TaxTMI 
TaxTMI 
TaxTMI 
2015 (2) TMI 320
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....t of profits on sale of plots of one year is shifted to another year which is incorrect method of accounting which results in diminishing the assessment of the taxable profit of the year as held by Apex court in the case of CIT vs British Paints India Ltd. (1991) 188 ITR 44." 2. Ground no. 1 is general in nature and therefore does not require any adjudication. 3. None appeared on behalf of the Assessee even though the appeal had been adjourned on 28.10.2014 at the request of the Assessee. We therefore decided to dispose off the appeal after hearing the ld. DR. 4. The brief facts of the case are that the Assessee is a firm engaged in the business of real estate activities such as construction of residential-cum-commercial project, developing of plots etc. In the year under appeal, the Assessee declared an income of Rs. 3,51,67,540/-. The AO made the following additions in the business loss declared at Rs. 3,52,869/- :- (i) Disallowance u/s 14A Rs. 23,22,638/- (ii) Addition on account of Professional/Consultancy fees Rs. 17,59,743/- (iii) Addition u/s 41(1) Rs. 3,56,605/- (iv) Profit on sale of plots Rs. 2,22,47,248/- Thus, total addition of Rs. 2,66,86,234/- was ....
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.... Accordingly:-[AxB]/C = Rs. 73,00,131 x Rs. 3,37,37,416 Rs.15,82,72,334 = Rs. 15,33,027/- (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not from part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. =Rs.3,37,37,416 x .005 = Rs. 1,68,687/- Accordingly, a sum of Rs. 23,22,638/- (Rs. 6,20,924/- + Rs. 15,33,027/- + Rs. 1,68,687/-) is disallowed u/s 14A read with Rule 8D as expenditure incurred for earning the exempted income and same is added to the total income." The Assessee went in appeal before CIT(A). CIT(A) sustained the disallowance to Rs. 1,53,662/-. 6. We heard the submissions made by the ld. DR and carefully considered the same alongwith the order of the tax authorities below. We noted that the Assessee has not submitted any evidence to discharge the onus before the CIT(A) except the contention that he has not made the investment in shares of Counto Automobiles out of the bank overdraft. Even we noted that no evidence has been placed on record that the interest paid on the capital invested by the par....
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....usiness purposes. It was also submitted that all the works are not related to the work in progress and these fees also included payment made to the consultants for availing advice on legal and taxation matters relating to the firm's affairs. On the basis of this submission of the Assessee, CIT(A) deleted the disallowance by holding that there is no mandate to capitalize these routine necessary expenses and even if these expenses are taken to closing work in progress, the value of the opening work in progress in the subsequent year shall increase resulting in reduction of the income in the subsequent year. In our opinion, the basis for deleting the disallowance cannot be that if expenses are taken to closing work in progress it will increase value of the opening work in progress in the subsequent year. Expenditure has to be allowed while computing the income as per the provisions given under the Income Tax Act i.e. Sec. 30 to 37. If an expenditure is a capital expenditure u/s 37 it cannot be allowed merely on the ground that if the expenditure is a capital expenditure in the impugned year and in the next year it will become revenue expenditure, it has to be allowed in the year when ....
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....Assessee has completed the development work of the plot as on 31.3.2009 and in respect of the plots he has received around 70-80% of the sale proceeds but still the Assessee has not shown the sale proceeds in the profit and loss account. Since the development has already been completed, therefore, the AO re-computed the profit relating to these projects completed crediting the sale proceeds to the profit and loss account. The Assessee has contended that he was showing sales when the registration of the sale deed was carried out. The Assessee went in appeal before the CIT(A). CIT(A) took the view as if the AO has changed the method from project completion method to percentage completion method and accordingly he deleted the addition. 11. We heard the submissions made by the ld. DR and have gone through the order of the tax authorities below. We noted that the AO has noticed that the Assessee has accounted the accrual of the sale proceeds on the basis of registration of sale deed in favour of the intended buyer. This method adopted by the Assessee, in our opinion, cannot be regarded to be in accordance with the mercantile system of accounting. The Assessee is engaged in construction....