TaxTMI 
TaxTMI 
2021 (4) TMI 528
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....nsferred during F.Y 2009-10. 2.Whether on the facts and in the circumstances of the case the Ld. CIT (A) was justified in holding that the AO has made addition by disallowing development expenses of Rs. 2,93,76,558/- on presumption basis whereas the fact is that the claim made by the assessee for development expenses has been disallowed as the assessee has received this expenditure from the customers therefore the Ld. CIT(A) has grossly erred in holding that the addition was made presuming that the assessee has received the same in cash. 3.The appellant craves leave to add to or deduct from or otherwise amend the above ground of appeal. ITA No.786/Ind/2018 A.Y 2013-14 1.The Ld. CIT(A) has erred in deleting the disallowance made by AO on account of Development expenses of Rs. 7,14,97,410/-, while the development expenses have not yet been incurred in respect of all the plots of the entire 'Infocity' projects and the amount. 2. The Ld. CIT (A) has erred in deleting the disallowance made by AO on account of development charge of Rs. 7,14,97,410/-, while it was contingent in nature. 3.The appellant craves leave to add to or deduct f....
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....nd has claimed these expenses on actual basis during A.Y.2009-10 to AY.2012-13. However, w.e.f. A.Y.2013-14, the assessee Company decided to change accounting policy and estimated the expenses on development to be incurred in this project at Rs. 33,31,66,000/- (apart from the development expenses which are already incurred by the assessee till A.Y.2012-13). These expenses are estimated on the basis of the report given by Architect & Engineer namely M/s Mathur and Associates (copy enclosed). Since the balance unsold area as on 01.04.2012 was 19,59,785 Sq. Feet and the estimated development expenses as per the Architect was Rs. 33,31,66,000/-, the assessee has worked out average development expenses at the rate of Rs. 170/- per Sq. Feet (Rs. 33,31,66,000 divided by 19,59,785 Sq. Feet). During year under consideration i.e. A.Y.2013-14 the assessee has actually incurred development expenses at Rs.l,94,74,600/- but has amortized development expenses at Rs. 7,14,97,410/- on estimation basis as discussed above. Similarly, in subsequent Assessment Years also, the assessee has followed this system. During the year under consideration, the assessee has sold out 4,20,573 Sq. Feet of ....
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....d in four years (A.Y. 2009-10 to A.Y. 2012-13) was only 6,74,480 Sq.Ft, which was only 25.60% of total salable area of 26,34,265 sq. Fts in the Info-city project. In the A.Y. 2013-14, due to introduction of section 43CA in the Income Tax Act, many of the customers who have only booked the plot by paying small amount of advance, but not turning out for registry of the plot, assessee company has rigorously followed them to get their plot registered and pay the difference amount. On such follow up many of the customers (Plot area sold was 4,20,573 Sq. Fts during A.Y. 2013-14, which is about 16% saleable area of 26,34,265 sq. Fts) have got registered their plot in the last quarter of the F.Y. 2012-13. The plots which were sold by the assessee company, were developed plots but however, development work was pending and expenditure needs to be incurred by the assessee company against the sales revenue so booked. Assessee company has no option but to book corresponding expenditure towards the development of the land to match the revenue booked and therefore it has got the report of the qualified valuer, who has estimated the cost of Rs. 170 per sq.ft of remaining area to be develo....
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....A.Y.20 12-13. However, during the AY. Under consideration, the development expenses have been worked out on an estimated basis at the rate of Rs. 170/- per Sq. Feet and claimed at Rs. 7,14,97,410/- accordingly. As the said expenditure is on projection basis i.e. contingent in nature and has not been actually, incurred during the year, the same is not allowable as an deduction in terms of the provisions of section 37(1) of the Act and hence disallowable. b) In para 14 above, it has been established that the assessee has been charging development charges at the rate of Rs. 170/- per Sq. Feet as also recorded by the assessee in its books of accounts in respect of the buyers who have paid the amounts by cheques. However, in respect of the buyers who have paid the amounts in cash, the assessee has not recorded corresponding development charges receivable at the rate of Rs. 170/- per Sq. Feet even though the assessee has claimed excess deduction on account of development expenses. When confronted with such apparent inconstancy and incongruity between the buyers paying entire purchase consideration by cheque and other buyers, the assessee took the plea of difference in considerat....
