INCOME TAX ACT, 1961

Section 36(1)(iii)

Business deduction under section 36(1)(iii) - Disallowance of interest under section 36(1)(iii) - Method of accounting followed by assessee -

Assessee-company was engaged in business of Real Estate Development in Mumbai and other cities. AO disallowed the interest under section 36(1)(iii) debited to P&L Account by assessee on the ground that project undertaken by assessee was not completed. CIT(A) directed AO to restrict the claim of interest under section 36(1)(iii) to that for the project completed during the relevant previous year only and held that AO should follow the same reasoning as given by him in his appellate order for the assessment year 2005-06. Held: Assessee was claiming interest expenses under section 36(1)(iii) on payment basis on the loans which were mainly for business and not project specific. If revenue expenditure was incurred in a particular year and assessee claims that expenditure in that year, the revenue cannot deny the expenditure and it had to be allowed. Loans were not project specific and it was undisputedly a revenue expenditure and same had to be allowed in the year it has been incurred irrespective of the fact that, whether the assessee was following 'project completion method'. This issue stands allowed in favour of assessee by Tribunal in assessee's own case. Thus, AO was directed to allow the interest claimed by assessee.

Relied:CIT v. Lokhandwala Construction Inds. Ltd. (2003) 260 ITR 579 (Bom) : 2003 TaxPub(DT) 0916 (Bom-HC) CIT v. Tata Chemicals Ltd. (2002) 256 ITR 395 (Bom) : 2002 TaxPub(DT) 1317 (Bom-HC) JCIT v. K. Raheja (P.) Ltd. (2006) 102 ITD 414 (Mum) : 2006 TaxPub(DT) 0457 (Mum-Trib)Followed:Taparia Tools Limited v. JCIT (2015) 92 CCH 123) (SC) : 2015 TaxPub(DT) 1438 (SC) Taparia Tools Ltd. v. JCIT (2003) 260 ITR 102 (Bom) : 2003 TaxPub(DT) 0901 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

INCOME TAX ACT, 1961

Section 14A

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