TaxTMI 
TaxTMI 
2021 (9) TMI 1409
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....ner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 2,21,32,624/- made by the AO on account of brokerage and commission." 4) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 38,08,6241- made by the AO on account of net interest free security deposit." 5) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 6, 78,81,157/-made by the AO on account of non-allocation of proportionate over head expenditure to other group entities." 6) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case by restricting the addition of Rs. 2,77,16,42, 129/- made by the AO to Rs. 6,61,871/- u/s 14A." 7) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 18,67,82,2877- made by the AO on account of treating the business income as 'Income from the House Property." 8) "Ld. Commissioner of e case in deleting the addition of Rs. 5,27,018/- made by the AO on account of notional rent on the properties lying vacant during the year....
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....assessee's own case in preceding years. It was further, submitted that except ground No. 13 and 15 of the appeal which are new issues, all the other grounds are fully covered in favour of assessee. 5. The Ld. CIT DR did not dispute the factual position. However, he submitted that where the facts and basis of disallowance/addition is same, the orders of coordinate bench may be followed. Further, the Ld. DR advanced arguments in respect of Ground 6,11 and 15 involving issue of disallowance u/s 14A, disallowance of expense on personal nature and transfer pricing adjustment u/s 92C respectively. With regard, to ground no. 13, he relied upon the assessment order and supported the action of the assessing officer. Firstly, we are taking up appeal filed by the revenue. 6.1 Ground No. 1 is against deletion of addition on account of revenue recognition from construction project as per Percentage of Completion Method (POCM). The assessing officer has considered the addition on the basis of observation of Special Auditor in AY 2009-10 wherein it was pointed out that appellant company has changed the method for apportionment of internal development charges from FY 2008-09. As per the new meth....
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....avour of assessee in preceding years wherein it has been held that notional capitalization of interest is not permissible particularly when the assessee has already capitalized interest pertaining to projects under execution. There is nothing on record to show that facts and the basis of disallowance in the year under consideration is different from that in preceding years. As the issue of capitalization of interest has been decided by the Coordinate bench in preceding years, the same is decided as per the table given in para 19. 8.1 Vide Ground No. 3, the revenue is aggrieved by the order of CIT(A) deleting disallowance of brokerage expense amounting to Rs. 2,21,32,083/-. The assessing officer considered the disallowance on the ground that brokerage paid by the assessee should have been linked with each project and transferred to WIP and recognized as per POCM method. 8.2 The CIT(A) deleted the addition on the basis of order of Coordinate bench in assessee's own case for AY 2006-07 and finding recorded by his predecessor in AY 2009-10. 8.3 We have considered the issue in hand. The action of assessing officer in treating brokerage as part of cost under POCM method has been depre....
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....ce of Rs. 6,78,81,157/- after making allocation of overhead expenses claimed by the assessee to group concerns namely M/s. DLF Infocity Developers (Chennai) Ltd. and M/s. DLF Cyber City Developers Ltd. The allocation of expense and consequential disallowance is wholly on the basis of assessment order passed for AY 2006-07 to 2011-12 which is evident from Para 5.1 of the assessment order. 10.2 In the impugned appellate order, the CIT(A) deleted the addition by following the reasoning given in order of CIT(A) in preceding years i.e. AY 2006-07 to 2011-12 as well as order of ITAT in assessee's own case of AY 2006-07. 10.3 On careful perusal of the facts, we find that the basis adopted by the assessing office while making disallowance of expenses in the hands of the assessee on account of allocation of overheads to group concerns is static and borrowed from earlier years assessment orders. Further, as this issue has already been decided by Coordinate bench in AY 2006-07 to 2011-12 wherein the disallowance was deleted. On parity of facts, this ground is also decided as per table given in para 19 of this order. 11.1 Ground No. 7 is regarding deletion of addition of Rs. 186,782,287/- b....