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....incurred by the assessee is not in doubt and excess development charges received from some customers has been offered to tax in the Assessment Year 2015-16. 11. Aggrieved Revenue is in appeal before the Tribunal. 12. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O. Reference was also made to the paper book filed on 27.11.2020 which included the comments of Ld. A.O. Ld. Departmental Representative further submitted that the claim of the assessee of having received development charges from 22 persons are with regard to special location is totally misconceived since the Director incharge of the project have refused to have charged extra money for locational advantages. Further he submitted that it is totally unacceptable that the assessee had taken development charges only from 22 plot holders and has not taken any such development charges from the remaining plot holders. He submitted that since Assessment Year 2009-10, 413 plots have been sold and the assessee might have received the development charges in cash from the remaining plot holders. Further as per the direction given by this Tribunal during the course of hearing to file written su....
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....ear under consideration. 2. It can be seen that the appellant has incurred development expenses for this project and has claimed these expenses on the basis of actual expenses incurred during relevant F.Ys. w.e.f. A.Y. 2009-10 to A.Y. 2012-13. However, w.e.f. A.Y. 2013-14, the appellant Company has estimated the expenses on development to be incurred in this project at Rs. 33,31,66,000/- (apart from the development expenses which are already incurred by the appellant till A.Y. 2012-13). These expenses are estimated on the basis of the report given by Architect namely M/s Mathur and Associates. The total expenditure to be incurred w.e.f. 01.04.2012 was estimated at Rs. 33,31,66,000/- by the said Architect. The balance unsold area as on 01.04.2012 was 19,59,785 Sq. Ft. as shown by the appellant and the estimated development expenses as per the Architect was Rs. 33,31,66,000/-. The appellant has worked out average development expense at the rate of Rs. 170/- per Sq. Ft. (Rs. 33,31,66,000 /19,59,785 Sq. Ft.) and applied this rate for working out and claiming this expenditure in various assessment years from A.Y. 2013-14. 3. The details of area sold out, devel....
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....Rs. 7,14,97,410/- against sold area of 4,20,573 Sq. ft. at average cost of Rs. 170/- per Sq. ft. which is more than double of developmental cost as shown during the period from F.Y. 2008-09 to F.Y.2011-12. Further perusal of record reveals that during the relevant assessment year, actual cost of development incurred was Rs. 1,94,74,600/- whereas the appellant has debited an amount of Rs. 7.14 crore (approx) on provisional basis on the basis of estimation given by one Architect in the name and style of M/s Mathur and associates who has estimated the remaining part of development expenses to Rs. 33.31crores and the appellant had proceeded to debit the provision of Rs. 7.14 crores during the relevant year proportionately, although the same was simple provision that too contingent to the incurring of same and meeting the standard as specified by the Architect. The AO had recorded the statement of Shri N.M. Mathur of M/s Mathur and Associates. He is none else but the one who was supervising the project right from the beginning. In other words, they were the contractors for execution of work. In his statement, Mr. N. M. Mathur has failed to give any basis for estimation of development ex....
