INCOME TAX OFFICER-9(1)(4), MUMBAI V. M/S.AVRUTI MALL MANAGEMENT COMPANY PRIVATE LIMITED, MUMBAI

ITA 6215/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7311 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 11-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Capital asset; Business income
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENCH M UMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEM BER ITA NO.6215/MUM/2017 ( ASSESSMENT YEAR :2013-14 ) ITO-9(1)(4) ROOM NO.260A, 2 ND FLOOR AAYKAR BHAWAN,M.K.ROAD MUMBAI-400 020 VS. M/S AVRUTI MALL MANAGEMENT COMPANY PRIVATE LIMITED 3 RD FLOOR, JAY CHAMBERS, SERVICE ROAD,VILE PARLE(E), MUMBAI-400 057 PAN/GIR NO. AA FCA5084N APPELLANT ) .. RESPONDENT ) ASSESSEE BY SATYAPRAKASH SINGH REVENUE BY N.PADMANABAN DATE OF HEARING 22 / 07 /201 9 DATE OF PRONOUNCEMENT 22/07/2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX APPEALS16, MUMBAI DATED 18/07/2017 AND IT PERTAINS TO THE ASSESSMENT YEAR 2013-14. THE REV ENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MA DE OF RS.1,06,23,487/- ON ACCOUNT OF CAPITALIZATION OF INTEREST EXPENDITUR E UNDER THE HEAD INCOME FROM OTHER SOURCE, WITHOUT APPRECIATING THE FACT THAT THE ASSESSES HAS ALREADY ENTERED JV AGREEMENT ON 24.03. 2011 FOR DEVELOPMENT OF THE SAID LAND. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT THE SALE WA S EXECUTED DURING A.Y. 2013-14 AND DATE OF JV WAS ALSO EXTENDED BY ADDENDU M DATED 31.03.2012, THEREFORE, RELYING ON THE ORIGINAL JV A GREEMENT IS NOT FAIR. ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 2 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID.CIT(A) WAS JUSTIFIED IN HOLDING THAT THE DEVELOP MENT AGREEMENT BY WAY OF JV AGREEMENT DOES NOT DISQUALIFY THE ASSESSE E FROM CAPITALIZING THE INTEREST EXPENDITURE TOWARDS THE COST OF LAND-W IP. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF INFRASTRUCTURE DEVELOPME NT, FILED ITS RETURN OF INCOME FOR AY 2013-14 ON 27/09/2013 DECLARING TOTAL INCOME AT RS. NIL, UNDER NORMAL PROVISIONS OF THE ACT, AND BOOK PROFIT OF RS. 17,284/- U/S 115JB OF THE I.T.ACT, 1961. THE CASE WAS SELECTED F OR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT ASSESEE HAS SHOWN FREE HOLD LAND AND CAPITAL WORKING PROGRESS I N ITS BALANCE SHEET AND ALSO CORRESPONDING LONG TERM BORROWINGS FROM M/ S ARTECH REALTORS PVT.LTD. IN ORDER TO ASCERTAIN DETAILS OF TRANSACTI ONS, THE AO CALLED UPON THE ASSESSEE TO FURNISH NECESSARY DETAILS. IN RESPO NSE, THE ASSESSEE HAS FILED LEDGER ACCOUNT COPY OF M/S ARTECH REALTORS PV