SANGHAVI LAND DEVELOPERS PVT. LTD,MUMBAI vs. ACIT 8 (1)(2), MUMBAI

O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee for Assessment Years 2013- 14 & 2014-15 contest separate orders of Ld. first appellate authority. Both the appeals are being disposed-off by way of this common order for the sake of convenience & brevity. 2.1 The appeal for AY 2013-14 contest the action of Ld. Commissioner of Income Tax (Appeals)-14, Mumbai order dated 16/10/2018 qua confirmation of disallowance u/s 14A for Rs.31.17 Lacs. The assessee being resident corporate assessee is stated to be engaged in construction business. 2.2 In an assessment framed u/s 143(3) on 31/03/2016, it transpired that the assessee earned certain exempt income during the year. Accordingly, Ld. AO, invoking the provisions of Sec. 14A r.w.r. 8D(2), computed aggregate disallowance of Rs.31.17 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs.29.08 Lacs and expense disallowance u/r 8D(2)(iii) for Rs.2.08 Lacs. The Ld. CIT(A) confirmed the same since the assessee’s plea that interest free funds available with the assessee were more than investments made by the assessee, was rejected. Aggrieved, the assessee is in further appeal before us. 2.3 The Ld. AR pleaded to restrict the disallowance to the extent of exempt income earned by the assessee during the year, with which we concur. It has also been submitted that the assessee has already offered certain suo-moto disallowance in its computation of income. Accordingly, Ld. AO is directed to restrict the disallowance to the extent of exempt income earned by the assessee. The credit of suo-moto disallowance as already offered in the computation of income shall be provided. We order so. The appeal stand partly allowed. 3.1 In AY 2014-15, the assessee is aggrieved by capitalization of expenditure of Rs.76.26 Lacs to closing work-in-progress as on 31/03/2014. In an assessment u/s 143(3) as framed on 29/12/2016, it transpired that the assessee offered rental income, interest income, car parking charges, society formation charges, and discount received etc. under Business income. The assessee was carrying out certain projects and accordingly, capitalized related expenditure as work-in-progress. However, expenses aggregating to Rs.76.26 Lacs which were in the nature of labor charges, electricity expenses, painting work, purchase of hardware items, purchase of metals etc. were debited to Profit & Loss Account. Keeping in view the fact that stated expenditure was related to ongoing projects, Ld. AO opined that the same should have been capitalized. The assessee did not file any reply to explain its stand. Consequently, the expenditure was disallowed and added to work- in-progress. 3.2 Before Ld. CIT(A), the assessee drew attention to the fact that these expenses were already capitalized by the assessee and the action of Ld. AO would result into double capitalization of the expenditure. However, since the assessee failed to substantiate the same, the action of Ld. AO was confirmed. Aggrieved, the assessee is in further appeal before us. 3.3 Upon careful consideration of factual matrix, it is evident that the assessee has failed to clarify its position before both the authorities. The requisite details could not be adduced. For proper adjudication, the correct facts need to be appreciated first. The submissions of Ld. AR are that the action of Ld. AO would result into double capitalization of same expenditure. From Ld. AR’s submissions, it appears that the stated expenditure was suo-moto disallowed by the assessee and already capitalized in work-in- progress. Therefore, we deem it fit to restore the matter back to the file of Ld. AO for fresh adjudication with a direction to the assessee