TaxTMI 
TaxTMI 
2018 (10) TMI 122
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.... computing the Profit on sale of TDR under normal provisions of the Act and while computing the book profits u/s.115JB of the Act. 5. Briefly stated the facts are that, the assessee is engaged in the business of Builder and Property Developers filed its original return of income on 30.09.2013 declaring income of Rs. 66,08,53,800/- under normal provisions of the Act and book profits of Rs. 20,37,91,742/- u/s.115JB of the Act. Later revised return was filed on 31.10.2013 declaring income of Rs.Nil under normal provisions of Act and book profits of Rs.Nil u/s.115JB of the Act. In the revised return filed, assessee written off unrealized cost of Rs. 441.98 Crores as extraordinary/exceptional item and unabsorbed cost of TDR of Rs. 104.25 Crores. The Assessing Officer completed the assessment on 30.03.2016 u/s. 143(3) of the Act determining the income under normal provisions at Rs. 647,29,01,700/- and book profits at Rs. 612,34,38,349/-. In the course of the Assessment Proceedings the assessee was asked to submit the details of such costs and its allowability in the year under consideration. Assessee by letter dated 04th Jan, 2016 submitted the detailed explanation why the unabsorbed ....
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....acres of Airport land to develop non-aeronautical services as part of development of Airport project. Pursuant to slum rehabilitation agreement Assessee purchased land of Rs. 1900 Crore known as Kurla Premier and conveyed the same to SRA authority as per SRA Scheme. SRA granted land TDR against surrender of land which was sold by assessee in open market. 8. Ld. Counsel for the assessee further submitted that from A.Y: 2009-2010 onwards, assessee started selling the land TDR. Each year the sale was credited to P/L A/C. The expenses were debited to WIP A/C. The cost of sale of TDR was estimated at Rs. 650 per sq feet by considering both airport land and SRA TDR. Said cost was transferred from WIP A/C to P/L A/C. On the profit deduction u/s 80IA(4) was claimed. MIAL terminated the contract with HDIL vide its letter dated 6/2/2013 i.e. in this AY 2013-2014. As a result, the assessee was not entitled to get 65 acres of airport land. Hence, entire cost incurred by assesse was only towards the SRA project from where it got TDR. 9. Ld. Counsel for the assessee further submitted that, the claim of Assessee pertaining to s.80-IA(4) for AY 2009-2010 and 2010-2011 was before ITAT and pen....
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.... ITR 295] and Radhasoami Satsand v. ACIT [193 ITR 321]. 14. The Ld. Counsel for the assessee referring to Page No. 383 and 384 of the Paper book submitted that the assessee worked out the unabsorbed cost for the A.Y. 2013-14 and this working was furnished before the Assessing Officer as well as the Ld. CIT(A). This working was prepared based on the decision of the ITAT for the earlier years and the same method followed in the earlier years and therefore there is no justification in rejecting the revised cost of unabsorbed TDR stating that details were not furnished. Ld. Counsel for the assessee invited our attention to Page NO. 524 of the Paper book which is the submission made before the Ld.CIT(A). Referring to the said submissions Ld. Counsel submitted that all the contentions raised by the Ld. A.O were rebutted and the Ld. CIT(A) failed to consider these submissions and by simply agreeing with the contentions of the A.O though the details were furnished, claim of the assessee is rejected. 15. Ld. DR vehemently supported the orders of the Authorities below and filed written submissions dated 12.07.2018 supporting the orders of the Authorities below. Ld. DR further referring....
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....rehabilitation being expended towards obtaining the expected benefits of the airport land, rather than deferring the income recognition, the assessee company, following the principles of AS - 9 Revenue Recognition, opted for booking the profits accrued from the Sale of TDRs and claiming the matching expenditure. The profit so computed would reduce the unabsorbed cost of attaining the final goal of commercial FSI available at the airport land on completion of the rehabilitation process. Since, both the said benefits and the associated costs were futuristic, without being able to be crystallized in absolute numbers; the assessee company had no alternative but to make probable estimates, based on acquisition price of land surrendered to SRA, cost of obtaining relevant approvals and expenses to be incurred for construction of rehabilitation buildings, the assessee company determined an estimate cost of Rs, 650/- per sq. ft. The proportionate expenses, corresponding to the sale of TDR was booked and the resultant profit was claimed as deduction u/s. 80IA (4). But due to certain unfavorable turn of events, MIAL vide letter dated 06.02.2013, terminated its abovementioned....