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....judicated by CIT (A) nor has it been decided by him. Therefore, on this issue/point, either the matter has to go to CIT (A) for proper adjudication or the issue is to be decided in favour of revenue on merits. 12. Further, ongoing through the grounds of appeal filed before CIT (A) as reproduced in page No. 1 of the appeal order, it is noticed that above discussed issue of "debiting provisions and estimated cost of club house " discussed in detail by AO have not been raised by the appellant through a specific ground. The concluding finding of AO on the relevant issue is given at page no. 34 of the assessment order which for the sake of convenience is reproduced as under: (a) The assessee has carried out development work on the plots of 'Infocity' Projects which it has debited on actual basis upto A.Y.2012-13. However, during the A.Y. under consideration, the development expenses have been worked out on an estimated basis at the rate of Rs. 170/- per Sq. feet and claimed at Rs. 7,14,97,410/- accordingly. As the said expenditure is on projection basis i.e. contingent in nature and has not been actually incurred during the year, the same is not allowable as an deducti....
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.... 17. Therefore, the AO has concluded that expenditure on account of development of land has been directly incurred by the purchaser; the assessee was not to be allowed the claim of such expenditure. This aspect has implication on the assessments for A.Y. 2009-10 to 2012-13. The basis adopted by AO to reach to above conclusion. 18. During the course of assessment proceedings, the AO had recorded the statement of following purchasers of plot. 1. Nirmal Chand Tiwari 2. Jagdish Chandra Tiwari 3. Anil Mallik 4. Rampurkar Tiwari 5. 19. Shri Nirmal Chand Tiwari had confirmed that as per registered sale agreement the consideration was Rs. 5,17,000/-, but he had paid total amount of Rs. 10 lacs by cheque which also included an amount of Rs. 5.98 lacs on account of other charges including development charges which as per the copy of account re-produced at page 12 of the assessment order was Rs. 2.93 lacs. 20. Similarly, in case of other three parties, as per the statements, price of plot as per registered sale deed did not include the component of development charges. Name of party Amount as per deed (in....
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....nt, they have clearly stated that development charges were separately charged and not included in cost of plot. In cases of parties other than 22 parties, the plots have been registered only on cost of plots. (e) In the interest of natural justice, during the course of assessment proceedings, the statement of Shri Ramesh Jain, Director of appellant company was recorded and it was specifically asked as why the development charges in regard with only 22 parties were separately recorded for. It was stated by the Director that these were not on account of development charges but extra charges were due to location advantage like "Corner Plot" etc. The AO has prepared and reproduced a chart showing locations of the plots of 22 parties at page No. 18 of assessment order. It can be seen that except in case of 03 parties, all others were non- corner plots and with no other advantages. Moreover, the statement of Director was entirely contrary to the copies of accounts of various parties and statements given by many purchasers. (f) AO vide letter dated 13/01/2016 had required assessee to explain as why the revenue in regard of 22 persons was not recognized in the year of reg....
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....ayment by cheque only. 27. The AO had correctly concluded that the assessee has not disclosed the development charges received from various customers in cash in all the AYs. i.e. A.Y. 2009-10 to 2012-13 because out of 22 customers, in case of 03 customers , the deed was registered in F.Y. 2008-09, and similarly, the same was registered for 03 parties in F.Y. 2009-10. Further it is seen that the deed for 05 and 10 parties were registered in F.Y. 2011-12 and F.Y. 2012-13 respectively. It is evident that the assessee has been indulging into the practice of not accounting the development charges recovered from the customers right from the beginning. 28. Therefore, the AO was within his competence to re-open the cases for A.Y. 2009-10 2010-11 and 2012-13 and making disallowance on account of development charges directly recovered from the customers not forming part of sales turn over. The conclusion of A.O. is fully supported by the decision of Hon'ble Supreme Court in the case of Commissioner of Sales Tax,.. Vs M/s H.M. Esufall, H.M. Abdulali on 18th April, 1973 (Equivalent citations: 1973 AIR 2266, 1973 SCR (3) 1005, where the turnover for entire year was es....
