TaxTMI 
TaxTMI 
2021 (1) TMI 60
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....e and commission expenses relating to leased out properties. [Page 129-142: of CIT(A)'s Order] 1.2 That in the alternative, if same is attributable to lease income, adjustment is required to be made while working out rental income as per provisions of section 23(1) of the Income Tax Act, 1961. 2.1 That the learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the disallowance made by AO u/s. 14A of the Income-tax Act, 1961, to the extent of Rs. 10,01,00,000/-. [Page 189-205 of CIT(A)'s Order] 2.2 That the learned CIT(A) has failed to appreciate that no interest, administrative or any other expenditure was incurred by the appellant in relation to investments during the assessment year 2009-10. That the learned CIT(A) ought to have held that no amount of interest, administrative or other expenditure was disallowable u/s. 14A of the I Income-tax Act, 1961. 2.3 That the learned CIT(A) has grossly erred in applying section 14A of the Act without appreciating that this section has no application to the present case. 2.4 Without prejudice to above, the learned CIT(A) ....
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....der is without proper appreciation of facts and/application of mind. 6. That the order passed by the learned CIT (Appeals) is bad in law as well as wrong on facts and erroneous in points of law and right is reserved to assail the same on such other ground or grounds as may be advanced at the time of hearing for which the appellant craves leave to amend, vary or add to the grounds hereinbefore appearing. 3. ITA No. 4436/DEL/2013 is filed by the learned assessing officer raising following grounds of appeal:- 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 3,09,16,658/- made by the AO on account of disallowance of prior period expenses? 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 7,72,65,10,922/- made on account of disallowance of deduction u/s. 80 IAB of the IT Act, 1961? 2A Whether the CIT(A) under the facts and circumstances of the case and in law was correct in allowing deduction of Rs. 7,72,62,10,922/- u/s. 80 IAB of the Act, without deducting the short allocation of overheads of Rs. 15....
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....on account of reclassification of income from house property to income from business or profession? 14. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 15,41,010/- on account of notional rental income on vacant/leased properties? 15. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 6,36,614/- on account of recalculation of depreciation in respect of earlier let out DLF Centre Building, now converted to self occupied property? 16. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 30,12,202/- on a/c of disallowance of expenses where bills were not in the name of the company? 17. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 3,48,396/- on a/c of disallowance of excess payment of rent? 18. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing. 4. Facts show that Assessee Company is engag....
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....2008-09 dated 27/05/2019. He referred to paragraph number 42-45 at page number 35-38 of that decision. 8. The learned departmental representative also stated that the coordinate bench has considered identical issue. However, he relied upon the order of the learned assessing officer. 9. We have carefully considered the rival contentions and perused the orders of the learned lower authorities. The coordinate bench in assessee's own case for assessment year 2008-09 in ITA number 2749/Del/2013 has dealt with this issue as Under:- "42. In so far as the first issue is concerned, the facts in brief are that the Special Auditors have pointed out that assessee has claimed prior period expenses amounting to Rs. 70,12,062/- on the basis of which, ld. Assessing Officer issued a show cause notice to the assessee. In response, the assessee submitted that first of all, an amount of Rs. 14,63,017/- was on account of purchase of assets being the cost of office equipment and computers and was never claimed as admissible expenses but have been capitalized as fixed assets. The balance amount was stated to be on account of reimbursement to their employees on account of telephone expe....
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....of LTA claim, the travelling of the employees is prior to the claims submitted by the employees. The CIT (A) has specifically dealt with one instance in para 27.3 of his order. After verification of the details, it was received by the assessee from its employees during this period and after following the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Shriram Piston-174 taxman 147, the disallowance is deleted. The reliance of the ld. AR on the decision of Hon'ble Delhi High Court in CIT vs. Modipan Ltd.- 334 ITR 102 is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowability of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition of Rs. 22,98,510/- on account of prior period expenditure. In the result, ground no. 26 of the revenue's appeal is dismissed." 45. Since, similar issue has been allowed by the Tribunal following the ratio and principle laid down by the Hon'ble Jurisdictional Hig....
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....d all the expenses debited in the P&L account are related to the business of the assessee. Even the Special auditors have not been pointed out even a single voucher pertaining to other group company which has been wrongly debited to the P & L account of the assessee. Regarding overhead allocation the assessee has submitted as under: a. That the assessee company has not developed the SEZ rather only constructed the buildings. The deduction u/s. 80-IAB is available only in the case of development of SEZ. Mere construction of Bare shell buildings will allow the assessee the deduction u/s. 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co-Developer agreement and lease deed that the intention on the part of the assessee co....
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....ssee's reply had observed as under: "12.5 The reply of the assessee has been considered and from the reply it emerges that the assessee has stated that it is a listed company and not incurred any expenditure on behalf of its associated companies. The assessee company has argued that in case of both the companies to which the expenses have been allocated the main project undertaken by the two companies is development of SEZ and hence administrative activities in these companies are minimal and there is no need for allocation of further overheads. Both these companies have incurred overhead expenditure which formed part of development cost considered in POCM. This argument of the company is not tenable as the two companies DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developer Ltd. during the Asstt. year 2008-09 had earned development income of Rs. 1,68,686.15 lacs and Rs. 1,63,049.03 lacs respectively and against the same the overhead expenditure shown by these companies is Rs. 71.58 lacs and Rs. 1,194.51 lacs respectively. In fact, in case of DLF Cyber City Developers, the expenditure of Rs. 1194.51 lacs includes commission and brokerage expenditure of Rs....
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....s. The associated concerns during the year have developed SEZ and the assessee company during the year had also earned income from development of SEZ but there is substantial variance in the level of expenses incurred and accordingly some expenses are to be attributable for the benefit of associated concerns since there is similar line of business. The associated concerns has claimed 100% deduction u/s. 80IAB and therefore by transferring the expenses of associated concerns to the assessee company some portion of such expenses are to be allocated to the associated companies. 12.9 The assessee has also cited judgment in the case of Nestle India Limited Vs. DCIT (2009) 27 SOT 9(Delhi). In this case it was held that the assessee company had incurred expenditure on account of advertisement and sales promotion in respect of only those products in which the Indian company dealing in. Thus, the expenditure had been incurred to promote sales in India. Therefore, those expenses were incurred wholly and exclusively for the purpose of business of the assessee. In this case the associated concerns of Nestle India are situated outside India and it was easily established by Nestle that ....
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....avour of the appellant, and various case laws relied upon by the appellant on this issue. It is seen that appellant company was allocating over head expenses to its associate companies till October 2006. However, after October 2006, the appellant company stopped allocating overhead expenses to its group companies and transferred the concerned staff, who were previously looking after the affairs of group entities, to the respective entities. After October 2006, the group entities started incurring their own expenses themselves and this fact has been verified by the Special Auditors during the course of Special Audit. It is seen that there are certain heads of expenses which were exclusively pertaining to the appellant company and could not have been allocated to the other group entities. It is also seen from the Special Audit report that the Special Auditors have not brought out any instance of expenditure specifically pertaining to other group companies but has been claimed in the profit and loss account of appellant company during the year. The allocation made out by the Special Auditors was based on the presumption without bringing any material on record. No allocation of overhea....
