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2019 (8) TMI 1858
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....the PCIT of Central Circle-16 and ITO Ward-21(1) are different. 2. That under the facts and circumstances, both the lower authorities grossly erred in law as well as on merits in making and confirming the addition of Rs. 135,11,67,220/- u/s.56 (2) (viia) r/w Rule- 11UA. 2.1 That under the facts and circumstances, both the lower authorities exceeded the scope of this limited scrutiny asstt. by extending his examination towards applicability of sec.56 (2) (viia) r/w Rule-11UA against examination correctly to be done only u/s.68 of the I.T. Act, thus the examination and addition u/s.56 (2) (viia) since not permitted by Pr. CIT, as mandated by instructions, has been done without jurisdiction, consequently the resultant addition being without jurisdiction needs to be deleted threshold. 2.2 That under the facts and circumstances, the provisions of sec.56 (2) (viia) r/w Rule-11UA is not applicable at all. 2.3 That without prejudice, since the workings u/s.56 (2) (viia) r/w Rule-11UA is not possible, more so on account of not possible to get the audited balance sheet as on the valuation date by the auditor of the company appointed u/s.224 of the Companie....
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.... made by the assessee company in the unlisted equity shares in various companies for the year ending 31st March, 2015 were as under: S.No. Name Script in which invest made No. of share purchased Purchase @ per share Total amount of investment (Rs.) 1 Ambience buildcon Pvt Ltd 3,01,211 10 3012110 2 Aman hospitality Pvt Ltd' 48266526 10 482665260 3 Ambience IT Developers Pvt Ltd 2,500 10 25000 4 Greenline developers Pvt Ltd 2,81,492 10 814920 5 R.S.G. Housing and finance Pvt ltd. 4,97,500 10 4975000 6 Senator developers Pvt. Ltd. 2,54,130 10 2541300 7 Sara estates Pvt. Ltd. 4,62,335 10 4623350 8 Ambience highway developers Pvt.Ltd. 6,25,000 10 6250000 9 Ambience towers Pvt Ltd 2,21,368 12.21 2702903.28 10 Ambience homes Pvt Ltd 2,47,550 10 2475500 11 Ambience power projects Pvt Ltd 12,500 10 125000 12 Ambience home developers Pvt Ltd 2500 10 25000 13 Prime commercial Pvt Ltd 268225 10 2682250 14 Green vally realtors Pvt Ltd 2593 10 25930 15 ....
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....hown in the balance-sheet as on 31st March, 2015, were as per the notes given by the auditors as on the date of transfer, i.e., 30th March, 2015, which were reduced by: (a) Amount of bad debts, (b) Business investments made in projects, (c) Borrowing cost included in the fixed assets, (d) Earnest money/advances given by the companies, (e) Cost of damages of various items forming part of the assets. The contention of the assessee was that these items did not represent the true value of the assets as they are fictitious asset value. 5. Apart from that, one of the contentions raised by the assessee was that a Fair Market Value of the shares as per Rule 11UA was not workable, because as per provision of Rule 11UA (1)(b) the Fair Market Value has to be derived from the balance sheet of the company drawn up on the date of valuation duly audited by the auditors appointed u/s. 224 of the Companies Act, 1956 as defined under rule 11U. However, w.e.f. 01.04.2014, new Companies Act, 2013 has come in operation under which appointment of auditors has been prescribed u/s.139 of the Companies Act and not u/s. 224, and therefore, the appointment o....