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....says "If a registered dealer X X a) x x x x (b) x x x x (c) x x x x (d) has not maintained any account or has not regularly employed any method of accounting, or if the. method employed is such that in the opinion of the Commissioner assessment cannot properly be made on the basis thereof; the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment." What is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under s. 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover. While making reassessment under s. 19, if the assessing authority has. no power to make best judgment assessment, all that the assessee need do to escape reassessment is to refuse to file a return or refuse to produce his account-books. If the contention taken on behalf of the assessee, is correct, the assessee can escape his liability to be re....
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....oncluding part of order of CIT (A) starts from para 3.6 of appeal order. It will be imperative to examine the findings para wise. Para 3.6:- The CIT (A) has stated that development charges @ Rs. 170/- were considered only in case of 07 customers whereas in case of 15 customers, it was ranging between Rs. 7/- to Rs. 165/- only. This was a new fact brought to the notice of CIT (A) which needed the comments from AO as such the matter should have been remanded. Para 3.8:- The CIT (A) says that the AO has not recorded the statement or called the information from other customers as such made this as one of the basis for deleting the addition. The CIT (A) has got co-terminus powers with the AO. The CIT (A) could have invoked section 251 (4) of IT Act in order to get the further verification done by the AO. Para 3.9:- The CIT (A) states that "learned AO had disallowed a sum of Rs. 7.14 crores being the amount actually incurred and charged to P & L account". The conclusion of CIT (A) is factually incorrect. The AO has no where stated that an amount of Rs. 7.14 crores was actually incurred. Right from the beginning, the AO has be....
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....is not sufficient ground for allowing the appeal of assessee as held in following cases of Hon'ble Apex Court. M/s Pebble Investment and Finance ltd., Vs ITO Supreme Court 2017 2017-TIOL-238-SC-IT ITO Vs M. Piral Choodi Supreme Court 2010 [2012] 20 taxman.com 733 (SC)/[2011]334 ITR 262 (SC)/[2011] 245 CTR 233 (SC) Roger Enterprises (P.) Ltd., Vs. CIT Supreme Court 2016 [2016] 72 taxmann.com 167 (SC) Further, CIT (A) could have directed the AO to allow the cross-examination of architect in remand proceedings. Therefore, the order of CIT (A) is not in accordance with the provisions of IT Act, 1961. Para 3.19:- There is no mistake by AO in relying on the report of M/s Mathur and associates about the cost of club house as the firm was associated with the project since beginning. Para 3.21:- The CIT (A) while deleting the addition has relied on the decision of Hon'ble Supreme Court. The facts of decision of Hon'ble Supreme Court in the case of Rotark Control India Pvt. Ltd., vs CIT (314 ITR 62) is totally distinguishable from the facts of present case. In that case, the issue before Hon'ble Apex Court was e....
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....is a developer engaged in the business of development of land by developing the colony and selling of developed plots of the colony. 2. During the impugned year, assessee had undertaken two projects, namely, Info-City and Royal Premium Park. During both the years under consideration, plots of only Info-City Project were sold and developed. The total plots in the 'Info City' project are 1142. The year wise break-up of sale of plots from F.Y. 2008-09 to F. Y. 2014-15 (AY 2009-10 to 2015-16) is as under:- A.Y. No. of plots of 'Info-City' project sold 2009-10 56 2010-11 120 2011-12 54 2012-13 33 2013-14 168 2014-15 4 2015-16 6 4. MPEB charges, development charges, club house charges and such other charges were received from the buyers of the plots in addition to the total sale consideration. 5. During AY 2013-14, assessee had received certain amount over & above the amount of sale consideration from the following buyers, details of which are as under [refer CIT(A) Order Para 3.15 Page 17] - Sr. No. Name of the party Plot No. Area of plot (sq.ft.) Excess amount received in addition to the ....
