The principle of consistency applies in tax proceedings when fundamental facts remain unchanged, and disallowance under Section 14A of the Income Tax Act is not maintainable in the absence of exempt income.

O R D E R

PER MANISH AGARWAL, AM:

Both appeals are filed by the Revenue against two separate orders of the Commissioner of Income Tax (Appeals)-I, New Delhi [CIT(A) in short] in appeal Nos. 268/16-17 and 653/16-17 for Assessment Years: 2013-14 and 2014-15 respectively, both dated 23.03.2016 and 31.03.2014 respectively.

2. Since, in both the appeals, the issues raised by Revenue are common, therefore, they are taken together for consideration and disposed-off by a common order.

3. Firstly, we take up Revenue’s appeal for Assessment Year 2013-14 in ITA No.6899/Del/2018.

4. Briefly stated the facts are that assessee has e-filed its return of income on 29.11.2013 declaring Nil income after claiming brought forward loss of Rs.51,32,341/-. The AO completed assessment u/s 143(3) by making disallowance of interest on debenture claimed at Rs.2,19,42,537/- out of the interest income earned on Inter Corporate Deposits and further treated the interest income of Rs.2,19,42,537/- as Income from Other Sources. Beside this, the AO further added a sum of Rs.5,02,612/- being disallowed u/s 14A of the Act and interest of income refund of Rs.5,972/-. Against the said order, the assessee preferred an appeal before the Ld. CIT(A) who vide assessment order dated 03.08.2018 had allowed the appeal of the assessee, therefore, the Revenue is in appeal before the Tribunal by taking the various grounds of appeal as per the appeal memo.

5. Ground of appeal No.1 is with respect to the deletion of disallowance of Rs.2,19,42,537/- made out of total interest paid of Rs.7,29,68,948/- on debentures.

6. None appeared on behalf of the assessee. However, the Ld. CIT-DR was heard at length.

7. On careful consideration of the facts, it is observed that the assessee has paid total interest of Rs.7,29,68,948/- and had claimed a sum of Rs.2,19,42,540/- under the head Income from business or profession and debited in the P&L Account and balance amount was added back to the cost of project being part of project expenses on which the income was computed and offered for tax on the basis of percentage of completion method as the assessee is engaged in the business of Real Estate Project.. The AO alleged that the assessee has received interest on the booking advances received from the customers and wrongly claimed the deduction of debenture interest paid out of such income and therefore, disallowed the same. However, ld. CIT(A) has deleted the same and allowed the appeal of the assessee. The Ld. CIT(A) had followed principle of consistency by observing that for Asst. Year 2011-12 similar claim was made by the assessee which was allowed by the AO in the assessment order passed u/s 143(3) of the Act. Since, the facts are identical, therefore, as a principle of consistency, the Ld. CT(A) has allowed the deduction claimed by the assessee and deleted the disallowance. The relevant observations of Ld. CIT(A) as contained in para 7 of the order are as under:

“I have carefully considered the assessment order and written submissions filed by the Ld. AR. The appellant company had incurred interest expenses on debentures issued for a total amount of Rs.7,29,68,948/-. Out of the said amount. the appellant had added back an amount of Rs. 5,10,26,411/- while computing its taxable income and transferred the said expenses to Project in progress. Further, the balance amount of Rs.2,19,42,537/- was transferred by the appellant to the Profit & Loss account and claimed as expenses.

The AO has disallowed the above claim of expenses of Rs.2, 19,42,537/- and has transferred the same to the Project in Progress.

The detailed submissions of the appellant against the aforementioned di