ACIT-8(3)(1) Vs Triple Securities Pvt. Ltd. (ITAT Mumbai)
Summary: ITAT Mumbai dismissed the Revenue’s appeal for Assessment Year 2016-17 and upheld the CIT(A)’s deletion of an addition of INR 2,18,84,138/- under Section 43CA and disallowance of interest expenditure of INR 1,55,42,291/- under Section 36(1)(iii) of the Income Tax Act, 1961. The assessee, a builder and developer, undertook redevelopment of an old tenanted residential building, “Govind Niwas”. Under the redevelopment approval, tenants were to be rehabilitated within specified carpet-area limits. Development remained stalled because certain tenants sought larger areas. At a meeting held on 07.08.2006 in the presence of the Deputy Chief Engineer, MBR&RB, a consensus was reached under which additional areas were allotted to specified tenants. The AO invoked Section 43CA when the final Permanent Alternative Accommodation Agreements were registered in FY 2015-16, treating the stamp-duty value of the additional area as deemed consideration.
ITAT held that Section 43CA creates a deeming fiction restricted to transfer of land or building or both and cannot be extended beyond its express scope. The Tribunal observed that the additional area allotted to the tenants had already been agreed and finalised in 2006, the assessee was never entitled to hold or sell that area, and it therefore could not be regarded as the assessee’s stock-in-trade. ITAT consequently upheld deletion of the Section 43CA addition. On the second issue, the AO had disallowed interest of INR 1,55,42,291/- because the assessee followed the project-completion method and had recognised no revenue during the year. ITAT noted that the assessee had capitalised construction costs until obtaining the part completion certificate in the preceding year and claimed the subsequent interest as period cost.