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....ssee, all those amounts have been duly recorded in the respective ledger account of that buyer and reported in the audited financial statements of the assessee. These are verifiable facts from the documentary material placed on record. 8. Development charges recovered from the buyers amounting to Rs. 61,21,220 were offered to tax in AY 2015-16. These development charges include the charges received from the ten buyers as mentioned in table at para 5 above. Out of the development charges of Rs. 61,21,220; amount of Rs. 39,21,275 relates to AY 2013-14. If this amount is again brought to tax in the year under consideration, it shall amount to taxing the same twice in two different years, viz. AY 2015-16 wherein the assessee itself has offered it to tax and AY 2013-14 wherein it is done by the Ld. Authority. [AO Para 14 Page 17 Table and CIT(A) Para 3.4 Page 14-15] 9. The amount of development charges from the ten buyers for Rs. 39,21,275 has already been reported in the return for AY 2015-16 which is an undisputed fact. Also refer Annexure 'A' to the impugned assessment order wherein the audited P&L account and its relevant Note 14 for AY 2015-16 is enclosed by the L....
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....to claim interest. 12. Assessee relies on Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 against the order of Ld. CIT(A) on the ground of bringing the amount of Rs. 39,21,275 to tax in AY 2013-14 again when it has already been taxed in AY 2015-16, drawing force from the above referred judicial precedents. Rule 27 states - "The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." 13. Reliance is placed on the decision of Hon'ble Delhi High Court in the case of Sanjay Sawhney [2020] 116 taxmann.com 701 (Delhi) dated 01.05.2020 for the application of Rule 27 in the instant case. The catch note reads - Where assessee succeeded before Commissioner (Appeals) in ultimate analysis and was, thus, not an aggrieved party, in Revenue's appeal, Tribunal committed a mistake by not permitting assessee (respondent before it) to support final order of Commissioner (Appeals) by assailing findings of Commissioner (Appeals) on issues that had been decided against him. 14. Combined reading of Explanation 2(a) to Section 153, section 153(6)(i) and section 150(1) also fortif....
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....e basis of area of land sold for which revenue was 33ecognized in the P&L of the year. [AO Para 8 Page 3 Table] 17. Accounting Standard, AS - 5 on Changes in Accounting Policies issued by Institute of Chartered Accountants of India permits for change in accounting policy. Para 29 of the said AS - 5 provides that where it is considered that the change would result in a more appropriate presentation of the financial statements of the enterprise, the change can be made. [PB 61] Following the prudent basis of matching concept of accounting, assessee provided for development expenses of Rs. 7,14,97,410 on the basis of technical report of Mathur & Associates, Architect & Engineers in the impugned year. Further, assessee being a 'developer', Accounting Standard AS - 7 on Construction Contracts does not apply. This standard is applicable in case of contractors. 18. Ld. AO while making disallowance of development expenses of Rs. 7,14,97,410 held that these expenses are contingent in nature and charged on projected basis. [AO Page 33, para (a)] 19. Development charges claimed by the assessee in Profit and Loss account of Rs. 7,14,97,410 are toward....
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....gh the written submissions filed by both the parties. Revenue has raised the common issue for Assessment Year 2010-11 and 2013-14 challenging the finding of Ld. CIT(A) deleting the disallowance of development expenses made by Ld. A.O at Rs. 2,93,76,568/-and Rs. 7,14,97,410/- for Assessment Years 2010-11 and 2013-14 respectively. Since the assessment order for Assessment Year 2013-14 was finalized earlier than the assessment order for Assessment Year 2010-11 adjudication of the sole issue raised by the revenue is on the basis of facts for Assessment Year 2013-14. We observe that the assessee is involved in the business of development of land and developing colony undertook two projects namely Info-City and Royal Premium Park. The issue under appeal for the two assessment years is with regard to the plots sold under the project 'Info-City'. There are total 1142 plots in the Info-City and the assessee has sold 56,120, 54,33, 168, 4 & 6 during Assessment Year 2009-10 to 2015-16. There is no dispute with regard to number of plots sold. From Assessment Year 2009-10 onwards till Assessment Year 2012-13 assessee was claiming actual development expenses incurred during the year. For Asse....
