TaxTMI 
TaxTMI 
2018 (10) TMI 122
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.... 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 cost of TDR to be allowed as deduction including th....
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....ces 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 pending adjudication, when the contract was terminated. As a r....
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..... 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 to the Assessment order as well as the Ld.CIT(A) order submitted that,....
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....her 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 Slum Rehabilitation Agreement dated 15.10.2007 entered into with the assessee company, HDIL. Copy of the sa....
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....hile 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 and circumstances of the case. Hence, on the principle of consistently the claim of Assessee may be allowed Reliance is placed on the Ap....
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....sp; 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 Cost recognized in P/L Therefore, Unabsorbed cost Bhandari Mill (Fine) Project :- Galaxy Computation of Cost of TDR F.Y. 2012-13 Estimate Particulars Area (sq. ft.) Rate /sq.ft. Amount (Actual) Cost of land 99,170.56 875,766,602 Cost of construction 770,372.70 1,100 735,251,386 Approval & Other Charges 76,229,227 Interest Cost 174,728,037 Total TDK 502,337.04 &nb....
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....land, details of cost of material consumed etc., before the Assessing Officer. Therefore, the contentions of the Assessing Officer that the assessee has not provided details is contrary to the record. In any case the issue whether the assessee is entitled to claim the revised unabsorbed cost of TDR as expenses and in view of the fact that the contract entered into with Mumbai International Airport Pvt. Limited by the assessee for development of the Airport has been cancelled on 06.02.2013, has been the subject matter of appeal for the A.Y 2009-10 and 2010-11 and the Tribunal by order dated 25.09.2013 directed the Assessing Officer to consider the revised cost of TDR and allow the same observing as under: "37. Ground No. 3. 4 & 5 relate to the income from sale of TDR arising from Slum Rehabilitation activity of airport project. It is the claim of the assesses that the sale of said TDR cannot be assessed in the year under consideration. In so far as Airport project is concerned, the cost of land at Rs, 1.900 crores far exceeds the amount realized from sale of TDR of Rs. 265 crores which has resulted into a loss for the year. 37.1. Briefly stated the facts of the case are that Mum....
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....tation of total income. 37.3. In alternative, the assessee also claimed that if its claim of deduction u/s. 80IA(4) is not allowed, then the sale value of the TDR should be reduced from WIP as the assessee is following project completion method. The AO denied the claim of deduction u/s. 80IA(4) and also rejected the alternative claim of the assessee as per the findings given at clause-(v) on page 52 of the assessment order. According to the AO, the assessee has failed to comply with the conditions laid down u/s. 80IA(4) of the Act and further the income against which deduction is claimed cannot be said to be derived from the Airport Project. 37.4. Rejecting the alternative contention of the assessee, the AO observed that the assessee itself has credited the P&L account by the amount received by it on account of sale of TDR. By doing this, the assessee itself has considered that the sum relates to the year under consideration and has also claimed u/s. 80IA(4) of the Act. Therefore, now the assessee cannot say that since the project has not been completed and since the assessee is following project completion method, the said amount of sale of TDR should be reduced from the Work-....
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.... not submitted in the earlier proceedings. The AO is also free to collect any relevant information as per the provisions of law and after giving due opportunity of being heard to the assessee. Ground No. 3, 4 & 5 is allowed for statistical purposes." 19. Therefore, as could be seen from the above the Tribunal held that 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 such claim is rejected subject to outcome of arbitration proceedings. It was also held that the profit arising out of the TDR has to be recomputed in line with the revised computation of cost of sale of TDR as filed by the assessee and directed the Assessing Officer to consider the revised computation of cost of sale of TDR after giving a reasonable and fair opportunity of being heard. We also find that the Tribunal by order dated 01.09.2017 in ITA No.2780/Mum/2017 to 2782/Mum/2017 quashed the order passed u/s. 263 of the Act by the Principal CIT, Central-3, Mumbai for the Assessment Years 2009-10, 2010-11 and 2012-13 who directed to revise the consequential order passed giving effect to the Tribunal order. Further, we....
