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2023 (9) TMI 219
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....expenses. 2. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 17,52,252/- on account of negative cash balance treated as unexplained cash credit u/s 68 of the Act. 3. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 33,24,796/- u/s 22 of the act towards computed ALV @ 5% on closing stock of finished flats though the assessee has allotted the flats/bungalows/units to purchaser and amount of consideration is received as advance which is shown in the balance sheet as "Advance from customer" in view of the 'agreement of sale'. 4. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 12,33,712/- u/s 40(a)(ia) of the Act. 5. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 6,07,48,187/- u/s 801B of the Act [a] where out of the Eleven blocks, Eight blocks were completed within five years as per completion certificate issued by the competent authority and for remaining three blocks [block E, F and G), not claimed any deductions u/s 80IB of the act. Therefore, no reason to disallow to claim deduction. [b] in resp....
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....Brief facts of the case is that the assessee is a dealer and developer of lands, real estates, Hotel Business Operations including Restaurant and Banquet facilities. For the Assessment Year 2013-14, the assessee filed its Return of Income on 28-09- 2013 declaring income of Rs. 50,00,379/-. The return was taken up for scrutiny assessment, after detailed enquiry, the Assessing Officer made the following disallowances/additions: (a) Disallowance of Prior Period Expenses of Rs. 25,64,380/- (b) Addition on account of Negative Cash Balance of Rs. 17,52,252/- (c) Over statement of loss of Rs. 5,00,000/- (d) Addition u/s. 22-ALV of finished stock of Rs. 53,19,672/-. (e) Disallowance u/s. 40(a)(ia) of Rs. 36,49,865/-. (f) Difference in cost of construction of Rs. 1,13,62,412/- (g) Deduction u/s. 80IB(10) of Rs. 2,15,18,887/-. (i) Addition on account of revaluation of land u/s. 115JB of Rs. 5,56,29,995/-. 5. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) dealt with each disallowance/addition observing as follows: 6. Disallowance of prior period expenses: A sum of Rs. 25,6....
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....sioner of Income- tax-l v. Indian Petrochemicals Corporation Ltd. Section 37(1), read with section 145, of the Income-tax Act, 1961 - Business expenditure - Allowability of (Prior period expenses) - Assessment year 1999-2000 Whether prior period expenses - quantified and paid during current year would be allowed as business expenditure in relevant assessment year even though assessee was following mercantile system of accounting - Held, yes [Para 3] [In favour of assessee] ii. [1995] 80 Taxman 61 (Gujarat) Saurashtra Cement & Chemical Industries Ltd. v. Commissioner of Income-tax Section 37(1), read with section 145, of the Income-tax Act, 1961- Business expenditure - Year in which deductible - Whether, where any liability though relating to earlier years, depends upon making a demand and its acceptance by assessee and has been actually claimed and paid in later previous years, such a liability can be disallowed as deduction merely on basis that accounts were maintained on mercantile system and that it related to a transaction of previous year - Held, no iii. [2010] 194 TAXMAN 158 (DELHI) Commissioner of Income-tax v. Jagatjit Industries Ltd. ....
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....ed. 8. Addition on account of over statement of loss of Rs. 5,00,0000/-: Auditors in the Special Audit Report observed that though during the year the assessee sold five shops of the hotel building for a consideration of Rs. 40,03,000/- but the sale consideration of only Rs. 35,03,000/- was adopted while working out the profits on such sales. Accordingly a sum of Rs. 5,00,000/- was proposed to be added by the AO. Before the AO assessee pleaded that out of the sum of Rs. 40,03,000/- sales worth Rs. 5,00,000/- was recognized in the earlier year's income, hence, the profits are worked out by taking the sale of the current year amounting to Rs. 35,03,000/- correctly and enclosed the computation of income of A.Y. 2008-09 in support of its claim. However AO was not convinced and he added the sum of Rs. 5,00,000/- to the total income. 8.1. The Ld. CIT(A) after considering the material records and held that he do not find any reason why this sum of Rs. 5,00,00/- should again be added in the total income, accordingly the addition amounting to Rs. 5,00,000/- made by the AO is deleted. 8.2. The Ld. D.R. could not submit any contra evidence on the above findings of the Ld CIT [A].....