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....0 to 2014-15 has been offered to tax in the Income Tax Return filed for Assessment Year 2015-16 decided to disallow the claim of assessee of development charges on following three counts:- 1. Development expenses have not yet been incurred in respect of all the plots of the entire 'Infocity' Projects and the amount of Rs. 7,14,97,410/- claimed is contingent in nature. 2. Actual development expenses when actually incurred would have to be considered for deduction in the relevant A.Ys. subject to fulfilment of the provisions of Section 37(1) of the Act. 3. Development charges whether received or not would accrue to the assessee at the rate of Rs. 170/- per Sq. Feet at par with 22 buyers of the plots and thus, the development charges would not be a charge on the assessee's profit as the same would be commensurately recoverable from the buyers of the plots. Also, the assessee has itself shown the entries of the development charges received from 22 buyers by cheques by passing general entries in assessment year 2015-16 for which the assessee has already filed its return of income. 17. From perusal of the above observation by Ld. A.O we find that....
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.... of Rs. 4,20,573 sq. feet being the total area sold during the year, instead of actual expenses incurred of Rs. 1,94,74,600/- in F.Y. 2012-13 to match the revenue. 3.4 During such proceedings, the learned AO had also noted that in case of 22 customers, the appellant had received the amount in excess of the amount stated in the sale deed, towards MPEB, club house, development expenses etc. The sale deeds of these 22 customers were executed in the FY 2008-09, 2009-10,2011-12 and 2012-13 (No sale 'deed related to FY 2010-11). And the amount of Rs. 1,25,94,195/- so received from these 22 customers were transferred to various heads including development charges of Rs. 61,21,200/- as income in AY 2015-16 and balance was kept. as liability towards MPEB, club house membership & colony maintenance charges. A chart given by appellant, is forming the part of submission made by appellant, which is reproduced as below: S.NO Name of the Plot Holder Plot No. booked Area Amount Development charges received and offered for tax in F.Y 2014-15 MPEB @ Rs. 35/- Club House Maintenance Financal Year of Registry 1 CHETNA W/0 R.K. MISHRA 888 210....
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....nd had recorded their statements, These persons were Shri Nirmal Charid Tiwari, Shri Rampukar Tiwari, Shri Anil Malik and Shri Jagdish Narayan Prasad (Father of customer Dr. Shailender Kumar). In addition to this, 2 customers namely Anu Kumar Gargav and Vinay Kumar Tiwari had submitted their replies, in response to information called by learned AO. Shri Nirmal Kumar Tiwari & Shri Rampukar Tiwari were also allowed by the AO for limited cross examination. 3.6 It was also brought to my knowledge that out of the cases of 22 customers, only in cases of 7 customers the income towards development charges was considered @ Rs. 170/- per sq. ft., while in the remaining 15 customers such income had ranged from Rs. 3/- per sq. ft. to Rs. 165 per sq. ft. 3.7 Out of 6 customers from whom statements were recorded and/or information was called, only for 3 customers, income was booked @ Rs. 170/ - per sq. ft. 3.8 The learned AO had not recorded or called information from any other customer, from whom he has presumed the appellant to have received cash in addition to what was recorded in books @ Rs. 170/- per sq. ft. 3.9 On the basis of these statements ,the learn....
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....d by them. 3.15 It had further been noted by AO that the amount of Rs. 61,21,200/had been offered by appellant himself in AY 2015- 16 as development charges, which had been received in excess in respective years and not offered as income even on accrual/receipt basis. The financial year wise breakup of the same is under: S. No. Name of the plot holder Financial Year of Registry Plot No. booked Plot area in Sq. ft T/f to Development charges recovered in 2014-15 Rate per Sq.ft recovered as development charge 1 CHETNA W/O R.K. MISHRA 2008-09 888 2100 174,095 82.90 2 SANJAY BADJATIYA 2008-09 145 2800 50,600 18.07 3 VINAY KUMAR TIWARI 2008-09 837 2100 283,500 135.00 TOTAL 2008-09 7000 508195 4 GOVIND &VIDYAVATI BAGHORE 2009-10 135 2700 16,800 6.22 5 KAVITA MUNDRA 2009-10 175 3200 9,600 3.00 6 LALITA W/O SURESH KABRA 2009-10 381 2025 344,250 170.00 TOTAL 2009-10 7925 370650 7 DEVI KISHAN SHARMA 2011-12 120 2400 408,000 170.0....