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....mitted that assessee had rightly claimed it as reduction from WIP. Thus, Ld. Counsel for the assessee requested to direct Assessing Officer to allow the claim of the assessee. 21. Ld. DR vehemently supported the orders of the authorities below and filed written submissions. 22. We have heard the rival submissions and perused the orders of the authorities below. We find that the Lower Authorities have not examined the claim of the assessee and no findings have been given by the Lower Authorities on this issue. In the circumstances, keeping in view the submissions of the assessee and also our decision in ground No.2 above while computing the income under normal provisions of the Act, we feel it appropriate to restore this issue to the file of the Assessing Officer who shall examine the claim of the assessee and allow in accordance with law. This ground is allowed for statistical purpose. 23. Ground No. 4 & 5: The issue in Ground No. 4 & 5 relates to upholding the action of the Assessing Officer in disallowing the deduction of unrealized cost of Rs. 441.98 crores debited to P&L account while computing the income under normal provisions of the Act and also while computing the book p....
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....gent and liability did not crystalize during this Assessment Year, without appreciating the submissions made before them. Ld. Counsel for the assessee relied on the decision of the Hon'ble Karnataka High Court in the case of Asia Power Projects (P.) Ltd. v. DCIT [370 ITR 257]. 27. Ld. DR vehemently supported the orders of the Authorities below and filed written submissions. 28. We have heard the rival submissions and perused the orders of the authorities below, the written submissions and the case laws relied on. We observe from the Assessment Order that the Assessing Officer denied the claim of the assessee being write off of unrealized cost of TDR observing that details have not been furnished and the assessee has not explained why the unabsorbed cost was not claimed in the original return and claimed in the revised return. The Assessing officer was also of the view that since the assessee disputed the termination of the contract by MIAL the expenditure debited to P&L account during this year is only a contingent liability and he was of the view that the expenditure is not allowable in the year under consideration but in the year in which the litigation between the assessee....
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.... 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 above mentioned Slum Rehabilitation Agreement dated 15.10.2007 entered into with the assesses company, HDIL. Copy of the same is already submitted before your kind selves vide this office letter dated 04/01/2016 (Point No. 8, Annexure - IX). This unprecedented event changed everything. Assessee Company is was then deprived of the very frui....
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....ontention and factual aspect, your precede after being satisfied with the computational accuracy of our calculation, has allowed the revised Unabsorbed Cost of TDR to the Assessee Company for the A.Y. 2009-10 & A.Y. 2010-11 and accordingly has also given an effect in the Original Assessment Order vide order Giving Effect to ITAT's order. Furthermore, on being served the notice of termination of contract of Mumbai International Airport Ltd, on Assessee Company for Mumbai International Airport project claiming unsubstantiated charges, which was being challenged by Assesses Company. The Assessee Company was being advised by its legal counsel that such notice of termination was not tenable in the court of law and had initiated legal remedies available to it. The board of the Assessee company following its conservative accounting policy had written off unrealized costs in the books of accounts, which is being incurred by the Assessee company during the fulfilment of contract in due faith of completion of contract aggregating to Rs. 441,98,44,632/- as exceptional item by debiting to the profit & loss account and crediting/ reducing the work-in-progress for the year under considerat....
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....e 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 assesses 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) during the A.Y, 2009-10, 2010-11 & 2011-12. But due to certain unfavorable turn of events, MIAL vide letter dated 06.02.2013, terminated its above mentioned Slum Rehabilitation Agreement dated 15.10.2007 entered into with the assessee company, HDIL. This unprecedented event changed everything, Assessee Company is was then deprived of the very fruit for which it strived laboriously over the better half of the last decade. Due to the termination of the contract, HDIL wa....
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....ed the revised Unabsorbed Cost of TDR to the Assessee Company for the A.Y. 2009-10 & A.Y. 2010-11 and accordingly has also given an effect in the Original Assessment Order vide Order Giving Effect to ITAT's order. Furthermore, on being served the notice of termination of contract of Mumbai International Airport Ltd, on Assessee Company for Mumbai International Airport project claiming unsubstantiated charges, which was being challenged by Assesses Company. The Assessee Company was being advised by its legal counsel that such notice of termination was not tenable in the court of law and had initiated legal remedies available to it. The Board of Directors the Assessee company following its conservative accounting policy had written off unrealized costs in the books of accounts, which is being incurred by the Assessee company during the fulfillment of contract in due faith of completion of contract aggregating to Rs. 441,98,44,632/- as exceptional item by debiting to the profit & loss account and crediting/reducing the work-in-progress for the year under consideration. Sir, in this connection we wish to further state that, Assessee Company has undertaken Rehabilitation of Slum....
