TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 30
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.... lakhs towards advance. According to the ld. Counsel, the Board of Directors of the Company decided not to proceed with the project due to unanticipated lull in the real estate market due to financial crisis in US. According to the ld. Counsel, most of the prospective buyers of the flats are non-resident Indians and software employees. Financial crisis in US, affected the real estate market in India since the assessee is targeting mainly software employees and non-resident Indians. Therefore, the assessee-company could not make any progress in respect of the land purchased at Ambattur, Madhavaram Village and hence, the Board of Directors decided to abandon the project. The land owners, however, forfeited the advance given by the assessee. Therefore, the advance given by the assessee to the extent of Rs. 50 lakhs was not refunded by the land owners and hence, this was treated as loss and claimed while computing the total income. However, the Assessing Officer rejected the claim of the assessee on the ground that the sale of the land as such would have resulted in more gain than incurring loss to the assessee. Moreover, the sellers of the land treated the land as capital asset and tr....
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....n record. Admittedly, the assessee engaged itself in the business of real estate and construction of flats/residential apartments. The contention of the ld. DR is that the assessee has purchased the land for construction of flats for catering to the luxury segment of the prospective buyers. Whether the assessee concentrate on construction of flats for the luxury segment or to the other section of the public, it is not for the Revenue to treat the business of the assessee separately merely because the assessee concentrates on the luxury segment of the prospective buyers of the flats. The fact remains that the assessee is engaged in the business of construction of flats and in order to promote the construction of flats, the assessee intended to purchase 6.68 acres of land at Ambattur, Madhavaram Village. After entering into an agreement, the assessee has also paid Rs. 50 lakhs as advance. The payment of Rs. 50 lakhs as advance for purchase of 6.68 acres of land is not in dispute. The assessee, for the reasons best known to it, decided not to proceeded with the project and accordingly abandoned the project which resulted in forfeiture of the advance amount of Rs. 50 lakhs by the vendo....
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....he machinery purchased by the manufacturing industry may be a stock-in-trade in the hands of the company which manufactures machinery. However, it is a capital asset in the hands of the company which purchases the machinery for using the same in its manufacturing activity. Similarly, when the land owners sell the land to a real estate dealer, the land is a capital asset in the hands of the land owner. However, the same land purchased by the real estate dealer becomes a stock-in-trade. Therefore, the treatment in the hands of the vendors of the land cannot be a determining factor to allow the claim of the assessee either as revenue loss or as capital loss. It has to be decided whether the loss has occurred in the course of the business activity for acquiring a stock-in-trade in the hands of the assessee. In this case, admittedly, the assessee acquired a stock-in-trade for construction of residential flats at Ambattur in Madhavaram Vilalge. Therefore, the loss, if any, suffered in the course of the acquisition of the stock-in-trade has to be necessarily allowed a revenue loss, hence, it has to be allowed as business loss while computing the total income. In view of the above, we are ....
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....rused the material available on record. Admittedly, the assessee is engaged in the business of construction of residential flats. The labourers in the construction industry are in the unorganized sector and most of the labourers are uneducated. The labourers who engaged in construction industry used to migrate from one place to another on day today basis depending upon the availability of work. Therefore, obtaining proper voucher from such kind of unorganized laboruers is something beyond the control of the assessee. Therefore, the assessee has to necessarily make self-made vouchers to evidence the payment of salary to such labourers engaged in the construction activity. Therefore, the Assessing Officer has to examine whether there was any inflation of the expenditure claimed by the assessee after comparing the nature of the work carried out by them. In the case before us, it is nobody's case that the assessee has inflated the expenditure. In the absence of any allegation that the assessee has inflated the expenditure, this Tribunal is of the considered opinion that merely because self-made vouchers are made with regard to payment made to labourers who engaged in the construction a....
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....ure after commencement of the project on the interest payment, there is no reason to deviate from the same while computing the taxable income. According to the ld. DR, the interest on the borrowed fund before commencement of the project cannot be allowed as expenditure either for assessment year 2009-10 or for assessment year 2010-11. Therefore, the CIT(A) has rightly confirmed the addition made by the Assessing Officer. 13. We have considered the rival submissions on either side and also perused the material available on record. The assessee is admittedly engaged in the business of construction of flats. During the course of business activity, the assessee proposed to construct residential flats at Thaiyur, Chennai. The assessee has also borrowed loan for the abovesaid housing project. The assessee is claiming interest on the borrowed funds as revenue expenditure. Since the construction of flats was not commenced due to delay in getting approvals from multiple authorities, the assessee carried forward the deferred revenue expenditure and claimed the same during the year under consideration. The question arises for consideration is when the assessee is in the business of construct....