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....e land purchased. The assessee undertakes to carry out the developments including laying out roads, provision of drainage system etc., within a reasonable time. The assessee, following the mercantile system of accounting, during the relevant assessment year entered in the credit side of its books of accounts, the whole of the sum representing the full sale price of the lands sold during the accounting year, though only a part of it was actually received in cash from the purchaser and the balance represented the unpaid balance retained by the purchasers the payment of which was secured by creating charge on the said lands as also the interest received or receivable in the year of account under the deeds of charge. The assessee estimated certain sum as expenditure for the developments to be carried out in respect of the plots which had been sold during the year and debited the same in the books of account on the ground that the liability for the said sum had actually arisen, the assessee being bound to provide the facilities it had undertaken to do, even through no part of that amount represented any expenditure actually made during that year. Held: The sum....
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....on by the learned AO to come to the conclusion that the cost estimated includes the cost of club house and the learned AO has completely relied on his report to come to the conclusion that the appellant had received development charges @Rs. 170 per sq. ft from each and every customer. 3.20 No evidence was brought on record by the learned AO to prove that the appellant had received any amount in cash over and above what was recorded in books of account. The sole basis for making addition was the book entry passed in AY 2015-16 for offering income under development charges in case of 22 customers and based on that entry, statement of customers were recorded. Therefore, the entry passed in AY 2015-16 could not be considered for disallowing expenditure. 3.21 Respectfully following the decision of Hon 'ble Supreme Court in case of Rotark Controls India P. Ltd. vs, CIT (314, ITR 62), and the decision of the jurisdictional Bench of ITAT, Indore, which has followed the decision of Hon'ble Supreme Court in case of Rotork Controls India Pvt. Ltd. and other decision relied on by the appellant, I hold that the expenses charged to profit and loss account on pr....
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....TURE "Business Expenditure - U/s 37 of the Income-Tax Act, 1961 -AO made addition in respect of provision for repair and maintenance-CIT(A) deleted the additions-HELDS The assessee is under obligation to maintain road for 3/5 years after completion of construction work. Further, when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year - Therefore, the CIT(A) was quite correct and justified in following decision in Rotork Controls India Put. Ltd. (2009) 13 ITJ 589 (SC): (2011) 3 STD 535 and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A). [Refer Para 48 & 49) 19. We further observe that Ld. A.O denied the claim of development expenses claimed by the....
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....0 17 RAMPUKAR TIWARI 2013-14 122 2400 4,08,000 170.00 18 SATYANARAYAN DHRUV 2013-14 464 4260 2,72,900 64.06 19 ANITA W/O SURESH SHARMA 2013-14 882 2100 3,46,500 165.00 20 NIRMAL S/O RAJENDRA TIWARI 2013-14 986 1725 2,93,250 170.00 21 ANIL MALIK 2013-14 391 2100 3,26,500 155.48 22 AMIT SHANTILAL 2013-14 345 2100 1,71,500 81.67 TOTAL 2013-14 28060 39,21,275 GRAND TOTAL 61,21,220 20. We are surprised to note that the Ld. A.O has raised no doubt about the genuineness of the actual development charges incurred by the assessee nor has he pointed out any mistake in the books of accounts maintained by the assessee except about the claim of development charges. The assessee has been consistently claiming the actual development charges from Assessment Year 2009-10 till Assessment Year 2012-13. Though actual expenses are incurred subsequently also but expenses are booked in the Profit and Loss account based on a scientific method i.e. report of technical expert. The ....
