TaxTMI 
TaxTMI 
2019 (1) TMI 17
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.... land developer and builder and is therefore entitled to claim expenses pertaining to the Flats sold in the year in which substantial sales of flats were made. (c) The C.I.T (Appeals) should have seen that even after obtaining part occupancy certificate from the CIDCO, the appellant had to incur expenses to comply with the directions issued in the part occupancy certificate dated 10.06.2008. (d) The First Appellate authority ought to have seen that even after obtaining part occupancy certificate, expenses were incurred by the appellant to fix leakages and other deficiencies pointed out by the purchases of flats. 2 The C.I.T. (Appeals) failed to consider the following decisions placed before her in support of the Appellant's claim (i) Decision dated 7.1.2011 in M/S Aditi Developers vs Asst. Commissioner of Income Tax in IT No.3302/M/2010. (ii) Decision dated 20.5.2011 in Mantri Developers vs ITO-ITA No. 2819/M/2010 (iii) Decision dated 6.2.2013 in Aditya Builders vs CIT in ITA No. 2220/M/2012. (iv) Decision dated 17.2.2015 in ACIT vs Paras Build Call Pvt. Ltd. ITA No. 234&4316/DEL/2010. 3. Without prejudice ....
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.... should have seen that no direction can be given by the AO in so far as such direction related to the next assessment year. (c) The First appellate authority has not considered the Asst. order for AY 2010-11, placed before wherein the AO accepted the figures furnished by the appellant." 2. The brief facts of the case are that the assessee company, engaged in the business as builder and developer, did not file return of income for A.Y. 2009-10 u/s. 139(1) of the Income tax Act, 1961. Thereafter, the Assessing Officer issued notice u/s. 148, dated 08.03.2013, and called upon the assessee to file return of income. In response, the assessee has filed return of income on 01.04.2013 declaring total income of Rs. 6,97,560/-. The case was selected for scrutiny and notices u/s. 143(2) & 142(1) of the Act were issued. In response to notices, the AR of the assessee appeared from time to time and filed various details as called for. During the course of assessment proceedings, the Assessing Officer noticed that the assessee is a builder and undertook development of residential cum commercial project at Nalasopara on Plot No.,67 & 68, Survey No.7 & 8, Village More, Taluka Vasai, ....
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....ng Officer, but the Assessing Officer has ignored all evidences filed by the assessee to make disallowance, which is incorrect. 4. The CIT(A) after considering relevant submissions of the assessee dismissed the appeal filed by the assessee, wherein she had upheld additions made by the Assessing Officer towards disallowances of expenses incurred towards project after obtaining completion certificate from the authorities by stating that once completion certificate is obtained for the project, no further expenses are required to be expended and, hence, there is no merit in the arguments of the assessee that it has incurred various expenses towards completion of the project. The CIT(A) further observed that although the assessee claimed to have incurred various expenses such expenses might be incurred for the remaining part of the project and, therefore, directed the Assessing Officer to allow expenses for work-in-progress for the part of the balance project i.e. Wing 'B'. Accordingly, the expenses incurred after obtaining Occupation Certificate is not allowable for the project which is completed and Occupation Certificate is granted. In so far as disallowance of interest is concern....
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....ducted from 76.46% of project completed and sold during the current financial year. It is the contention of the assessee that it has obtained Part Occupancy Certificate from the Architect on 15.04.2008 and from CIDCO on 10.06.2008 to ensure timely completion and to show delivery of plots to the customers. However, at the time of obtaining completion certificate the project was not fully complete for occupancy and some minor work like POP work, installation of grills & fabrication, internal paintings, alterations in locations of wash basis, alteration in windows etc. and other small work were pending, for which the assessee has incurred various expenses after 15.04.2008. The assessee further claimed that the details of expenses incurred after 15.04.2008 has been furnished to the Assessing Officer along with necessary supporting evidence. 6. We have heard both the parties and perused the material available on record. There is no dispute with regard to the fact that the assessee has developed the project in two phases. The first phase consists of Block 'A' and the second phase consists of Block 'B'. The assessee claims that it has completed 76.46% of the total project and sold i....
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....after 15.04.2008 @76.46% and balance amount of 23.54% to be reduced from Work-in-progress. 8. Coming to the alternative claim of the assessee that although it has obtained completion certificate from the Architect on 15.04.2008, the fact remains that it has obtained Part Occupancy Certificate from the competent authorities i.e. from CIDCO on 10.06.2008, hence, at least expenditure incurred for the period from 16.04.2008 to 10.06.2008 should be allowed. We find that the assessee claims to have incurred a sum of Rs. 13,37,447/- between 16.04.2008 and 10.06.2008 i.e. the date of partial Occupancy Certificate obtained from the competent authority. The assessee claims that it has filed necessary evidence before the Assessing Officer to justify those expenses. We find that although the assessee has obtained completion certificate from its Architect on 15.04.2008, what is relevant is the completion certificate obtained from the competent authority i.e. CIDCO on 10.06.2008. Therefore, we are of the considered view that whatever expenditure has been incurred between 16.04.2008 and 10.06.2008 needs to be allowed, if the assessee substantiated incurring various expenses for the work stated....
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....ancial year the project has yielded good return therefore, the management has decided to pay interest retrospectively from F.Y. 2005-06 onwards. The assessee further claims that such interest has been paid after deducting applicable TDS as per the provisions of the Act. Having heard both the sides, we do not find any merits in the arguments of the assessee for the reason that the assessee cannot pick and choose to pay interest on loans and advances according to its convenience. If loans have been taken with interest, the assessee, who is following mercantile system of accounting have to provide for interest in the books of account whether such interest has been paid or not. In this case, on perusal of facts, we find that assessee claims that it has not paid and also not chosen to pay interest in the earlier period due to inadequacy of profits. During the current financial year, the assessee has paid interest retrospectively from A.Y. 2006-07 onwards. The assessee has not given any reasons for paying interest for earlier period. We further notice that once mercantile system of accounting is followed, the assessee needs to provide all expenses incurred for the period in the books of ....
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....es like travelling etc. and later the assessee company reimbursed such expenses. The relevant details have been filed before the Assessing Officer. 12. Having heard both the sides, we find that the Assessing Officer has disallowed expenses incurred by the Director on behalf of the company without assigning any reasons and concluded that the assessee has not filed any details in respect thereof. But, it is the claim of the assessee that it has filed necessary details in respect of expenditure incurred by the Director and reimbursed by the company. The facts are contradicting each other. Therefore, we are of the considered view that the issue needs to be re-examined by the Assessing Officer in the light of claim of the assessee. Hence, we set aside the issue to the file of the Assessing Officer and direct him to call necessary inquiries and take decision in accordance with law. 13. The next issue that came up for consideration is reduction of certain expenses from Work-in-progress while completing the income tax assessment for A.Y. 2010-11. The Assessing Officer has disallowed certain expenses on the basis of project completion ratio as per which it has disallowed 76.46% of exp....