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....to the tune of Rs. 4,45,732/- u/s 32 of the Act. The assessing officer made the disallowance on the basis of observation of Special auditor relevant for AY 2006-07 as per which WDV of the property was calculated as on 01/04/2005 after reducing notional depreciation from 01/04/1999 to 31/03/2005. The initial disallowance of depreciation was in AY 2006-07 and thereafter every year on the basis of reduced WDV. 13.2 The CIT(A) deleted the disallowance in AY 2006-07 and the revenue accepted the order of CIT(A) on this issue and did not prefer appeal before ITAT. However, in AY 2007- 08 this issue came for consideration before Coordinate bench for the first time wherein vide order dated 01/11/2017 in ITA No. 4342/D/12 the disallowance of depreciation was deleted as per finding recorded in Para 151. Further, the Ld. Counsel submitted that the assessing officer has accepted the claim of depreciation on DLF Centre building in AY 2016-17 and no disallowance was made. 13.3 As the issue of depreciation is recurring issue based on recalculated WDV and same having been decided by Coordinate bench in preceding years, this ground is also decided as per table at para 19 of this order. 14.1 Groun....
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....eld that assessing officer cannot question the reasonableness of the expenditure incurred for the purpose of business. On the basis of decision of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co 253 ITR 749I, it was further held that assessee is a public ltd. company and being a distinct assessee, there cannot be a case of disallowance of expenses on account of personal expense. If the expenses are incurred for the purpose of Director or employees of the company, the same are allowable. 15.3 We find that this issue came for up consideration before Coordinate bench in AY 2010-11 and 2011-12 wherein the disallowance of expenses relating to aircraft and helicopter on the ground of personal expense was deleted. The finding of Coordinate bench in ITA No. 4793/D/15 relating to AY 2010-11 is reproduced hereunder: 4. Ground number 16 and 17 of the appeal is with respect to the disallowance of expenses not incurred wholly and exclusively for business purposes amounting to Rs. 49,629,551 and operational expenditure of Rs.387,449,073/-. This issue has been raised by the learned assessing officer wherein he disallowed the expenditure of the above sum considering the same ....
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....e present appeal is same as that in AY 2010-11 and respectfully following the order of Coordinate bench, this ground is decided as per table at para 19 of this order. 16.1 Ground No. 12 is against deletion of addition of interest of Rs. 1,59,02,000/- by the CIT(A). The assessing officer vide para 13.3 and 13.4 of the assessment order has observed that rate of interest charged by the assessee company on loans advanced to group concerns is less than that paid to financial institutions and banks. The assessing officer worked out the interest short charged from the group concerns on proportionate basis and accordingly made addition in the hands of the assessee. 16.2 The assessee succeeded before CIT(A) who deleted the addition as per finding record at Para 20.1 of the impugned order. The CIT(A) relied upon the decisions of Apex Court in the case of S.A. Builders 288 ITR 1 and M/s. Taparia Tools 372 ITR 605 (SC) while holding that assessing officer was not empowered to make addition of notional interest. 16.3 We have considered the assessment order and order passed by CIT(A). The issue under consideration is addition of interest over and above what has been charged by the assessee on....
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....s observed that while examining the allowability of deduction of the interest the AO is required to consider the genuineness of the business borrowing and that the borrowing was for the purposes of the business and not an illusionary and colourable transaction. Once the genuineness of the borrowing is proved and the interest is paid on the borrowing it is not within the powers of the learned assessing officer disallowed the deduction either on the ground that the rate of interest is unreasonably high of that the assessee had himself charged the lower rate of interest on the money which it has advanced. The learned departmental representative could not controvert the above finding of the learned CIT - A. In view of this, we confirm the order of the learned CIT - capital and dismiss ground number 18 and 19of the appeal. Respectfully following the order of Coordinate bench and taking the consistent view, we uphold the order of CIT(A) deleting the addition. The Ground No. 12 is decided as table at Para 19 of this order. 17.1 Ground No. 14 is directed against deletion of addition of Rs. 9,52,53,136/- made on account of income from sale of carbon credits by treating the same is revenue....