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....and accordingly claimed the same in Revised Computation of Income as per normal provisions of the Income Tax Act, 1961 and also while computing book profit u/s 115JB of the Income Tax Act, 1961 for the year under consideration, in other words it can be said that, entire expenditure with respect to Airport project was not charged to profit & loss account and in balance sheet a portion of it was shown as deferred expenditure/ work in progress, assesses could not be denied benefit of actual expenditure while computing profit under section 115JB of the I.T Act, 1961. In this, regard Assessee Company places reliance on the decision of High Court_of Karnataka_ in the. case Commissioner of Income Tax, Central Circle. Bangalore v, Karnataka soaps & Detergents Ltd (2015) 59 taxmann.com 43 (karnaaka) Pg. No 382_- 389). Copy of the same is marked as Annexure - XI is attached herewith for your ready reference. Sir, as pointed out in the facts, the revised computation of trust of sale of TDR has been accepted by A.O. presiding your kind selves after due application of mind in earlier Asst Years i.e. A.Y. 2009-10 and A Y. 2010-11 and subsequent A,Y. 2012- 13. Them is no change in facts ....
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.... Rate/ sq. ft. Amount (Actual) Rehab: Cost of land 1,663,162.00 13,382,665,273 Tenancy right Cost of Construction 7,787,711.48 1,100 10,267,620,206 Approval& Other Charges 1,272,635,890 Interest cost 6,583,858,540 Total TDR 9,034,779.44 31,506,779,909 Less : Cost of Airport Land 2,405,875,026 Total Cost 29,100,904,883 Less:- Cost of sale of previous year 9,034,779.44 27,420,126,014 Balance area/cost (0.00) 1,680,778,869 Project F.Y 2012- 13(Actual) Premier Area (Sq ft) TDR Sale Cost of Sales Profit/ (Loss) Revised cost &nb....
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.... 37,884,762 Interest Cost 90,323,541 TDK available 824,863.83 2,353,330,143 Less : Cost cf Airport Land 219,653,320 Total Cost 2,133,676,823 Less:- Cost of sale of previous year 809,271.21 2,030,582,313 Area/cost for the year 15,592.62 6,612 103,094,510 Less:- Cosfy^rea of sale during year 15,592.62 103,094,510 Balance area/cost (0.00) (0) Project FY 2012- 13(Actual) Cost of Sale Per Unit 6,611.75 Kilburn Area (Sq ft) 15,592.62 TDRSale 28,255,500 Cost of Sales 103,094,510 Profit/ (Loss) (74,839,010) ....
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....ay be relocated. It was also agreed that the State Government will provide such additional land to the MIAL as required by the MIAL and has identified by the MIAL for such purpose. 37.2. Thereafter, MIAL entered into an agreement with MMRDA on 12.12.2006 to free slum encumbered in Mumbai Airport land because the State Govt. of Maharashtra has appointed MMRDA as nodal agency to handle the airport slum rehabilitation project and therefore MMRDA agreed to assist MIAL to clear the land for MIAL. With these factual background, a Slum Rehabilitation agreement was entered between MIAL and the assessee on 15.10.2007. This agreement contained the entire scope of work to be undertaken for the purpose of modernization and upgradation of the Mumbai Airport and the consideration received by the assessee. Accordingly, the assessee has to rehabilitate the slums in lieu of which it has to get 65 acres of Airport land to develop non-aeronautical services as part of development of Airport project. Pursuant to slum rehabilitation agreement. the assessee purchased land of Rs. 1900 crores known as Kurla Premiere and conveyed The same to SRA authorities as per SRA scheme. SRA granted land TDR a....
