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Income Tax Appellate Tribunal, ‘E‘ BENCH
Before: SHRI M.BALAGANESH & SHRI RAHUL CHAUDHARY&
आदेश / O R D E R
PER M. BALAGANESH (A.M):
This appeal in A.Y.2017-18 arises out of the order by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) in appeal No.CIT(A)-22, Mumbai/10345/2019-20 dated 23/09/2021 (ld. CIT(A) in short) against
M/s. Sterling Sez & Infrastructure Ltd., the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 17/12/2019 by the ld. Income Tax Officer Ward 14(3)(1), Mumbai (hereinafter referred to as ld. AO).
The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance of Rs.1,10,82,800/- towards stamp duty paid for hypothecation and mortgage in the facts and circumstances of the instant case.
None appeared on behalf of the assessee. We have heard ld. DR and perused the materials available on record. We find that assessee is a private limited company engaged in the business of real estate development. The ld. AO observed that assessee had debited a sum of Rs.1,10,82,800/- in its profit and loss account towards stamp duty for hypothecation and mortgage under the head “financial expenses”. The ld. AO observed that the said expenditure has been incurred by the assessee for mortgage of loan. The ld. AO also observed that the assessee had capitalised the interest expenditure on the loan by adding it to work in progress (WIP). Despite the fact that the said expenditure was not even claimed as deduction by the assessee, the ld. AO proceeded to disallow the expenditure incurred on stamp duty in the sum of Rs.1,10,82,800/- in the assessment.
3.1. During the appellate proceedings, the assessee submitted that it had filed the following details in the online portal electronically during the course of assessment proceedings:-
M/s. Sterling Sez & Infrastructure Ltd., a) Re-conciliation of closing stock as per balance sheet and profit and loss account. b) Details of additions to WIP c) Details of financial expenses considered in WIP and considered in profit and loss account and claimed as deduction. d) Details of expenses other than work in progress 3.2. The assessee before the ld. CIT(A) again submitted the details of finance cost and the total break-up of the entire finance cost capitalised to work-in-progress in tabular form which are enclosed in page 6-7 of the order of the ld. CIT(A). The assessee also submitted the basis of apportionment of finance cost to work in progress as well as to profit and loss account which is enclosed in pages 8 & 9 of the order of the ld. CIT(A). Ultimately, the assessee submitted that within the total finance cost incurred, 94.18% of the same has been capitalised to the value of WIP. However, the ld. CIT(A) did not appreciate any of the contentions of the assessee and confirmed the action of the ld. AO.
3.3. From the complete details of finance cost claimed as deduction and finance cost apportioned to WIP which are duly tabulated in the orders of ld. CIT(A) as stated supra, we find that assessee had not even claimed the sum of Rs.1,10,82,800/- as deduction during the year under consideration. In fact this fact is also stated by the ld. AO in his assessment order. Having done so, it is grossly incorrect on the part of the lower authorities to disallow the same when a particular sum is not even claimed as deduction. We hold that the orders passed by the lower authorities completely depict absolute non-application of mind. In view of the above, we have no hesitation in directing the ld. AO to delete
M/s. Sterling Sez & Infrastructure Ltd., disallowance of Rs.1,10,82,800/- towards stamp duty. Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on 27/06/2022 by way of proper mentioning in the notice board.