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....ion to the completed units out of completed units cost of Rs. 441.98 crores out of the total cost of 709.49 crores. 31. Therefore, the contentions of the Lower Authorities that the details were not furnished and no explanation has been given appears to be not correct. The reason given by the Assessing Officer for denying the claim is that the expenditure is contingent. This also appears to be not correct for the reason that the assessee has already incurred the expenses in the books of accounts but only thing is the said expenditure was not charged to P&L account but was debited to work in progress account since the MIAL terminated the contract during this year. 32. We also observe from the Paper Book in Page No. 380 that MIAL issued termination letter dated 06.02.2013 for termination of Slum Rehabilitation Agreement dated 15.10.2007 executed between the MIAL and the assessee. Assessee invoked the arbitration clause and the matter went to the Arbitral Tribunal and the Arbitral Tribunal passed award on 19.09.2016. While the dispute was pending before the Tribunal, parties settled the dispute mutually and Settlement Agreement was entered into on 08.09.2016. Keeping in view the Sett....
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....d is annexed to this Award. All the disputes between the parties are thus settled on the terms contained in the Settlement Agreement dated September 8, 2016. 4. This Award is made here in Kolkata on September 19, 2016 and signed by the two Arbitrators of the Tribunal and is being sent to Justice A. M. Ahmadi for obtaining his signature." 33. Further, on a perusal of the Settlement Agreement, we noticed that both the parties agreed for termination of the contract on mutual agreement with effect from the termination letter dated 06.02.2013 and the termination is valid and binding on both the parties from that date. Relevant clauses of the settlement agreement are as under: - "Mutual Covenants: 1. The Parties hereto accept and agree that the SR Contract is terminated by mutual agreement of the Parties with effect from the Termination Date and further agree that the termination is valid, subsisting and binding on both the Parties. 2. HDIL specifically agrees, acknowledges and undertakes that (a) it shall have no claim, and specifically waives and releases all claims against MIAL in respect of the invocation of the Bank Guarantee dated 30th May 2009 (as extended from time to ti....
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....or effort of rehabilitation initiated by MIAL or Government of Maharashtra or any statutory authority or body, either directly or through a third party, for removal and rehabilitation of slums/ slum dwellers from the Encroached Airport Land (as defined in the SR Contract). HDIL shall not raise any objection if the rehabilitation units constructed by HDIL pursuant to the Letters of Intent issued by the Slum Rehabilitation Authority on the basis of the SR Contract are used by the Government for rehabilitation of slum dwellers from the Encroached Airport Land (as defined in the SR Contract). HDIL will have no financial liabilities of any nature whatsoever in this respect. 8. The Parties, for themselves and on behalf of their respective affiliates, successors and assigns, fully and forever release and discharge the other and their respective successors, agents, employees, affiliates, attorneys, accountants, insurers, partners and joint ventures, and each of them, of and from any and all liability, claims, demands, damages, punitive damages, disputes, suits, actions, claims for relief and causes of action, whether known or unknown, arising out of or relating to the SR Contract (since ....
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....tlement Agreement and Award to find out when the liability crystallized i.e., on 06.02.2013 when the termination letter was given or on 19.09.2016 when final Award was passed by the Arbitral Tribunal. In the circumstances, we are of the considered view that the Lower Authorities have to examine all the clauses of the settlement agreement vis-à-vis Arbitral Award and the termination letter before concluding that the liability did not crystallized during this Assessment Year. 35. Further, the Hon'ble Karnataka High Court in the case of Asia Power Projects (P.) Ltd., v. DCIT [370 ITR 257] while considering the allowability of expenditure on abandoned projects, it was held that even though the assessee invoked arbitration clause and pending the expenditure on abandoned project should be allowed in the year in which the contract is terminated. 36. In view of above discussion, we feel it appropriate to restore this issue to the file to the Assessing Officer who shall examine the whole issue in the light of the above observations and to decide in accordance with law while computing the income under normal provisions of Act as well as book profits u/s. 115JB of the Act. Needless t....
