Case Law Details
Mahindra World City Developers Ltd. Vs ACIT (Madras High Court)
The issue under consideration is whether the Tribunal was right in law in holding that the interest expenditure is Capital in nature since assessee had in its books, included interest portion related to projects as its work in progress in its books, and claimed them as a deduction in income computation memo for the purposes of tax payments?
High Court states that, the Proviso to Section 36(1) of the Act incorporated in Part D of Chapter IV of the Act providing for the “Method of Computation of Total Income”, quoted above, will, in our opinion, override the provisions of Section 145A of the Act, which is incorporated in Chapter IV of the Act relating to “Procedure for Assessment”. The words in the Proviso to Section 36(1) of the Act “whether capitalised or not” will override the accounting practice followed in the Books of Accounts by the Assessee. The Assessee has admittedly capitalised the interest paid on the borrowed capital in the present case. The Assessee has also not claimed before us or before the Authorities below that the land in question was put to use in the Assessment Years in question. Mere purchase of the land in the Years in question out of the borrowed capital does not entitle the Assessee to claim such interest paid on borrowed capital as a deductible expenditure in the present Assessment Years merely on the basis of method of accounting prescribed under Section 145A of the Act. The method of accounting provided for valuation of inventory under Section 145A of the Act does not determine the allowability of the expenditure. The Proviso to Section 36(1), which says that such claim of deduction will be allowed in the Assessment Years, when it was put to use, will override the provisions contained in Section 145A of the Act. Since the position of law and the inter play of the above provisions are very clear, ITAT do not find any substantial question of law to be arising in the present case for our consideration. Accordingly, they are dismissed the appeal.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
The Assessee, Mahindra World City Developers Limited, Chennai has filed these Appeals under Section 260A of the Act raising the following purported substantial questions of law arising from the order of the Income Tax Appellate Tribunal dated 27.6.2018 for the Assessment Years 2010-2011 to 2012-2013:-
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