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....which can prove that expenditure debited in the P&L account of the appellant company was not incurred for the bonafide business needs of the appellant company. The appellant company is main group company and expenditure incurred in this company are bound to be higher and in the process of incurring such expenditure if other group companies derived some benefit from such expenses, the expenditure cannot be allocated to the companies who have also derived some benefit. The genuineness of the impugned expenditure for the purpose of business has not been disputed by the AO. Further, under the facts and circumstances as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant's business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of Rs. 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted." 12....
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....The CIT (A) relying upon the decision of ITAT, Delhi Bench in the case of Nestle India Ltd. vs. DICT- 27 SOT 9 has deleted the addition. We do not find any infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with instances that these are not incurred by the assessee wholly and exclusively for the purposes of the business of the assessee. Hence, we confirm the order of the CIT (A) deleting the addition of Rs. 14,55,37,400/-. Ground No. 4 of the revenue's appeal is dismissed." 130. In view of the aforesaid observation and the finding of the Tribunal which is applicable in this year also, therefore, respectfully following the same, the Revenue's ground is dismissed." 14. Therefore, respectfully following the decision of the coordinate bench in assessee's own case, ground number 2 and 2A of the appeal of the learned assessing officer are dismissed. 15. Ground number 3 is with respect to the deletion of addition on account of estimated IDC charges and revenue recognition as per percentage completion method cost of the construction. The learned authorised representative submitted that this issue is covered in favou....
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.... 6,34,73,181 38,56,76,277 Royalton 7,15,12,958 7,97,19,390 82,06,432 1,43,28,160 4,88,79,491 Pinnacle 45,32,46,474 49,38,96,094 4,06,49,620 4,39,97,615 28,41,42,051 Icon 38,56,98,510 41,54,67,530 2,97,69,020 4,05,73,424 93,46,81,602 Summit 67,87,31,045 69,82,35,605 1,95,04,559 1,28,23,779 - Magnolias 526,66,86,898 5,36,95,65,201 10,28,78,303 2,17,22,670 - The Belaire 322,94,28,422 3,29,92,89,020 6,98,60,598 1,55,03,253 - The Park Place 250,38,47,408 2,570,346,411 66,499,003 - - Wellington (49,17,634) (4,917,634) - - - Princeton (59, 02,013) (5,902,013) - - - Carlton (38,99,436) (38,99,436) - - - Total Phase-V (A) 12,23,98,82,978 12,66,72,44,430 42,73,61,452 33,99,21,573 2,15,54,13,334 DLF City Court 9,33,58,702 94,652,773 1,294,071 - - CourtYard Office 6,37,92,669 6,38,23,974 31,305 65,641 - Rajarhat Kolkata 59,75,03,936 59,75,03,936 - - - Jalandhar Mall 23,83,66,943 23,83,66,943 - - - Ludhiana Mall 28,96....
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....nternal Development Charges are incurred towards amount spent on roads, parks, water supply, electricity and other facilities required for habitation inside the peripheral of a colony. Since the expenditure is common for total colony and cannot be directly correlated with the particular project or Building, the total internal development charges (IDC) are required to be apportioned on some scientific basis over the projects. The availability of approach road, sewage and other infrastructure facilities are an essential part of sale transaction and therefore, it is a liability committed by the appellant at the very initial stage of sale of property itself Without the provision of these infrastructure facilities, the constructed building cannot be habitable and no customer may even buy the property of the appellant without these essential facilities. Thus, there is a direct nexus between the sale price and the expenditure to be incurred on these infrastructure facilities by the appellant. The sale revenue as well as expenditure on internal development works is inextricably linked with each other and, since the estimated revenue includes charges for internal development work, the corre....
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....department. From A.Y. 2001-02 to 2005-06, no additions have also been made on this issue except in A.Y. 2002-03 wherein an addition of Rs. 4,43,994/- was made, which was deleted by CIT(A). It is also seen that Hon'ble ITAT in the appellant's own case has held that appellant can claim upto 30% as IDC cost of the budgeted sales. It may be seen that revised IDC of Rs. 236.05 crore claimed by the appellant for Phase-V project is less than the 30% of budgeted sales as stated supra. It is also seen that budgeted cost of the IDC has been accepted in A.Y. 2004-05 and 2005-06 in the appellant's case. It may be seen that IDC is an integral part of the cost of the project and based on these estimates, the project has been approved by the Director Town and Country Planning, Govt. of Haryana. If there is no provision for IDC in the project then, appellant's project may not be approved by the Director Town and Country Planning, Haryana. It is also an accepted fact that whenever project is taken for development, initially flats are constructed and thereafter the basic infrastructure facilities like roads, sewage, lightning, park, water supply line etc. are developed. Ther....
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....1.2012 at page No. 91 of Paper Book (Volume II). It was submitted that no liability has been accrued or arisen upto 31.3.2008. On perusal of this summary, it will be appreciated that all these bills were for over lapped period beginning in the previous year and continuing in the subsequent year. Obviously, the bills were received after the close of the year and after receipt of such bills due verification of the work was done. After verification and measurement of the work done, bills were approved. Till that date no expenditure accrues or arises and that date falls in the subsequent financial year. The company consistently follows the policy of accruing and booking costs on the basis of the date on which bills were approved and verified which can only be after the date of receipt of the bill. In the opening balance also, similar policy has been adopted. This is the only possible way for accounting. The law does not require the assessee to do the impossible. The Hon'ble Chhattisgarh High Court in the latest judgment reported in 323 ITR 252 (Chhattisgarh) in the case of Beekay Engineering Corporation has decided the similar issue. Head Note of the said judgment is reproduced for....
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....bility, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years it cannot be disallowed as deduction merely on the basis the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. ..." (p. 531) Further reliance was placed on the judgment in the case of National Agricultural Co-operative Federation of India Ltd. vs. Jt. CIT (2008) 304 ITR (AT) 303 (Delhi) wherein it has been held that the liability is deductible only when it crystallizes into an ascertained liability. In this case as per an arbitration award interest was payable by the assessee on the sum awarded only up to the date of award of the arbitrator. Thereafter, a decree was passed by the High Court, for further interest on amount of award from the date of the award by the arbitrator till the date of payment, after the end of the accounting year. In the circumstances of the case it was held by the Hon'ble jurisdictional Tribunal that there was no liability to pay interest after the award of the arbitrator and such liability arose only aft....
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....roper verification of receipt of material, work done by the labours and measurement of the work done by the concerned person. Once it is certified of having material received upto the desired standard and quantity, and work done by the labour and contractor upto proper satisfaction, then only the liability is crystallized and entered into the books of account. The various bills of material, labour and contract mentioned by the Special Auditors and ASSESSING OFFICER, as pertaining to the F.Y. 2007-08 were, in fact, crystallized during the F.Y. 2008-09 and on the basis of same rightly accounted for in F.Y. 2008-09. The cost of Rs. 3,39,77,973/- pertaining to labour charges, contract and material which was accounted for in F.Y. 2008-09 on the basis of crystallization of liability cannot be preponed from assessment year 2009-10 to the current Assessment Year 2008-09. Again, this attempt and exercise made by the Special Auditors and the ASSESSING OFFICER is revenue neutral and it would make no difference to the Revenue except resulting in increased administrative work load of shifting expenses from one year to another. In my view, it is only a futile exercise and consequently, the addit....