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....upported the orders of the authorities below and filed written submissions. 43. We have heard the rival submissions and perused the orders of the authorities below and the case laws relied on and the written submissions. We find that the alternative contention of the assessee that if deduction u/s 35AD is not allowable the said expenditure is to be allowed u/s 37(1) of the Act was not considered by the Ld. CIT(A). Ld. Counsel for the assessee fairly submitted that the alternative claim was not made before the Assessing Officer. It is submitted that assessee is only making the alternative claim before the Tribunal. In view of the decisions referred by the Ld. Counsel for the assessee, we are of the view that the alternative claim of the assessee shall be examined by the Lower Authorities. In view of the matter, we restore this issue to the file of the Assessing Officer to examine the alternative claim of the assessee and to decide in accordance with law after providing adequate opportunity of being heard. These grounds are allowed for statistical purpose. 44. Ground No. 8 is in respect of Employees Contribution of ESIC and Provident Fund. 45. Ld. Counsel for the assessee, at the ....
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....onsidered as normal business of the assessee. Similarly interest bearing loans have been given to the subsidiary and interest income is earned thereon and the transaction with the subsidiary is not in the normal course of business and there is no business arrangement in the form of joint venture or profit sharing with the subsidiary company and therefore the entire interest income received by the assessee from the NCD's are from subsidiary was treated as income under the head of other sources by the Assessing Officer and consequently interest income expenditure to the extent of Rs. 89.83 crores claimed by the assessee was disallowed. 49. On appeal the Ld.CIT(A) sustained the action of the Assessing Officer in assessing the interest income from NCD and subsidiary company under the head income from other sources. However, since the assessee company had already credited the interest income of Rs. 19.41 crores from Ravijyot Finance and Leasing Pvt. Ltd. subsidiary of the assesse and forming part of interest income from subsidiary amounting to Rs. 72.54 crores shown under the head "income from other sources" directed the Assessing Officer to exclude the same since disallowing the same ....
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....9;Income from Other Sources' or as 'Business Income'. 8.3.2 It Is proposed at the outset to deal with the first question. It Is pertinent to note that the appellant had declared total income of Rs. 66,08,53,800/- under normal provisions of the Act and book profit of Rs. 20,37,91,742/-u/s.115JB in the original return of Income filed on 30.09.2013. However, in the revised return of Income filed on 31.10.2013, the appellant declared total income at Rs.-Nil under normal provisions of the Act and book profit of Rs. NIll u/s.115JB of the Act. Thus, the net effect of filing the revised return claiming the aforesaid income as 'Business Income' was that the 'Income from Other Sources' as shown In the original return was reduced from Rs,47,50,38,329/ to Rs, 1,22,31,187/- as brought out above. While filing the revised return of income, The appellant did not explain as to how the disclosure of Interest Income on NCD and Interest from subsidiary under the head 'Income from Other Sources' in the original return of income could be considered an "omission or wrong statement" therein so as to necessitate the filing of a revised return showing the aforesaid Inco....
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....ambit of section 139(5) of the Act Moreover, the filing of revised return showing the aforesaid Interest income under the head "business income" could not be said to be bona fide In so far as it had the effect of substantially reducing the taxable income of the appellant for the A.Y. under consideration. Reliance Is placed in this regard on the judgment of Hon'ble Delhi High. Court in the case Of Golden Insulation & Engg. Ltd. v. C1T 305 ITR 427 (Del) wherein the assessee changed the method of valuation of closing stock in the revised return because the method adopted did not reflect the correct state of affairs. The result of change in the method of valuation was that the assessee showed a. loss of Rs. 4,01,290/- which was higher than the original loss shown at Rs. 3,00,369/-. In these circumstances, it was held that the same was clearly not a legally valid reason nor was it bona fide and that the change was not Justified or legally permissible. 8.3.4 It is now proposed to consider whether the aforesaid interest income earned by the appellant was liable to be assessed under the head "business income" as claimed in the revised return or under the head "income from other sourc....
