| The Tax Publishers2019 TaxPub(DT) 7529 (Del-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
From the perusal of the ledger account of parties where in the receipt of money was reflecting and a summary sheet reflecting the date of receipt of amount and the date of payment for flat, it could be seen that assessee had applied the fees amount towards the purchase of flat as a measure of commercial expediency. Moreover, as it could further emerge from the records that the assessee had duly offered such receipt amount as its income on cash basis in accordance with its method of accounting which was also evident from the ledger accounts of such parties. Thus, AO was not right in making addition in respect of interest incurred on account of amount standing as advance.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Interest paid to parties in the earlier years which was standing under the head 'loans and advances' as opening balance -
Assessee-firm was engaged in the business of providing architectural services for housing and commercial projects. AO made disallowance on account of interest on borrowings paid by the assessee. Assessee contended that the borrowed funds were used for business activities only and hence the interest paid was a deductible expenditure. Assessee further contended that no disallowance could be made in respect of the interest paid to parties in the earlier years which was standing under the head 'loans and advances' as opening balance. Held: It was mutually agreed between the assessee and the respective parties that the payment for fees will be made subject to the condition that the assessee applies for allotment of flat. Thus, assessee had to apply for allotment of flat as a measure of commercial expediency. The ledger account of such parties where in the receipt of money was reflecting was also placed on record. Further, a summary sheet reflecting the date of receipt of amount and the date of payment for flat was also submitted by the assessee. Thus, it could be seen that assessee had applied the fees amount towards the purchase of flat as per the terms agreed upon. It could further emerge from the records that the assessee had duly offered such receipt amount to its income on cash basis in accordance with its method of accounting which was also evident from the ledger accounts of such parties. Thus, AO was not right in making addition in respect of interest incurred on account of amount standing as advance.
REFERRED : CIT (Large Tax Payer Unit) v. M/s. Reliance Industries Ltd. (2019) 410 ITR 466 (SC) : 2019 TaxPub(DT) 0659 (SC),Hero Cycles (P) Ltd. v. CIT (Central) (2015) 379 ITR 347 (SC) : 2015 TaxPub(DT) 4897 (SC),SA Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0833 (SC),The pr. CIT-3 v. DLF Hotel Holding Ltd. [Income Tax Appeal No.1012/2018, dt. 28-9-2018] : 2018 TaxPub(DT) 6752 (Del-HC),Pr. CIT-7 v. The Basti Sugar Mills Company Limited (ITA No. 205 Order, dated 28-9-2018) : 2018 TaxPub(DT) 6805 (Del-HC),The CIT-1 v. Consumer Marketing (India) (P) Ltd. (ITA No. 646 of 2015 Guj. HC) : 2017 TaxPub(DT) 2154 (Guj-HC),CIT-2, Mumbai v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom. HC) : 2014 TaxPub(DT) 3351 (Bom-HC),CIT I v. Amod Stamping (P) Ltd. (2014) 223 Taxman 256 (Guj. HC),Punjab Stainless Steel Inds. v. ACIT [I.T.A. No. 5532/DEL/2016, I.T.A. No. 1107/DEL/2016, I.T.A. No. 1147/DEL/2016, I.T.A. No. 6036/DEL/2016, dt. 4-6-2019] : 2019 TaxPub(DT) 4359 (Del-Trib),Chemical Sales and Services 3N v. ITO (ITA No. 4146/Del/2015 Order, dated 26-9-2018) : 2019 TaxPub(DT) 0081 (Del-Trib),The Dy. C.I.T, Circle 13 (2), New Delhi v. M/s. Jetair (P) Ltd. (ITA Nos. 2712, 2713 and 6884/Del/2015 Order, dated 19-9-2018) : 2018 TaxPub(DT) 6294 (Del-Trib),M/s. R.N. Gupta and Co. Ltd. v. The Addl. C.I.T. (ITA No. 848/Chd/2015, dated 12-4-2016 Tri. Chandigarh) : 2016 TaxPub(DT) 2824 (Chd-Trib)
FAVOUR : In assessee's favour
A.Y. : 2013-14
INCOME TAX ACT, 1961
Section 37(1)
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