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.... Commissioner (Appeals) confirmed this view whereas the Tribunal reversed the order and allowed those expenses. On appeal: Held, dismissing the appeal, that even when the assessee was following the mercantile system of accounting, the explanation furnished by the assessee was that the expenses were not booked due to non-receipt of details, information thereof on time, which was beyond the control of the assessee. It was also explained that these expenses to the tune of Rs. 41.95 lakhs were marginal as compared to the enormous size of the assessee-company. It was also explained that as per the accounting policy followed by the assessee, such expenses were booked in the year in which they were settled for payment. The Tribunal went into the details of each and every such expense and recorded the finding of fact that all these expenses were settled during this year. It was also recorded that more than 50 per cent of expenses could be claimed only on actual payment, as they were covered under section 43B(d) of the Income-tax Act, 1961. The assessee also informed that even in the earlier year, the assessee had shown positive income and paid tax thereon. Therefore there was no l....
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....nstruction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. (c) At least 25% of the saleable project area is secured by contracts or agreements with buyers. (d) At least 10 % of the total revenue as per the agreements of sale or any other legally enforceable documents are realised at the reporting date in respect of each of the contracts and it is reasonable to expect that the parties to such contracts will comply with the payment terms as defined in the contracts. To illustrate-If there are 10 Agreements of sale and 10 % of gross amount is realised in case of 8 agreements, revenue can be recognised with respect to these 8 agreements." According to the above guidance note the revenue of the project can be recognised only when the above conditions specified therein. According to one of the conditions specified there in is reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to....
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....'s appeal is consequently, dismissed." 18. Therefore, respectfully following the decision of the coordinate bench in assessee's own case for earlier years, we dismiss ground number 3 of the appeal of the learned assessing officer and confirm the order of the learned CIT-A in deleting the disallowance on account of estimated IDC charges and commencement of construction cost. 19. Ground number 4 is on account of disallowance of brokerage and commission expenditure of Rs. 40,044,936/-. The learned authorised representative submitted that this issue is covered in favour of the assessee company by the order of the coordinate bench for assessment year 2006-07. Further it was also stated that the revenue has not preferring the appeal before the honourable High Court on this issue and in subsequent year i.e. in assessment year 2016-17 the learned assessing officer himself has not made any addition/disallowance on this issue. It was further stated that in assessment year 2008-09 also this issue was considered and the order of the learned CIT-A was upheld. Therefore it was submitted that the issue is squarely covered in favour of the assessee. 20. The learned departmental re....
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....TAT in earlier years and CIT (Appeals) in appellant's own case for A.Y. ' 2006-07 and 2007-08. It is seen that as per para-19 of AS-7, it is mentioned that the selling cost cannot be attributed to contract activity or cannot be allocated to a contract under construction. Even as per AS-2 "Valuation of Inventory" issued by ICAI, it is seen that selling and distribution cost cannot be considered as part of the cost of inventory and such expense has to recognized in the period in which they are incurred. The cost which can be attributed/allocated over the inventory should comprise all the cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. In the case of construction activities the cost of purchase of land and construction cost can only be attributed over the project. The brokerage expenses are purely a selling cost and cannot form a part of inventory. In view of the accounting standard, the brokerage expenses being a selling cost cannot be capitalized with the cost of inventory and cannot be allocated to the construction activity. During the year the appellant has paid brokerage of Rs. 10,63,46,742/- ....
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....ty or flat sold and it cannot be extended to other properties. Therefore, brokerage expenses cannot be postponed for the future years. Therefore, ratio of the said judgment is not applicable in the case of appellant. 13.21 The appellant has placed reliance on the decision of the jurisdictional High Court in the case of Nokia Corporation vs. DIT, Delhi, 2007, 162 Taxman 369 (Delhi), wherein it is held that even if the Department has filed further appeal against the last order, which is in favour of the appellant, the last order is judicially binding on the subordinate authority. Hence, respectfully following the order of the Hon'ble Income Tax appellate Tribunal for AY 1984-85 and the order of CIT (Appeals) for the immediately preceding years relevant to the Assessment Yea ' 2006-07 and 2007-08 in appellant's own case. In view of the above, the addition to the extent of Rs. 2,99,74,600/- (Rs. 2,82,93,983 + Rs. 16,80,717) pertaining to payment of brokerage and commission is deleted. 13.22 However, expenses of Rs. 64,51,161/- pertains to brokerage paid for giving property on lease. These brokerage expenses have been incurred for giving the Grand Mall and ....
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.... universal Limited in ITA no. 1136/2009 dated 16.04.2015 while deciding ground no. 4 of the appeal of the revenue honourable high court has held that expenditure towards brokerage and commission paid to brokers for booking and sale of certain properties is allowable firstly in view of the facts that assessee's treatment of such expenditure has been decided in favour of the assessee and revenue has not challenged it and secondly such expenditure are allowable. In view of the above facts and following the decision of coordinate Bench as facts are not distinguished by revenue, we confirm the order of CIT (A) in deleting the addition of Rs. 20,87,70,567/- on account of brokerage expenses for sale of various properties. Therefore, ground no. 14 is dismissed." 103. Thus, in view of the aforesaid precedence of the earlier year this issue is decided in favour of the assessee." 22. Therefore, respectfully following the decision of the coordinate benches we confirm the order of the learned CIT-A and deleting the disallowance of brokerage and commission expenditure, thus, ground number 4 is dismissed. 23. Ground number 5 of the appeal is against the deletion of addition on ....
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..... 08-09 Interest Expenditure allowable in the proportion of revenue recognised Interest expenditure to be capitalized towards non- recognition of proportionate revenue from projects Phase - V Gurgaon Project 1,529.55 100.00 33.76 76.50 25.83 7.93 95. After detailed discussion, AO held that the interest to the extent of Rs. 7.39 crore is in the nature of borrowing cost attributable to the acquisition or construction of qualifying assets and hence these expenses needs to be capitalized and is not allowable as revenue expenditure. 96. Ld. CIT(A) has deleted the addition after observing as under: "11.12 I have considered the submission of the appellant and observation of the Special Auditors as well as ASSESSING OFFICER and order of CIT (A)-XVIII for AY 2006-07 and my own order for AY 2007-08 in appellant's own case wherein this issue was decided in favour of appellant. It is seen that ASSESSING OFFICER has further capitalized an amount of Rs. 7,93,00,000/- towards ongoing projects. This capitalization is over and above the amount already capitalized by the appellant to the extent of Rs. 354.43 crores which relates to the loan t....
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....ding under construction are not capital asset 2. These are stock in trade 3. Any borrowing for stock in trade can never be capitalized. * Accounting standard AS-(16) has no application. * Accounting Standards cannot override the provisions of Income Tax Act. In view of the above, it is held that capitalization of interest of Rs. 7,93,00,000/- on notional basis done by the assessing officer based on various permutation and computation was not justified and same is deleted." 97. This issue too has been decided in favour of the assessee after detailed discussion by the Tribunal and the relevant observation of the Tribunal reads as under: "49. We have carefully considered the rival contentions. It appears that the AO has made this addition mainly because of note mentioned by assessee in its accounting policies with respect to borrowing costs according to Accounting Standard 16 issues by ICAI. We have perused notes attached to financial statements and we are of opinion that these notes have arisen in the financial statement of the assessee because of the issue of applicability of Accounting Standard 16 issued by the ICAI. Ac....
