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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI RAJESH KUMAR, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri K. Gopal/ Ms. Neha Paranjpe (AR) Department by: Shri Abi Rama Kartikiyen(DR) Date of Hearing: 26.02.2019 Date of Pronouncement: 24.04.2019 O R D E R
PER AMARJIT SINGH, JM:
The present appeal has been filed by the revenue against the order dated 12.04.2017 passed by the Commissioner of Income Tax (Appeals)-12, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2009-10.
The revenue has raised the following grounds: -
"1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.76,04,210/- on account of capitalization of interest ignoring the facts that the ITA. No. 4786/M/2017 A.Y.2009-10 AO has passed a speaking order on the directions given by Hon’ble ITAT.
2. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the AO be restored.
3. The appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary.”
The brief facts of the case are that the assessee filed its return of income on 30.09.2009 for the A.Y. 2009-10 declaring loss to the tune of Rs.1,58,48,154/-.Thereafter, the assessment of the assessee was concluded u/s143(3) of the Act on 14.12.2011 assessing the total income in sum of Rs.1,42,84,600/- after capitalizing interest towards office building (Capital WIP) amounting to Rs.1,02,87,081/- and not allowed depreciation of Rs.77,95,403/-. Therefore, the assessee filed an appeal before the CIT(A) who confirmed the action of the AO in capitalizing the cost of construction to the WIP was upheld. So far as the depreciation is concerned, the AO directed was directed to disposed of assessee’s application u/s 154 of the Act. Thereafter, the assessee filed an appeal before the Hon’ble ITAT and Hon’ble ITAT vide order dated 24.01.2014 disposed off the appeal of the assessee in and Hon’ble ITAT has directed to re-assess the interest/computation/calculation and decide the case on merits. Thereafter, the notice was given and the percentage was applied to the cost of interest claim in sum of Rs.1,02,87,081/- which was worked out to the tune of Rs.76,04,210/- and added to the income of the assessee. The total income of the assessee was assessed to the tune of ITA. No. 4786/M/2017 A.Y.2009-10 Rs.64,77,153/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.
ISSUE NO.1& 2
All the issues are inter-connected, therefore, are being taken up together for adjudication. Under these issues the revenue has challenged the deletion of addition of Rs.76,04,210/- on account of capitalization of interest. The CIT(A) has decided the matter of controversy while deciding the grounds no. 3. The relevant finding is hereby reproduced as under.: -
“I have carefully gone through the assessment order and the appellant's submissions. It is seen that the A.O. has erred in not carrying out the directions of the Hon. Mumbai ITAT (order dated 24.1.2014 in in appellant's own case for A.Y. 2009-10 (i.e. the present appeal). The appellant had claimed Rs.1,02,87,081/- as interest. The A.O. however capitalized the amount at Rs.76,04,210/-. The CIT(A) upheld the addition on account of capitalization. On appeal to I-Hon’ble Tribunal, the Hon'ble Tribunal accepted -the contention of the Appellant with certain discretion. The total interest claimed for the relevant year was Rs.1,02,87,081/-. The break-up of the said interest is as under: Interest paid on unsecured loan Name of the Party Diam Organic Chemical Industries 1,500,000 Maniben Lalji 933,822 Meena D. Nandu 401,820 Popatlal Bhanji (HUF) 110,959 Romil D. Nandu 110,959 Sandra Bhansali 113,425 Interest on TDS 3,090 Dhiren P. Nandu 1750,027 Interest on secured loan windmill 52,23,307 Bank charges1,34,491
ITA. No. 4786/M/2017 A.Y.2009-10 Other: Interest to Bank, 5,181 Total Interest as per Profit and Loss account 1,02,87,081 The A.O. was given direction by Hon'ble Tribunal to consider interest on loan for windmill, bank charges and interest received to arrive at the figure for capitalization of interest. Therefore, in view of the said directions, interest for the purpose of capitalization comes to Rs. 29,48,852/- which is as under: Total Financial Cost A 1,02,87,081/- Less: Interest on windmill 52,23,307 Bank Charges 1,34,491 Interest received from others 19,80,431/- B 73,38,229 Gross Interest for calculation of capitalization (A-B) 29,48,852/- So as directed by Hon’ble ITAT the AO is to take the interest at Rs.29,48,852/- for capitalization calculation. It is also seen that as per Schedule 3 of the Balance-Sheet, the secured loans have been taken for windmill and interest paid against it. Ground no.3 of the appeal is partly allowed.”
On appraisal of the above said finding, we noticed that the Hon’ble ITAT has already directed the AO to net off the interest after due calculation/computation. The AO failed to comply the direction in proper manner, therefore, the appeal filed before the CIT(A). The CIT(A) has considered the each and every facts of the case and in this regard the calculation has been mentioned above and capitalized the interest to the tune of Rs.29,48,852/-. The computation nowhere seems found wrong and the issue is purely factual in nature. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.
ITA. No. 4786/M/2017 A.Y.2009-10 Accordingly, these issues are decided in favour of the assessee against the revenue.