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Income Tax Appellate Tribunal, INDORE SMC BENCH, INDORE
However in the profit and loss account for Financial Year 2014-15 opening stock is shown as Rs.5,96,45,959/-. So there is a clear cut difference of Rs.27,58,288/- . the said plot of land located at 6/6 New Palasia, Indore was introduced by one of the partner namely Shri Sunil Kumar Jodhani. This plot was purchased at Rs.4,98,71,485/- vide registered deed dated 11.2.2013 by the partner Shri Sunil Kumar Jodhani. For making such purchase, secured loan of Rs. 2.45 crores was taken from Tata Finance Ltd. From 11.2.2013 to 31.3.2014 the interest accrued on the borrowing taken from Tata Finance Ltd. Now during the financial year 2013-14 when the said plot of land was introduced into the partnership firm then the secured loan was also transferred to the partnership firm and as on 31.3.2014. The capital account of Shri Sunil Kumar Jodhani reflects the figure of Rs.2,54,19,931/- and on secured loan from Tata Finance Ltd was also shown at Rs.2,30,76,007/-. However the interest accrued at Rs.27,58,288/- did not form the part of the cost of plot of land. As per the assessee the inventory value of developed land as on 31.3.2014 is actually Rs.5,96,45,959/- which includes the interest accrued on borrowings at Rs.27,58,288/- but the assessee failed to include in the cost of land. The calculation of the inventory value of developed land as on 31.3.2014 is as under:
Gurukripa West End Particulars Amount Original cost of land purchased 49871485 Interest till 31.03.2013 to inventory 1898434 Interest till 08.072.2013 (property transferred 1488369 in firm) Total value of land in firm 53258288 Interest till 31.03.2014 1731198 Closing Inventory value of land on 31.03.2014 54989486 Material and other cost incurred in 4656473 development as per books of accounts Total Inventory value of developed land as 59645959 on 31.03.2014 7.2 Now the revenue have not controverted the above details filed by the assessee at any stage. The reason given by the assessee for making said change in the balance sheet for Financial Year 2014- 15 is that it wanted to make compliance to the Income computation and Disclosure (In short ‘ICDS’) Standard-IX notified by CBDT which includes the land as a qualifying asset in para 2(b)(i).
Further para 2(b)(iii) of the ICDS states that if inventories that require a period of 12 months or more to bring them to a saleable condition then such borrowing cost being interest incurred for land and other immoveable property held as inventory is required to be capitalized. Further in para 4 of the ICDS it is stated that for the purposes of this ICDS, Capitalization in the context of inventory referred to in item (iii) of clause (b) of sub-paragraph (1) of the 8 inventory. In view of the ICDS norms assessee has calculated the inventory value as on 31.3.2014 and 1.4.2014.
7.3 Though the Ld. A.O has rightly observed that these provisions of ICDS were required to be complied for Assessment Year 2016-17 but in my view the interest incurred up to 31.3.2014 has only been added to the cost of land. Irrespective of the ICDS, the cost of land including the interest incurred in the hands of the partner needs to be shown as total cost of land as on 31.3.2014, therefore the correct value of the inventory as on 31.3.2014 is Rs.5,96,45,959/-.
The assessee should have incorporated this correct figure in the return for preceding year. However so far as the year under appeal is concerned the assessee has rightly adopted the correct figure of opening stock at Rs.5,96,45,959/-. Therefore there being no loss to the revenue as the alleged sum would have been claimed as an expenditure in subsequent year as per ICDS, therefore in my view both the lower authorities erred in observing that the assessee has suppressed the profits to the tune of Rs.27,58,288/-. I therefore set aside the finding of Ld. CIT(A) and delete the impugned addition of the assessee.
In the result appeal of the assessee is allowed.