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....d u/s. 36(1)(iii) which provides that the interest can be disallowed if incurred for the purpose of inventory as provided under Accounting Standard 16. Apparently, in this case, there is no allegation that interest is not paid on capital borrowed for the purpose of the business. Hon'ble Mumbai High Court in the case of CIT vs. Lokhandwala Constructions Industries Ltd. 131 taxman 810] has held as under:- "4. From the facts found by the Tribunal on record, it is clear that assessee undertook two-fold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from both the activities were assessed under section 28 of the Income-tax Act. In this case, we are concerned with the second activity (hereinafter referred to, for the sake of brevity, as "Kandivali Project"). According to the Commissioner, loan was raised for securing land/development rights from the Mandal. That, the loan was utilised for purchasing the development rights, which, according to the Commissioner, constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest inc....
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....m.); (ii) DCIT vs. Thakar Developers-115 TTJ 841 (Pune); (iii) DCIT vs. K. Raheja Pvt. Ltd.-(2006) TIOL 220 ITAT-MUM.; (iv) K. Raheja Development Corporation vs. DCIT in ITA No. 240/Bang./97 dated 22.09.1997-In this case, reference application filed by the Department has also been rejected by the Hon'ble Karnataka High Court vide its order dated 08.11.2000 in Civil Petition No. 832/2000 (IT). Before us, ld. DR could not cite any decision against the claim of the assessee, therefore, respectfully following the decision of Hon'ble Bombay High Court and as well as various coordinate Benches, cited above, we do not concur with the view of CIT (A) on disallowance of interest of Rs. 24.75 crores u/s. 36(1) (iii) of the Act. The alternative argument of the assessee regarding adoption of any artificial formula for the purpose of computing interest disallowance. Ld. CIT (A) has presumed proportion of utilisation of funds in absence of the nexus holding that assessee has used mixed funds. Honourable Bombay High court in case of CIT V. Reliance Utilities & Power limited 313 ITR 340 has held that "The principle therefore would be that if the....
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....ly supported the order of the learned assessing officer. However, he did not distinguish the facts of the impugned appeal with the facts of the issues decided by the coordinate bench in earlier years. 31. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also perused the orders of coordinate benches in assessee's own case for earlier years. It is apparent that this issue first arose in the appeal of the assessee for assessment year 2006-07. The coordinate bench wide decision dated 11th of March 2016 decided the issue in favour of the assessee however the revenue did not prefer any further appeal before the honourable High Court on this issue. For assessment year 2008-09 the coordinate bench followed the decision of the coordinate bench in assessee's own case for assessment year 2006-07. The latest decision for assessment year 2008-09 which dealt with this issue as Under:- "104. In ground no. 7, the Revenue has challenged the deletion of addition on account of late construction charges of Rs. 1,88,81,388/- Ld. Assessing Officer following the assessment order for Assessment Yea ' 2006-07 and 2007-08 held....
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.... (page Nos. 204-218 of the said order) and by me vide order dated 29.05.2012, in appeal No. 66/2010-11 for A.Y. 2007-08 (page Nos. 146-149 of the said order) respectively in appellant's own case. Accordingly, the addition of Rs. 1,88,81,388/- made by the AO is not sustainable. The same is, therefore, deleted." 106. This issue has been dealt in detail by the Tribunal in assessee's own case for Assessment Year 2006-07 wherein this issue has been decided in favour of the assessee in the following manner: "225. We have carefully considered the rival contentions. It is an admitted fact that the assessee is receiving late construction charges from customers which is under dispute before the Hon'ble Punjab & Haryana High Court and that litigation was settled vide order dated 19.11.2000 of Hon'ble Supreme Court. The ld. CIT (A) has decided this issue after considering the judgment of Hon'ble Supreme Court in the case of E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27 wherein it is held that if the assessee acquires a right to receive the income the said income has accrued to him. As till the decision of Hon'ble Supreme Court assessee did n....
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....hat date revenue cannot be legally recognized. During the hearing, I was informed by the ld. AR that this income has been recognized in the current financial year (F.Y. 2010-11) after receiving the judgment of the Supreme Court. 26.13 Accordingly, the addition of Rs. 1,88,81,388/- made by the AO is not sustainable. The same is, therefore, deleted." 226. We have noted that identical issue has been decided by the coordinate bench of ITAT in case of Nilgiri Cultivations Pvt. Ltd. V. ACIT for AY 2006-07 in ITA no. 4634 & 4635/Del/2011 dated 30.4.2012 where in while deciding the issue in ground no. 1 of the appeal addition of late construction charges received from customers shown under the head sundry creditors is income which has accrued to the assessee or not, It is held that "7.1 Assessee as following a prudent and consistent accounting policy which was necessitated by the order of Honourable Punjab And Haryana High court. The assessee offered the entire amount as its income on settlement of disputes by the Honourable Supreme Court. Therefore, we hold that the assessee was acting on prudent and consistent accounting policy. Going by this accounting policy,....
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.... 8 of the appeal is with respect to the deletion of addition on account of net interest free security deposit of Rs. 63,159/-. 37. Both the parties confirm that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for assessment year 2006-07 and 2008-09. However it was also stated that revenue has not preferred any appeal before the honourable High Court on this issue and the learned assessing officer has also not made any addition on this issue in assessment year 2016-17 onwards. 38. We have carefully considered the rival contention and perused the orders of the lower authorities. This issue has been considered by the coordinate bench in assessee's own case for assessment year 2008-09 dated 27 May 2019 in paragraph number 112-115 as Under:- '112. In ground no. 9, the Revenue has challenged the deletion of addition on account of net interest fee security deposits receipt of Rs. 3,30,893/-. This amount has been added by the Assessing Officer on the ground that maintenance charges collected by the assessee are the same as has been collected by the maintenance agencies. There was no liability....
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....deposit till the formation of condominium and society. These deposits are taken as a safeguard to defray the maintenance expenditure of the society and to keep these deposits for insurance premium and maintenance. They are refundable to resident welfare associations. CIT (A) relying on the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Goel Gases Pvt. Ltd.- 188 ITR 216 (Del.) held that security deposit cannot be charged to tax as an income. In view of this, we do not find any infirmity in the order of the CIT (A) when deposits are with a purpose, the depositors are identified, there is a regular method of accounting adopted in past for treatment of this income which is accepted by the revenue and there is an obligation cast upon the assessee. Hence, ground no. 28 of the revenue's appeal is dismissed." 115. Accordingly, following the aforesaid order, this issue is decided in favour of the assessee and revenue's ground is dismissed.' 39. In absence of any change in the facts and circumstances of the case, respectfully following the decision of the coordinate bench in assessee's own case for earlier years, we confirm the order of t....
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....ing Officer was that real nature of the balance is that buyers have paid advance bills to the assessee and accordingly this has been shown as liability in the balance-sheet and this method has been consistently followed by the assessee in the earlier assessment years. However, the ld. Assessing Officer held that these are not correct fact because similarly additions have been made in the Assessment Yea? 2006-07 and 2007-08 by the Assessing Officer. The Assessing Officer has also accompanied the assessee company has furnished company-wise, property wise of the persons from whom registration charges were received during the financial year 2007-08 which cannot contains the subsequent dates of payment of registration charges till 31.12.2010. From these details, Assessing Officer held that it is difficult to assessed the amount spent up to the period ending 31.02.2010 which corresponding to the amount received in the financial year 2007-08 and whether the amount of Rs. 8,49,20,884/- received in the year was actually spend till 31.12.2010 assessee has also not given proof of deposit of registration charges and has only enclosed the list. He thus concluded assessee has not utilized the am....
