou n s el ne xt s ub mi t t e d t h a t si mi l a r i n t er e s t o f di ff e r en t a m o un t w e r e de b i t ed i n F i n a n c i al Y e a r 2 0 07 -0 8 o nw a r d s a nd t h e sa m e w e re a ll ow e d a g a in st t he re v e n u e ge n e r at e d fr o m t he M E G A Ci t y P r o j e ct i n al l th es e y e a rs. T he a ss e s s m en t u n d e r S e c t i o n 143 ( 3) w e r e c a r ri e d ou t fo r A s se ss m e n t Y e a r 20 1 5 - 1 6 a s w el l as 2 01 7 - 18 an d t he i n te r e st e xp e n se s c l a i m e d i n t h o s e y e ar s w e r e a l s o a l l o w e d an d t h er e fo r e, t he do c t r i n e o f p r i nc ip l e o f c on s is t e nc y s h o ul d no t b e d is t ur b e d w i t h o ut a ny t a n g i b l e r e a so n . Th e l d. c o u n se l a l so r e fe r r e d t o th e j ud g m en t a s re n d e r e d in t h e c as e o f C IT v s. L o kh a n d wa l a C on st ru ct i o n I n ds. L t d. (2 0 03 ) 2 6 0 IT R 5 79 (B om ) fo r t h e pr o p os i t i o n t ha t w he re t he a ss es se e - c o m p a n y w a s e nga ge d i n c on str uc t i o n o f b u il di ng an d un d e r t o ok a p r o j e c t a nd ob ta i ne d c e r t a i n l o a n s fo r su c h w ork i n pr o gr es s a n d w he r e t h e pr oj ec t ob t a i ne d c o n s ti t ut e d s t o c k- i n -t ra d e , t he i nt e re st p ai d o n bo r r ow e d c a pi ta l w a s a ll ow a b l e de du c t i on u n d e r S ec t i on 3 6 (1 )( i i i ) o f t h e A ct . T h e l d . c o u nse l s ub mi t t e d t h a t t he f a c t s a re i d e n t i c al i n th e pr e se n t c a s e a n d t he a ss e s se e h as a ls o s how n t h e i nv e n t o r y in t he n at ur e o f t r a d i n g a ss et . T h e l d . cou n se l t h u s su b mi t t e d t ha t t he re sp e c t i v e or d er s o f bo t h t he l ow e r a ut ho ri t i e s su f fe rs fr o m t he v i c e o f mi su n d e r st a n di n g o f fa ct s a n d l a w an d t h u s re q u i r e s t o be m o d i fi e d . 7. T he l d. D R fo r t h e R e v en ue , on t h e ot he r ha n d , re l i e d up on t he or d e r o f t h e a ut h o ri t i e s b e l o w . 8. W e h a v e co ns i d e r e d t h e r iv al s u b m iss i o ns a n d p e ru se d t h e ma t e r i a l a va i l a b l e o n re c o r d. 9. T he q u es t i on be f or e u s i s w h e t h e r th e i n t e r e s t ex pe n se s i nc ur r e d a r e c ap it a l i n na t ur e a n d re q u i re s t o b e ca p it a l iz e d w i th t he I.T.A. No.4605/Del/2018 4 c os t o f t h e de v e l o p m e nt p ro je c t o r w he t h e r s u c h i n te r e st e xp e n se s c an b e t r e a t e d a s re ve n ue e xp e n se s a s c l a i m ed b y t he A ss e ss e e. 10 . O n ap pra i s a l o f t h e fa c t s b ro ug h t o ut on r e c o r d o n b e h a l f o f t he a sse ss ee , w e ob se r ve t h a t t he i n te r e st e x pe ns e s i s b e i n g cl a i m e d fr o m l a s t s ev er al ye a rs a n d i s b e i n g c l ai m e d i n t h e su b se qu e n t a ss es s m e n t ye ar s as w e ll . T he R ev en ue ha s a c c e p t e d t he st an d o f t he a ss es se e t h a t i n t e r e st e xp e n se s i n c u r re d a r e r e v e n ue i n na t ur e i n t h e i de nt i c a l fa ct s si t ua ti o n in a l l t h es e ye a rs e xc e p t t h e a ss e s s me nt y e a r 20 1 4- 15 in qu es t i o n . S o me o f t he a s s ess m e nt h a s b e en s ub j e c t e d t o sc r ut i n y a n d t he as s e ss m e n t h a s b e e n fr a me d u nd er Se c t i o n 1 4 3( 3 ) o f t he A c t . We a l so si mu l ta ne ou sl y n o ti c e th at t he a s ses s ee ha s de c la re d t he i nv e nt o ry o f th e M E G A C it y P r oj e ct a s c u r re nt a ss et / t ra d i n g a ss e t i n t he o rd i n a r y c ou r s e o f t h e bus i ne ss. T he re v e n u e ge ne ra t e d fr o m t he p r oj e c t ha s be e n ac c o un te d fo r a s re v e n u e i n c o me i n di ff er en t a ss ess m e nt ye a rs b a s e d o n t h e sa le s c ar ri e d ou t. 10 . U n de r t h e se c i rc u m s t a n c e s, w e ha r d ly se e a n y l og i c fo r de n y i n g th e be ne fi t o f i nt er es t e x pe n se s i n c u rr ed as re ve nu e e xp e n d i t u r e i n t e r m s o f S e c t i o n 3 6( 1 )(i i i ) o f t h e Ac t . T he a c t i o n o f t he a u t h or i t i e s b e l o w a re t h u s un fo u n d e d i n l a w . We t h u s se t a si de t he o r d e r o f th e CI T (A ) a n d r e v e r s e t h e ac t i on o f th e A ss e s si n g O ff ic e r a n d c o n s e q ue n t l y r e st o r e t h e s t a n d o f t he as se s s ee . 11 . I n t h e re s ul t , th e a p p e a l o f th e a s se ss e e i s a ll o w ed . Order pronounced in the open Court on 20/09/2023 Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /09/2023 Prabhat