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....record to show that it was carrying on the business of financing or money-lending in a systematic and organized manner. The appellant's reliance in this regard on the incidental/ ancillary object clause 10 on page 3 of the memorandum of association is of no avail. Secondly, the appellant company has also not made it known to outsiders that they are in financing business so as to develop the business. There is nothing on record to show that money had been advanced to any outsider. And finally, it is noticed from, the record that debenture Interest income or Rs. 63,57,53.425/- was earned by the appellant from one of its subsidiaries, namely. Guruashish Construction pvt. Ltd, whereas the interest Income of Rs. 72,54,23,350 /- was also derived from the loans given by the appellant to its six subsidiary companies. The appellant is thus seen to have lent money to its subsidiary companies and derived interest therefrom. The afore mentioned activities of the appellant company Can by no stretch of imagination be said to constitute 'business. As a matter of fact, it is found that the appellant has not done any activity which could be termed as an activity Of business. There Is not ev....
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....llant has placed the same on record at pages 163 to 165 of the paper book filed before me. However, merely furnishing details of gross finance expenses of Rs. 567,77,06,676/- is not sufficient to claim deduction of Interest expenses of Rs. 89,83,69,633/- u/s.57(iii) of the Act. In the course of appellate proceedings, the appellant furnished specific details of interest expenses of Rs. 89,83,69,633/- vide submission dated 08.03.2017. A perusal of the details of fiancé/interest expenses aggregating to Rs. 89,83,69,633/- reveals that these include interest on overdraft (Rs.62.10 Crores), penal interest on debentures (Rs.13.14 crores,) penal interest on interest on loan (Rs.6.41 cores), interest on late payment of service tax (Rs.3.45 crores), interest on bill discounting Rs. 2.05 crores, interest on late payment of VAT (Rs.2 crores), interest on late payment of works contract tax (Rs.0.45 crores), loan processing charges (Rs.0.14 cores) and other interest (Rs.0.10 crores). bill discounting (Rs.2.05 cores) interest. However, no attempt was made by the appellant to establish that the aforesaid interest expenses had been Incurred for the purpose of earning The Interest Income so a....
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.... making or earning the Income must be decided on the facts of each case, the final conclusion being one of law. 8.3.9 On application of aforesaid legal propositions to the facts of the present case, the inescapable conclusion is that the appellant has failed to discharge the onus u/s.57(iii) to prove with The help of relevant evidences and concrete materials that the aforesaid Interest expenses were laid out wholly and exclusively for the purpose of making or earning the Interest income. It is pertinent to note that the appellant has been providing different details of interest expenses at different points of time. For example, in its written submissions on this ground before me filed in the course of hearing on 24.02.2017, the appellant has given break up/ working of net other income (after claiming interest expenses of Rs. 89,83,69,633/- against interest income of Rs. 137,34,07,962/-) to The tune of Rs. 47,50,33,829/- as per original return of Income Wherein interest expenses of Rs. 41,60,32,661/ have been shown against Interest income on NCD (Rs.63,57,53,425/-) interest expenses of Rs. 47,47,12,042 /- have been shown again interest from subsidiary (Rs,72,54,23,350/-) and inter....
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....of the Assessing Officer to disallow the capitalization of expenses by reducing work in progress on account of compensation paid to MIAL. 57. Briefly stated the facts are that, in the course of the assessment proceedings Assessing Officer noticed that assessee claimed Rs. 29.86 crores towards compensation expenses. Assessee was required to explain the same and it was submitted by the assessee that expenses of Rs. 25 Crores include compensation paid to MIAL on account of invoking of bank guarantee by MIAL. The Assessing Officer however reducing the said expenditure of Rs. 25 Crores from work in progress observing that assessee had already claimed unrealized costs of Rs. 441.98 crores debited to P&L account on account of cancellation of contract by MIAL and there is nothing on record to suggest that Rs. 25 Crores forms part of Unrealized expenses or not. He also observed that no proper details were furnished and therefore the said expenditure has to be reduced from work in progress. On appeal the Ld.CIT(A) sustained the disallowance. The Ld.CIT(A) sustained the disallowance observing that it is only a contractual liability. 58. Ld. Counsel for the assessee submitted that the bank g....
