What did the Tribunal hold?

The Tribunal found the CIT(A)'s order to be non-speaking and sketchy. Therefore, the Tribunal set aside the order and restored the file to the CIT(A) for passing a speaking and detailed order.

The Revenue appealed against the CIT(A)'s order deleting additions made by the Assessing Officer on account of interest and legal/professional expenses. The Assessing Officer had treated these expenses as capital in nature, while the CIT(A) allowed them as revenue expenses.

What were the issues?

Whether interest and legal/professional expenses incurred by a builder and developer engaged in TDR trading are capital or revenue in nature, and whether the CIT(A) passed a speaking order.

ACIT vs Jayant Maniklal Lunawat | ITAT Pune 2019

Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM

For Appellant: Shri Shrenik Gandhi

For Respondent: Shri P.S. Naik

आदेश / ORDER

PER VIKAS AWASTHY, JM :

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-3, Pune dated 25-10-2016 for the assessment year 2009-10.

The Revenue has raised following grounds assailing the order of Commissioner of Income Tax (Appeals) : “1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the deduction of interest expenses & legal and professional expenses, which needed to be capitalized and added back in the WIP.

2 ITA No.618/PUN/2017, A.Y. 2009-10

On the facts and circumstances of the case, the Ld. CIT(A) has erred in not considering the issue of capitalization of interest expenses & legal and professional expenses in his order and allowing these expenses only on the basis that TDR trading business cannot be distinguished from routine business. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in not considering the fact that the assessee is following project completion method in respect of the project undertaken and therefore, all the expenses including interest expense and legal/professional expenses relating to such projects can only be allowed in the year in which revenue is recognized and therefore, the said expenses have to be included in the Closing WIP. 4. The appellant craves leave to add, alter, amend or omit any of the above grounds of appeal during the course of the appellate proceedings.”

Shri P.S. Naik representing the Department submitted that the assessee had claimed interest and financial charges amounting to Rs.87,77,780/- and legal and professional charges Rs.15,90,742/- as expenditure. The Assessing Officer after examining the facts of the case held the expenditure towards payment of interest and financial charges as capital in nature. Similarly, the legal and professional charges paid by the assessee were also held to be on capital account. In First Appellate proceedings, the assessee assailed the above additions. The Commissioner of Income Tax (Appeals) deleted the additions without assigning any reasons in a non-speaking order.

On the other hand Shri Shrenik Gandhi appearing on behalf of the assessee vehemently defended the order of Commissioner of Income Tax (Appeals).

Both sides heard. Orders of the authorities below perused. The assessee is a builder and developer. The assessee is also engaged in trading of TDR. The assessee had claimed interest expenditure, legal and professional charges on revenue account. The Assessing Officer held the same to be on capital account. In first appeal, the Commissioner of

3 ITA No.618/PUN/2017, A.Y. 2009-10

Income Tax (Appeals) reversed the findings of Assessing Officer. A perusal of impugned order shows that the order of Commissioner of Income Tax (Appeals) is sketchy and a non-speaking order. The contention of the assessee is that interest and financial charges and legal and professional charges are unrelated to TDR business. Since, the assessee has prepared consolidated Profit and Loss Account for his entire business activities the facts are not clearly emerging. Without commenting on the merits of the additions, we deem it appropriate to restore this file to Commissioner of Income Tax (Appeals) for passing speaking and detailed order. The impugned order is set aside and the appeal of Revenue is allowed for statistical purpose.

In the result, the appeal of Revenue is allowed for statistical purpose.

Order pronounced on Monday, the 22nd day of April, 2019.

Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 22nd April, 2019. RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-3, Pune 3. 4. The Pr. Commissioner of Income Tax-2, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,

यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune

ASSISTANT COMMISSIONER OF INCOME TAX, PUNE vs. JAYANT MANIKLAL LUNAWAT, PUNE

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments