M/S KRYSHNAJAY DEVELOPERS PVT LTD.,MUMBAI vs. ITO 12 (3), MUMBAI

ITA 7232/MUM/2019Status: DisposedITAT Mumbai04 August 2021AY 2015-162 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the expenses incurred on the registered mortgage deed for obtaining the bank loan were correctly capitalized as part of work in progress. The assessee was therefore entitled to include this amount.

What were the facts?

The assessee, a builder, claimed capitalization of stamp duty and registration charges of Rs. 10,30,000/- related to a bank loan from ICICI Bank. The Assessing Officer disallowed this amount, and the CIT(A) upheld the disallowance.

What were the issues?

Whether stamp duty and registration charges incurred for obtaining a bank loan for business purposes are allowable as a deduction or should be capitalized as part of work in progress.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI ‘SMC’ BENCH, MUMBAI

Income Tax Officer-12(3)(1) Mumbai. ....……………….Respondent Appearances: Veerkumar Shah for the appellant Vijaykumar Menon for the respondent Date of concluding the hearing : May 10, 2021 Date of pronouncement : August 04, 2021 O R D E R Per Pramod Kumar, VP:

1. By way of this appeal, the assessee-appellant has challenged the correctness of the order dated 30th September 2019, passed by the learned CIT(A) in the matter of assessment u/s. 143(3) of the Income Tax Act, 1961 for the assessment year 2015-16.

Grievances raised by the assessee are as follows:

On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax erred in retaining the disallowance of a sum of Rs.10,30,000/- made by the Income Tax Officer being stamp duty of Rs.10,00,000/- and registration charges of Rs.30,000/-towards registeration facility obtained by your appellant from ICICI Bank Ltd and the amount was debited to your appellant's bank account and hence the expenditure was incurred wholly, necessarily and exclusively for the purposes of business of your appellant and was therefore allowable as deduction as expenditure claimed by your appellant. The appellant had treated the said amount as cost of execution of project and had included the same in arriving at the closing value of Work in progress.

2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in reducing the aforesaid amounts of Rs.10,30,000/- from the closing Assessment Year: 2015-16 Page 2 of 2 value of work in progress which has been done improperly as these expenses were allowable as deduction and requiste evidences were also submitted before learned CIT(A) through email by the date they were called for ,He erred in not considering the same and further stating that no evidence was produced..

To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before me is a builder. During the course of scrutiny assessment proceedings that Assessing Officer noticed that the assessee has, inter alia, claimed capitalization of work in progress in respect of registration in charges of Rs. 10,30,000/- in connection with ICICI Bank loan. The Assessing Officer disallowed the same. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but without any success. The assessee is not satisfied and is in further appeal before me.

Having heard the rival contentions and having, perused the material on record- particularly registered mortgage deed dated 04.02.2015 in favour of ICICI Bank (at page 5 of the paper book) and challan #MBSTD3021550397 for Rs. 10,30,000/- (at page 7 of the paper book), I am satisfied that the amount of Rs. 10,30,000/- was spent on registered mortgage deed in favour of ICICI Bank which was required for obtaining bank loan. As such, in my considered view when all other related expenses were capitalized, the assessee had correctly claimed capitalization of these expenses. I, therefore, uphold the plea of the assessee and direct the Assessing Officer to take into account the above Rs. 10.30,000/- for capitalization of work in progress at year end. The assessee gets the relief accordingly.

In the result, this appeal is allowed. Pronounced in the open court today on the 04th 5. day of August 2021.

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