Tribunal directs AO to verify specific expenses for A.Y. 2009-10. Director expenses remanded; AO's directions for A.Y. 2010-11 set aside.

The Tribunal partly allowed the appeal, directing the AO to verify and allow specific expenses and interest for A.Y. 2009-10 if substantiated with evidence. The issue of Director-incurred expenses was remanded for re-examination, while the AO's directions for A.Y. 2010-11 were set aside.

---

---

Issues Involved:
1. Disallowance of construction expenses incurred after 15.04.2008.
2. Disallowance of interest on loans for previous financial years.
3. Disallowance of expenses incurred by the Director on behalf of the company.
4. Reduction of certain expenses from Work-in-progress for A.Y. 2010-11.

Detailed Analysis:

1. Disallowance of Construction Expenses Incurred After 15.04.2008:
The assessee claimed construction expenses of Rs. 22,91,738/- incurred after 15.04.2008, arguing these were necessary for completing additional works requested by occupants. The Assessing Officer (AO) disallowed these expenses, asserting the project was complete as of 15.04.2008, supported by a completion certificate from the architect and a Part Occupancy Certificate from CIDCO dated 10.06.2008. The CIT(A) upheld this disallowance, reasoning that no further expenses were justified post-completion certificate. The Tribunal found merit in the assessee's alternative claim for expenses incurred between 16.04.2008 and 10.06.2008, directing the AO to verify and allow these expenses if substantiated with evidence.

2. Disallowance of Interest on Loans for Previous Financial Years:
The assessee had not provided interest for F.Ys. 2005-06 and 2006-07, citing inadequate profits, but later paid interest retrospectively in F.Y. 2008-09. The AO disallowed this interest, arguing the assessee should have provided for it in the respective years under the mercantile system of accounting. The CIT(A) concurred, stating the assessee cannot retrospectively adjust interest to reduce taxable income. The Tribunal upheld the disallowance for prior years but directed the AO to allow interest for A.Y. 2009-10 if it was paid after deducting necessary TDS.

3. Disallowance of Expenses Incurred by the Director on Behalf of the Company:
The AO disallowed these expenses due to lack of evidence proving they were incurred wholly and exclusively for business purposes. The assessee contended that the Director incurred these expenses for business-related travel and other activities, submitting relevant details. The Tribunal found the facts contradictory and remanded the issue back to the AO for re-examination with necessary inquiries and evidence.

4. Reduction of Certain Expenses from Work-in-progress for A.Y. 2010-11:
The AO disallowed certain expenses for the current year and directed the remaining portion to be reduced from Work-in-progress for A.Y. 2010-11. The assessee argued the AO had no authority to give directions for a subsequent year not under assessment. The Tribunal agreed, stating the AO's directions for A.Y. 2010-11 were beyond his scope. However, the AO was permitted to take necessary steps under the law for A.Y. 2010-11.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the AO to verify and allow specific expenses and interest for A.Y. 2009-10 if substantiated with evidence, and remanding the issue of Director-incurred expenses for re-examination. The AO's directions for A.Y. 2010-11 were set aside.

---