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....nies Act, 2013 and has found that the provisions are pari materia, hence the audited financial by the auditors can be taken into consideration for the purpose of computing the fair market value of the shares as if they were appointed u/s.139. The provision of Rule 11UA provides that Fair Market Value of the shares should be computed as per the audited balance-sheet of the company as on the date of valuation/transfer and the balance-sheet based on which the value is to be computed should be audited by the auditors of the same company. Simply because of the language of the provisions under Rule 11UA(b)(ii) has not been amended consequent to the introduction of new Companies Act, 2013, that does not mean that the said provision itself has become unworkable for computing the Fair Market Value of the shares. 9. One of the core contention raised by the assessee was that on the facts of the present case, provision of Section 56(2)(viia) would not be applicable on the transaction of investment because the same has been done in respect of group companies owned by common shareholders within the same family of Shri R.S. Gehlot and his HUF. It was submitted that the transaction was within t....
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....her contention raised by the assessee was that the Assessing Officer has done certain arithmetical error and the value of Fair Market Value determined by the Assessing Officer was factually incorrect and it was pointed out that Fair Market Value computed to the extent of Rs.10,56,92,728/- should be deleted. However, the ld. CIT(A) held that nowhere assessee could explain the difference of Rs.10,56,92,728/-. 13. Lastly, in so far as the contention of the assessee that various adjustments made in the value of assets submitted before the Assessing Officer has to be given effect for which assessee has given detailed submission and also collated the adjustment proposed under Rule 11UA in the value of assets and liabilities. The adjustment made by the assessee before the Assessing Officer and also before the Ld. CIT(A) has been discussed in great detail by the Ld. CIT(A) and same have been rejected. Since, the claim of this adjustment has been the main bone of contention and one of the core arguments taken before us at the time of hearing, therefore, the relevant observation and the finding of the Ld. CIT(A) in this regard are summarized as under: • As regards the a....
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.... held that no working or documentary evidence has been brought by the assessee to show that how the said area has been worked out and the proportionate cost worked out by the assessee and same is not supported by any documentary evidences. He further held that whenever a township is developed then the surrounding amenities in the form of roads, common area, parks, green area etc. were also developed which forms an important part of the project and the cost pertaining to the same is embedded in the total cost of the project and the sale price of the unit of the township are determined accordingly, which are recovered from the buyers. • Regarding the cost of damage electrical material, tiles, marbles and hardware etc., the same was rejected on the ground that there was no corroborative evidence filed by the assessee and even otherwise also if it is assumed that said cost incurred actually represents the cost of damaged goods then also no reduction/adjustment can be allowed because same represents the normal loss borne out by the company. • Regarding impairment in the value of property due to adverse court order, etc., Ld. CIT(A) held that nowhere....
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....hallenged at any stage and once it is found that there is an inherent lack of jurisdiction of the Assessing Officer, then in absence of any transfer order the assessment order passed by such AO cannot be sustained. In support, he relied upon following judgment:- i) KUSUM GOYAL 329 ITR283 (CAL.) Held that - In case of transfer within the same city, locality or place the opportunity of hearing as postulated in Sec. 127 (1) and (2) is dispensed with, other statutory formalities which include issuing an order are required to be complied with and in the absence of the same the Asstt. is to be treated as illegal. ii) AJANTHA INDUSTRIES AND ORS. VS. ABDT & ORS. 102 ITR 281 (SC) Held that - The requirement of recording reasons U/s. 127 (1) for transfer of a case from one AO to another is a mandatory direction and non - communication thereof to the assessee is not saved by showing that the reasons exist in the file although not communicated to the assessee. iii) RISHABH BUILDCON (P) LTD. VS. CIT & ORS. (2011) 57 DTR (DEL.) 252 On a reading of the provisions of S. 127 three aspects emerge: (i) a show-cause notice has to be issued and a reply has t....