T.LTD. ALONG WITH CONFIRMATION AS PER, WHICH IT WAS NOTICED THAT THE ASSESSEE HAS TRANSFERRED LAND IN PURSUANCE OF JOINT DEVELOPMENT AGREEMENT TO M/S ARTECH REALTORS PVT.LTD. FOR A CONSIDERATION OF RS. 11,08,75,000/- AND HAS RECEIVED FULL CONSIDERATION, BUT NOT RECOGNISED REV ENUE FROM THE TRANSACTIONS. THE LD. AO FURTHER OBSERVED THAT THE ASSESSEE HAS DEBITED CONSTRUCTION AND OTHER EXPENSES TO CAPITAL WORKING PROGRESS INCLUDING INTEREST PAID ON LOAN BORROWED FROM M/S WESTEX INFO TECH PVT.LTD. THE AO, FURTHER NOTED THAT WHEN, THE ASSESSEE HAS TRANS FERRED LAND IN PURSUANCE OF JOINT DEVELOPMENT AGREEMENT AND POSSES SION WAS HANDED OVER TO M/S ARTECH REALTORS PVT.LTD. ON 24/03/2011, THERE IS NO REASON FOR ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 3 THE ASSESEE TO PAY INTEREST ON LOAN BORROWED FROM M /S WESTEX INFOTECH P.LTD AND ACCORDINGLY, DETERMINED INCOME FROM THE P ROJECT BY TAKING INTO ACCOUNT SALE CONSIDERATION RECEIVED FROM M/S ARTECH REALTORS P.LTD AND AFTER REDUCING COST OF LAND INCLUDING ALLOWABLE CAP ITAL WORKING PROGRESS DETERMINED TOTAL INCOME FROM THE PROJECT AT RS. 1,0 6,23,487/-. FURTHER, WHILE ARRIVING AT PROFIT FROM THE PROJECT, DISALLOW ED INTEREST PAID ON LOAN BORROWED FROM M/S WESTX INFOTECH PVT.LTD. AMOUNTING TO RS. 1,02,65,993/-. THE RELEVANT FINDINGS OF THE AO ARE AS UNDER:- 27. HOWEVER, THE SHOVE SUBMISSION OF THE ASSESSEE I S DEVOID OF MERIT AND NOT RELATING TO FACTS OF THE CASE. SEQUENCE OF EVENTS FOR ACQUISITION OF LAND, CONSTRUCTION ACTIVITY AND SUBSEQUENT TRANSFER TO M/S. ARTECH REALTORS PVT. LTD., MAY BE SUMMARIZED HERE AS UNDER :- * THE LAND WAS PURCHASED BY ASSESSEE DURING F.Y. 2 005-06; * THE INITIAL STOP WORK MEMO WAS ISSUED TO ASSESSES COMPANY, WHICH WAS CONSTRUCTING STRUCTURES ON SAID LAND AT I TS OWN, VIDE ENQUIRY REPORT/ORDER DO, MO. REPORT (RR)/3697/09-10 /8 DATED 06.04.2009, * THE ASSESSEE ENTERED INTO JOINT DEVELOPMENT (JV) AGREEMENT DATED 24.03-2011 WITH M/S. ARTECH REALTORS PVT. LTD . * THE ASSESSEE VIDE ABOVE JV AGREEMENT HANDED OVER POSSESSION OF THE AFORESAID PROPERTY TO M/S. ARTECH REALTORS PVT, LTD. (THE DEVELOPER) FOR DEVELOPMENT AND CONSTRUCTI ON OF A MULTI STORIED APARTMENT COMPLEX TO BE NAMED AS 'ARTECH GR ANDEUR & MALL*. * AS PER JV AGREEMENT ENTIRE EXPENSES PERTAINI NG TO DEVELOPMENT OF LAND/CONSTRUCTION OF BUILDING MALL I S TO BE BORNE BY DEVELOPER I.E. M/S, REALTORS PVT. LTD. 28. AS EVIDENT, FROM THE ABOVE THERE IS NO OCCASIO N TO ASSESEE INCURRING ANY CONSTRUCTION/ DEVELOPMENT EXPENSES FROM/AND AFTER DATE OF AGREEMENT I.E. 24.03.2011. THE