Bengal Omnitech Nirman Limited Vs ACIT/ITO (ITAT Kolkata)
Advance Lost in Project = Trading Loss: ITAT Allows ₹1.5 Cr Write-Off & Higher Interest to Directors Justified in Current-Account Dealings
Assessee, a real-estate developer, claimed business loss of ₹1,50,00,000 written off as bad debt towards advance paid to New Look Intex P. Ltd. for supply of ready-mix concrete for the Omni Lake View project. AO disallowed the claim holding that no revenue was recognised from the project & treated the loss as capital in nature. CIT(A) upheld the disallowance.
Tribunal observed that the advance was given in ordinary course of business, the supplier failed to deliver material, the amount was irrecoverable, & the project income was recognised later under project-completion method. Relying on Delhi HC in CIT Vs Sumangal Overseas Ltd, Tribunal held it to be a trading loss allowable u/s 28.
On interest paid to customers (₹6,36,432) for refund of advances due to delay in delivery, AO capitalised/disallowed part of it. Tribunal held that such interest is a normal business expenditure & allowable.
On disallowance of ₹14,55,630 alleging excessive interest (18%) paid to directors vis-à-vis lower interest charged on loans given, Tribunal held that these were current-account transactions with fluctuating balances, higher rates were normal, similar rates allowed in earlier years, & deleted the addition.