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....mination of contract between the assessee and MIAL, the Ld. Counsel for the assessee argued at length that the very foundation of claiming the deduction u/s, 80IA(4) has been removed by the termination of contract, therefore, the claim of the assessee has to be considered entirely on new facts which have emerged subsequent to the completion of assessment and appellate proceedings. 40 The Ld. Departmental Representative fairly conceded to these new developments which have emanated alter the conclusion of the assessment proceedings. 41. At this stage, we would like to appreciate Ld. Counsel for assessee, Dr. K. Shivram for bringing to the notice of this Bench the facts which have arisen after the conclusion of the first appellate proceedings. This factual submission by the Ld. Counsel, miscarriage of justice would be prevented. The facts as they are before us today leave us no choice but to restore this issue back to the files of the AO for framing the assessment denovo. Since the very basis of the claim of deduction u/s. 80IA(4)of the Act do not exist, the claim of deduction u/s 80IA(4) cannot be entertained and therefore rejected subject to the out come of the arb....
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....ame method as adopted in earlier years which was also accepted by Assessing Officer in earlier years while giving effect to ITAT order, we see no reason to accept the same for this Assessment Year. Thus, we direct the Assessing Officer to accept the revised computation of cost of TDR after verification. Subject to verification claim of the assessee is allowed. This ground is allowed. 20. Coming to Ground No. 3 which is in respect of upholding of disallowance of unabsorbed cost of TDR while computing income u/s.115JB of the Act. Ld. Counsel for the assessee submitted that AO and Ld.CIT(A) has not made any discussion in their Orders and A.O. has not reduced the unabsorbed cost of TDR of Rs. 104,25,74,531/- from the book profits. Ld. Counsel for the assessee further submitted that as it was an event subsequent to closing of the accounts, same should be allowed to be reduced from book profits. Ld. Counsel for the assessee relied on the decision of the Hon'ble Jurisdictional High Court in the case of Sushila Shantilal Jhaveri vs. UOI [286 ITR 428] wherein it has been held that Revenue Department must consider subsequent events. He also relied on the decision of Karnataka High Cou....
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....puting the book profits u /s. 115JB of the Act under Clause (c) of Explanation (1) being provision made for meeting liability other than ascertain liabilities. According to the Assessing Officer, it is only a provision for meeting the liabilities and is not an ascertained liability. On appeal the Ld. CIT(A) sustained the action of the Assessing Officer in denying the claim of the assessee holding that it is only a contingent liability. 25. Before us, Ld. Counsel for the assessee submitted that till 31.3.2013 assessee had incurred actual cost with reference to rehabilitation of slum dwellers of Airport project at Kurla Premiere land of Rs. 2856 crores. Out of the said expense assesse had claimed Rs. 611 crores [Rs.650 per sq feet] and Rs. 1535 crores as unabsorbed cost of TDR leaving a balance of Rs. 709 crores. It is submitted that as the contract was terminated, out of balance Rs. 709 crores assesse written off Rs. 441,98,44,632/- crores by considering the tenements already constructed on which there was not going to be any TDR Income. 26. Ld. Counsel for the assessee referring to the Page Nos.390 to 393 stated that detailed submissions were made before the Assessing Officer....
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....d renovation of the CSIL Airport, Mumbai and as a consequence, AAI entered into an Operation, Management, Development Agreement (OMDA) with MIAL on 04.04.2006. The primary necessity for the commencement of the airport modernization project was the evacuation of approximately 276 acres of airport land, encroached by slums. The said responsibility of evacuation and rehabilitation was entrusted by MIAL to the assesses vide Slum Rehabilitation Agreement dated 15.10.2007. In accordance with this agreement for the evacuation of the encroached land, the assessee was to receive a 30-year leasehold right to develop and operate non- aeronautical services on the released airport land of approximately 65 acres, in lieu of constructing the rehabilitation buildings, the assessee received TDRs from the Slum Rehabilitation Authority (SRA). The entire project of evacuating the encroached land and rehabilitating the slum dwellers was an integral part of developing the new CSIL. Airport, Mumbai, with the ultimate goal of obtaining the aforementioned lease of 65 acres of prime airport land, in the form of commercial FSI. The assessee was under the bond fide belief that it was a devel....
