Property developer wins on rental value calculations and basement area reductions under income tax assessment

ITAT Delhi ruled on multiple issues involving a property development company. The tribunal favored the assessee on ALV calculations for rented properties and self-occupied business premises, following previous decisions. For properties under litigation, the matter was restored to AO for fresh examination with proper evidence. Regarding windmill sales income for first three months, the tribunal directed AO to allow corresponding expense deductions. The 50% ALV reduction for basement areas was upheld as reasonable given usage restrictions. Employee PF/ESI disallowance was remanded for factual verification, while section 43CA addition was allowed in revenue's favor.

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Issues Involved:
1. Addition on account of notional annual letting value (ALV) under section 22 of the Income Tax Act, 1961.
2. Determination of ALV in respect of properties under litigation.
3. Determination of ALV in respect of property under self-occupation.
4. Application of section 43CA of the Income Tax Act.
5. Addition in respect of revenue from windmill operations.
6. ALV value of basement area properties.
7. Deletion of disallowance on account of Employees' Contribution to PF and ESI.

Issue-wise Detailed Analysis:

1. Addition on Account of Notional Annual Letting Value (ALV) Under Section 22 of the Income Tax Act, 1961:
The assessee challenged the addition of notional ALV for properties classified as stock in trade. The Tribunal noted that the issue was covered in favor of the assessee by its earlier decision in ITA Nos. 5010 & 5011/Del/2017 and ITA Nos. 5679 & 5680/Del/2017 for AYs 2013-14 and 2014-15, where it was held that properties actually let out and offered to tax should not be included for notional ALV. Consequently, Ground Nos. 1.1, 2, and 2.1 raised by the assessee were allowed.

2. Determination of ALV in Respect of Properties Under Litigation:
The Tribunal noted that the issue was covered by its earlier decision in the assessee's case for AYs 2013-14 and 2014-15, where it was held that properties under litigation should not have notional ALV added. The Tribunal restored the issue to the Assessing Officer (AO) for fresh examination with necessary documentary evidence. Thus, Ground Nos. 3 and 3.1 were allowed for statistical purposes.

3. Determination of ALV in Respect of Property Under Self-Occupation:
The Tribunal referenced its earlier decision where it was held that properties used for business purposes should not have notional ALV added, as per section 22 of the Act. Consequently, Ground No. 4 raised by the assessee was allowed.

4. Application of Section 43CA of the Income Tax Act:
The assessee did not press Ground Nos. 5 to 5.2, which were dismissed as not pressed.

5. Addition in Respect of Revenue from Windmill Operations:
The Tribunal examined the agreements and transactions related to the sale of windmills to M/s Rugby Renergy Pvt. Ltd. It was held that revenue from windmill operations for the period 1.4.2014 to 30.6.2014 should be taxable in the hands of the assessee, with corresponding deductions for expenses incurred during this period. The AO was directed to verify the expenses. Ground Nos. 6.1 and 6.2 raised by the assessee and Ground No. 4 raised by the revenue were disposed of accordingly.

6. ALV Value of Basement Area Properties:
The Tribunal upheld the CIT(A)'s decision to estimate the ALV of basement areas at 50% of ground floor properties, considering the restrictive usage of basements. Ground No. 1 raised by the revenue was dismissed.

7. Deletion of Disallowance on Account of Employees' Contribution to PF and ESI:
The Tribunal noted the recent Supreme Court decision in Checkmate Services Pvt Ltd vs CIT, which held that employees' contributions to PF/ESI remitted after the due dates prescribed under respective Acts are not deductible. The issue was restored to the AO for verification of the actual dates of cheque issuance and clearance. Ground No. 2 raised by the revenue was allowed for statistical purposes.

8. Deletion of Addition Made U/S 43CA:
The Tribunal noted that the issue was to be decided in favor of the revenue, as the assessee did not advance arguments against the revenue's position. Ground No. 3 raised by the revenue was allowed.

Conclusion:
Both the appeals of the assessee and the revenue were partly allowed for statistical purposes. The Tribunal provided detailed directions for the AO to re-examine specific issues, ensuring compliance with legal precedents and factual verification.

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