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....passed u/s.127 and other related points and in response to such RTI Application, no such information was provided. Thereafter, assessee had filed a First Appeal and the First Appellate Authority has directed the CPIO to provide the information within 15 days from the date of the order, i.e., 26.04.2019 which was not made available till the first date of hearing. Contention by the Revenue on the issue of Jurisdiction 17. Before us, Ld. CIT-DR submitted that ITO, Ward-21(1), Delhi had territorial jurisdiction over the case of the assessee and not only that, assessee had participated in the assessment proceedings before the Assessing Officer in response to the notice u/s.143(2) and 142(1) and filed the requisite details from time to time. Even survey u/s.133A was also conducted by the officers under the same range and statements were also recorded and till that time assessee had not raised any objections and has duly participated in the assessment proceedings. Thus, the case of the assessee is squarely covered u/s.124(3) of the Act, and therefore, assessee now cannot question the jurisdiction of the Assessing Officer after the expiry of one month of issue of notice u/s.143....
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....ame authority then such a transfer has to be done after giving reasonable opportunity of being heard in the matter and after recording the reason before passing the order. However, if transfer is from Assessing Officer to another Assessing Officer situated in the same city then no opportunity is required to be given. Thus, it is mandatory under the law that, if case of an assessee is transferred to one Assessing Officer to another, then order u/s 127 has to be passed and without such order jurisdiction cannot be conferred on the transferee Assessing Officer. On the other hand, Section 124 is applicable only when there is a direction or an order issued u/s.120(1) or 120(2) vesting the Assessing Officer with a jurisdiction of an area, i.e., where there is an assignment of the jurisdiction of an Assessing Officer. Sub section (1) of Section 124 assigns Assessing Officer's jurisdiction linked with the territory. Sub Section (2) of Section 124 provides that assessee may raise objection regarding the correctness of the jurisdiction with respect to territorial jurisdiction u/s. 124(1). Sub Section (3) of section 124 provides for time limit for raising such objection. Here, it is not a cas....
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....cer would have jurisdiction over the area in terms of any direction or order issued under sub-section (1) or sub-section (2) to Section 120 of the Act. Jurisdiction would depend upon the place where the person carries on business or profession or the area in which he is residing. Sub-section (3) clearly states that no person can call in question jurisdiction of an Assessing Officer in case of noncompliance and/or after the period stipulated in clauses (a) and (b), which as observed in S. S. Ahluwalia {supra) would negate and reject arguments predicated on lack of subject matter jurisdiction. Where an assessee questions jurisdiction of the Assessing Officer within the time limit and in terms of sub-section (3), and the Assessing Officer is not satisfied with the correctness of the claim, he is required to refer the matter for determination under sub-section (2) before the assessment is made." Further, the Hon'ble High Court held that: "Section 127 relates to transfer of case from one Assessing Officer having jurisdiction to another Assessing Officer, who is otherwise not having jurisdiction as per directions of the Board under Section 120 and Section 124 of the Act....
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....oceedings to the Assessing Officer Ward-58(2) Delhi. It was on these facts; their Lordships held that there was no need to invoke or to follow the proceedings mentioned in Section 127. Further, it was clearly held and observed that, "Section 127 would come into play when the case is to be transferred from Assessing Officer who having jurisdiction to the 3rd officer and not having jurisdiction over an assessee in terms of direction of Board u/s.120 of the Act. Further Section 127 would also apply when the Department wants transfer of the case and in that case Section 120 and Section 124 are not attracted." The aforesaid clarification by the Hon'ble Jurisdictional High Court clearly clinches the issue that if the case is being transferred from one Assessing Officer having jurisdiction over the assessee to another assessing officer who otherwise was not having the jurisdiction in terms of direction of the Board u/s.120 and 124 of the Act, then transfer order u/s 127 is mandatory, without which the jurisdiction of the Assessing Officer cannot be conferred to pass any order. If such a statutory procedure is not followed then there would be a chaos where any Assessing Officer can pass or....
