AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 303
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.... assessment year. The project Classique profits were eligible to claim deduction under section 80 IB (10) of the Act. The Project Royal is a normal project and Assessee was not claiming any benefit under Section 80 IB. Accordingly, Assessee submitted separate Profit and Loss Account for each project and declared Gross Profit of Rs. 29,48,020/- in Project Classique and Rs. 69,14,987/- in the case of Royal Project and it also declared receipts of Rs. 4,99,09,782/- towards sale of TDR, the Assessee claimed the profit declared in Classique Project as deduction under Section 80 IB(10). 3. During Assessment Proceedings, Assessing Officer observed that Assessee has claimed various common expenditure during this year which includes Employee Cost, Professional and Consultancy Fees, Marketing Expenses and other Administrative Expenses. Since assessee has not allocated any common administration expenses incurred in claiming the deduction under Section 80IB(10) of the Act. Therefore, Assessing Officer considering the status of the project completion, he estimated @ 15% of the common expenses attributable to the project Classique. Accordingly reduced the deduction under section 80 IB to the ....
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....lier years, no sale was accounted. Therefore, nothing had to be done by the administrative staff or marketing staff etc. in this respect. In this view of the matter, only minimal or negligible amount of expenses can be attributed to the Classique project. It would be wholly unjust to allocate expenses of Rs. 14,82,375/- as pertaining to the Classique project or any higher amount when there was not/dug left to be done in the respect of this project. (ii) The ledger account of the initial amount received from the identified purchaser is enclosed herewith from which it is evident that the booking of the unsold flats as on 01.04.2008 has been made in earlier years. b. Without prejudice to the above, it would be wholly unjust to the assessee to allocate the administrative, marketing and other expenses to the two projects only i.e. Royale and Classique project and not to allocate the same to the TDR sale. The said administrative, marketing expenses and other general expenses additional evidence incurred in the normal course of business comprising of various components and therefore allocating the same to only two components would give a distorted figure and therefore un....
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....ate a negligible or token amount of the said general expenses (that to only for the period upto May 2008) to Classique Project and direct the Assessing Officer to rework the deduction allowable u/s. 801B in respect of Classique Project, 5. The assessee request Your Honour to dispose the appeal on the basis of this written submission and the other submission on record. The assessee most humbly requests Your Honour to allow the appeal for which kind act of Your Honour, the assessee shall be grateful." 6. After considering the above said letters, Ld CIT(A) rejected the submissions of the assessee and enhanced the disallowance of common expenditure with the observation that the assessee has failed to demonstrate why the general expenses claimed by it of Rs. 94.15 lakhs would not be allocated to every project and Royal housing project. He observed that the major expenses of the assessee are salary of Rs. 28.06 lakhs, professional charges of Rs. 9.21 lakhs, marketing expenses of Rs. 11.79 lakhs, administrative expenses of Rs. 10.95 lakhs and insurance, depreciation, office and repairs and maintenance. All these are general expenses which does not have any direct nexus on any ....
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....at out of 3 flats sold during the year which were sold prior to this assessment year. The assessee has only completed the sales process and accordingly declared the sales during this year. Further he brought to our notice page 31 and 32 of the paper book in which assessee has given detailed submissions of the common expenditure incurred by the assessee during this year. He submitted that all these common expenditure is incurred for the purpose of business and most of the expenses were incurred for the new project as well as for sale of TDR. Further he submitted that the profit to be claimed as deduction under section 80 IB (10) should be derived from the project only after considering direct income and direct expenses. For that purpose, he relied on the case of Zandu Pharma - 350 ITR 366. In the said decision, the Hon'ble Court held that head office expenses not to be considered for deduction under section 80 IB. Further he relied in the case of Hindustan Unilever Ltd - 394 ITR 73. He brought to our notice page 77 of the said order in which the Hon'ble Court referred to the above case i.e., Zandu Pharma case (supra). 9. He further submitted alternative submissions:- a. ....
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..... With reference to the case law relied by the assessee, Zandu Pharma (supra), the Hon'ble High Court observed that while computing the profits and gains of the concerned undertaking, only expenses relating thereto can be deducted. In other words, the expenses must be incurred, for and on behalf of the concerned undertaking. The expenses attributable to any other unit or the head office expenses which have no relevance to the industrial undertaking, cannot be deducted in respect of the said undertaking while computing the profits and gains of the undertaking. From the above, the expenses attributable to the industrial unit or profit centre should have relevance to such industrial unit or profit centre. In the given case, the expenses of administrative and other common expenditure have direct relevance to the respective profit centres i.e., 2 projects and other activities of sale of TDR. We notice that the administrative functions carried on by the assessee are common to all the projects and activities carried on by the assessee. The expenses can be direct to the ongoing project, allocable or reasonably estimated with relevance to the respective projects carried on by the assessee. ....