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...., in the interest of justice, has restored the issue back to your predecessor for his kind consideration of the revised cost of sale of TDR. The assesses company, complied the inspections of the Hon'ble ITAT, in letter and spirit, submitted the revised cost of TDR per sq. ft, based on actual expenditure incurred from FY. 2007-08 to FY. 2012-13. Unlike the costs filed in the original return of income, which were based on estimates, the assessee company had then substantiated the working with concrete, tangible costs actually incurred. Copy of detailed calculation of TDR cost per sq. ft. & unabsorbed cost of TDR of Rs. 104,25,74,531/- is already submitted before your kind selves vide this office letter dated 04/01/2016 (Point No, 8, Annexure - X). Sir, profit on sale of TDR now resulted loss which is nothing but the actual book loss on account of termination of contract of Assessee Company by MIAL of the development of Airport, In other words, the unabsorbed cost of TDR was part of expenses incurred by the Assessee Company in his books of account, not charged to profit & loss account but debited/added to Work-in-Progress account of Airport Project in anticipation of total benefit....
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....f the expansion, development, improvement and renovation of the CS1L Airport, Mumbai and as a consequence, AAI entered into an Operation, Management, Development Agreement (OMDA) with MIAL on 04.04.2006. The primary necessity for the commencement of the airport modernization project was the evacuation of approximately 276 acres of airport land, encroached by slums. The said responsibility of evacuation and rehabilitation was entrusted by MIAL to the assessee vide Slum Rehabilitation Agreement dated 15.10.2007. In accordance with this agreement for the evacuation of the encroached land, the assessee was to receive a 30-year leasehold right to develop and operate non- aeronautical services on the released airport land of approximately 65 acres. In lieu of constructing the rehabilitation buildings, the assessee received TDRs from the Slum Rehabilitation Authority (SRA). The entire project of evacuating the encroached land and rehabilitating the slum dwellers was an integral part of developing the new CSIL Airport, Mumbai, with the ultimate goal of obtaining the aforementioned lease of 65 acres of prime airport land, in the form of commercial FSI. The assessee was und....
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.... the issue back to your predecessor for his kind consideration of the revised cost of sale of TDR. The assesses company, complied the instructions of the Hon'ble ITAT, in letter and spirit, submitted the revised cost of TDR per sq. ft., based on actual expenditure incurred from RY. 2007-08 to RY. 2012-13. Unlike the costs filed in the original return of income, which were based on estimates, the assessee company had then substantiated the working with concrete, tangible costs actually incurred. Copy of detailed calculation of TDR cost per sq. ft. & unabsorbed cost of TDR of Rs. 104,25,74,531/- is already submitted before your kind selves vide this office letter dated 04/01/2016 (Point No. B, Annexure - X), Sir, profit on sale of TDR now resulted loss which is nothing but the actual book loss on account of termination of contract of Assessee Company by MIAL of the development of Airport. In other words, the unabsorbed cost of TDR was part of expenses incurred by the Assessee Company m his books of account, not charged to profit & loss account but debited/added to Work-in-Progress account of Airport Project in anticipation of total benefit to be receivable from the MIAL ....
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.... Company had reworked cost of TDR sold till 31-03-2012, which came to Rs. 2,376/- per sq.ft which resulted into unabsorbed cost of TDR sold till 31-03-2012 amounting to Rs. 1535,99,03,749/-(forming part of WIP), In nutshell, Assessee Company has balance cost to the tune of Rs. 709,49,14,124/- (Rs. 2245,48,17,873/- MINUS Rs, 1535,99,03,749/-) as on 31-03-2013 in the books of account under Work-in-Progress. Sir, out of the said balance cost, Assessee Company based on the total Number of Rehab Tenements on Kurla Premier Land, worked the Number of Rehab Tenements completed as on 31-03-2013 based on the fact that out of the Number of Rehab Tenements completed no TDR revenue will accrue to the Assessee Company & arrived at the cost to be written in the books of accounts to the tune of Rs. 441.98 Crore In other words, it is neither any provision of expenses nor any assumption of future cost to be incurred,, instead it is purely an actual expenditure incurred by the Assesses Company written off in the books account during the A.Y. 2013-14 on account of Termination of Contract by MIAL. Details of Cost Incurred in the books of account for Premier Rehab from F.Y. 2007-08 to RY. 2012-13 releva....