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....97,277/-. The Assessing Officer has calculated the Fair Market Value of these shares of only 22 companies out of 26 companies and thereby calculated the differential value of shares of 22 companies as per the Rule 11UA at Rs.135,11,67,220/-. He submitted that Assessing Officer had erred in not considering the balance 4 companies for the purpose of determining the Fair Market Value of shares as per the Rule and all are considered cumulatively, then the overall valuation would be negative. 24. Before that, his first point of contention is that the deeming provision of Section 56(2)(viia) would not be applicable, because transaction was between the same group companies belonging to the same family having registered office at same place and owned by same Ambience group and managed by the same members of the family. Here, it is not a case, where the shares have been acquired by the assessee of some unconnected or outside company, albeit the shares were held beneficially, earlier by the same family in the name of different entity and now by way of this transfer, the shares are again held by the same family but in a different entity. Thus, there cannot be a transaction of any unaccount....
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....mpared, otherwise Legislature would not have used the word 'aggregate' twice in clause (ii) and therefore it clearly shows that the aggregate value of Fair Market Value of the shares has to be taken. 26. His next contention was with regard to the fact that the auditor who has prepared the balance sheet on the date of the transfer/valuation date was appointed u/s.224 of the Companies Act, 1956; and from the Assessment Year 2014-15 the new Companies Act, 2013 has been operative whereby auditors have to be appointed u/s.139 of the Companies Act. Since, there is no enabling provision brought in Rule 11U, therefore it would create an impossible situation whereby said Rule can be made available in the case of the assessee as the balance sheet referred to in Rule 11U are those which should be audited by the auditors appointed u/s.224 of the Companies Act. Thus, such an audited balance sheet cannot be the basis for determining the FMV of the shares. 27. His next contention was with regard to the certain calculation errors of Rs.10,56,92,728/-, the working of which was given before the Assessing Officer and also given in the paper book from pages 132 to 150 of the paper book. Thus, he....
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....claim was given before the AO and CIT(A) and also as per sheet attached in the audited balance sheet as on 30.0.15, by way of notes. Rs.347,81,67,504/- has been shown as non-recoverable which includes Rs. 260,98,63,707/- for earnest money and advance and balance Rs.86,83,03,797/- for borrowing cost being interest. The nature of this amt. is that, due to defaults of the assessee in payment / long and continued delayed in payments / non observing and non-complying with the mandatory terms and conditions of the contracts, the amounts gets forfeited by the authorities. Necessary evidences showing that the money will be forfeited in case of such defaults were available with the assessee. Now, the audited balance sheet has to be considered and applied by giving effect with the notes appended therein. At times, the amount forfeited is not given as a fact in the financial accounts since in that case any hope / claim for the same gets vanished. b) For interest cost incurred for purchase / development of plots / land / projects capitalized / work in progress. Name of the company Amount Ambiance Pvt. Ltd. 86,83,03,797/- Ambiance Developer & Infrastructure Pvt. Ltd. 52,37,....
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....d be allowed for calculating FMV as per Rule-11UA. Further, the A.O. nowhere disputes that the amounts claimed as a deduction in above accounts stands capitalized and / or included in work in progress, he simply claims that the amt. is not deductible, which is not correct. c) Bad debts: Name of the company Amount Ambiance Developers & Infrastructure Pvt. Ltd. 4,08,45,945/- This claim is appearing in the notes to audited balance sheet as on 30.03.15. Nature of this amount represent non recoverable lease / rents from the tenants of Ambiance Mall at Gurgaon. This amt. already stands written off in books, in parts, and finally upto A.Y.18-19. Since this amt. is upto 30.03.15, i.e., the date of audited bal. sheet, therefore this amount should be allowed. More so, this amount stands reported in the notes of the audited balance sheet. Contention by the Revenue on Merits 29. On the other hand, ld. CIT-DR submitted that the contention of the ld. counsel that the aggregate fair market value of all the 26 companies should be taken including the negative value of shares with respect to four companies, is untenable in law. Apart from relying upon the order of....
