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Income Tax Appellate Tribunal, DELHI BENCHES : F : NEW DELHI
Before: SHRI R.S. SYAL & SMT. BEENA A. PILLAI
PER R.S. SYAL, VICE-PRESIDENT :
This appeal by the Revenue arises out of order dated 4.7.2016 passed by the learned CIT(A) in relation to the assessment year 2013-14.
The only issue raised in this appeal is against the deletion of addition of Rs. 2,40,68,091/- made by the Assessing Officer on account of capitalization of interest paid on loans taken for construction of hotel.
Succinctly, facts of the case are that the assessee filed return declaring loss of Rs. 6.47 crore. During the course of assessment proceedings, the Assessing Officer observed that the hotel and resort building claimed to have been started on 18.10.2011 had not in fact become operational by that date. Since the capital work was still in progress in the opinion of the Assessing Officer, he required the assessee to show cause as to why interest paid up to February, 2012 may not be capitalized. The assessee submitted details before the Assessing Officer submitting that the business commenced on 18.10.2011. In support of such a contention, the assessee filed copy of invoice for room charges and food bills of the guests from 18.10.2011; copy of first service tax return; copy of monthly luxury tax returns for October, November and December, 2011; copy of VAT return for the quarter October to December, 2011 and other necessary registrations/certificates. Not convinced, the Assessing Officer held that the hotel business did not 2
February, 2012. He made proportionate disallowance of interest of Rs. 240609/- capitalizing it in terms of proviso to section 36(1)(iii) of the Act. The learned CIT(A) deleted the addition.
Having heard both the sides and perused the relevant material on record, it is seen that the assessee furnished more than necessary details to demonstrate that its hotel / resort building was completed on 17.10.2011 which commenced operations from 18.10.2011 furnishing copies of invoices for room charges and food bills and other necessary returns/certificates as discussed above, which abundantly show that the business of the assessee commenced from 18.10.2011. In such circumstances, we hold that the learned CIT(A) was justified in deleting the addition of Rs. 2.40 crore and odd made by the Assessing Officer by capitalizing proportionate interest to the building alleged to be under construction.
In the result, the appeal is dismissed.