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....lty and disallowed the expenses under section 37(1) of the Act in view of the explanation thereto. On appeal, the CIT(A) deleted the disallowance and allowed the l. On further appeal by the Revenue, the Tribunal confirmed the order of the CIT(A) and in particular, his findings of facts. 3. The contention of the revenue is that forfeiture/encashment of the bank guarantee is penal in nature and therefore, cannot be allowed as expenses under Section 37(1) of the Act in view of the explanation. Consequently, according to the revenue, the expenditure has been correctly disallowed by the Assessing officer. 4. We find the finding of fact recorded by the CIT(A) and upheld by the Tribunal was that respondent took a business decision not to honour its commitment of fulfilling the export entitlement in view of loss being suffered by it. The Assessing officer does not dispute this fact nor does he doubt the genuineness of the claim of the expenditure being for business purpose. For these facts the Tribunal held that respondent assessee has not contravened any provisions of law and thus the forfeiture of bank guarantee was compensatory in nature under Section 37(1) of the Act. In view of th....
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....ursement made from withdrawal from the bank account being pocket expenses incurred at various offices and sites of the assessee company. The Ld.CIT(A) sustained the disallowance of development charges for want of the specific details and nature of expenditure for which the expenditure was incurred. 65. Ld. Counsel for the assessee referring to the Page No 411 of the paper book, reiterated the submission made before the Lower Authorities. The Ld. Counsel for the assessee further referred to the page book in Page No. 338 of the paper book. 66. Ld. DR supported the orders of the authorities below. 67. On hearing both the parties and perusing orders of the Lower Authorities, we find that the assessee has not substantiated its claim with complete details of expenditure and with supporting evidences. In the circumstances, we are of the view that this issue has to be examined afresh by the Assessing Officer. Thus we set aside this issue to the file of the Assessing Officer for denovo adjudication in accordance with law after providing adequate opportunity of being heard to the assessee. The assessee may produce necessary details to substantiate its claims. This ground is allowed for st....
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.... in favour of the assessee in the case of Runwal Construction v. ACIT (supra) following the decision of the Hon'ble Gujarat High court in the cast of CIT v. Neha Builders (supra) holding as under: - 3. "The brief facts of the case are that the assessees, engaged in the business of builders and developers, filed return of income for A.Y. 2012-13. The assessment was completed under Section 143(3) of Income Tax Act, 1961 (hereinafter "the Act") and while completing the assessment the AO computed the annual letting value in respect of unsold flats held as stock in trade by the assessees. The assessees contended before the AO that they are engaged in the business of builder, developers and construction and the property they purchased is stock in trade and the income from sale of such developed property into flats is assessable as business income. Therefore, the unsold flats which are in the stock in trade cannot be brought to tax under the head 'income from house property' simply because the flats remain unsold at the end of the year. The assessees also placed reliance on the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Neha Builders Pvt. Ltd. (296 ITR 661....
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....o. Ltd. (supra). The action of the AO was upheld by the learned CIT(A). 8. The Hon'ble Gujarat High Court in the case of Neha Builders Pvt. Ltd. (supra) considered the question whether the rental income received from any property in the construction business can be claimed under the head 'income from property' even though the said property was included in the closing stock. The Hon'ble Gujarat High Court held that if the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the business and the business stocks, which may include movable and immovable, would be taken to be stock in trade and any income derived from such stocks cannot be termed as income from house property. While holding so the Hon'ble High Court observed as under: - "8. True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stock-in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the....
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....e from the same is not assessable u/s.23(1) of the IT Act. 4. On the other hand, ld. DR relied on the order of Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) in support of the proposition that even in respect of unsold flats by the developer is liable to be taxed as income from house property. 5. We have considered rival contentions and perused the record. The issue under consideration has been restored by the CIT(A) to the file of AO to compute the annual value. Recently the Hon'ble Supreme Court in the case of M/s Chennai Properties & Investments Ltd. Vs. CIT, reported in (2015) 42 SCD 651, vide judgment dated 9-4-2015 has held that where assessee company engaged in the activity of letting out properties and the rental income received was shown as business income, the action of AO treating the rental income as income from house property in place of income from business shown by the assessee was held to be not justified. The Hon'ble Supreme Court held that since the assessee company's main object, is to acquire and held properties and to let out these properties, the income earned by letting out these properties is main ob....