Notional ALV addition upheld on unsold residential stock-in-trade units under section 80IB(10) deduction claims

The ITAT Delhi upheld the addition of notional ALV on unsold residential units held as stock-in-trade, following binding precedent from Delhi HC and SC. The tribunal partly allowed revenue's appeal, restoring the matter to AO for verification of vacant farmland claims. Regarding section 80IB(10) deduction, the tribunal dismissed revenue's appeals on expense allocation, affirming CIT(A)'s findings on advertisement expenses, interest on borrowed capital, and directors' meeting fees. The tribunal rejected assessee's cross-objections on retainership fee and directors' meeting fee allocation, finding insufficient evidence to support claims that services weren't rendered to eligible projects.

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Issues Involved:
1. Deletion of addition on account of notional Annual Letting Value (ALV).
2. Allocation of various expenses to eligible projects for deduction under Section 80IB(10).
3. Allowing set-off of losses against profits of succeeding years.
4. Deletion of addition under Section 14A read with Rule 8D.
5. Allocation of advertisement expenses, retainership fees, and Director's meeting fees.

Detailed Analysis:

1. Deletion of Addition on Account of Notional Annual Letting Value (ALV)
The Revenue challenged the deletion of INR 58,09,780/- added by the AO on account of notional ALV for unsold spaces/flats treated as income from house property. The Assessee conceded that the issue was decided against them by the Delhi High Court in their own case for earlier assessment years. The Tribunal noted that no material was presented to support the contention that the flats were not habitable. Therefore, the Tribunal upheld the AO's addition but remanded the issue of farm lands to the AO for verification. Thus, the Tribunal partly allowed the Revenue's appeal on this ground.

2. Allocation of Various Expenses to Eligible Projects for Deduction Under Section 80IB(10)
The Revenue disputed the substantial relief granted by the CIT(A) regarding the allocation of expenses to eligible projects. The Tribunal analyzed the following expenses:

- Advertisement & Publicity Expenses: The CIT(A) allocated INR 38,22,503/- based on average expenses from previous years. The Tribunal upheld this finding.
- Interest on Borrowed Capital: The CIT(A) found that most projects were 90% complete and running in surplus, so no allocation was warranted. The Tribunal upheld this finding.
- Professional Charges: The CIT(A) allocated INR 1,04,23,153/- for retainership fees but excluded other professional expenses. The Tribunal upheld this allocation.
- Director's Meeting Fee: The CIT(A) upheld the allocation of INR 9,65,000/-. The Tribunal agreed, noting the absence of evidence from the Assessee.
- Director's Travelling Expenses: The CIT(A) found no allocation was warranted as the expenses were unrelated to eligible projects. The Tribunal upheld this finding.

Thus, the Tribunal dismissed the Revenue's grounds on these allocations.

3. Allowing Set-off of Losses Against Profits of Succeeding Years
The Revenue contested the CIT(A)'s decision to allow set-off of losses from earlier years against profits of succeeding years. The Tribunal noted that losses already set off against other income in earlier years could not be notionally set off again. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground.

4. Deletion of Addition Under Section 14A Read with Rule 8D
The Revenue challenged the deletion of INR 10,80,927/- disallowed by the AO under Section 14A read with Rule 8D. The Tribunal noted that the AO failed to establish any nexus between borrowed funds and exempt income. The Tribunal upheld the CIT(A)'s deletion, dismissing the Revenue's ground.

5. Allocation of Advertisement Expenses, Retainership Fees, and Director's Meeting Fees
The Assessee's cross-objection included:
- Advertisement Expenses: The Tribunal upheld the CIT(A)'s allocation of INR 38,22,503/-.
- Retainership Fees: The Tribunal upheld the CIT(A)'s allocation of INR 1,04,23,153/-.
- Director's Meeting Fees: The Tribunal upheld the CIT(A)'s allocation, noting the absence of evidence from the Assessee.

Thus, the Tribunal dismissed the Assessee's cross-objection.

Conclusion
- The Revenue's appeal was partly allowed.
- The Assessee's cross-objection was dismissed.

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