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2015 (7) TMI 611

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....commencement certificate for the said project was received on 11th June, 2001 and the said project was completed in the Financial Year 2004 relevant to assessment year 2005-06 and occupation certificate was received on 5th November 2004. A chart of the premises constructed was also filed before the AO during the course of the proceedings in which it was claimed that the built up area of each flat is not more than 1000 sq.ft. In the course of assessment the AO also raised query with regard to the area of the 16th floor. It was explained to the AO that the assessee firm had constructed the project "Ganga Tower-II" as per plan approved from the MCGM and have constructed two flats on the 16th Floor and that the built-up area of the Flat No.1602 was 921 sq.ft. and that of Flat No. 1603 was 958 sq.ft. The Architect's certificate of the built-up area of these flats and copy of agreement of sale of the said premises was also filed during the course of the assessment proceedings. In this regard, the AO observed that the Ganga tower-II is a 16 story building comprising of 61 flats. On verification of details submitted, it was noticed by him that the building has got only two flats on 16t....

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....e certificate of Auditor under rule 10CCB alongwith the return of income. During the course of assessment proceedings, your Honour has asked to explain the area of the 16th floor. In this connection It is submitted that we have constructed the project Ganga Tower II as per plan approved from the NMMC and have constructed two flats on 16th floor. The built-up area of the flat l602 is 921 sq.ft and area of Flat 1603 is 958 sq. ft. We are enclosing herewith the architect certificate of the built up area and agreement of sale of the premises. In view of the above, the claim of deduction Lt/s.80IB in our project fulfill all the condition provided in the act." 4. However, the explanation regarding the built-up area of 16th floor flats was not found to be acceptable by the AO. The AO observed that the assessee had sold the flat NO.1602 having area of 921 sq.ft. on 21/10/2003 for a consideration of Rs. 23,67,750/- which means the average rate is Rs. 3201/- per sq.ft. There is no justification for such wide variation in the selling price over a period of three to four months, that also the price falling by almost Rs. 700/- per sq.ft. Such a scenario has not happened in the real estate m....

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....th Floor flat the terrace rights have to be included in the calculation of built-up area of 16th Floor flat. The learned Assessing Officer's conclusion, to this extent, is upheld. 4.3.3. However, there is considerable force in the appellant's argument that nonallowance of deduction u/s.80IB 'has to be restricted to the proportion of the flats whose area exceed 1000 sq. ft. The ld. AR's reliance on the ITAT, Mumbai's finding in Saroj Sales Organization v/s Income Tax Officer ITAT, Mumbai 'E' Bench vide No 115 TTJ (Mumbai) 485: (2008) 3 DTR 494 'and ACIT v/s Sheth Developers (P) Ltd., ITAT 'G' Bench, Mumbai vide' appeal No. 33 SOT 277 (MUM) are clearly applicable to the facts of the case. It is also a fact that actual 'built-up area of none of the flats exceed 1000 sq. ft. and built-up area for 16th Floor flats are only technically and marginally higher than 1000 sq. ft." 6. Against the above order of CIT(A), assessee is in appeal before us in respect of disallowance of claim of deduction u/s.80IB(10) in respect of flat No.1602&1603, whereas revenue is in appeal before us against deleting disallowance of claim u/s.80IB(10) in respect ....

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....k no.1 wherein the area is mentioned at page no.9 and the relevant clause no.(j) relied on by AO and ld.CIT(A) is as under :- "Flat 1602 admeasuring 921 sq.ft. built up (including area of balconies where applicable) (with the adjoining terrace if applicable) on the 16th floor in the said building being constructed on the said property and also car parking space admeasuring (nil. Sq.ft. thereabout)." 10. On page No.20, the plan of the flat is also attached with the agreement which shows that terrace is separate and not attached with the flat and that has not marked as the area sold. For Flat No.1603, similar clause (j) is on page no.28 and the similar plan attached with the agreement is also at page no.39 which also indicates that area of the terrace is not sold to the flat owner and further from the plan it is clear that terrace is not openable from the flat while the way to the terrace is from the passage of the 16th floor. 11. We had also verified the sanctioned plan of the building placed at page 2 of the paper book from which it is also clear that flat no.1602 and 1603 are separate and the terrace is not openable from inside of any flat and access to the terrace is from the ....

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....ty, gardening, computer, accountant and other misc. expenses. In lieu of that, all the group companies make the payment under the head 'Business Centre Facility and Administration Charges'. This is going on for last number of years. We found that no disallowance u/s.40A(2) made in the assessment year 2005-06, in respect of disallowance made in the assessment year 2006-07, 2008-09, were deleted by the CIT(A) after following the decision of Tribunal in the case of group concern. The finding recorded by the CIT(A) in the assessment year 2006-07 while deleting the disallowance u/s.40A(2) reads as under :- "3.7 I have carefully considered the issue. It is a fact that the issue of sister concern viz. M/s. Kukreja Services P. Ltd. providing Business Centre facility and Administrative facility came up for consideration before the Hon'ble ITAT in the case of the appellant's other sister concern viz. M/s. Tolararn & Co. for A.Y.2000-01 in Which it was held that it is very apparent from the facts narrated that the entire office is hired and maintained by M/s. Kukreja Services Pvt Ltd. and the group concern reimburse the expenses to this company in the proportion of the area a....

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....on activities and operation of hotel. There can be a case where indirect expenses need to be apportioned in a ratio other than the respective turnovers. However, the most natural presumption of applying the indirect expenses would be in proportionate in the respective turnovers/WIPs. Applying Indirect expenses in proportion to respective profits would amount to attributing NIL amount to activities which yield loss or no profit. Therefore, the ratio of the judgment by the ITAT in the appellant's own case for A.Y. 2001-02 has to be applied in all cases except the ones in which such apportionment yields absurd or unrealistic results. The ld.AO has made no case in the assessment order to hold that apportionment of indirect expenses In the ratio of respective profits would be logically more sound. Therefore, respectfully following the said ratio of the ITAT, the Id.AO is directed to apportion the indirect expenses in the ratio of respective WIPs of different activities of the appellant, as claimed by the appellant. This ground of appeal is, accordingly, allowed." 19. As the issue is covered by the Tribunal in assesse's own case in the assessment year 2001-02, we do not find any....

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.....40 crores, the assessee has given interest free loans to sister concerns of Rs. 20.34 crores only. As per ld. AR these facts are verifiable from the balance sheet of the firm as on 31st March, 2009 for A.Y.2009-2010. 22. We have considered rival contentions and carefully gone through the orders of authorities below. The Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd, 313 ITR 340 and Hon'ble Allahabad High Court in the case of Prem Heavy Engineering Works P. Ltd., 285 ITR 554 have held that where interest free loans to sister concerns were given from the interest free funds available with the assessee, no disallowance on account of interest should be made. In the following judgments it has been held that if the interest free funds available with the assessee are far more than the interest free advances made to subsidiary companies then presumption should be that interest free advances are given out of the interest free funds available with the assessee. i) Reliance Utilities & Power Ltd., 313 ITR 340; ii) Prem Heavy Engineering Works Pvt. Ltd., 285 ITR 554; iii) S.P.Jaiswal Estates (P) Ltd., 140 ITD 19 (Kol.Trib.Third Member) and iv) Bunge Agri....