EXPENSES CAPITALIZE D UNDER VARIOUS GROUPINGS (EXCEPT FOR INTEREST TO WESTEX INFOTECH PVT, LTD,) ARE NEARLY CONSTANT FROM F.Y 2009-10 I.E. YEAR IN WHICH FIRST STOP-WORK ORDER WAS ISSUED TO THE ASSESSEE. THE ASSESSEE, FURTHER, HAS NOT FURNISHED ANY DETAILS WITH RESPECT TO NEED AND ACTUAL UTILIZATION OF LOON TAKEN FROM M/S. WESTEX INFOTECH PVT. LTD. MERE PAYMENT OF INTEREST TO M/S. WESTEX INFOTECH PVT. LTD. IS NOT SUFFICIENT TO PROVE THE N EXUS OF SAME WITH CWIP MAIMED ON SAID LAND, THE ASSESSEE HAS TO ESTABLISH EXACT NATURE OF EXPENSES /SERVICES INCURRED OUT OF SAID LOAN AMOUNT AND ALSO THAT SAID EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR P ROJECT WORK / DEVELOPMENT WORK ON SAID LAND. THE ASSESSEE, HOWEVE R, HAS FAILED TO PROVE NEXUS OF SAID INTEREST EXPENSES WITH LAND/LAN D WIP* ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 4 29. CONSIDERING THE ABOVE FACTS OF THE CASE, IT IS HELD THAT EXPENSES CAPITALIZED AFTER F.Y. 2010-11 (I.E. DAY OF ENTERIN G JV AGREEMENT AND HANDING OVER POSSESSION OF LAND TO M/S. ARTECH REAL TORS PVT LTD.) CANNOT BE ALLOWED AS PART OF COST OF LAND-WIP. THEREFORE, THE COST/ EXPENSES ALLOWED AS WIP IS RS, 2,33,57,673/- ONLY ( I.E, EXP ENSES CAPITALIZED TILL F.Y, 2010-11). 30. COST OF LAND/LAND WIP TO BE ALLOWED AGAINST SAL E PRICE IS ACCORDINGLY WORKED OUT AS UNDER: LAND: RS. 7,68,93,840 CWIP:RS.2,33,57,673 RS.10,02,51,513 31. AS REGARDS THE HEAD OF INCOME, THERE IS NO DISP UTE THAT SALE TRANSACTIONS IS TO BE ASSESSED AS BUSINESS INCOME. CONSIDERING THE FACTS OF THE CASE, THE AR AGREED WITH SAME TAXING TREATME NT. THE TAXABLE BUSINESS INCOME FOR SAID LAND/LAND-WIP SALE/TRANSFE R IS ACCORDINGLY WORKED OUT AS UNDER: SALE CONSIDERATION: RS.11, 08,75,000 LESS: COST OF LAND INCLUDING OF ALLOWABLE CWIP: RS. 10,02,51,513 RS.1,06,23,487 32. THUS, AN ADDITION OF RS. 1,06,23,487/- IS MADE TO TOTAL INCOME OF THE ASSESSEE UNDER HEAD BUSINESS INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT, ARE BEING INITIATED SEPAR ATELY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALING OF INCOME. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE CONTENDED THAT THE DEVELOPMENT AGREEMENT DOES NOT IPSO FACTO AMOUNT TO TRANSFER OF IMMOVABLE PROPERTY, UNLESS THE COND ITIONS PRESCRIBED U/S 2(24)(V) R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT , IS FULFILLED. THE ASSESSEE FURTHER CONTENDED THAT ALTHOUGH, DEVELOPME NT AGREEMENT WAS ENTERED BETWEEN THE PARTIES, BUT IT WAS FOUND THAT THE PROPERTY WAS UNDER LITIGATION AND WORK WAS STOPPED BY THE GOVERNMENT