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2021 (8) TMI 35
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....ssessee, Mr. Pradeep Dinodia stated that assessee does not want to press the solitary ground raised by it in its appeal pertaining to disallowance of Rs. 7,90,230/- on account of replacement fund in view of the findings of Ld. CIT(A) on this issue. In the written synopsis dated 25.06.2021 filed online, the assessee has opted not to press the solitary ground raised in this appeal. In view of this submission of the assessee, the appeal filed by the assessee being ITA No. 898/Del/2013 is treated as dismissed. The appeal of the assessee is dismissed. ITA No. 1348/Del/2013 - A. Y. 2008-09 3. Now we shall deal with the departmental appeal as above. The facts in brief are that assessee filed its Return of Income for A. Y. 2008-09 declaring an income of Rs. 23,90,50,763/- on 30.09.2008. The case of the assessee was picked up for scrutiny and assessment order dated 31.12.2010 u/s 143(3) of the Income Tax Act was passed at a taxable income of Rs. 42,48,16,084/- by making various disallowances as per the said order. In the appeal before Ld. CIT (A), the assessee was allowed relief as per the detailed order dated 07.12.2012 passed by the Ld. CIT(A)-1, New Delhi. Against which the department....
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....as submitted before the CIT (Appeals) that the facts of the assessee's case were not at par with T V Sundaram judgment and it was also explained that the subsequent judgment Hon'ble Supreme Court in the case of CIT Vs. Singauli Sugar Works (236 ITR 518) have explained the provisions of Section 41(1) and has clearly laid down the proposition that simply on expiry of the period of the limitation under the Limitation Act could not extinguish the debt and provisions of Section 41(1) are not attracted. (PB- 80-87). It was further explained that these clarifications by Hon'ble Supreme Court has subsequently been accepted by the Ho'ble Punjab & Haryana High Court in the case of CIT Vs. Smt. Sita Devi Juneja (187 Taxman 96) and also in CIT Vs. G P International (186 Taxman 229). The reference was also made to the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Jaipur Jewelers (Exports) (187 Taxman 169) for highlighting that so long as there is no cession of liability by writing it back in the books of the assessee, no addition can be made u/s 41(1) of the Income Tax Act. The Ld. CIT (Appeals) on appreciation of all the facts has allowed the relief. Apart from the judgments r....
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....rt in the case of CIT v. BSES Yamuna Power Ltd. [358 ITR 47 (Delhi)] and in the case of Birla Soft Ltd. [TS-82-SC-2014]. Respectfully, following these judgments, it is held that CIT (A)'s order on this issue does not need any interference and is hereby upheld. The Ground No. 3 raised by the department is accordingly dismissed. 10. Ground No. 4. This ground has been raised by the revenue against the relief allowed by the Ld. CIT (A) on account of disallowance made by the AO towards the Foreign Tour Expenses of wife of one of the Directors of the company. The AO in the Assessment Order observed that when Mr. Aveneesh Sood travelled overseas his wife Mrs. Tithi Sood also travelled. On being required to explain, the assessee claimed before the AO that Mrs. Tithi Sood was also an employee of the company and these travels were undertaken for the business purpose of the company. It was also submitted that these expenses in any case have also been considered for the purposes of payment of fringe benefit of tax. No part of the disallowance of these expenses can be made under the provision of Income Tax laws. However, AO was not satisfied and he disallowed the air ticket expenses along with....
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....aimed by the assessee amounting to Rs. 18.52 Crores in respect of Dwaraka Project. According to the Department, these losses had been worked out by the assessee on estimated basis and in an unscientific manner. 16. The facts pertaining to this issue as noted and discussed at Pages 1 to 12 of Assessing Officer's Order for A. Y. 2008-09 are that, auditors had given a Note No. 2 in the audit accounts that loss of Rs. 18.52 Crores has been written off in a commercial project as the estimated total contract cost and revenue indicate a loss. Picking up a thread from this note, the Assessing Officer was of the view that such loss was claimed on estimated basis on which the Assessing Officer required the assessee to explain the basis of claiming loss with necessary details and supporting documents. In response to such requirements of the Assessing Officer, the assessee explained that it had acquired a plot for developing a commercial site in auction from the DDA for which the total cost came to be Rs. 122.98 Crores. There is no dispute on this. It was further explained that assessee proposed to develop a shopping mall for which initially there was a good response from the public. However,....