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....parties have been settled and a prayer has been made that an award be passed in terms of the Settlement Agreement dated September 8, 2016. Justice A. M. Ahmadi, one of the Members could not be physically present on account of illness but attended the meeting through teleconference. The Presiding Arbitrator apprised him of the settlement of the disputes. The Settlement Agreement dated September 8, 2016 has been signed by the parties. 2. The Tribunal has perused the Settlement Agreement entered into between the parties. The Tribunal wishes to record that the matter and issues raised in this Arbitration not only concerns the parties to the dispute, but more importantly, impacts the larger public interest, namely airport development and housing of slum dwellers in Mumbai. In light of these larger issues, it was both, necessary and desirable that the disputes between the parties be expeditiously resolved. Almost three and a half years have passed since disputes arose between the parties. The entire process of Arbitration would have been time consuming and any outcome would have delayed airport development and rehabilitation of slum' dwellers, which would not be in public in....
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....im against each other, whether prior to the Termination Date or in present or in future, under or in respect of (i) the SR Contract, and (ii) any benefits that may have accrued or benefits that may accrue, to each of HDIL and MIAL in respe of, or arising from, the SR Contract. 4. It is hereby agreed that neither Party has any claim or liability against the other Party of any nature whatsoever, including any third party claims, and the Parties further agree, declare and confirm that they will not in any manner make any claim against each other, in present or in future, in respect of, arising out of, or in relation to the SR Contract (including all other agreements or documents entered into, or issued, by the Parties pursuant thereto). All such claims are hereby irrevocably waived. 5. HDIL shall, immediately upon execution of this Agreement, and not later than fifteen (15) days from the date hereof, remove all its servants, agents, employees, contractors, material and equipment of whatsoever nature, if any, from the Mumbai Airport Land. In the event, HDIL fails to do so, MIAL shall on the expiry of the period of fifteen (15) days be at liberty to remove such materia....
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....in the format set out in Schedule II of this Agreement thereby enclosing the consent award received from the Arbitral Tribunal. 10. The Parties shall respectively bear their own costs in respect of the proceedings before the Arbitral Tribunal." 34. As could be seen from the above clauses through the Settlement Agreement both the parties have agreed that there shall not be any counter claims in respect of the contract entered into by both the parties in terms of the Slum Rehabilitation Agreement dated 15.10.2007 and the contract is terminated with effect from 06.02.2013. Therefore, we find that, though the assessee seems to have initially disputed the termination of contract but ultimately the parties mutually agreed to end the dispute from the date of termination of the letter issued by MIAL and it was also agreed that there shall not be any counter claims. In the circumstances, a question arises whether there is any real dispute between the parties, when both the parties are agreeing for the termination from the date of letter issued by MIAL dated 06.02.2013 without any claims and counter claims. But Lower Authorities have rejected the claim of the assessee on the grou....
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....sked to submit the details regarding the claim made u/s. 35AD and the assessee furnished the details vide letter dated 12.02.2016. However, the Assessing Officer was of the view that the assessee has not furnished complete details and there was no explanation as to why the claim in the original return u/s. 35AD was made at Rs. 99.50 Crores which was reduced in the revised return to Rs. 52.71 Crores and since there was no explanation why the assessee reduced its claim to Rs. 52.71 crores and also observing that the assessee did not explain how the conditions u/s. 35AD are fulfilled. The claim of the assess was denied. 39. Before Ld. CIT(A) assessee contended that if deduction u/s. 35AD is not allowable since the expenditure is revenue in nature the same is to be allowed u/s. 37(1) of the Act. However, the alternative claim of the assessee is not entertained by the Ld.CIT(A) and sustained the disallowance made by the Assessing Officer. 40. Ld. Counsel for the assessee further referring to Page No. 385 and 386 submitted that a detailed break up of expenses was submitted before the Assessing Officer. The entire expenses were incurred for creating common infrastructure for airport....