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....olony fit for constructing residential houses. In all this process development charges ought to be incurred. They were incurred and were consistently charged to Profit & Loss Account. The change of accounting policy effected from Assessment Year 2013-14 was based on the accounting standard AS-5 issued by Institute of Chartered Accountants of India which permits the change and which was done so to make appropriate presentation of financial statements of the enterprise. The same was taken up since the highest number of plots were sold by the assessee during Assessment Year 2013-14 which were 168 in number. Almost 16% of saleable area was sold during the year. Change in accounting policy is duly disclosed in the audited financials by way of note. Actual development charges incurring during the year are also reported in the balance sheet. 22. We find that the development charges which were taken from some of the purchasers of plot and were excess in nature in comparison to the amount charged to other plot purchasers the excess amount of Rs. 61,21,220/- have already been offered to tax in Assessment Year 2015-16 and the chart showing year wise amount of income offered during Asses....
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....013-14 to Assessment Year 2015-16 are Rs. 7,50,00,430/-. For Assessment Year 2014-15 and Assessment Year 2015-16 the estimated development expenses charged to Profit & Loss account are only Rs. 14,62,000/- and Rs. 20,31,020/- as against the actual expenditure of Rs. 1,36,26,544/- and Rs. 1,01,17,084/- respectively which shows that the assessee has duly adhered to the changed accounting policies implemented from Assessment Year 2013-14. For Assessment Year 2013-14 there was certain spike in the claim of development expenses but the revenue for the year were also at a higher side since around 420573 sq. ft area of land was sold during the year as against 87750 sq. ft area sold in the immediately preceding Year. Ld. A.O also failed to appreciate that the assessee had shown a positive income at the end of the year and paid taxes there on. We have also examined the audited balance sheet and Profit & Loss Account and treatment of development charges incurred during the year. The excess amount charged in the preceding years has been offered to tax in Assessment Year 2015-16 and it would not be justified to tax an income already offered to tax in the correct year as there is no loss to ....
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....t and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year. - Therefore the CIT(A) was quite correct and justified in following decision in Rotork Control India Pvt Ltd [2009] 314 ITR 62 (SC) and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A)." [emphasis supplied] [refer PB 62 & 67] 29. Under these given facts and circumstances of the case and the judgments referred herein above we are of the considered view that Ld. CIT(A) was justified in allowing the claim of estimated development expenses booked by the assessee in the Profit & Loss Account at Rs. 7,14,97,410/- on matching concept by adopting scientific method allowable u/s 37(1) of the Act and thus the theory adopted by the Ld. A.O of the assessee having received the development charges in cash is just in air and ....
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....should be considered as income in ASSESSMENT YEAR 2010-11 of Rs. 3,70,650/-. 32. Before us the Ld. Counsel for the assessee submitted that the amount of development charges from 3 buyers at Rs. 3,70,650/- has already been offered in the Return of income filed for Assessment Year 2015-16 which is an undisputed fact. The direction of Ld. CIT(A) taxing sum of Rs. 3,70,650/- for Assessment Year 2010-11 would amount to taxing the income again. 33. On the other hand Ld. Departmental Representative supported the finding of Ld. CIT(A). 34. We have heard rival contentions and perused the records placed before us. In view of Rule 27 of Income-tax (Appellate Tribunal) Rules, 1963 and also in view of the judgment of Hon'ble Delhi High Court in the case of Sanjay Sawhney (supra) we accept the application of the assessee. 35. As regards the issue of taxability of development charges received by the assessee at Rs. 3,70,650/- Ld. CIT(A) has held that this sum is to be taxed in Assessment Year 2010-11. Ld. Counsel for the assessee submitted that this amount has already been offered to tax in the return of income filed for Assessment Year 2015-16. 36. It is a settled law that onc....