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....en (1969) 73 ITR 53 (SC). c. Calcutta Co. Ltd. V. CIT (1959) 37 ITR 1 (SC). d. CIT V. Insilco Ltd. 179 Taxman 5 (Delhi) 18. Thereafter, the Assessing Officer required the assessee to explain the basis of computation of loss which was furnished. Similarly, other details as required by the AO in respect of total salable area, total area actually sold and agreed sales realization in respect of area sold, total unsold area and the rate at which such unsold area has been estimated were called for which were also furnished by the assessee as recorded by the AO at Page No. 7 of his Order. The complete details of total project cost at Rs. 176.10 Crores were given Page 6 of AO's Order. Similarly, total estimated sales revenue calculated at Rs. 157.58 Crores were given Page 7 column 10 of his Order. The difference between estimated project revenue and project cost, being Rs. 18.52 Crores was claimed as loss in A.Y. 2008-09 as per Accounting Standard-7. Thereafter, the AO called for further information in respect of the said project details which was all submitted to the AO. 19. The main reason given by the Assessing Officer was that very small amount of expenditure had been incurred....
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....method. To that extent the submissions being made by Ld. CIT-DR as well as by Ld. AR on this issue shall also cover Ground No. 2 raised by the department in A. Y. 2009-10 in ITA No. 1349/Del/2013. 24. The learned DR brought certain facts to our notice wherein it was submitted that whereas in Assessment Year 2008-09 the assessee claimed the total estimated cost of this project at Rs. 176.10 Crore and total estimated revenues at Rs. 157.58 Crores and determined the loss at Rs. 18.52 Crores, going forward for Assessment Year 2009-10 while revising the cost of this project at Rs. 173.26 Crores, the assessee estimated the sale value at Rs. 129.26 Crores. It was submitted that although the cost estimates made by the assessee in these two years has slightly reduced and there is no real challenge given by the Assessing Officer to such cost estimates, it is the sales realization value which has sharply dipped from the last year as per assessee's own estimates which was at Rs. 157.58 Crores in A. Y. 2008-09 to Rs. 129.26 Crores in Assessment Year 2009-10. The learned CIT DR took us through the Assessment Order for 2009-10 and submitted that although the learned Assessing Officer in Assessme....
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....y reiterating his earlier submissions that the matter should be restored back to the file of CIT (A) for adjudication on the issue of sale price of the unsold area which has been sold in Assessment Year 2009-10 to a sister concern at a hefty discount of 31.5% which according to the learned AO and Department should not exceed 5% as has been fairly given by the AO. 26. Mr. Pradeep Dinodia Ld. Counsel appearing on behalf of the assessee submitted with reference to the ground raised by the department on this issue that the only grievance which the department has on this issue is about the estimated and unscientific nature of losses. Ground No. 5 of the department is reproduced for the sake of ready reference. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in directing to allowing the assessee's claim of losses amounting to Rs. 18,52,00,000/- in the Dwarka Project despite the fact that the losses worked out by the assessee was on estimate basis and unscientific. 27. By drawing our attention to the aforesaid ground, he submitted that there is no challenge either to the costs incurred by the assessee or the sales made by the assessee as has been made out i....