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..... The purpose or intention of introducing the Finance Bill, 2010 whereby this amendment was brought, cannot be the approach to interpret the section when a literal construction of the clear-cut words has been used in the section. There is no ambiguity under the provision for which any purposive construction has to be done. Finance Minister's speech cannot be treated as a law laid down by the legislature. He has also distinguished the judgment relied upon by the ld. counsel. 31. Lastly, with regard to the adjustment in the value of asset under Rule 11UA, his elaborate submissions are as under: "As per Rule 11UA (1)( c) (b), the book value of the assets in the balance sheet will be reduced by the following- 1. Tax paid as TDS/TCS/Advance Tax [not self-assessment tax] net of tax claimed as refund [therefore actual tax liability to the extent paid as TDS/TCS/Advance Tax] 2. Amount shown in the balance sheet as asset which does not represent the value of any asset including unamortized amount of deferred expenditure [Misc. expenditure and losses not written off] The asset which does not represent the value of any asset including unamortized amount ....
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....o the extent not written off or adjusted) Liabilities Amt Assets Amt Capital & Reserves Current Assets Add - Net Profit Cash at Bank Less - Drawings Cash in Hand Reserves & Surplus Sundry Debtors B/R Long Term Liabilities Stock Loans Non-Current Assets Land and Building Plant and Machinery Current Liabilities Furniture Sundry Creditors B/P Investments Outstanding expenses Misc. Expenditure Discount on Issue if Shares Total Total The amount not written-off in the current accounting period is shown in the balance sheet. This is an example of fictitious asset. 9. Fictitious assets are shown in the balance sheet itself an....
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.... Rule 11UA(1)(b). 13. On perusal of the claim of the adjustments against the value of assets, it appears that the assessee has made unsubstantiated claims. The AO can very well examine the claim of the assessee in respect of FMV of shares purchased. The assessee has claimed adjustment in the value of assets on following grounds- 1. Earnest money/advance against plots/land forfeited The CIT(A) has examined this issue in para 5.23 on page 20-21 of his order and has given the finding that the assessee has not submitted any documentary evidence to substantiate its claim. In the paper book of the assessee also, no supporting document is filed. The assessee is making claim of adjustment only on the basis of notes to balance sheet. Onus is on the assessee to substantiate that its claim falls under Rule 11UA and then it has to be established that the claim is genuine. The assessee has fail to discharge the onus. 2. Interest Cost incurred for purchase/development plots/land/projects The CIT(A) has examined the above claim in para 5.23 on page 21-23. And has given the finding that the claim is bereft of merit. 3. Bad debts The CIT(A) has ....
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....note that the so-called assets whose value was shown as inflated as on 30.03.2015 was not shown so in the balance sheets of those companies as on 31.03.2015. Further, no such observations of the statutory auditors of the said companies are there in the audited financial accounts as on 31.03.2015. Therefore, the claim of the assessee is self-contradictory. The purpose of the assessed" is to reduce the FMV of shares by claiming the lesser value of assets." Decision on Merits 32. We have heard the rival submissions and perused the relevant finding given in the impugned orders as well as material referred to before us at the time of hearing. So far as one of the main contentions raised by the ld. counsel that the deeming provision of section 56(2)(viia) would not apply on the facts of the present case as a transaction was between the same family/group companies and therefore, it cannot be deemed that it was case of money laundering of unaccounted money or colorable transaction. Here, in this case, it is a matter of fact that all the companies belonged to/owned by the same family having the registered office at the same place and owned by the same group. The deeming provision of S....
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.... the provision as to when such deeming provision will be triggered. No exception has been carved out (except for as provided in proviso that it shall not be applicable on certain kind of transfer) either looking to certain hardships or under certain circumstances where the provision will not apply. It is a well settled and trite law right from time memorial that the construction of the statute must be taken from the bare words of the Act. One should not look what possibly may have been the intention of the Legislature and aid the language of the statute. If the Legislature did intend anything but has not expressed clearly in the language of the statute, then also the Courts cannot invent something which do not matches with the words of the text. It is only where the language of the statute in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity or hardship or injustice, presumably not intended, then a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence, then the Courts probably can go what was the purpose of bring....