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....n of Rs. 8,49,20,884/- made by the ASSESSING OFFICER is deleted." 119. We find that similar issue was decided by the Tribunal in assessee's own case in Assessment Year 2007-08 has dismissed the Revenue's appeal after observing and holding as under: "244. We have carefully considered the rival contentions. It is noted that this is the amount which is collected by the buyers with specific object of getting exclusion of conveyance deed in favour of the buyer. In fact, it is an advance collected by the assessee from the buyer towards registration charges with the office of the Registrar for conveyance deed registration. At the time of registration, assessee incurs this expenditure by debiting to this account of that particular customer. The total receipt of registration charges is identified with respect to each of the buyer and there are movement in respective accounts. In fact, it is a past through cost collected by the assessee from the buyer to be incurred by assessee on behalf of the buyer. In view of these facts, these receipts cannot partake character of the revenue in the hands of the assessee. It is also not the case of the AO that the depositors are ....
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....red in favour of the assessee by the decision of the coordinate bench for assessment year 2008-09 as Under:- "125. In ground no. 12, the Revenue has challenged the deletion of addition Rs. 15,02,99,365/- on account of disallowance of expenses towards non allocation of overheads. 126. Ld. Assessing Officer based on Special auditor's observation noted that there were certain discrepancies with regard to apportionment of common overhead expenses incurred by the assessee company but attributable to group concern were benefiting from such expenditure. Based on the observations of the Special Auditors, the Assessing Officer required the assessee as to why the expenditure of Rs. 15,02,99,365/- benefit of which has accrued to the group entities like, DLF Infocity developers (Chennai Limited) and DLF Cyber City Developers Ltd. be apportioned to them and correspondingly the same should be disallowed in the hands of the assessee. In response, the assessee has submitted the detail reply and submitted that if income expenditure has been incurred on behalf of company, the same have been duly recovered from those companies specifically and assessee has not debited to the P&L....
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....and its form are one and the same. However, the substance can be different from the form of the transaction in many cases. In the present case, the assessing officer has rightly gone for the substance of the transaction and disallowed the deduction u/s. 80-IAB claimed by the assessee company as the lease deed is mere eye wash and actual transaction was sale of land which is clearly not permissible under SEZ Act. Relevant paras of Lease deed are at page 135 & 136 of the Paper Book II filed by the Counsel of the assessee. d. The transfer of building is absolute and as per the amended agreement and lease deed, Co-developer shall be treated as owner of the bare shell building and the warm shell building after additions etc and will have exclusive rights to let, mortgage, or allow use of all or any part of buildings. e. That if the deduction u/s. 80-IAB is allowed to the assessee company in this case and the Co-developer does not develop the SEZ later on, how can we say that the SEZ has been developed and why should the deduction be allowed to the assessee company at this stage where the development of SEZ has not been done. Allowing the deduction at the stage of const....
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....ent u/s. 80IAB, hence the argument of the assessee that this exercise would be revenue neutral is incorrect. 12.7 The assessee has stated in the reply that in these two companies even though construction activities were going on, there was no marketing, planning or any other HO level administrative work involved during the year. The assessee has not been able to substantiate this argument with any documentary evidence. 12.8 The assessee has relied on certain citations wherein it has been held that expenses incurred for business requirement are allowable and any incidental benefit arising to a third party out of such expenditure cannot be made basis for disallowing the same. These citations are not relevant in the present case since the expenses incurred by the assessee have benefited the associated companies of the assessee who are in similar line of business as that of the assessee and in the past also the assessee itself had allocated certain expenditure to its associated companies. The assessee has also mentioned certain citations regarding business expediency and stated that the expenses must be incidental to the business of the assessee. The question here is ....
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....f business should also be similar but as mentioned above there is substantial variance in the proportion of overhead expenditure incurred by the assessee company vis-a-vis the two associated concerns. The judgment of Nestle quoted by the assessee is not at all relevant in the present case since the assessee has not been able to prove that the overhead expenses incurred were wholly and exclusively for its benefit and had not benefited the associated concerns. The assessee has not been able to convincingly explain the extremely low level of administrative overhead expenditure incurred by the two associated concerns as compared to the assessee company considering the similar line of business. 12.10 In view of the same it can be inferred that a part of overhead expenses relatable to the two entities stand in the books of the assessee. Since the benefit of such expenditure does not accrue to the assessee but to the two group entities also, the expenditure of Rs. 15,02,99,365/- as worked out by the special auditors is disallowed." 128. Ld. CIT(A) has deleted the addition in the following manner: "19.22 I have considered the submission of the appellant, observat....
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....f M/s. DLF Cyber City Developers Ltd, it is noted that the main project was only development of SEZ project at Sector 25 Gurgaon. Besides, the above project this company has only rental income. The administrative activity in this company is also minimal and hence there is no need of allocation of any further overheads. This Company is again self sufficient and has its own resources to carry out the activity and hence no further allocation is required. Apart from the above, the company had incurred overhead expenditure which formed part of the development cost which has been considered for POCM. The details of such expenditure was furnished to the Assessing Officer at page No. 2 of appellant's letter dated 31.3.2011. The total cost of the overhead expenditure forming part of development cost is Rs. 9,73,06,213/-. This expenditure includes the overhead expenses incurred by the DLF Cybercity Developer Ltd. 19.23 Hence, it is clear that no benefit has accrued to group companies namely DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd. from the expenses of Rs. 1,50,299,365/-, as these expenses were exclusively for the business of the appella....
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....e assessee and further veracity of those expenditure have also not been doubted. The only reason for disallowance is that assessee has not allocated this expenditure to its various group companies and, therefore, AO was of the view that this expenditure has not been incurred wholly and exclusively for the business purpose of the company. On perusal of the expenditure and the orders of the lower authorities, it is apparent that the director's salary is being paid to the directors of the company including a commission thereof is for the purpose of managing the business of the DLF-assessee. Further, for the protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders' activity. Furthermore, the advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all pertaining to the business of the company. No evidence/instances have been cited by AO that any of this expenditure has not been incurred by the company and they are not related to the business of the assessee. It may happen that by incurring certain expenditure by the assessee for the purpose of h....
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....as granted a relief of Rs. 61,01,72,000/-therefore revenue is in appeal before us. On this issue the assessee has also preferred an appeal before us as per ground number two wherein it is challenging the confirmation of the disallowance of Rs. 10.01 crores. 51. The learned authorised representative vehemently submitted that this issue has been considered by the coordinate bench in assessee's own case for assessment year 2008-09 so far as the issue is with respect to deletion of disallowance of the interest expenditure u/s. 14 A of the act. He referred to paragraph number 131-132 of that order. It was submitted that issue is squarely covered in favour of the assessee. 52. Pressing ground no. 2 of the appeal of the assessee, ld AR submitted that even other amount of disallowance u/s. 14A cannot be Rs. 10.01 Crs. He submitted a chart of investments which yielded tax free income. He also submitted revised working of disallowance of Rs. 15 lakhs as under. Average investment in Partnership Firms and Mutual Funds Opening as on 01/04/2008 = Rs. 31cr Closing as on 31/03/2009 = Rs. 31cr Total Rs. 62cr Average investment = Rs. 31cr Disallowance be....