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....g Officer to allow the claim of the assessee to delete the disallowance made under section 43B in respect of ESIC and PF contribution remitted beyond the due dates by the respective Acts but before the due dates for filing the return of income. This ground is allowed. 47. Ground No. 9, 11 & 12: These grounds are relating to Assessing interest income of Rs. 63.57 Crores from Non-convertible debentures [in short "NCD"] and interest income of Rs. 72.54 Crores from subsidiary under the head "from other sources" instead of income for business and disallowing interest of Rs. 89.83 crores under 36(1)(iii) of the Act. 48. Briefly stated the facts are that the, Assessing Officer noticed that the assessee, in the revised return filed, treated interest income from NCD and interest from subsidiary, as business income and consequently assessee claimed interest expenses amounting to Rs. 89.83 Crores as business expenses. In the course of the assessment proceedings, it was submitted that since the assessee is engaged in the business of real estate and its subsidiary which is also engaged in the business of real estate, the interest income received shall be considered as business income. How....
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....s below. 52. This aspect of the matter has been elaborately dealt with by the Ld.CIT(A) with reference to the submission made by the assessee as well as the averments of the Assessing Officer observing as under: "8.3.1 I have considered the submissions of the appellant and perused the materials available in record. The point for adjudication raised vide Ground No.8 is whether the A.O was justified in assessing interest income from NCD of Rs. 63,57,53,42S/-and interest income from subsidiary of Rs. 72,54,23,350/- under the head 'income from Other Sources' as against 'Business income' claimed by the appellant in the revised return of Income. It is matter of record that the appellant had on Its own offered the Interest on NCD as well as interest from subsidiary as 'income from Other Sources' In its original return of Income filed for the A-Y- under consideration on 30.09 2013. It is also admitted vide submissions dated 08.03.2017 and 16.03.2017 during appellate proceedings that even in earlier A.Ys.2011-12 and 2012-13, the appellant had declared interest Income from subsidiaries and interest Income on NCD under the head 'Income from Other Source....
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....e of the objects incidental/ ancillary to the attainment of the main objects of the company Is "to undertake and carry on and execute all kind of financial, commercial and other operations of the company e.g. to draw, make, accept, endorse, discount, execute and Issue bills of exchange, promissory notes, bills of landing, "warrants, debentures and otter negotiable or transferable instruments and securities". In this connection, it is pertinent to note that the expression "omission or wrong statement" occurring in section 139(5) has been judicially interpreted to mean a clerical or an inadvertent mistake or omission in the originally filed return. It signifies bona fids inadvertence or mistake. In the case of Sunanda Ram Deka v. C1T 210 ITR 988 (Gauh), It has been held That the filing of the revised return after discovery of omission or wrong statement is not by itself sufficient to bring the revised return within the ambit of section 139(5). The further requirement is that this omission or wrong statement in the original return must be due to bona fide inadvertence or mistake on the part of the assessee. 8.3.3 In view of the above legal position, it emerges that in the Ins....
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....The mode and manner in which the income is derived Is relevant In determining under which head the income received by the assessee would fall [south India Shipping corporation v. CIT 240 ITR 24 (Mad)], It has to be seen whether the assessee was carrying on the business of money lending in a regular, systematic anti organized manner. In other Words, what is required to be considered is whether the loans are advanced with The Intention to carry on the business of money-lending. The intention has to be gathered with reference to all the activities of advancing money which should be permitted by the objects of the company and also by the resolution of the board of directors to carry on the business of lending of money. The relevant tests to be applied are volume, frequency, continuity .md regularity of the transactions in arriving at the conclusion that the activities of the assessee constituted business. 8.3.5 On application of the aforementioned legal principles to the facts of this case, I am in agreement with the A.O's finding supported by detailed reasoning that the aforesaid Interest income earned by the appellant was rightly chargeable to tax under the head 'income ....