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....t "any property, being shares of a company". The word 'aggregate fair market value' refers to the said property only, i.e., the share of a company. It is only where the aggregate fair market value of shares of such company exceeds Rs.50,000/-, then same has to be taxed. The word 'aggregate' used in the section refers to shares of a company and cannot lead to an inference that aggregate value of transaction of shares of various companies should be taken cumulatively for computing the FMV. This word has been used to see the aggregate value of the shares of a particular company and not to infer to aggregate or club all the transaction of transfer of shares of different companies. There is no such exception or provision where a transaction relating to purchase of shares of several companies are undertaken then the fair market value of shares of all the companies needs to be aggregated or any kind of set-off of positive and negative figure is to be given, i.e., where the FMV of a share is negative or FMV is lesser than the purchase value, then same is to be adjusted with transaction of shares of a company where FMV is positive. In case where purchase consideration is more than FMV, then....
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....luation would be Rs.124,54,66,572/- and therefore, difference amount of Rs.10,56,92,728/- is to be corrected. In support he has given the company wise value of the shares as per the balance sheet taken by the Assessing Officer which gives the figures of assets and liabilities and has worked out the aggregate excess/short Fair Market Value. Accordingly, he submitted that the Ld. CIT (A) and Assessing Officer have wrongly made this addition instead of verifying and correcting the same. Since calculation error in the figures taken by the AO for the valuation has been pointed out as per the detail working submitted before, therefore, we find it fit that same needs to be verified by the AO. Accordingly, we direct the Assessing Officer to examine the calculation as submitted by the AO and correct the figures if any after verification and rectify the error and grant consequential relief. 37. Now coming to the last contention raised by the ld. counsel that the ld. Assessing Officer and Ld. CIT(A) have erred in law and on facts in not giving any deduction of various adjustment made by the auditors in the value of assets in his report/financial statements on the date of transfer, i.e., 30....
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....igure of assets and liabilities. It has been clarified by the ld. counsel that though for the purpose of accounting standard and disclosure requirement under the Companies Act, the figures of assets have been given in the balance sheet which may be similar to as on 30th March, 2015 and 31st March, 2015, however on the valuation date the balance sheet prepared contains detail notes to the accounts wherein auditors have clearly clarified and qualified certain items which does not represent the value of the assets. Most of these items broadly have been following: - (i) Borrowed interest on assets which has been capitalized as per the accounting standard and requirement of the Income Tax Act. (ii) Work in progress. (iii) Bad debts. (iv) Earnest money/advance forfeited against the plots. (v) Various materials which are though part of assets but have been damaged; and for certain payment in respect of EDC charges, statutory charges, licensing fee, etc. paid to the Government Authorities for acquiring the land. 38. Before us following details of assets of the companies which have been clarified by the auditors that they do not represent the ....
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....000 Note No. 6 4,73,36,511 7,80,957 4,65,55,554 8 Ambience Towers Pvt. Ltd. Borrowing Cost included in trade investment in Shalimar Bagh Project which is not relisable 24,04,31,291 Note No. 9 9,69,59,184 3,62,776 9,65,96,408 Borrowing Cost included in trade investment in Rohini Project which is not relisable 14,58,80,709 38,63,12,000 9 Sara Estate Pvt. Ltd. Stock in Trade (Inventories)- Assets 19,63,58,841 Note No. 5 5,05,23,969 14,33,155 4,90,90,814 10 Senator Developers Pvt. Ltd. Stock in Trade (Inventories)- Assets 23,68,42,716 » Note No. 6 5,96,69,724 4,57,774 5,92,11,950 11 Greenline Developers Pvt. Ltd. Stock in Trade (Inventories)- Assets 24,74,18,000 Note No. 6 6,24,49,000 5,91,794 6,18,57,206 Total 1,34,13,21,085 6,45,46,907 1,27,67,74,178 Regarding the nature of stock-in-trade and business investment, the ld. counsel had clarified that these amounts appear in the balance sheet of these companies ....
