TaxTMI 
TaxTMI 
2011 (7) TMI 1331
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....es of the case, the learned CIT(A) should have deleted the whole of the addition of ₹ 69,978/- in respect of interest. (4) On the facts and in the circumstances of the case, the learned CIT(A) has erred in confirming the addition of ₹ 5,15,933/- made by the Assessing Officer in respect of G.P on advances. (5) On the facts and in the circumstances of the case, the learned CIT(A) has erred in confirming proportionate estimate of income on percentage completion method. (6) Without prejudice to whatever stated above, on the facts and in the circumstances of the case the Hon. CIT(A) ought to have given direction for credit of gross profit estimated and/or valuation in the gross profit actually taxed and admittedly accepted by the department in the subsequent years." 3. The assessee is engaged in the business of civil construction, developers of land, estate, property etc. The return of income was filed by him declaring taxable income at nil after claming deduction u/s 80IB of the Income-tax Act, 1961 of ₹ 13,14,927/- and the return was processed u/s. 143(3) of the Act accepting return of income. Subsequently, the case was selected for scrutiny and assessment u/s....
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....see reiterated the submission made before the lower authorities and further submitted that assessee was not engaged in the work of carrying out construction work. In fact, he was a builder and was engaged in construction and sale of immovable property, hence revised AS7 was not applicable in his case. In fact in case of builder Revenue needs to be recognized on the basis of AS-9 which upholds the method followed by the assessee as income is recognized once the sales of unit is completed. The unit completion method refers to recognizing of profit at earlier points of time as soon as unit is disposed off. This method of accounting is in consonance with AS-9 issued by ICAI. It is rather in some cases recognizing income earlier than percentage completion method. Thus rejection of method of accounting followed by the assessee was without any valid reasons and hence not sustainable in law. It was also argued that since the method of accounting followed by the assessee was accepted by the Revenue in earlier and also in subsequent year following the Rule of consistency the same should be accepted during the year under appeal and return of income shown by the assessee be accepted and propor....
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....t assessee had claimed expenditure on account of financial charges of ₹ 4,55,740/- and interest on partner's capital account of ₹ 4,22,523/- and opined that when the assessee was paying interest on borrowed funds there was no justification for granting of interest free loans and advances and disallowed interest at the prevailing rate of 12% on above advances amounting to ₹ 69,978/-. 11. Before Ld. CIT(Appeals) the contention of assessee was that transaction with four parties were not loan transactions but were transaction during the course of business on which no interest was required to be charged. It was stated that the amount outstanding in the name of Laxminarayan Mandir Trust of ₹ 1.60 lakh was payment made for purchase of land and it was neither a loan nor an advance. Further it was an old balance carried forward in the balance-sheet. In regard to payment of ₹ 80,000/- to Exotic Resorts Pvt. Ltd., it was stated that this was an old balance carried forward from earlier balance-sheet and was towards membership deposits so charging of interest did not arise on such amount. Amount of ₹ 50,000/- to Shri Manharsinh R Parmar was towards purchase ....
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....aring Revenue did not dispute the fact that assessee has interest free secured loan of ₹ 33.47 lakh available to him. The assessee's case is that he has given a sum of ₹ 10 lakh to Mr. Ajaykumar Bharatkumar & Co. out of this interest free unsecured loan available to him. Unless nexus is established that ₹ 10 lakh were given to Mr. Ajaykumar Bharatkumar & Co. out of interest bearing loan, the plea taken by assessee before us cannot be ignored and interest claimed by assessee cannot be disallowed. The same has not been done in this case. Therefore the addition of ₹ 34,800/- sustained by Ld. CIT(Appeals) is hereby deleted. This ground of assessee's appeal is allowed. 16. Ground No.4 relate to gross profit addition of ₹ 5,75,953/- made by Assessing Officer in respect of GP advances which has been confirmed by Ld. CIT(Appeals). During the assessment proceedings the Assessing Officer noticed that assessee has received advances of ₹ 22,26,097/- and ₹ 2.20 lakh for Arunoday bungalows and Upvan residency project respectively and Assessing Officer worked out the GP on percentage completion method as under:- Project Advances % completion G.P. Ar....
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....at the approval for developing and building housing projects was granted to the original owners of the land and not to the assessee, who acted only as an agent for execution of the project of Arunoday duplex Bunglow Project and Arunoday Bunglow Project which rights were obtained by the assessee firm from the original owners. 3. The learned CIT(A) failed to appreciate that the land being an essential and intrinsic part of developing and building of a housing project, approval is granted by the local authority to the owner of the land for developing and building housing projects thereon, and any other person, to whom he entrusts the works connected with the execution of the project instead of taking it up himself, cannot be said to be an "undertaking developing and building housing projects approved by the local authority" within the meaning of Section 80IB(10) of the Act. 4. The learned CIT(A) failed to appreciate that it is the owners of the land who entered into agreements for sale of the developed units to the buyers and the assessee acted only as a confirming party which renders to owners of the land and not the assessee as 'an undertaking' in terms of Section 80IB(10). 5.....
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....9,912/- also for deduction u/s 80IB(10) and thus restricted the deduction u/s. 80IB(10) to ₹ 6,88,223/- i.e.(8,28,135 - ₹ 1,39,900). 25. Before Ld. CIT(Appeals) it was argued that the assessee satisfied all the conditions laid down u/s 80IB(10) and that the assessee had been consistently following the method of apportioning the expenses such as administrative, selling and general expenses in proportionate to the turnover. Accordingly, such expenses were apportioned in the ratio of receipts in project Arunoday bungalows scheme. It was also asserted that borrowed funds were never utilized for the eligible projects. Further, there was no justification to allow 7% of the expenses relatable to Upvan residency for the reason that in Upvan residency, there was no sale during the year and that only opening and closing balances were accounted for. It was therefore emphasized that allocation of expenses by Assessing Officer was arbitrary against principle of natural justice. With regard to disallowance of untilized FSI of ₹ 1.39,912/-, it was submitted that the assessee was engaged in the development and construction of bungalows and tenement and not apartments and there w....