AUTHORITIES BECAUSE OF THIS NO SALE DEED COULD BE REGISTERED. DUE TO TH IS LITIGATION, THE SALE DEED COULD NOT BE REGISTERED. BUT, FACT REMAINS THA T MONEY BORROWED FROM M/S WESTEX INFOTECH PVT.LTD. WAS UTILIZED FOR CONST RUCTION OF PROJECT WAS ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 5 NOT DISPUTED AND ACCORDINGLY, INTEREST PAID ON SUCH LOAN HAS BEEN CAPITALIZED TO THE CAPITAL WORKING PROGRESS. 4. THE LD. CIT(A) AFTER CONSIDERING RELEVANT SUBMIS SIONS OF THE ASSESSEE AND ALSO RELIED UPON CERTAIN JUDICIAL PREC EDENTS, CAME TO THE CONCLUSION THAT IN ORDER TO DETERMINE INCOME FROM THE PROJECT, THE PROVISIONS OF SECTION 2(24)(V) R.W.S. 53A OF THE TR ANSFER OF PROPERTY ACT SHOULD BE FULFILLED. HOWEVER, IN THIS CASE THE OWNE RSHIP AND CONTROL OVER THE PROPERTY STILL REST WITH THE ASSESSEE. THEREFOR E, MERELY FOR THE REASON THAT THERE WAS A DEVELOPMENT AGREEMENT, IT CANNOT B E CONSIDERED THAT TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF TH E ACT WAS HAPPENED. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO NEVER D ISPUTED FACT THAT LOAN BORROWED FROM M/S. WESTEX INFOTECH PVT.LTD. WAS UTI LIZED FOR CONSTRUCTION AND ALSO INTEREST PAYMENT ON SUCH LOAN HAS BEEN MAD E THROUGH PROPER BANKING CHANNEL. IT WAS FURTHER OBSERVED THAT WHEN THE ASSESSEE WAS DEVELOPING A SINGLE PROJECT, IT IS INCORRECT ON THE PART OF THE AO TO COME TO THE CONCLUSION THAT INTEREST CANNOT BE ALLOWED AS D EDUCTION AS PART OF CAPITAL WORKING PROGRESS, UNLESS HE DEMONSTRATE THA T LOAN PROCEEDS WERE NOT UTILIZED FOR CONSTRUCTION OF PROPERTY. THEREFOR E, HE OPINED THAT ON THE BASIS OF EVIDENCES FILED BY THE ASSESSEE INCLUDING JV AGREEMENT AND ADDENDUM TO SUCH AGREEMENT, IT IS VERY CLEAR THAT T HE ASSESSEE HAS UTILIZED BORROWED FUND FROM THE PROJECT AND ACCORDI NGLY, INTEREST PAYMENT ON SUCH LOAN WAS RIGHTLY CAPITALIZED TO CAPITAL WOR KING PROGRESS. ACCORDINGLY, HE DELETED ADDITIONS MADE BY THE AO TO WARDS COMPUTATION OF PROFIT FROM THE PROJECT. THE RELEVANT FINDINGS OF T HE CIT(A) ARE AS UNDER:- ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 6 6.1.7. A DEVELOPMENT AGREEMENT DOES NOT, IPSO FACTO , AMOUNT TO TRANSFER OF IMMOVABLE PROPERTY. THE SIGNING OF DEVELOPMENT A GREEMENT DOES OT MEAN A TRANSFER IN GENERAL LAW, BUT CAN BE CONSID ERED AS SUCH IF THE CONDITIONS IN SECTION 2(24(V) OF THE ACT ARE SATISF IED. IN OTHER WORDS, IT IS POSSIBLE TO CONTEMPLATE A SITUATION WHERE EVEN THOU GH A DEVELOPMENT AGREEMENT IS SIGNED BETWEEN TWO PARTIES, BUT YET TH E SAME MAY NOT AMOUNT TO 'TRANSFER . THE RELEVANT AND