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.... under the head 'Income from other sources'. The action of the A.O, in bringing to tax the aforesaid Items of interest income under this head 'Income from other sources' Is found to be In accordance with law as well as peculiar facts and circumstances of the case and is, therefore, upheld. Ground No,8 of the present appeal is Thus found to be devoid of merit and is accordingly dismissed. 8.3.6 As far as Ground No.9 is concerned, I find merit in the appellant's claim that the appellant company had already credited the interest income of Rs. 19,41,01,237/- from Ravijyot Finance and Leasing Pvt. Ltd, (a Subsidiary of the appellant) which was forming part of interest income from subsidiaries amounting to Rs. 72,54,23,350/-/- shown under the head 'Income from Other Sources' In the original return of Income, Therefore, The action of the A.O. In adding back the same once again while computing the total income of the appellant vide impugned assessment order has resulted in double taxation of the said interest Income:. The A.O. is. therefore, directed to verify the facts from the record and delete the said addition of interest of Rs. 19,41,01,237/- in ca....
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....aking or earning the interest Income. 8,3.8 In this connection, It would be pertinent to consider the judicial precedent in the case of Smt Virmati Ramkrishna v. CIT 131 ITR 659 (Guj) wherein the Gujarat High Court has inter allia summed up the fallowing principles or propositions emerging from analysis of the statutory language of section 57(iii) as well as the decided cases: - * The expenditure must not be in the nature of capital expenditure or personal expenses of the assesses. * The expenditure must have been laid out or expended wholly and exclusively for the purpose of making or earning "income from other sources "- The purpose of making or earning such Income must be the sole purpose for which the expenditure must have been Incurred, that is to say, expenditure should not have been Incurred for such purpose as also for another purpose. or for a mixed purpose. *. The distinction between purpose and motive must always be borne in mind In this connection, for what Is relevant IS the manifest and immediate purpose and not the motive or personal considerations weighing In the mind of the assessee in Incurring the expenditure. * If the....
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....as brought out in para 8.3.7 above. No attempt has been made by the appellant to provide any explanation or reconciliation in this regard. Be that as it may, from perusal of details of interest expenses furnished by the appellant vide letter dated 08.03.2017 at the appellate stage, it is noticed that barring Interest on overdraft, none of The other items of Interest expenses viz. penal interest on debentures, penal interest on loan, interest on late payment of service tax/VAT/ works contract tax, Interest on bill discounting, loan processing charges etc. can reasonably be believed to have even the remotest connection with the earning of interest income. Even as regards interest on overdraft, the appellant has not adduced any concrete documentary evidence in order to demonstrate the nexus of utilization of funds in the overdraft account with the earning of interest income. In view of the above discussion, I do not find any error or Infirmity in the action of the A.O in holding that the appellant had failed To establish, the nexus between the interest expenses Incurred and the interest Income earned and consequently disallowing the appellant's claim for deduction of aforesaid exp....
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....galia Apparels P. Ltd. [352 ITR 71] and Asia Power Project P. Ltd. v. Dy. CIT [370 ITR 257]. It is submitted that encashment of bank guarantee is business expenditure. 59. Ld. DR strongly supported the orders of the authorities below. 60. We have heard the rival submissions perused the orders of the authorities below and the case laws relied on. It is not in dispute that MIAL had invoked the bank guarantee forfeiture and encashed the bank guarantee in the course of business of the assessee to MIAL. In the case of CIT v. Ragalia Apparels P. Ltd. (supra) the Hon'ble Bombay High Court considered a situation where the forfeiture of bank guarantee is business expenditure or not and it was held that forfeiture of bank guarantee was compensatory in nature and thus allowable as deduction u/s 37(1) of the Act while holding so it was observed s under: - "2. The respondent assessee is a manufacturer of garments. The Apparel Export Promotion council (APEC) granted to the respondent assessee entitlements for export of garments and knit wares. In consideration for export entitlements the respondent assessee furnished bank guarantee in support of its commitment that it shall ab....
