Case Law Details
Keystone Realtors Pvt. Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the interest paid on such borrowing is allowable under section 36(1)(iii) of the Income Tax Act as the funds were borrowed for the purpose of construction project.
Facts- During the year, the assessee incurred finance cost of Rs. 108,75,77,612 out of which Rs. 6,69,81,882 was allocated to those contracts of which construction has been completed and the balance interest of Rs. 102,05,95,730 was debited to the profit and loss account and not capitalised to work in progress (‘WIP’). During the course of assessment proceedings, the assessee was asked to show cause as to why the balance interest should not be disallowed as revenue expenditure and capitalised to the WIP.
AO further held that once the interest is attributable to the project, the same is to be allowed as business expenditure in the ratio of revenue offered from the project and WIP at the end of the year. Accordingly, the AO disallowed the interest of Rs. 102,05,95,730 as revenue expenditure and further increased the closing WIP.
The CIT(A), vide impugned order dismissed the appeal filed by the assessee. Being aggrieved, the present appeal is filed.
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