SURROUNDING FACTS HAVE TO BE S EEN BEFORE ARRIVING AT THE CONCLUSION THAT THE EFFECTIV E OWNERSHIP AND ENJOYMENT OVER THE PROPERTY HAS BEEN ' IRREVOCABLY ALIENATED BY THE PROPERTY HOLDER TO THE BUYER BY VIRTUE OF THE SAID DEVELOPMENT AGREEMENT. THIS IS ALSO MANDATED BY SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 19**, ON WHICH SECTION 2(47)(V) OF TH E ACT IS BASED ON. THUS, IF AN ASSESSEE WERE TO SUCCESSFULLY DEMONSTRA TE ON THE BASIS OF HARD, TANGIBLE AND ACCEPTABLE FACTS THAT THE OWNERS HIP AND CONTROL OVER THE PROPERTY STILL RESETS WITH HIM, THEN NO INFEREN CE OF THERE BEING A 'TRANSFER' WITHIN THE MEANING OF SECTION 2(47) OF T HE ACT CAN BE REACHED. IF THIS BE SO, THEN AIL ELIGIBLE EXPENSES WILL BE AVAI LABLE TO THE PROPERTY OWNER TO AVAIL OF - IF THEY ARE LEGITIMATELY AVAILA BLE. ONLY THE FACT OF OVERALL CONTROL IN HANDS OF DEVELOPER AND NOT EXCLU SIVE CONTROL NEEDS TO BE ESTABLISHED TO INVOKE 2(47)(V). 6.1.8 KEEPING IN VIEW THE ABOVE FACTS, THE JV AGREE MENT WAS REPLACED BY MUTUAL CONSENT THROUGH AN ADDENDUM TO JV AGREEMENT AND AS A RESULT IT WAS EXTENDED UP TO 31 ST MARCH 2012. THE COPY OF THE ADDENDUM WAS FURNISHED DURING THE COURSE OF APPELLATE PROCEEDING S. IT IS NOT A NEW EVIDENCE AS SAME IS ACKNOWLEDGED BY THE LD.AO.IN PA RA 21 OF THE ASSESSMENT ORDER WHEREIN THE LD.AO. HAD MENTIONED T HAT DUE TO STOP WORK AND LITIGATION ON PROPERTY SALE CONSIDERATION WAS MUTUALLY AGREED AND PAID DURING KY. 2012-13 AND THEREFORE SAID JV A GREEMENT HAD NO FORCE. IN PARA 14 OF THE ASSESSMENT ORDER ALSO ID. A.O, HAD MENTIONED THAT THE SALE PRICE FIXED WAS PAID TO THE APPELLANT ONLY DURING FY.2G12- 13. THE ENTIRE INTEREST PAID TO M/S, WESTEX INFOTEC H P, LTD. WAS THROUGH BANKING TRANSACTIONS AFTER DEDUCTING TAX. THE APPEL LANT WAS HAVING ONLY ONE PROJECT. THEREFORE, THERE WAS NO QUESTION OF SP ENDING THE LOAN AMOUNT ON ANY OTHER BUSINESS OF THE APPELLANT. THER E WAS NO DOUBT ABOUT APPLICATION OF THE LOAN AMOUNT SOLELY TO THE ONLY PROJECT OF THE COMPANY. THE LOAN WAS TAKEN DURING F.Y.2010-11 FOR WHICH INTEREST WAS ALSO ALLOWED TO BE CAPITALIZED BY THE ID.A.O. IN IT S ORDER. WHILE DISALLOWING CAPITALIZATION IN SUBSEQUENT YEAR, THE LD.A.O. HAD MERELY RELIED UPON SIGNING OF JV AGREEMENT BUT HE IGNORED THE FACT THA T THERE WAS LITIGATION ON THE PROPERTY AND AS A RESULT PROJECT WORK WAS ST OPPED. JUST TO OVERCOME THESE DIFFICULTIES AN ADDENDUM TO THE JV D EVELOPMENT AGREEMENT WAS SIGNED BETWEEN THE APPELLANT COMPANY AND M/ S. ARTECH REALTORS. SINCE THE DATE OF JV AGREEMENT WAS EXTEND ED BY ADDENDUM, THEREFORE