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....High Court in the case of CIT vs. Woodward Governor of India Private Limited (294 ITR 451). d. Hon'ble Supreme Court and Hon'ble Delhi High Court in the case of CIT Vs. Woodward Governor of India Pvt. Ltd. (Supra) 312 ITR 254 (SC) 29. Similarly the learned AR submitted that, whether the estimates of the project cost made by the assessee were realistic based on the relevant costs or not and in case the AO had any doubt about the said cost, he should have gone for independent valuation as has been held by Hon'ble Delhi High Court in the case of CIT Vs. Triveni Engg. & Industries Limited (2011) 196 Taxman 94 (Delhi) after considering the ratio laid down by Apex Court in Calcutta Co. Ltd. Vs. CIT (1956) 37 ITR 1 (SC). But, this, according to AR, was not required because the Ld. AO has accepted the cost estimates and it is only the realization of revenue which has been altered by the Ld. AO, both in A. Y. 2008-09 and A. Y. 2009-10 by making his own estimates of sales as against the estimation done by the assessee. 30. The learned AR thus requested that the ground raised by the department having no connection with the estimated cost or estimated sale price or on the losses estimate....
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....ncome earned by NPHREPL in subsequent years has also been assessed and brought to tax by same AO. k. Assessee company has taken prudent decision to sell the spaces at best possible rate to save interest cost and other recurring expenses. 32. Our specific attention was drawn to the submissions dated 09.10.2012 made before the learned CIT(A) in Assessment Year 2009-10 which are available at Paper Book Pages 54 to 88 wherein the detailed submissions and reasons of losses in this project has been explained. 33. The learned AR submitted that the assessee purchased a plot in auction from DDA in January, 2007 when the real estate market was at its peak, for a cost of Rs. 122.98 Crores. There is no dispute on this fact. It has been claimed that there was a sudden down fall in the real estate due to Sub Prime Crisis in September, 2007 in USA. Banks and financial institutions were unwilling to finance any institution related to real estate and there was fear in the real estate market for sustaining larger projects. Due to such global crisis, most of the real estate sector projects were put on hold. Real estate sector was badly affected as was also witnessed by the sharp fall in the rea....
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....he sister concern, the AR of the assessee submitted that in view of the deteriorating real estate market heavy borrowed funds were involved in the project which was affecting the entire future growth of the company. The assessee company worked out a formula to offer discount on bulk sale to a sister concern, who was having sufficient surplus funds. Such discounts were worked out as under: Discount for Bulk booking on down payment basis 24% Advertisement and other selling expenses 3% Commission 5% Other Overheads 1% 33% 35. Ld. AR submitted that each and every item which went into making of the aforesaid calculation of 33%, against which assessee offered on 31.5%, was decided by a well-reasoned and sound basis on commercial basis. He submitted that average carrying time of inventory of the assessee is about 2 years and assessee was paying interest to the bank varying between 12.5% to 16% as supported from the paper book pages 233 to 240. It was pointed out that interest on loan obtained from Housing Development Finance Corporation Ltd. for the period 01.04.2007 to 31.03.2008 was @ 12.5% as witnessed from paper book pages 233 to 236 which went up to 15.75 t....
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.... and sales amount actually realized cannot be questioned by the AO. Reliance for this proposition was made by the Ld. AR on the judgment of Hon'ble Supreme Court in the case of A. Raman & Co. as reported in 67 ITR 11 (SC). 38. It is also submitted by Ld. AR that there is no dispute on costs incurred by the assessee on this project. Similarly the sale price realized by the assessee has also been accepted by the Ld. AO in all subsequent assessment years i.e. A. Y. 2010- 11, A. Y. 2011-12 and A. Y. 2012-13, which is the period during which this project of Dwarka Mall ran and completed. Once the same sale price has actually been accepted by the Revenue in subsequent year and further loss claimed in these subsequent years also allowed, there is no reason to question the same during these two years, it has been submitted. 39. It was also submitted on behalf of the assessee that although Ld. CIT (A) should have allowed the complete loss of Rs. 45.72 Crores on this project in the assessment year 2008- 09 itself in accordance with AS-7 read with clause 35 & 36, yet allocation of loss done by him in various years did not adversely affect the assessee or the revenue because tax rates in all....