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.... The learned departmental representative could not controvert the above decision and therefore respectfully following the decision of the honourable Andhra Pradesh High Court we confirm the order of the learned CIT - A in deleting the addition of Rs. 122,34,040 on account of Carbon credit receipt holding the same to be a capital receipt. Accordingly ground number 19 of the appeal is dismissed. In the light of the decision of Hon'ble Andhra Pradesh High Court and Coordinate bench, we find no reasons to deviate from view taken by the CIT(A) and the order of CIT(A) deleting the addition is upheld. Accordingly, this ground is also decided as per table at Para 19 of this order. Coming to the cross objection of the assessee (Co No.6 of 2021) 18.1 The sole issue involved in the CO is addition of Rs. 6,80,874/- being notional rent in respect of kiosks let out to tenants. The assessee is not recognizing the rental in its hand on the basis of mutual arrangement with maintenance company M/s. DLF Services ltd. which is providing maintenance and upkeep services in the Mall. The claim of the assessee is that the income did not accrue or arise in its hands and same has duly been taxed in the ....
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....er of Coordinate bench for AY 2008-09 and 2011-12 which is a matter of precedence, we respectfully follow. Gr No. Particulars of the Ground Issue covered by ITA order dtd. 27/5/2019 for A.Y. 2008-09 Issue on identical facts and circumstances dealt with in order dated 29/09/2020 in ITA No. 4187 & 4793/D/15 for A.Y. 2010-11 Issue on identical facts and circumstances dealt with in order dated 29/09/2020 in ITA No. 4794/D/15 for A.Y. 2011-12 Our decision on grounds following the order of coordinate bench in preceding years Appeal of the revenue (ITA No. 5941/Del/17) 1 Disallowance deleted on account of revenue recognition under POCM Para number 81- 87 of the order Para number 9 of the order Para number 13 of the order Dismissed 2 Holding that interest expenditure is capital in nature which CIT appeal allowed in favour of the assesse holding it to be revenue in nature Paragraph 94-98 covers the issue in favour of the assessee Paranumber 10 Para number 13 of the order Dismissed 3 Disallowance on account of brokerage and commission expenditure deleted b the learned CIT-A Decided in favour of the assesse as per paragraph numbe....
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....d Cross Objection of the assessee (CO No. 6 of 2021) 1 Addition of notional rent on kiosks Decided in favour of the assesse as per paragraph number 21-24 Covered in favour of the assessee by paragraph number 32 of the order. Covered in favour of the assessee by paragraph number 7-10 of the order. Allowed 20. However, we deem it fit to adjudicate in detail the grounds for which specific arguments were advanced by the both the sides including the grounds which are not directly covered by the orders of Coordinate bench. 21.1 Ground No. 6 of the revenue's appeal is against deletion of disallowance of Rs. 2,77,16,42,129/- u/s 14A read with Rule 8D of the Income Tax Act, 1961. The assessee in its return of income made suo moto disallowance u/s 14A to the extent of Rs. 6,61,871/-. However, the assessing officer enhanced disallowance u/s 14A on the basis of Rule 8D(2)(ii) and (iii) without making any comment on suo moto disallowance by the assessee. Aggrieved by the disallowance, the assessee challenged the same before CIT(A) which deleted the disallowance on the ground of non-recording of satisfaction in terms of section 14A(2) of the Act. The CIT(A) further obs....
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.... of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act and section 14A(3) provides that, "the provisions of sub section (2) shall apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act". While a lot of emphasis is placed by the counsel on wordings of section 14A(2) which refer to the need of' Assessing Officer's satisfaction to the effect that the claim, made by the assessee is incorrect, it simply overlooks the provisions of section 14A(3) which state that a disallowance u/s 14A(2) can also be made in a case in which assessee claims that no expenditure has been incurred for earning the tax exempt income. Therefore, a plain reading of the statutory, provisions of section 14A(2) and (3) shows that when assessee offers a disallowance u/s 14A, the provisions of section 14A(2) ....
