TaxTMI 
TaxTMI 
2013 (8) TMI 820
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....secured loan on the ground that interest has been paid in this year @ 18% per annum as against 12% per annum in the preceding year. The Assessing Officer while disallowing the interest also observed that the interest on loan taken from the financial institutions during the year has been paid @ 12% per annum. Besides, it was also observed that interest in the provisional balance sheet and Income & Expenditure account has been provided at 12% whereas in the audited accounts interest has been provided @ 18% per annum. 2.2 Against the disallowance, the assessee preferred an appeal before the ld. CIT(A) with the submission that interest @ 18% per annum was paid/provided to all the parties/creditors. No special rate was paid to the parties covered under section 40A(2)(b) of the Act. The interest was paid @ 18% per annum at the prevailing market rate as approved by the Members of the Executive Committee in its meeting. Copy of the minutes of the meeting and the balance sheet were filed before the ld. CIT(A). It was also contended that during the year no loan was taken from any financial institution. Therefore, question of payment of interest @ 12% per annum to any financial institution d....
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....per annum on the basis of the resolution passed by the Members of the Executive Committee of the assessee-society. But this rate of interest was increased for both the types of creditors, therefore, it cannot be said that excess rate of interest was paid to the persons specified under section 40A(2)(b) of the Act. Nothing is placed on record to establish that the assessee has paid lesser rate of interest to the financial institutions. Moreover, no loan was borrowed from the financial institutions in the impugned assessment year. In the light of these facts, we are of the considered view that since the assessee has paid interest @ 18% per annum to all types of its creditors, disallowance of excess payment of interest on the ground that higher rate of interest was paid to the persons specified under section 40A(2)(b) of the Act cannot be sustained. We accordingly confirm the order of the ld. CIT(A) who has rightly deleted the additions after having observed that the payment of interest @ 18% per annum is reasonable, market related and not extraordinary and therefore no disallowance is called for. Accordingly, the order of the ld. CIT(A) on this issue is confirmed. 2.6 In assessment ....
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....for lending the books on charges, it is eligible for depreciation @ 100% as per para 9(ii) of the Schedule of Depreciation of the Income-tax Rules. It was further contended that due to fast changing technology around the globe, the reference books also become obsolete in a short span. Because of frequent changes in the syllabus and technology, the books purchased by the college for library and used as reference books by the students of engineering become obsolete shortly. Finding force in the contentions of the assessee, the ld. CIT(A) allowed depreciation @ 100% as per para 9(ii) of the Schedule of Depreciation of the Income-tax Rules. 3.3 Aggrieved, the Revenue is before us and has placed reliance upon the order of the Assessing Officer whereas the ld. counsel for the assessee besides placing reliance upon the order of the ld. CIT(A) has reiterated the arguments as raised before the ld. CIT(A). 3.4 Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the lower authorities, we find that there is force in the contentions of the assessee that due to fast changing technology around the globe, the reference books also become ob....
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.... written submissions pointing out various defects in the Valuation Report and the estimation made by the Assessing Officer. For the sake of reference, we extract the same as under:- "Ld. A.O. failed to consider the valuation report of approved Registered Valuer and in disposing his objections/observations. Registered Valuer has only mentioned /highlighted those issues which are not considered / wrongly considered by the DVO. Objections of the assessee which remained undisposed by the DVO /Assessing Officer are as under. a.) DVO has adopted various plinth area rates for different floors of the building. These rates are not given in C.P.W.D. schedule of rates. DVO is requested to give the detailed working of rate adopted by him. b.) DVO has adopted C.P.W.D rates. The work is being done in U.P. As such he should adopt P.W.D rates. This has been held by Hon'ble High Court and also by various Appellate Commissioners. The U.P.P.W.D rates are 6% cheaper than C.P.W.D rates. c.) Total area of Ground Floor taken by DVO as 3544.23m2 is not correct Actual area of Grou....
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.... There are number of case laws in support of assessee's- version. Some case laws are mentioned below:- NO ADDITION WHERE COST OF CONSTRUCTION OF THE PROPERTY IS DULY REFLECTED IN THE BOOKS OF ACCOUNTS AND NO INCREMENATING MATERIAL OR DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH. In the case of Dr. Surya Mani Diwedi vs. ACIT (2010) 132 TTJ (LUK.) 240, Hon'ble ITAT, Lucknow Bench by following the case of CIT vs. Meerut Cement Company Pvt. Ltd. (2006) 202 CTR (All.), held that addition cannot be made towards undisclosed investment in construction on the basis of report of the DVO, when books of accounts have been maintained wherein every expenditure relating to the construction is recorded and those books of accounts have not been rejected by the A.O. In the case of ACIT vs. Dr. Mrs. Sharda Adlakha (2005) 95 TTJ 643 (Amritsar), it was held by the Hon'ble ITAT that where the cost of construction of the property is duly reflected in the books of account and was shown in the Balance Sheet prior to the date of search and the same was alr....
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....'ble ITAT Bench took the similar view by holding that no addition can be made on the basis of valuation report specially when no incriminating documents indicating unexplained investment in the cost of construction was found during the course of search. Om Prakash Sharma vs. DCIT (2004) 83 TTJ 246 (Jaipur) DCIT vs. Raj Kumar Agrawal (2006) 102 TTJ 991 (Jodhpur) NO ADDITION WHERE DIFFERENCE UPTO 15% BETWEEN THE VALUE ESTIMATED BY THE DVO AND COST ACTUALLY INCURRED BY THE ASSESSEE ON CONSTRUCTION OF THE PROPERTY. As regards difference between the cost actually incurred by the appellant and the value estimated by the D. V. O. there are several case laws where difference upto 15% between the two values has been deleted by the Hon'ble Courts. In the case of Simla Singh Vs CIT(2009) 222 CTR 404 (Patna) it was held that if the difference between the cost of construction estimated by the Departmental valuer & cost disclosed by the assesses is less than 15%, the same will be ignored. In the case of Ashish Agrawal & Others vs. DCIT, Central Circle-11, Kanpur, the Hon'ble ITAT Luc....
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....ng difference, cost of construction would not be so large as to merit a deduction @ 35%. I am of the considered view that the DVO should have allowed a deduction @ 15% on total hall area (which is 3822 sq. mt.). This deduction would come to Rs.38.50 lakhs (3822 x 6725 (avg. rate) x 15%). 6.1.2 The next substantial objection is to the valuation adopted by the A.O with respect to the rate adopted for Kota Stone, which is @ 392/- by the DVO whereas the Registered Valuer has adopted the rate @ 220/-. I am of the considered view that rate @ 300/- to 310/- per sq. mt. would be reasonable and would meet the end of justice in this regard. Accordingly, the cost of construction on account of Kota Stone is reduced by Rs. 5.00 lakhs. 6.1.3 The next contentious issue is difference between the CPWD rate and the PWD rate with regard to the cost of construction. It is an admitted fact that the DVO adopts CPWD rate for the purpose of valuation. It is commercial reality that there would be.some difference in the rate of construction adopted by the CPWD and that by the UPPWD. The Registered Valuer had adopted the difference between these 2 rates @ 6%, which in my opinion i....