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....A. Y. 2009-10. Against the cumulative loss of Rs. 44 Crores till A. Y. 2009-10 out of which assessee claimed Rs. 18.52 Crores in A.Y. 2008-09 and balance Rs. 25.48 Crores in A. Y. 2009-10, the AO calculated and accepted the loss of Rs. 14.98 Crores and disallowed balance loss of Rs. 29.02 Crores in these two years being Rs. 18.52 Crores in A. Y. 2008-09 and Rs. 10.50 Crores in A. Y. 2009-10. It is observed and also has been admitted by both the parties before us that, there is no dispute on the cost estimates by the assessee. Cost estimates on the Dwarka Project have very minor variations over the years and have rather reduced from Rs. 176.1 Crores as estimated in A. Y. 2008-09 to Rs. 173.26 Crores in next two years and fructified at Rs. 174.98 Crores in the final year i.e. A. Y. 2012-13 when this project was finally closed. The AO has not challenged the cost estimates. However, what the AO had done to disallow the claim of losses in these two years is that he has changed the sales estimates and made his own estimates about the possible sale realizations. 42. In A. Y. 2008-09, when assessee estimated its realizable sales value at Rs. 157.45 Crores including the area already booked....
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.... selling major area to its sister concern in A. Y. 2009-10 is not justified and only 5% discount would have been sufficient. 43. The other aspects of the issue that POCM method is applicable, As-7 is applicable, is also not in dispute. In fact, as already noted above, in the POCM method applied by the assessee, the AO has merely substituted the estimated sales in A. Y. 2008-09 and enhanced the sale price actually realized by the assessee in A. Y. 2009-10 and in subsequent 3 years, the cost and sales value have been accepted by the AO himself i.e. in A. Y. 2010-11, 2011-12 and 2012-13. 44. The Ld. Counsel of the assessee has given elaborate justification for allowing the discount to the sister concern which is supported from the documents filed in the paper book and available on records. All the details and explanation filed by the assessee about major crisis in the real estate market during that period, falling indices of reality sector, atmosphere of fear and crashing of reality prices, DDA slashing its floor prices of similar properties by about 40% from Rs. 118.21 Crores in March 2009 to Rs. 70.93 Crores in 2010 and 2011, but still no buyers of similar property in Dwarka itsel....
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....nsactions sitting in the arm's chair of a businessman. Reasonableness of expenditure, the test of commercial expediency would be required to be judged from the point of view of a businessman as has been held in many of the judgments some of which are as under:- a. CIT Vs. Panipat Woolen & General Mills Limited 103 ITR 66 (SC) b. Sasoon J. David & NCo. Pvt. Ltd. Vs. CIT 118 ITR 261 (SC). c. CIT Vs. Walchand & Co. 65 ITR 381 (SC). d. J. K. Woolen Mills Vs. CIT 72 ITR 612 (SC). e. Aluminium Corporation Vs. CIT 86 ITR 11 (SC). f. CIT Vs. Delhi Safe Deposit 133 ITR 756 (SC). g. SA Builders Ltd. Vs. CIT 288 ITR 1 (SC). 46. The only reason given by the Ld. AO that sales in A. Y. 2009-10 to the sister concern are covered u/s 40A (2)(b) of the Income Tax Act. We fail to appreciate this reasoning and concern of the AO. As rightly pointed out by Ld. Counsel and duly acknowledged by Ld. CIT-DR that provisions of section 40A(2)(b) cannot be applied to the transaction of sales or income. These provisions are applicable when assessee incurs expenditure, the expenditure incurred by the assessee being costs of the project have all been accepted by the revenue. We also notice t....
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....ed the losses in A. Y. 2008-09 to the extent of Rs. 18.52 Crores and reallocated major part of this loss in A. Y. 2009-10. As per the order of Ld. CIT (A), the assessee should have been allowed and was eligible to the loss of Rs. 4.70 Crores in A. Y. 2009- 10 as against Rs. 25.48 Crores claimed by him in its ITR. However, Ld. CIT (A) determined the loss allowable in A. Y. 2009-10 at Rs. 19.10 Crores. If the submission of Ld. Counsel is fully accepted, then it would mean lot of rectification orders etc. will have to be passed. Since the assessee as well as department has already acted upon the order of Ld. CIT (A) by filling appeals and cross-appeals and keeping in view the fact that tax rates in each of these years was the same as also admitted by the Ld. AR, we feel that no useful purpose will be served to accept this settled assessment history of the assessee. We, therefore, are of the view that allocation done by Ld. CIT(A) for the total losses of Rs. 45.72 Crores incurred by the assessee over the period of project running into 5 years started from A. Y. 2008-09 to A. Y. 2012-13, which allocation as already clarified has been acted upon both by the assessee as well by the depart....
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....t of this, the Ld. CIT (A) allowed the loss of Rs. 19.1 Crores as per POCM method and the balance loss were allocated to be allowable in A. Y. 2010-11 to A. Y. 2012-13. The appeals filed by the department in A. Y. 2011-12 and 2012-13, which are being simultaneously heard also clarify this position that assessee claimed these balance losses in A. Y. 2010-11 to A. Y. 2012- 13 in appeals filed before CIT(A), which the Ld. CIT(A) has allowed following his own order in A. Y. 2008-09. 54. In our view, no grievance is left with the assessee to pursue this ground. Assessee has also submitted that if order of Ld. CIT (A) in A. Y. 2008-09 is upheld in toto then this ground of appeal raised by the assessee shall become infructuous. Since, we have upheld the order and findings of Ld. CIT (A) in A.Y. 2008-09 and A. Y. 2009-10, this ground of appeal raised by the assessee does not survive. 55. Therefore, assessee's appeal 899/Del/2013 is hereby dismissed. Appeal No. 5776/Del/2014 - A. Y. 2011-12 56. The solitary ground raised by the department in A. Y. 2011-12 pertains to the relief allowed by the Ld. CIT(A) amounting to Rs. 2,51,00,000/- on account of losses in the Dwarka Project. The Asse....
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....ed that this issue also came up before Hon'ble ITAT in assessee's own case in ITA No. 4832/Del/2014 in A. Y. 2010-11, wherein Hon'ble ITAT has upheld the order of Ld. CIT (A) in A. Y. 2010-11. A copy of this order has been filed before us. Since the issue involved and the facts as well as law on this issue are identical, respectfully following the judgment of Hon'ble ITAT in assessee's own case in ITA No. 4832/Del/2014 for A. Y. 2010-11, we uphold the order of CIT(A) on this issue and dismiss this ground of the department. 62. Ground No. 3: This ground has been raised by the department towards bad debts written off. The Ld. AO disallowed a sum of Rs. 15,11,300/- on account of bad debts written off, which mainly represented the advances given to various parties who were suppliers of the assessee in the ordinary course of its business. The Ld. AO disallowed this amount on the plea that the amount written off are not covered u/s 36(1)(vii) of the Income Tax Act. According to AO such write-off don't fall within the purview of section 36(1)(vii) of the Income Tax Act. The Ld. CIT (A) deleted this disallowance by holding that if the advances given to the supplier and the expected goods ....
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....43B, but it may be covered under clause (a) of section 43B, which talks of any some payable by the assessee by way of tax, duty, cess or fee by whatever name called under any law for the time being in force. Thus, according to Ld. CIT (A) ground rent payable to L&DO falls in this clause and he has upheld the disallowance made by the AO. 66. Before us, the Ld. AR submitted that the provision of section 43B is not applicable to the said nature of payment. Reliance has been placed on the judgment of this Tribunal in the case of K. Narendra v/s ACIT as reported in 77 TTJ 76 (Del). A copy of this judgment has been filed before us. In that case also, the issue involved was whether the amount payable for misuse of premises and illegal construction was allowable or not. The nature of such amount, i.e., amount payable towards misuse of premises and illegal construction was held to be in the nature of ground rent by following the judgment of Hon'ble Delhi High Court in the case of Gulab Singh & Sons (P) Ltd. v. CIT 94 ITR 537 (Delhi). It was amongst others held that ground rent does not come under any items mentioned in the various clauses of section 43B. Although the main issue in that cas....