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....consideration before Coordinate bench in the case of assessee for immediately preceding AY 2011-12 (ITA No. 4794/D/15) and AY 2010- 11 (ITA No.4793/D/15)wherein the disallowance was deleted by observing that satisfaction recorded by the assessing officer is invalid. The satisfaction recorded in present case is ad-verbatim that in AY 2010-11 and 2011-12. The finding of coordinate bench in AY 2010-11 is reproduced hereunder for ready reference: "18. We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently in this case the learned assessing officer has not recorded the satisfaction stating that why the claim of the assessee that it has incurred only Rs. 1,815,695 on account of in admissible expenditure u/s 14 A of the act. The learned assessing officer has only given a general observation. The issue is squarely covered by the decision of the honourable Delhi High Court in case of Eicher Motors Ltd. v. Commissioner of Income-tax-III* [2017] 86 taxmann.com 49 (Delhi)/[2017] 250 Taxman 532 (Delhi)/[2017] 398 ITR 51 (Delhi) "13. As regards the disallowance of expenditure for earning exempt income in terms of Section 14A of the Act, ....
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.... the assessee is allowed." In the light of finding recorded in aforesaid para and respectfully following the order of Coordinate bench, we find no reasons to interfere with order of CIT(A) deleting the disallowance u/s 14A r.w.r 8D and same is upheld. 22.1 Ground No.13 is in respect of deletion of disallowance of expenditure to the tune of Rs. 14,64,00,000/- on account of short/non-allocation of proportionate overhead expenditure to windmill unit in Gujarat and Karnataka. The assessing officer made the disallowance on the ground that the windmill units located in Gujarat and Karnataka are claiming deduction u/s 80IA and assessee has failed to allocate overhead expenses to these units. Eventually, the assessing officer allocated the establishment, finance and general administration expenses in the ratio of turnover and disallowed the expenses so allocated in the hands of the assessee company. The impugned disallowance was deleted by CIT(A). 22.2 The Ld. DR supported the order of assessing officer and submitted that allocation of expenses to windmill units in Gujarat and Karnataka as done by the assessing officer is correct. 22.3 The Ld. Counsel for the assessee filed synopsis on....
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....or the allocation of any expenses to the windmill project, no expenditure claimed in the taxable income can be linked with the windmill project. In view of the above, it is clear that no, expenditure can be allocated to the windmill project. Both the divisions have maintained the separate books of accounts and all the expenditure in the nature of operational and general and administrative expenses have been debited to the respective divisions. There is no force in the argument of the Assessing Officer that the assessee has not allocated any expenses to the separate divisions. The separate books of accounts maintained by both the divisions leave no "scope for making any addition on account of the administrative and other expenses. The addition of Rs. 14,64,00,000/- made by the Assessing Officer is therefore, deleted. The Assessing Officer is directed to modify the order of assessment accordingly." The Ld. DR was unable to controvert the finding recorded by CIT(A). On closer perusal of assessment order, we find that assessing officer has not given any basis for making impugned disallowance and the only reasoning behind the allocation of expense is that windmill units have not clai....
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....ht in by Finance Act, 2012 in section 92B, the rendering of Corporate guarantee is an international transaction as per clause (c) of Explanation to section 92B of the Act. It was accordingly argued that TPO has rightly benchmarked the transaction for the purpose of transfer pricing adjustment after applying interest saving approach. 23.4 The Ld. AR reiterated the arguments advanced before CIT(A) and supported the order of CIT(A). It was argued that giving corporate guarantee to bank does not have any bearing on profit, income, losses or assets of the companies, the same cannot be treated as international transaction u/s 92B of the Income Tax Act, 1961. The Ld. AR is his alternate submission argued that the benchmarking of guarantee commission fee by applying interest rate @ 0.375% p.a. is excessive and same be reduced to 0.25% p.a.. 23.5 We have heard both sides. The issue of corporate guarantee has been subject matter of dispute between the taxpayer and revenue. From the side of the taxpayer, the argument taken is that corporate guarantee falls outside the purview of section 92B and is not an international transaction, whereas the revenue contends that post amendment in section ....