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....an to other subsidiary companies at a higher interest rate, therefore, the interest on which sums have been borrowed and assessee has not made any expenditure on earning interest free income or exempt income to warrant any disallowance, on the ground that same also remained unsubstantiated. AO further observed that assessee-company has not been able to establish flow of funds or any nexus. The assessee's contention is based on the presumption that entire investments have been made from the interest free funds available in the balance sheet as the assessee has not establish only flow of funds from its bank account into investment and establish that same is from interest free funds available only. He accordingly worked out the disallowance of 29.42 crore on account of interest expenditure under Rule 8D(2) and further made disallowance of administrative expenditure of Rs. 5.98 crore under Rule 8D(2)(3) after following decision of ITAT Special Bench in the case of Chem Invest Ltd., 121 ITD 318. He proceeded to make the disallowance of Rs. 35,40,91,000/- u/s. 14A r.w. Rule 8D(ii). 4. Ld. CIT (A) after analyzing the investment made interest income on an interest expenditure ....
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....e construction projects being undertaken by the appellant company and advanced to other group, entities. Therefore, interest on such loan cannot be considered for disallowance u/s. 14A. The loan taken in making investments in the shares of M/s. Edward Keventor (Successor) Pvt. Ltd. can be considered for making disallowance u/s. 14A of the IT Act which worked out as under:- Amount 1 Expenditure directly relating to the exempted income - 2 Amount of expenditure by way of interest other than the amount of interest included in point No. 1. (directly related to exempted income) (A x B/C) 0.54 Disallowance u/s. 14A (1 + 2) 0.54 A Amount of expenditure by way of interest other than the amount of interest included in point No. 1. (directly related to exempt income) 7.93 B Average of value of investment, income from which does not form part of total income. 1197.30 C The average of total assets as appearing in the balance sheet 17,419.40 5. Before us, the learned counsel for the assessee, Mr. R.S. Singhvi submitted that, the ld. CIT (A) has allowed the relief to the extent of Rs. 28,87,91,000/- by observing that ....
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....ts in earning tax free securities, * thirdly, investments in partnership firms and companies are for the business purposes of the assessee and; * lastly, no dividend was earned by the assessee on investments in unquoted share of the private limited companies. 8. He further strongly relied upon the judgment of Hon'ble Delhi High Court in the case of ACB India Ltd. vs. ACIT reported in (2015) 374 ITR 108, wherein it has been upheld that while calculating the disallowance under Rule 8D(2)(ii) Assessing Officer has to adopt average value of the investment the income from which does not form part of the total income and disallowance can only be computed in respect to investment which has yielded exempt income during the year. The assessee has earned exempt income from the investments made in partnership firm and mutual fund and not from other investments, and therefore, disallowance if any should be restricted to the extent of Rs. 53.75 lac, the working of which was given in the following manner: Average investment in Partnership Firms and Mutual Funds Opening as on 01/04/2007 = '84+10 cr. Closing as on 31/03/2008 = '90+31 cr ....
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....rest. The other loans taken from the assessee-company on which interest has been paid, purely related to business undertaken by the assessee and business advance to the group companies. Based on such findings he has held that interest of such loan cannot be considered for disallowance u/s. 14A. However, he has confirmed the disallowance of Rs. 653 lacs mostly arising out of disallowance of administrative expenditure under Rule 8D(2)(iii) and disallowance of interest on the investment made in the shares of M/s. Edward Keventor P. Ltd. which has been stated to be strategic investment. 11. In so far as disallowance of interest is concerned, we find that, not only the ld. CIT (A) has properly examined the utilization of interest bearing funds for the assessee which was purely for the purpose of business but also from the bare perusal of the balance sheet, it is seen that the interest free funds available with the assessee in the form of reserves and surplus far exceeds the total investment made in shares/partnership firms including the investment made in the shares of M/s. Edward Keventor P. Ltd. which has been stated to be strategic investment. If that is so, then no disallow....
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....e appeal of the assessee is set aside to the file of the learned assessing officer with above direction. 57. The next ground of appeal of the learned assessing officer i.e. ground number 12 of the appeal is with respect to the deletion of addition/disallowance on account of expenses on commercial projects which are not commenced amounting to Rs. 1,05,19,606/-. 58. The parties confirm that this issue is identical to the issue decided by the coordinate bench in assessee's own case for assessment year 2006-07 and 2008-09. It was further submitted that this issue has not been preferred by the revenue before the honourable High Court in appeal of the revenue. Therefore the learned authorized representative price to that this issue is now concluded in favour of the assessee by the decision of the coordinate bench. The learned departmental representative vehemently supported the order of the learned assessing officer. 59. We have carefully considered rival contention and perused the orders of the lower authorities as well as the orders of the coordinate bench. The issue has already been decided by the coordinate bench in assessee's favour by the decision dated 27 May 2019....
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....eveloping real estate like developmeAssessing Officer nt of plots, multi storey buildings, commercial complexes etc. During the year, the appellant has incurred certain expenditure on legal and professional fees paid for drafting the joint venture agreements, preparing draft report for Gujral Design Plus Valuation, Purchase of preferential shares by DAL Singapore from Lehmen Brothers, drafting of memorandum corporation with Fraport AG for joint venture and airport projects, acquisition of companies, advice taken for cross border investments etc and other expenses on feasibility and viability of the various projects. It is seen that the appellant has paid these expenses for taking legal and professional advice on the issues mentioned above and have paid Rs. 1,30,38,853/- to the various parties for services rendered by them. In the assessment proceedings these expenses have been treated as capital expenditure by the ASSESSING OFFICER. It is claimed by the appellant that expenses incurred on legal and professional fees paid for drafting the joint venture agreements, preparing draft report for Gujral Design Plus Valuation, Purchase of preferential shares by DAL Singapore from Lehmen Br....
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....the disallowance made by the ASSESSING OFFICER on account of capitalisation of such expenses cannot be sustained. Therefore, respectfully following the decisions of jurisdictional High Court and my own order for AY 2007-08 in appellant's case (Page 229-237), the disallowance of Rs. 1,30,38,853/- made by the Assessing Officer on this account is deleted." 142. We find that the Tribunal also in Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: "216. We have carefully considered the rival contentions. The assessee has incurred this expenditure on proportionate and feasibility of various construction projects in which business the assessee is engaged into. Before embarking on to any of the projects, it is a common practice to obtain a feasibility and economic viability of construction projects at different geographical location. These expenses are for facilitating the existing business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or unrelated to the business of the assessee. Therefore, in our view, this expenditure are wholly and exclusively incurred for the pu....
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....WIP) Copy of fixed assets register in substantiation of the above is enclosed as Annexure "A" (Page 15). b) Properties shown as current assets:- S. No. Name of the property 1. Corporate Park. 2. Shops at Centre Point Faridabad. 3. Le Millennia Supermart, Windsor Court , Phase-V, Gurgaon. 4. Le Millennia Supermart, Carlton Estate, Phase-V, Gurgaon. 5. Apartments at DLF City, Gurgaon. 6. Shop at DLF City Centre, Gurgaon. 7. Shops at Ridgewood Estate. 8. DLF Centre, Sansad Marg, New Delhi (Partly held as SIT). 9. American Express bank Ltd. Phase-V, DLF City, Gurgaon. 10. Felicite Builders & Constructions Pvt. Ltd., I-E, Jhandewalan Copy of the finalization schedule of Balance Sheet in substantiation of the above is enclosed as Annexure "B" (page No. 16). Out of the properties mentioned in (b) above the property mentioned at S1. No. 8 is not treated as owned by the Company. In the case of property at DLF Centre Sansad Marg, in the assessment order for A.Y. 2007-08 & A.Y. 2006-07 and earlier years, it has been held that the said property is not owned by the assessee company. However, it....