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....d a doubt as to whether this Rs. 25 Crores included in the unrealized cost of Rs. 441.93 crores or not. Before the Ld. CIT(A) the assessee submitted that the said expenditure of Rs. 25 Crores does not form part of write off exceptional loss of Rs. 441.98 crores. In view of the above, following the decision of the Jurisdictional High Court, we hold that the bank guarantee forfeited is allowable business expenditure subject to verification of the Assessing Officer. This ground of the appeal is allowed. 62. Ground No. 14 & 15: These grounds are relating to upholding the action of the Assessing Officer to disallow the capitalization of expenses by reducing the work in progress on account of payment made to tenants and development expenses. 63. In the course of the assessment, the Assessing Officer noticed that out of Rs. 29.86 crores claim towards compensation expenses, Rs. 4,86,30,000/- were payments made by the assessee company to tenants. It is contended that the payments were made by the assessee to tenants of Patthar Nagar, Bandra (E) and agreements were submitted. It was contended that since the payment is through account payee cheques the genuineness of the transaction is ....
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....osed off accordingly. 70. Set off of brought forward losses and unabsorbed depreciation are only consequential in nature, therefore we restore these grounds to the file of the Assessing Officer who shall examine and allow set off of brought forward losses and unabsorbed depreciation in accordance with law. This ground is allowed for statistical purpose. 71. Ground No. 18: This issue is relating to upholding the action of the Assessing Officer in adding the deemed rental income on the properties which were stock in trade of the assessee. 72. Ld. Counsel for the assessee at the outset submits that the issue in appeal is covered by the decision of the Hon'ble Gujarat High Court in the case of CIT v. Neha Builders [296 ITR 661] and the Bombay Bench of the Tribunal in the case of M/s. Mayank Chemiplast Pvt. Ltd. in ITA.No. 4072/Mum/2011 (A.Y. 2007-08), M/s. C.R. Developers Pvt. Ltd. v. JCIT in ITA.No. 4277/Mum/2012 dated 13.05.2015, Runwal Construction v. ACIT in ITA.No. No. 5408/Mum/2016 (A.Y. 2012-13) dated 22/02/2018. Ld. Counsel for the assessee further referring to Page No. 15-16 which is Finance Act, 2017 submitted that has w.e.f 01.04.2018 introduced sub- section 5 i....
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.... and brought to tax under Section 23 of the Act as income from house property. 4. On appeal the learned CIT(A) sustained the action of the AO in bringing to tax the notional annual letting value under the head 'income from house property' in respect of the unsold flats. Aggrieved, assessees are in appeal before us. 5. The learned A.R. before us strongly placing reliance on the decision of the Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) submitted that if the property is used as stock in trade then such property would become or partake the character of stock and any income derived from such stock in trade would be income from business and not income from house property. The learned counsel also placed reliance on the decision of the Coordinate Bench in the case of C.R. Developers Pvt. Ltd. vs. JCIT in ITA No. 4277/Mum/2013 dated 13.05.2015 and submitted that identical issue has been decided by the Coordinate Bench holding that in the case of property held as stock in trade the income should be assessable under the head 'income from business' and no income shall be brought to tax as notional annual letting value under the head 'incom....
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....mmovable, would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property'. Even otherwise, it is to be seen that there was distinction between the 'income from business' and 'income from property' on one side, and 'any income from other sources'. The Tribunal, in our considered opinion, was absolutely unjustified in comparing the rental income with the dividend income on the shares or interest income on the deposits. Even otherwise, this question was not raised before the subordinate Tribunals and, all of sudden, the Tribunal started applying the analogy. 9. From the statement of the assessee, it would clearly appear that it was treating the property as 'stock-in-trade'. Not only this, it will also be clear from the records that, except for the ground floor, which has been let out by the assessee, all other portions of the property constructed have been sold out. If that be so, the property, right from the beginning was a 'stock-in-trade'." 9. Similarly the Coordinate Bench has considered similar issue as to whether the unsold property which is held as....
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....ase, assessee is engaged in business of construction and development, which is main object of the assessee company. The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. Accordingly, we do not find any justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee's stock in trade as at the end of the year. Accordingly, the AO is directed to delete the addition made by estimating letting value of the flats u/s.23 of the I.T.Act." 10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock ....