DCIT, KOLKATA vs. FORUM IT PARKS PRIVATE LIMITED, KOLKATA

PDF · subscribers
ITA 1241/KOL/2024Status: DisposedITAT Kolkata20 November 2025AY 2012-135 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A). The Tribunal found that the CIT(A) had passed a reasoned order, noting that the assessee followed the project completion contract method, which allows revenue and expense recognition to be deferred until project completion. The CIT(A) observed that the interest expenses were not actually claimed as revenue expenses but were added to the capital work-in-progress. Consequently, the CIT(A) rightly concluded that the AO should have rejected the books of accounts under Section 145(3) of the Act before disallowing the interest expenses, which the AO failed to do. Since the AO's action was not sustainable without rejecting the books of account, the addition made by the AO was deleted. The Tribunal agreed with this conclusion and dismissed the Revenue's appeals.

What were the facts?

The Revenue filed appeals against the orders of the CIT(A) for Assessment Years 2011-12 and 2012-13. The appeals were filed with delays of 124 and 129 days, respectively, which were condoned. The core issue stemmed from a search action under Section 132(1) of the Income Tax Act, 1961, initiated against the assessee, Forum IT Parks Private Limited. The Assessing Officer (AO) disallowed interest expenses of ₹4,17,85,850/- on unsecured loans, arguing that interest-bearing funds were diverted as interest-free loans to group companies. The assessee contended that these advances were made as per project management and tripartite agreements and were interest-free refundable mobilization amounts and performance deposits, intended to be part of capital work-in-progress. The AO rejected this explanation and disallowed the interest, reducing the capital work-in-progress.

What were the issues?

1. Whether the Tribunal had to decide if the Assessing Officer erred in disallowing interest expenses of ₹4,17,85,850/- on unsecured loans, which were treated as part of capital work-in-progress by the assessee, turning on Section 145(3) of the Income Tax Act, 1961. Assessee's Contentions: - The interest-free advances/deposits were given as per project management and tripartite agreements. - These amounts were refundable and spread over a stipulated period, intended to be part of capital work-in-progress. - The AO should have rejected the books of account under Section 145(3) to disallow these expenses, which was not done. - Documentary evidence was furnished to substantiate that interest earned on unsecured loans by related concerns was offered to tax. Revenue's Contentions: - The assessee company's interest-bearing loan funds had been diverted as interest-free loans given to group companies, hence the interest paid on such loans was not allowable.

Which sections of the Income-tax Act were involved?

Section 132(1),Section 153A,Section 143(2),Section 143(1),Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI DUVVURU RL REDDY, VP & SHRI RAJESH KUMAR, AM

1.

These are appeals preferred by the Revenue against the orders of the Commissioner of Income-tax (Appeals), Kolkata-21(hereinafter referred to as the “Ld. CIT(A)”]even dated 22.11.2023 for A.Ys. 2011- 12 & 2012-13.

2.

At the outset, we observe from the appeal folder that there are delays of 124 days and 129 days for A.Y. 2011-12 and 2012-13 respectively in filing the appeals by the department and in support of this a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay may be condoned being

3.

As the facts and circumstances are similar in both the appeals of the Revenue, hence, they are clubbed and decided together, First we will take and will decide the issue accordingly.

04. The only issue raised by the Revenue in the various grounds of appeal is against the deletion of ₹4,17,85,850/- as made by the ld. AO by disallowing the interest expenses on unsecured loans.

5.

The facts in brief are that a search action u/s 132(1) of the Act was carried out in the business premises of the assessee. The notice u/s 153A of the Act was issued on 17.06.2013, which was complied with by filing the return of income on 20.08.2011, disclosing loss of ₹1,45,027/-. Thereafter, notice u/s 143(2) and 143(1) of the Act along with questionnaire were issued. The assessee replied the same. The ld. AO observed that the assessee company claimed interest on secured loans amounting to ₹3,52,29,372/- and interest on unsecured loan of ₹46,24,495/-. The ld. AO noted that the loan was taken from the Forum Project Holding Pvt. ltd. a majority shareholder of the assessee company. The ld. AO further noted that the assessee advanced money / deposits to group companies M/s Forum Project Pvt. Ltd. amounting to ₹53.25 crores and Forum Project Holding Pvt. ltd. amounting to ₹24.00 crores, without charging any interest from these companies. Accordingly, show cause notice was issued on 11.02.2014, asking the assessee as to why the interest paid on unsecured loans may not be disallowed. The assessee replied the said

6.

In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by observing and holding as under:-

“So, interest free refundable mobilization amount of Rs.32.25 crores was paid to enable the project manager for setting up critical infrastructure, capital and construction equipment and other initial setting of cost, and that the said amount was refundable and spread over stipulated period as agreed in the agreement, Performance deposit of Rs.21 crores, mentioned that the project manager is always ready and capable of services as per agreement but on account of delay commencernent of project it could not render any services and Interest free deposit of Rs.24 crores to Forum Holding Project Pvt. Ltd. was given pursuant to tripartite agreement between Assessee, Forum Projects Holdings and K28 Commercial dated 27.12.2007. The fact that the above-mentioned payments were made as per the tripartite agreement

9.

In the result, both the appeals of the Revenue are dismissed.

Order pronounced in the open court on 21.11.2025.

More judgments on Section 132(1)

All 846 judgments and leading authorities on Section 132(1) →

Recent GST High Court judgments

Search GST case law →