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....in the case of CIT vs. Neha Builders, 296 ITR 661, reiterated the addition and computation made by the Special Auditor. 158. Ld. CIT (A) has deleted the addition in the following manner: "27.13 I have considered the submission of the appellant and observation of the ASSESSING OFFICER and decision of Hon'ble ITAT for A.Y. 1996-97 in appellant's own case and decision of the Hon'ble CIT(A)-XVIII for A.Y. 2006-07 and my own decision in appellant's own case for A.Y. 2007-08. It is seen that the issue in this ground is covered in favour of the appellant by the order of Hon'ble ITAT in appellant's own case for AY 1996-97. The appellant has received income from the properties owned by it and such properties are reflecting in balance sheet as stock in trade. The appellant has furnished the receipt of house tax payment with respect to above said properties during the course of assessment proceedings which establish that said properties belong to appellant and owned by it. It is noticed that the Assessing Officer has made the addition by reclassifying the income by relying upon the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Neha....
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....unal in various years, therefore, consistent with the view taken, the order of the ld. CIT (A) has confirmed and consequently the Revenue's ground is dismissed." 65. Therefore, respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2008-09 is above we dismiss ground number 13 of the appeal of the learned assessing officer. 66. Ground number 14 is against the deletion of addition on account of notional rent, additional annual letting value in respect of the vacant and lease of properties amounting to Rs. 15,41,010/-. 67. Both the parties confirm that this issue is identical to the issue decided by the coordinate bench in assessee's own case for assessment year 2006-07 and 2008-09. It was further stated that AO has not further agitated this issue before the honourable High Court and has also not made any such addition with respect to assessment year 2016-17 onwards. The learned departmental representative vehemently supported the order of the learned assessing officer. 68. We have carefully considered the rival contention and perused the orders of the lower authorities as well as the orders of the coordinate benc....
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....the case of appellant the property is remained vacant, therefore, the ALV of such properties will be Nil. Hence, no notional rent can be estimated in the case of vacant properties. The decision of the ASSESSING OFFICER was not justified." 164. The Tribunal also in assessee's own case for Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: "196. We have carefully considered the rival contentions. We have also perused the order of the coordinate Bench of the ITAT in ITA No. 3561/Del/2013 wherein ground no. 3 have considered the identical issue where in para no. 16 to 23 addition is deleted by ITAT as under:- "16. The Assessing Officer made an addition of Rs. 3,02,61,251/- on account of notional rent/additional annual letting value (ALB) u/s. 23(1) (a) of the Income tax Act, 1961, in respect of vacant properties. The details of the addition as per the assessment order is as under: -DLF City Centre '2,36,01,310/- -DLF Commercial Shopping Complex '27,21,360/- DLF Corporate Park '1,69,07,688/- '4,32,30,358/- Less: Standard Deduction u/s. 24(1) '....
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....ugned addition made on account of notional rent on properties that remained vacant for part of the previous year, the AR reiterated submissions made before the AO and emphasized that the matter is covered in favour of the appellant by judgment in the case of one of the appellant's group concerns M/s. DLF Office Developers Vs. ACIT reported in 23 SOT 19 (Del) and orders of CIT (Appeals) in appellant's own case for the Assessment yea ' 2006-07, 2007-08 & 2008-09. It is observed that "where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value will have to be worked out under section 23(1)(c) of the IT Act and according to this clause, if the actual rent received/receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property." In the case of appellant, the appellant had intention to let such properties but could not get suitable tenant. In such a situation, the AL V will be Nil as per provision of section 23(1)(c) of the IT Act. Section 23(1)(a) r.w.s. 23(1)(c) clearly provides that if the prop....
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....operty" on account of notional income u/s. 23(1) (a) of the Income Tax Act is deleted." 22. We find that the first appellate order on the issue as discussed above is reasonable and view supported with this decision. Hence, we are not inclined to interfere with the order, the same is upheld. Ground no. 3 is accordingly rejected." 197. Therefore, following the decision of the coordinate Bench of the ITAT in the case of the assessee for AY 2005-06, the addition of Rs. 3,27,52,542/- is deleted. In the result, ground no. 19 is dismissed." 165. Once this issue has been consistently decided in favour of the assessee, then in this year, without any change in material facts no different view can be taken. Respectfully following the aforesaid decision of the Tribunal, we dismiss the ground raised by the Revenue." 69. Therefore, respectfully following the decision of the coordinate bench we dismiss ground number 14 of the appeal of the AO. 70. Ground number 15 of the appeal is with respect to the deletion of the addition on account of disallowance of depreciation claimed on DLF Centre building amounting to Rs. 636,614/-. 71. Both the parties submitted that ....
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....rmissible under Section 24 of the Income Tax Act. Deductions by way of depreciation allowance are dealt in section 32 of the Income Tax Act which provides for allowing depreciation on the basis of Written Down Value of the assets under section 32(1)(ii). The definition of the word written down value is in section 43(6)(b) of the Income Tax Act which provides that in the case of assets acquired before the previous year written down value means the actual cost to the appellant less all depreciation actually allowed under the Act. From the facts and the judgment of Hon'ble Supreme Court in the case of CIT vs. Doomdooma India Limited (2009) 178 Taxman 261 (SC), it is clear that the depreciation is to be allowed on the basis of actual WDV and same cannot be reduced on notional basis for the period for which property was not used for business purposes and no depreciation was claimed on such part of the property. From the facts as narrated above and respectfully following the judgment of Hon'ble Supreme Court in the case of CIT vs. Doomdooma India Limited (2009) 178 Taxman 261 (SC) and the judgment of the CIT (Appeals) in the case of the appellant for A.Y. 2006-07 and 2007-08 (sup....
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....ficer has made the disallowance on the ground that no documentary evidences have been filed in respect to certain expenses as bills does not contain the name of the assessee company. 173. Ld. CIT(A) has deleted the addition in the following manner: ""32.7 I have considered the facts available on records and the contention of the appellant and order of CIT (A) XVIII for AY 2006-07 and my own order for AY 2007-08 in appellant's own case where this issue was decided in favour of the appellant company. It is observed that the impugned disallowance of expenditure of Rs. 58,50,162/- have been made on the ground that the bills are not in the name of appellant. It is observed from pages 403 to 406 of the assessment order that the appellant has explained each and every item of expenditure in detail. It is seen that these expenses are in the nature of electricity bill and water charges pertaining to Jhandewalan Office of the appellant, reimbursement made to the employees and other group companies. As explained by the appellant that Jhandewalan Property belongs to the appellant since so many years but the same was given on rent to M/s. DCM Ltd. When the said property was....
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....ar issue was involved in the earlier year also, therefore, respectfully following the precedence this issue is decided in favour of the assessee and against the Revenue. Accordingly, the Revenue's grounds are dismissed." 80. In view of the decision of the coordinate bench in assessee's own case for assessment year 2008-09 ground number 16 of the appeal of the learned assessing officer is dismissed. 81. Ground number 17 of the appeal is with respect to the deletion of disallowance on account of excess payment of rent of Rs. 3,48,396/-. The fact shows that that appellant has paid rent of Rs. 21,62,796/- to Ms. veena Swarup. The special auditor reported that the learned assessing officer may examine the reasonableness of these expenditure u/s. 40 A (2) (a) of the act. The AO noted that rent cannot be increased on annual basis in the proportion basis and by ignoring the fact that during the year Under appeal the rent was increased by 19% as compared to increment in rent by 50% in previous year. The AO noted that assessee has failed to furnish any supportive evidence with respect to the instance of rent paid of other similar flat in the same area as asked by the appellant.....