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.... A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; L = book value of liabilities shown in the balance-sheet, but not including the following amounts, namely:- (i) the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax ....
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....ings in more than one accounting period. Basically, they are amortized over a period of time and are recorded as assets in financial statements only to be written off in a future period. Fictitious assets are shown in the balance sheet itself and while computing the net worth of a firm, such fictitious assets are reduced from the value of assets. Here in this case auditor has qualified and also quantified such items in the notes annexed to the accounts which do represent the value of the asset. 41. Fair market value is the amount a stock is worth in a market. It is to be seen, what is the current price at which shares can be sold in the market. The value of a share of a company is determined by underlying assets as reduced by liabilities. Then can such value be enhanced by some artificial or fictitious cost. No one in the open market will buy an asset which is worth of Rs.100/- at Rs.120/- or more because the enhanced amount represent some artificial cost, unless the entire business is transferred as an ongoing business or on slum sale. The fair market value of the shares has to be seen qua the real value of the underlying asset. In our opinion, if there are any items which has ....
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....he purchase of plot/ land in auction and has been forfeited by the Government Authority and as on the date of valuation and allotment has not been revived, then such an amount reflected as an asset in the books cannot be reckoned as representing the real value of the asset on the date of transfer. The auditors based on the material on record have stated as under: "Inventories includes amount of Rs.347,81,67,504/- paid towards earnest money and advances against purchase of plots being non recoverable due to cancellation/non payment of demand raised by the respective authorities and amount incurred towards overheads not representing the value of the assets. " During the course of the proceedings assessee has given the communication/letters whereby the NOIDA authority have stated that the amount deposited has been forfeited and based on such event auditors have reduced the amount from the value of the asset, then it cannot be held that as on the date of valuation, it represents the true value of the asset even though assessee still recognized as a part of an asset in the balance sheet hoping for some future recovery or does not want to give up its claim. Thus, when the fac....
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....ue of the asset. Thus, the interest cost capitalized goes to enhance the value of asset which cannot be treated as representing the correct or fair market value of the asset. For example, if a person has bought an asset being land at a market value of Rs.100/- from the borrowed funds and has incurred borrowed cost like interest or any other cost for acquisition, say Rs. 50/-, then said amount is capitalized in the books and the value of assets in the books will reflect Rs. 150/-. Then such enhancement of cost is purely fictitious. A person buying the asset at a market rate will not value the asset for the amount which has been capitalized in the books. Simply for the purpose of accounting standard or provision of the law if the interest cost has been capitalized to the asset and later on when the asset is put to use, and interest capitalized is deferred to be claimed over the period of time or becomes part of the Profit and Loss account, then can it be held to the value of the asset. Even Explanation 8 to section 43 provides that, where any amount is paid or is payable as interest in connection with the acquisition of an asset, and so much of such amount as is relatable to any peri....
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....ng to adjustment on account of stock-intrade not realizable or business investment, has been clarified by the Ld. Counsel that the nomenclature may be different but the real nature of these amounts are different for which the ld. counsel before us has elaborated before us as incorporated above. These amounts which has been claimed has been stated to pertain to payment of EDC charges and fee etc. to the Government of Haryana relating to such land which have to be left compulsorily for use by public at large as earmarked in master plan. It has been stated that only EDC and fee etc. has been claimed for deduction and not the value of the land. We agree with the contention of the ld. counsel that such payment for EDC and fee etc. relating to such portion of land which has been compulsorily left for public at large but is not related to any open area, roads, parks, hospital by the resident colony, etc. then such charges does form part of the asset for the project and does not represent the value of the asset. Assessing Officer is however directed to verify the contention of the ld. counsel and only reduce the payment for EDC charges and fee etc. paid to the Government Authorities pertai....