D S DOORS (INDIA) LTD.,FARIDABAD vs. ITO, WARD- 1(2), FARIDABAD

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ITA 852/DEL/2018Status: DisposedITAT Delhi09 July 2024AY 2013-14Bench: SHRI KUL BHARAT (Judicial Member), SHRI M. BALAGANESH (Accountant Member)8 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal allowed the appeal regarding the addition for notional interest on land, finding that borrowed funds were utilized for business purposes and thus interest was deductible under section 36(1)(iii). However, it dismissed the appeal concerning the disallowance of interest on borrowed funds for WIP, holding that such interest must be capitalized as per the proviso to section 36(1)(iii) until the asset is put to use. The grounds related to agricultural income were also dismissed, upholding the CIT(A)'s estimation of expenses and confirmation of additions due to insufficient evidence.

What were the facts?

The assessee, engaged in manufacturing, acquired land for factory construction using borrowed funds. Due to project delays, part of the land was temporarily used for agriculture. The AO made an addition for notional interest on the land acquisition, disallowed interest on borrowed funds used for Work-in-Progress (WIP) assets, and questioned the claimed agricultural income, leading to additions and estimation of agricultural expenses.

What were the issues?

1. Whether notional interest on land acquired for business, but temporarily used for agriculture, is deductible. 2. Whether interest on borrowed funds for Work-in-Progress (WIP) assets should be capitalized or allowed as revenue expenditure. 3. Whether the CIT(A) was justified in estimating agricultural expenses and making additions to agricultural income due to insufficient evidence.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 36(1)(iii),Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI

Before: SHRI KUL BHARAT & SHRI M. BALAGANESH

For Respondent: Shri Vivek Kumar Upadhyay, Sr. DR
Hearing: 10/04/2024Pronounced: 09/07/2024

per acre yield is not furnished by the assessee , affidavits contained various infirmities, the claim of the assessee cannot be accepted. Further the ld. CIT(A) observed that the assessee has shown Rs 40,39,514/- as net agricultural income. No expenses were incurred by the assessee. How the assessee has paid for the electricity, water, seeds, tractors, diesel, repair and maintenance , pesticides, insecticides etc is not known. Obviously the same could not have been paid in kind as claimed by the assessee for the labour charges by giving agricultural produce in kind. The ld. CIT(A) observed that the average yield of the same crops had been obtained by the ld AO from the Agriculture Department NUH u/s 133(6) of the Act during the assessment proceedings of Asst Year 2014-15 which reveal that there is a huge difference in the agricultural produce per acre shown by the assessee and the per acre agricultural produce assessed by the agricultural department specifically for this geographical area. Accordingly, the ld CIT(A) concluded that the assessee had inflated the exempt agricultural income. Since no expenses were claimed by the assessee, the ld CIT(A) proceeded to treat 30% of agricultural income shown by the assessee towards expenses incurred by the assessee for the purpose of earning agricultural income. For this purpose, the ld CIT(A) issued an enhancement notice on 27.12.2017 to the assessee. The assessee reiterated its earlier submissions. Since the agricultural income is accepted by the revenue at Rs 20,34,000/-, the ld CIT(A) estimated the agricultural expenditure at Rs 6,10,200 (being 30% of Rs 20,34,000) and made an enhancement thereon. Consequently, the net agricultural income was determined by the ld. CIT(A) at Rs 14,23,800/- (2034000- 610200). We do not find any infirmity in the said detailed finding of the ld. CIT(A). Accordingly, the Ground Nos. 3 to 5 raised by the assessee are dismissed. Page | 7

7.

The Ground No. 6 raised by the assessee is general in nature and does not require any specific adjudication.

8.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 09/07/2024.

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