DY. COMMISSIONER OF INCOME TAX, CENTRAL DELHI vs. THREE C RESIDENCY PRIVATE LIMITED, SOUTH DELHI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the Ld. CIT(A) correctly concluded that Section 68 of the Act could not have been invoked. The assessee had provided explanations for the entry, and the capitalization of interest to CWIP was not disputed on merits, with no unexplained credit entry found.
What were the facts?
The assessee, engaged in real estate, obtained a group housing plot on lease. Terms of the lease deed were revised to include penal interest of 1.5% for delayed payments, making the total interest rate 14%. The assessee capitalized this interest on lease rent payable as part of Capital Work-In-Progress (CWIP). The Assessing Officer (AO) invoked Section 68 of the Act for unexplained credit.
What were the issues?
Whether the capitalization of interest on lease rent as CWIP by the assessee was an unexplained credit attracting Section 68 of the Act.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
This appeal is preferred by the Revenue against the order dated 14.01.2025 of the Ld. Commissioner of Income Tax (Appeal)-24, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’)
31.05.2021 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ACIT, Central Circle-6, Delhi for AY: 2018- 19.
On hearing both the sides, we find that assessee is a part of real estate group engaged in housing projects and was granted a group housing plot by the Yamuna Expressway Industrial Development Authority (YEIDA) through a lease deed dated 17.02.2012. The assessee was required to pay lease deed against this on a condition that if there is an outstanding balance beyond the installment period YEIDA will charge 12.5% per annum as interest. The case of the assessee is that these terms were revised and a penal interest of 1.5%
per annum was added thereby making the total interest rate 14% in case of delay or default in payment. The assessee has computed interest payable by applying rate of 14% per annum of total impugned outstanding as on 31.03.2017 and in its account assessee has shown principle amount as a long term liability and the interest on lease rent payable was shown as a trade payable. The case of the assessee is that this accounting treatment was carried out in accordance with applicable accounting standards. Assessee capitalized Capital Work-In-Progress (CWIP).
However, ld. AO invoked Section 68 of the Act considering this to be unexplained and as the matter reach the stage of First Appeal, additional evidences application under Rule 46A was filed on which remand report was sought and the ld. AO had submitted that evidences were not filed in the assessment proceedings. However, on merits, capitalization of interest to Capital Work In Progress (CWIP) was not disputed.
After going through the impugned order of Ld. CIT(A), we find that additional evidences were forwarded to AO and after taking comprehensive remand report the same was admitted and became the substratum of the decision as Ld. CIT(A) concluded that assessee had explained by letter dated 06.06.2022 that this entry is related to loan installment to be paid to YEIDA along with related interest as installment could not be paid in due times. Ld.
CIT(A) also appreciated that there was a mere journal entry and no cash credit entry existed at the time of increase in closing stock of CWIP to the same.
The Ld. DR although tried to defend the case on the basis that assessee had failed to file necessary evidences at the assessment proceedings, however, given facts and circumstances discussed above including the extensive remand report submitted by the AO wherein on merits the case of the assessee has not been disputed, we find no substance in the grounds as raised. There is nothing to indicate any unexplained credit entry for making addition u/s 68 of the Act. The appeal of the department is dismissed.
Order pronounced in the open court on 05.12.2025
More judgments on Section 68
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
- Bliss Dealtrade Private Limited, Kolkata vs Income Tax Officer - Ward 9(2) Kolkata…ITA 208/KOL/2026[2012-13]Status: Disposed21 Oct 2026AY 2012-13
- Hemal Paresh Madeka, Rajkot vs Asst.Commissioner of Income Tax…ITA 955/RJT/2026[2020-21]Status: Disposed19 Oct 2026AY 2020-21
- Ajaybhai Dineshbhai Bagdai, Near Central… vs The Income Tax Officer, Ward-1(2)(1), New…ITA 74/RJT/2026[2013-14]Status: Disposed19 Oct 2026AY 2013-14
Recent GST High Court judgments
Search GST case law →- The State Of Bihar Through The Commissioner Of State Tax vs. Kaushlendra KumarPatna · 27 Oct 2026
- Ayush Sureshchandra Shah vs. State Of GujaratGujarat · 27 Oct 2026
- Sureshchandra Moolchand Shah vs. State Of GujaratGujarat · 27 Oct 2026
- M/S Larsen And Toubro Limited vs. Joint Commissioner Of Central GST And Anr.Delhi · 27 Oct 2026
- T C Global INDIA Private Limited vs. Principal Commissioner Of Central GST, North DelhiDelhi · 27 Oct 2026