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....e agreements as above the rental in the areas in which the buildings are located are estimated to be around 5% of the value of the property. Accordingly, the ALV is computed @ 5% of the book value of the flats which comes to Rs. 47,49,708/-. After allowing deduction @ 30% u/s. 23 of the Act amounting to Rs. 14,24,912/- the income under the head house property comes to Rs. 33,24,796/-. Thus, appellant gets a relief of Rs. 19,94,876/-. Ground of appeal No. 4 is partly allowed. 10. Aggrieved against the same, both the Assessee and the Revenue are in appeal before us. The Ld. Counsel for the assessee submitted that the unsold property of various project to the extent Rs. 9,49,94,152/- have been constructed and completed in all respect and the assessee has obtained BU permission from the Competent Authority. The amount standing in the balance sheet as work in progress is the amount for which sale deed is yet to be executed. However the assessee has allotted the same flats/ bungalows or units to the Purchases and substantial amount of consideration received as advance, which is shown in balance sheet under the group of current liabilities as "Advance from Customer". The customers/purc....
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....e, take on lease, or acquire by sale, or let out the buildings constructed by the assessee. Development of land or property would also be one of the businesses for which the company was incorporated. 8. True it is, that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stock-in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property'." 10.1. Ld CIT DR appearing for the Revenue heavily relied on the judgement of the Delhi High Court in the case of Ansal Housing Finance & Leasing Co Ltd. [cited supra] and pleaded to sustain the addition made by the AO. 10.2. We have heard the rival submissions and perused the relevant materials on record. On....
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.... to the relevant provisions and amendment in the Act. The following sub-section (5) has been inserted after subsection (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018: "(5) Where the property consisting any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to nil." Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. 10.6. In view of the above amendment to section 23, in....
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....ssee and the Revenue are in appeal before us raising Ground no.4 in their respective appeals. We do not find any infirmity in the order passed by the Ld CIT[A] that the sum of Rs. 24,16,153/- paid to HUDCO is clearly out of the purview of TDS and directed the AO to reduce the WIP by Rs. 12,33,712/-. Therefore the Ground No.4 raised by the Assessee and Revenue are hereby dismissed. 13. Disallowance of deduction u/s. 80IB(10) of Rs. 6,07,48,187: The assessee claimed deduction u/s. 80IB of the Act amounting to Rs. 6,07,48,187/- being the income of residential/commercial projects constructed by it. In the SAR the auditors pointed out that the assessee has not fulfilled the conditions stipulated in section 80IB of the Act and hence, is not eligible for deduction so claimed. Briefly, the assessee claimed deduction u/s. 80IB on the income of following three housing projects: (a) Takshshila Coloneal: As per the auditors the construction of this project has not been completed within the time limit of 5 years prescribed in section 80(IB) of the Act. (b) Takshshila Habitat: In this project the auditors have found out that the commercial construction is more that the presc....
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....income on such units/ buildings. However, plain reading of section 80IB(10) makes it abundantly clear that if any one of the conditions specified therein are not fulfilled, deduction u/s. 80IB(10) of the Act cannot be allowed. Hence, Ld CIT[A] did not find any merit in the arguments of the assessee and denial of deduction u/s. 80IB(10) amounting to Rs. 6,07,48,187/- by AO is upheld. 14. Aggrieved against the same, the Assessee is in appeal before us raising Ground no. 5.a. Project has not been completed within the time limit of 5 years prescribed in section 80(IB) 5.b.Commercial construction is more that the prescribed limit of 3% of the aggregate built-up area of the housing project 5.c. Sold units to more than one person of a family which is not allowed as per section 80(IB) of the Act 14.1. Regarding Takshshila Coloneal project was not completed within the time limit of 5 years prescribed in section 80(IB) of the Act. This issue was considered by this very same Bench of this Tribunal in ITA No.1401/Ahd//2019 vide order dated 23-08-2023 and held as follows: "... 7. The solitary issue in this appeal is confirmation of addition of Rs. 31,64....
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....64,266/- and added as the total income of the assessee. 9. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) after considering the submissions of the assessee held that the assessee has not fulfilled the conditions laid down in section 80IB(10) of the Act and thereby upheld the addition made by the Assessing Officer. 10. Aggrieved against the same, the assessee is in appeal before us. Ld. Counsel Mr. Sudhir Mehta submitted before us a Paper Book running to 36 pages, wherein from Page Nos. 7 to 22 placed copies of the Commencement Letter (Rajachitthi) issued by Ahmedabad Municipal Corporation (AMC) and Building Usage permission certificate issued by the AMC for Block Nos. C, D, L, M, N, O, P & Q. Thus the Ld. Counsel for the assessee submitted the Lower Authorities failed to consider that separate building planning permission obtained by the assessee for each Block as separate housing project and completed the same less than five years period and therefore eligible for claim of deduction u/s. 80IB(10) of the Act. The Ld. Counsel further submitted that the assessee has not claimed deduction u/s. 80IB(10) for Block Nos. E, F &....