IT IS NOT FAIR TO DISALLOW THE CAPITALIZA TION OF INTEREST : DEPENDING UPON THE FIRST AGREEMENT. THE A.O. HAD HIMSELF ADMI TTED THAT THE SALE CONSIDERATION WAS PAID ONLY DURING FY.2012-13 AND D ATE WAS ALSO EXTENDED BY ADDENDUM, IN PARA 22 OF THE ASSESSMENT ORDER, THE ID.A.O HAS HIMSELF ADMITTED THAT ALL THE CONDITIONS FOR RE COGNIZING REVENUE FOR ABOVE LAND TRANSACTION FULFILLED DURING EY.2012-13 RELEVANT TO AY 2013-14 AND APPELLANT OUGHT TO HAVE COMPUTED INCOME ON SAID SALE TRANSACTION ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 7 DURING A.Y. 2013-14. SINCE SALE WAS EXECUTED DURING A.Y. 2013-14 AND DATE WAS ALSO EXTENDED BY ADDENDUM DATED 31.03.2012 , THEREFORE, IT WAS NOT FAIR ON THE PART OF THE A.O. TO RELY ON THE ORI GINAL JV AGREEMENT. IN VIEW OF ABOVE DISCUSSION, APPEAL OF THE APPELLANT I S ALLOWED AND APPELLANT IS ALLOWED TO CAPITALIZE THE INTEREST EXP ENDITURE CLAIMED BY THE APPELLANT. 5. THE LD. DR SUBMITTED THAT THE LD.CIT(A) WAS ERRE D IN DELETING THE ADDITIONS MADE OF RS. 1,06,23,487/- ON ACCOUNT OF C APITALIZATION OF INTEREST EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS ALREADY ENTERED JV AGREEMENT ON 24/03/2011 FOR DEVE LOPMENT OF THE SAID LAND AND ALSO AS PER THE TERMS OF JV AGREEMENT, ALL EXPENSES OF DEVELOPMENT SHALL BE BORNE BY THE DEVELOPER. THE LD . DR FURTHER SUBMITTED THAT WHEN THE DEVELOPMENT AGREEMENT WAS I N FORCE, THE LD. CIT(A) WAS ERRED IN HOLDING THAT SALE WAS EXECUTED DURING THE AY 2013- 14 AND DATE OF JV AGREEMENT WAS ALSO EXTENDED BY A DDENDUM DATED 31/03/2012, IGNORING THE FACT THAT THE ASSESSEE WAS HANDOVER THE POSSESSION OF THE LAND AS ON THE DATE OF THE JV AGR EEMENT CONSEQUENTLY, THE QUESTION OF CAPITALIZATION OF INTEREST FOR SUBS EQUENT PERIOD IS INCORRECT. 6. THE LD.AR FOR THE ASSESSEE STRONGLY SUPPORTING O RDER OF THE CIT(A) SUBMITTED THAT ALTHOUGH, JV AGREEMENT WAS SIGNED, B ECAUSE OF LITIGATION IN THE PROPERTY THE WORK WAS STOPPED BY THE GOVERNM ENT AUTHORITIES AND SALE DEED COULD NOT BE REGISTERED. THE LD. AR, FURT HER SUBMITTED THAT THE ASSESSEE HAS FILED NECESSARY EVIDENCES INCLUDING CO PY OF JOINT DEVELOPMENT AGREEMENT AND ALSO ADDENDUM TO THE JOIN T DEVELOPMENT AGREEMENT AS PER WHICH, THE JD AGREEMENT TENURE WAS EXTENDED BY WAY OF AGREEMENT DATED 31/03/2012 DUE TO LITIGATION AND ENCROACHMENT OF ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 8 GOVERNMENT LAND. THEREFORE, IT IS INCORRECT ON THE PART OF AO TO COMPUTE PROFIT FROM THE PROJECT ON THE BASIS OF JV AGREEMEN T DATED 24/03/2011. THE LD.AR, FURTHER SUBMITTED