Case Law Details
DCIT Vs Sylvannus Builders and Developers Ltd (ITAT Ahmedabad)
ITAT Ahmedabad held that when interest free funds are available with the assessee, it can be said that investments are made out of interest free funds and hence disallowance under section 36(1)(iii) of the Income Tax Act not justifiable.
Facts- The respondent assessee is a Private Limited Company engaged in the business of Real Estate Developers and Construction. For A.Y. 2016-17, the assessee filed its Return of Income on 28.09.2015 declaring a total income of Rs. 3,11,94,560/-. The case was selected for scrutiny and assessment was completed u/s. 143(3) wherein the Assessing Officer held that the assessee in principal accepted Percentage Completion Method (PCM) and returned profit of Rs. 3,11,94,560/- whereas AO estimated the profit at 31% under Profit Margin Method (PMM) as per earlier A.Y. 2015-16 and accordingly made an addition of Rs. 2,76,69,223/-. AO also made disallowance of interest u/s. 36(1)(iii) of the Act amounting to Rs. 1,06,64,058/- and thereby demanded tax thereon.
Aggrieved against the same, the assessee filed an appeal before Commissioner of Income Tax (Appeals) who deleted the additions. Being aggrieved, revenue has preferred the present appeal.
Conclusion- We have given our thoughtful consideration and perused the materials available on record. The Ld. CIT(A) deleted the addition on the ground that the A.O. without rejection of books of accounts u/s. 145 of the Act, but estimated the income based on Profit Margin Method.
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