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....cks not satisfying the condition under Section 80IB(10) of the Act. 12. It is not denied by the Revenue that there is no definition of the expression "Housing project" under Section 80IB of the Act. The said expression is defined under Explanation to Section 80HHBA of the Income Tax Act, which reads as under: "Section 80HHBA. - Deduction in respect of profits and gains from housing projects in certain cases. ** ** ** Explanation: For the purposes of this section, - (a) "Housing project" means a project for - (1) The construction of any building, road, bridge or other structure in any part of India" 13. Section 80IA of the Act is a specific provision which deals with deduction in respect of profits and gains from industrial undertakings or enterprises engaged in the development of infrastructural facilities such as roads, bridges and other structure as regards the grant of deduction in respect of development and construction of a housing project. Section 80IB is a specific provision in respect of profits and gains from undertakings engaged in developing and constructing housing projects other than infrastructure development undertakings. ....
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....e fulfills the conditions of section 80IB(10). Applying the aforesaid principles to the facts of the present case, it is very much evident that blocks A, B & F in respect of which assessee has claimed deduction u/s 80IB(10) are fulfilling all the conditions of the said provision. It is also a fact that municipal authorities have also issued completion certificate certifying that the buildings are complete in all respects. In the aforesaid view of the matter, assessee, since has fulfilled all conditions of section 80IB(10) in respect of blocks A, B & F, it is eligible for deduction u/s 80IB(10). Provisions of section 80IB(10) being beneficial in nature, too technical an approach, would defeat the purpose for which provision has been brought into the statute. Moreover, as far as Ld. CIT(A)'s observation that the housing project should have been completed by 31/03/2011, we do not find the same to be acceptable. As assessee's housing project has been approved after 1st April, 2005, the stipulated period within which assessee has to complete the project is five years. Assessee having completed blocks A, B & F within five years from the date of approval, in our view, it is eligible to cl....
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....BA, of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings - other than infrastructure development undertakings Housing projects - Assessment years 2003-04 and 2004-05 - Whether housing project under section 80- IB(10) includes commercial units - Held, yes - Whether where both commercial and residential units are built, proportionate deduction to extent of compliance, would be allowed - Held, yes [Paras 39 & 47] [In favour of assessee]" 14.4. Respectfully following the above judicial precedents the assessee is eligible for deduction u/s. 80IB [10] of the Act on the commercial construction which was approved by the Local Authority within the frame work of Development Control Rules and Regulations. Thus this ground raised by the assessee is hereby allowed and the disallowance made by the AO is hereby deleted. 14.5. Assessee sold units to more than one person of a family which is not allowed as per section 80(IB) of the Act. This issue is also considered by the co-ordinate Benches of the Tribunal in the following cases as follows: 3. [2018] 90 taxmann.com 267 (Mumbai Trib.) Om Swami Smaran Developers (P.) Ltd. v. income-tax Officer, Wa....
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....ssessing Officer with a direction to grant the deduction after giving opportunity to the assessee. Thus Ground Nos.5 a, b, c raised by the assessee are hereby allowed. 15. Difference in cost of construction of Rs. 1,13,62,412/- In the Special Audit Report the Auditors compared the cost of construction of the shops/flats adopted by the assessee in the current year to the earlier years and pointed out that the cost adopted in the current year is much higher in comparison to the cost taken in earlier years after adjusting the addition to cost of construction during the year. As per the Auditors the cost of the construction during the current year is taken at Rs. 42,500/- per square yard, whereas the same can at the most be Rs. 18,173/- per sq yd. Before the AO the assessee contended that for the purpose of determination of cost of the construction cost of the project is estimated in advance and hence the cost in earlier year was on estimation basis which cannot be compared with the actual cost for this year. It was the contention of the assessee that this fact was also recorded by the Auditors in the SAR, however, the AO was not convinced and adopted the cost at Rs. 18,173/- and wo....