THAT WHEN THE WORK WAS STOPPED, THE POSSESSION OF THE LAND WAS TILL WITH THE ASSESSEE A ND ASSESEE CONTINUE TO PAY INTEREST ON LOAN BORROWED FROM M/S WESTEX INFOT ECH PVT.LTD. AND SUCH INTEREST HAS BEEN CAPITALIZED TO WORKING PROGR ESS. THEREFORE, THE LD. CIT(A) AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY DELETED ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCES OF INTEREST PAYMENT ON LOAN BORROWED FROM WESTEX INFOTECH PVT.LTD. AND HIS ORDER SHOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES B ELOW. WE FIND THAT THE LD.CIT(A) HAS RECORDED CATEGORICAL FINDINGS IN LIG HT OF EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE THAT TRANSFER AS DEFINED U/S 2(47)(V) OF THE ACT, IS NOT HAPPEN FOR THE YEAR UNDER CONSIDERATION AND ACCORDINGLY, THE QUESTION OF DETERMINATION OF INCOME ON THE BASIS OF DEVELOPMENT AGREEMENT EVEN THOUGH, THERE IS NO TRANSFER IS NOT CORRECT. WE FURTHER NOTED THAT THE LD.CIT(A) HAS RECORDED CATEGORICAL F INDINGS IN LIGHT OF JV AGREEMENT AND AN ADDENDUM TO JV AGREEMENT DATED 31/ 03/2012 THAT DUE TO LITIGATION OF PROPERTY THE WORK WAS STOPPED AND THE SALE CONSIDERATION WAS MUTUALLY AGREED AND PAID DURING THE FY 2012-13 RELEVANT AY 2013- 14, ACCORDINGLY, INTEREST PAID ON LOAN BORROWED FRO M M/S WESTX INFOTECH PVT.LTD. WAS RIGHTLY CAPITALIZED TO CAPITAL WORKING PROGRESS, BECAUSE THE AO NEVER DISPUTED THE FACT THAT SUCH LOAN HAS BEEN BORROWED AND UTILIZED FOR THE PURPOSE OF CONSTRUCTION OF PROJECT. WE FURT HER NOTED THAT THE AO ITA NO.6125//MUM/2017 M/S. AVRUTI MALL MANAGEMENT COMPANY PVT.LTD. 9 HAD HIMSELF ADMITTED THAT THE SALE CONSIDERATION WA S PAID ONLY DURING THE FY 2012-13 AND DATE WAS ALSO EXTENDED BY AN ADDENDU M. WHEN THE DATE OF JV AGREEMENT WAS EXTENDED AND ALSO PAYMENT OF SA LE CONSIDERATION IS RECEIVED IN AY 2013-14, THEN OBVIOUSLY ANY EXPENDIT URE INCURRED IN RELATION TO SUCH PROJECT INCLUDING INTEREST PAID ON LOAN BORROWED FROM M/S WESTEX INFOTECH PVT.LTD. NEEDS TO BE CAPITALIZED TO WORKING PROGRESS TILL THE DATE OF THE TRANSFER ACTUALLY TAKEN PLACE, ACC ORDINGLY, THERE IS NO REASON TO DISALLOW INTEREST PAID ON LOAN BORROWED F ROM M/S WESTEX INFOTECH PVT.LTD. FACTS REMAIN UNCHANGED. THE REVE NUE FAILED TO BRING ON RECORD ANY EVIDENCES TO COUNTER FINDINGS OF FACTS R ECORDED BY THE LD.CIT(A). HENCE, WE ARE INCLINED TO UPHOLD FINDING S OF THE CIT(A) AND DISMISSED APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/ 07/ 2019 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 22 /07/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//