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....use (b), the expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities, for which the payment is made or the legitimate needs of business or profession of the assessee or the benefit delivered by or accruing to him. In the present case the learned assessing officer has disallowed the sum merely on the basis of increase in the earlier year compared to the increase in the current year. Increase in the earlier year was more than 50% whereas increase in the current year is merely 19%. The learned assessing officer has not brought on record any material to show that what was the market rate of the rent of the flat. In absence of such information it cannot be said that what is paid by the assessee to a related party is excessive. All these exercised by the learned assessing officer are missing in this case. In view of this we do not find any infirmity in the order of the learned CIT-A in deleting the addition of Rs. 3,48,396/-. Accordingly, ground number 17 of the appeal is dismissed. 86. Ground number 18 of the appeal is general in nature, no arguments advanced by either of the parties. Therefore, it is dismissed. 87. In t....
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....nds covered in favour of the assessee by the Tribunal in assessee's own case for the Assessment Year 2007-08 vide order dated 01.11.2017 in ITA No. 3846/D/2012. 22. The addition has been made on the ground that assessee despite being owner of the Kiosks has not disclosed rental income in its books and the same has been transferred to M/s. DLF Services Ltd. by over riding title. M/s. DLF Services Ltd. is providing maintenance and upkeep services of the mall including Kiosks. In return for consideration for these services, the appellant vide authority letter dated 12/12/2005 has granted M/s. DLF Services Ltd., right to recover the rental receipts from the third parties using said Kiosks. Assessee has not claimed any expenditure in the name of M/s. DLF Services Ltd. in connection with maintenance services of the mall. In view of above arrangement, M/s. DLF Services Ltd. is showing the receipts from the Kiosk as a part of its income which is duly subjected to tax in its hands and accordingly there is no loss to the revenue. 23. This precise issue had come up for consideration before the Tribunal in assessee's own case in the earlier year, wherein it has been o....
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....that there is no justification for addition of Rs. 12,60,000/- as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted." 24. Thus, following the aforesaid precedence in assessee's own case, we decide this issue in favour of the assessee and the impugned addition is directed to be deleted." 93. Therefore, respectfully following the decision of the coordinate bench we allow ground number three of the appeal. 94. Ground number 4 of the appeal is regarding the disallowance on account of interest on late deposit of tax deduction at source of Rs. 116,935/-the learned authorised representative submitted that this issue is covered against the assessee by the order of the coordinate bench in assessee's own case for assessment year 2008-09 is per paragraph number 32 of that decision. The learned DR also confirmed the same. 95. On careful consideration of the orders of the lower authorities and the order of the coordinate bench it is found that for assessment year 2008-09 the identical issue arose in the case of the assessee which has been decided against ....
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.......in the case before us the interest was paid for delayed payment of service tax & TDS. The interest for the delay in making the payment of service tax & TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand. The issue of delay in the payment of service tax is directly covered by the judgment of Hon'ble Apex Court in the case of Lachmandas Mathura Vs. CIT reported in 254 ITR 799 in favour of assessee. The relevant extract of the judgment is reproduced below: "The High Court has proceeded on the basis that the interest on arrears of sales tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on its Full Bench's decision in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All.) The learned counsel appearing for the appellant assessee states that the said judgment of the Full Bench has been reversed by the larger Bench of the High Court in Triveni Engg. Works Ltd. v. CIT [1983] 144 ITR 732 (All.) (FB), wherein it has been held that interest on arrears of tax is compe....
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....the same. Hence, this ground of Revenue is dismissed." 36. Before us, the ld. Special Counsel for the revenue submitted that there is one direct judgment of Hon'ble Madras High Court in the case of Chennai Properties and Investment Ltd., 239 ITR 435 (Mad) and submitted that now in view of this only judgment of Hon'ble High Court, in this issue, the matter should be decided against the assessee. 37. After considering the rival submissions, we find that the assessee-company has received an interest on income tax refund of Rs. 30,31,199/- and such an interest was credited in the account of "interest paid others-Income Tax" and such an interest of refund was adjusted against the interest paid on late payment of TDS of Rs. 28,79,372/- and only the balance amount has been offered as interest income. Thus, in this manner, interest paid on late payment of TDS has been claimed as expenditure u/s. 37 of the Act. 38. Learned counsel for the assessee had contended that the TDS amount is in the nature of tax for the deductee and not that of the assessee and such interest on late deposit of TDS is allowable expenses u/s. 37 because it has been incurred during t....
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....ssee, but is ultimately for the benefit of and to the credit of the recipient of the income on whose behalf that tax is payable does not in any manner alter the character of the payment, namely, its character as income tax. 6. Learned counsel for the Revenue submitted placing strong reliance on the recent decision of the Supreme Court in the case of Bharat Commerce & Industries Ltd. vs. CIT (1998) 145 CTR (SC) 340: (1998) 230 ITR 733 (SC): TC S17.1878 that payments required to be made by way of income-tax under the IT Act are not deductible as expenditure and the further amounts which a person may be required to pay by a reason of failure to comply with the provisions requiring the payments of the tax are also amounts which cannot be regarded as deductible expenditure under s. 37 of the Act. In that case the question considered was as to whether interest paid on delayed payment of income-tax and surtax by way of instalments, on income voluntarily disclosed under the Voluntary Disclosure of Income and Wealth Act, 1976, is not in any way an expense incurred wholly or exclusively for the purpose of the assessee's business. The Court held that (head note): "When i....
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....T (1992) 196 ITR 406 (Bom): TC 17R.817 and the decision of the Calcutta High Court in the case of Martin & Harris (P) Ltd. vs. CIT (1994) 73 Taxman 555 (Cal). It was held in those cases that the interest paid under s. 201(1A) of the Act was not deductible as business expenditure under s. 37 of the Act. 9. As already noticed the payment of interest takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be but not paid in time, which rendered the assessee liable for payment of interest was in the nature of a direct tax and similar to the income-tax payable under the IT Act. The interest paid under s. 201(1A) of the Act, therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by learned counsel for the assessee. 10. Counsel for the assessee in support of his submission that the interest paid by the assessee was merely compensatory in character besides relying on the case of Mahalakshmi Sugar Mills Co. (supra) also relied on the decision of the apex Court in the cases of Prakash Cotton Mills (P) Ltd. vs. CIT (1993) 111 CTR (SC) 389: (1993) 20....
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....on the same sum Dividend Distribution Tax of Rs. 2,81,418,489/-was deposited on 13/10/2008. In the profit and loss account the assessee has shown proposed dividend of Rs. 33,94,388 lakhs. On the same amount the provision for tax on dividend is shown at Rs. 2,89,121 lakhs. In the return of income the assessee has shown dividend distribution tax payable at Rs. nil. Therefore, the learned assessing officer asked the assessee to explain the same. The assessee submitted a detailed reply on 12 September 2011 and submitted that assessee has special economic zone undertaking [ SEZ] and profit of that undertaking, if distributed as dividend, is not subjected to dividend distribution tax in terms of the provisions of Section 115 O(6) prevailing at that time. Therefore, assessee submitted that on that sum assessee has not paid dividend distribution tax. For working out that amount on which dividend submission tax is not payable, assessee submitted working, which was disputed by the AO. According to the AO the computation given by the assessee is not correct, therefore, he held that assessee has short paid dividend distribution tax by Rs. 46,157,388/-. This amount was added as income of the as....