TaxTMI 
TaxTMI 
2023 (11) TMI 535
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....ised of 5 towers having approximately saleable are of 6,50,000 sq.ft. The assessee followed percentage completion method in which the income was offered based on the flats sold during the year and the cost of acquisition against the same was based on the estimated cost as agreed with GPL. There was a substantial delay in the project on account of various changes in the development control rules and litigation relating to the development of mill land which led to increase in the cost of construction. GPL from time to time has been issuing letters regarding the revised cost of construction to the assessee based on which, the assessee has been computing the profit for the relevant assessment years. 3. For the assessment year 2010-11, the assessee filed the return of income declaring an income of Rs. 25,73,24,918/- on 30/09/2010. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the year under consideration, the assessee has shown revenue arising from development of land at Rs. 20,98,24,657/- in the P&L Account as per the below working:- SRL GPL TOTAL Tower I 178,091,589 63,342,506 241,434,095 Towe....
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....nbsp; 100% Tower I to II 398,354,372 Tower III to IV 540,728,222 Tower V ....
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....nbsp; 209,824,657 4. During the year, the assessee has shown saleable area of 6,19,163 sq.ft. and the cost of construction was shown at Rs. 2,12,87,04,820/- which works out to Rs. 3,140 per sq.ft. for Tower I to IV and in respect of Tower V works out to Rs. 4,640/-. The Assessing Officer, during the course of assessment proceedings noticed that as per the agreement dated 24/09/2004 entered into with GPL, the cost of construction for Towers I to IV was estimated at Rs. 2,315/- per sq.ft. and in respect of Tower V at Rs. 3,815/-. The Assessing Officer further noticed that in A.Y. 2009-10, there was an addition made in respect of excess claim of cost of construction over and above Rs. 2,315/-. The Assessing Officer called on the assessee to explain why the excess claim of expenses should not be disallowed similar to the addition made in A.Y. 2009-10 for the year under consideration also. The assessee submitted before the Assessing Officer that these rates per sq.ft. have been taken based on the budgeted cost revised by GPL which have been p....
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....2013 based on the letter dated 26-2-2013 received from Godrej Properties Ltd." 7. The CIT(A) forwarded the additional ground to the Assessing Officer for his comments. The Assessing Officer, vide letter dated 18/09/2013 submitted the following reply:- "On perusal of records, it is observed that the assessee has made a claim for allowing of additional cost of Rs. 23,20,35,862/- vide letter dated 04.03.20/3 during the course of assessment proceedings for A.Y. 2010-11. In the said letter the assessee has mentioned that based on the reply of Godrej Properties Ltd. (GPL vide letter dated 26.02.2013, the cost pertaining to A.Y. 2009-10 which was disallowed during the said year should be allowed in the current year i.e. A.Y. 2010-11. It is also seen that the assessment for A.Y. 2009-10 was completed on the basis of the estimated cost of Rs. 2,315/- per sq. ft. for Tower 1 to IV and Rs. 3,8151- for Tower V. These costs were allowed on' proportionate basis i.e. proportionate fo the areas sold. In response to the enquiry u/s 133(6)' during the proceedings for A.Y. 2009-10, Godrej Properties Ltd. confirmed cost only at Rs. 2,315/- and Rs. 3515/- for Towers I to IV and Towe....
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....mpany has given an undertaking through its managing director that in case Hon'ble ITAT grants than benefits in A.Y. 2009-10, in respect of this expenditure, than the same may be withdraw in the A.Y under consideration, u/s 154 of the Act. . In view of the above undertaking, I direct the Ld. AO to allow the claim of additional cost of Rs. 23,20,35,8627- during the year under consideration with a rider that if the Hon'ble ITAT allows appellant's claim in A.Y. 2009-10, in future , then the relief allowed in this year (A.Y. 2010-11) , may be withdrawn , for which an undertaking has already been given by the Chairman and Managing Director of the appellant company. Accordingly, this ground of appeal is allowed." 9. The assessee and the revenue are in appeal before the Tribunal against the above order of the CIT(A). ITA 2554/Mum/2014 (Assessee's appeal) 10. The assessee raised the following ground of appeal - "1. Profits on sale of Flats in Planet Godrei -? 10,32,70,4367- On the facts and in the circumstances of the case and in law, the Hon,ble CIT (Appeals)-40 erred in upholding the disallowance of Rs. 10,32,70,436/- in respect of additional cost of....
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....pect of units sold in the earlier years. The ld AR accordingly prayed that the cost as claimed by the assessee during the year under consideration should be allowed as a deduction. 13. The Ld.DR submitted that since the assessee is being offering only the incremental revenue under percentage completion method, whether the difference is cost of AY 2009-10 which is allowed by the CIT(A) includes the similar difference claimed in AY 2010-11 needs to be verified. The ld DR further relied on the order of the lower authority. 14. We heard the parties and perused the material on record. We notice that as per the original agreement entered into between the assessee and GPL, the cost of construction was agreed at Rs. 2,315/- per sq.ft. It is further noticed that GPL has been issuing letters revising the estimated cost of construction per sq.ft. which is evidenced from the various costs communicated through letters as tabulated in the earlier part of this order. The Assessing Officer while making the addition has relied on the response received to the notice under section 133(6) of the Act where GPL has informed that they have accounted an estimated cost of Rs. 3,166/- for the entire p....
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....assessee went in further appeal before the Tribunal. The assessee during the appellate proceedings for AY 2010-11 raised the additional ground making the claim for the said amount stating that the amount since disallowed in AY 2009-10 should be allowed in AY 2010-11 and the CIT(A) after admitting the additional ground, called for a remand report from the Assessing Officer. It is to be noted that at the time of passing the appellate order for the year under consideration, the appeal pertaining to A.Y. 2009-10 was still pending before the Tribunal. The Assessing Officer in the remand report stated that if the expenditure claimed by the assessee in A.Y. 2009-10 was held in favour of the assessee by the Tribunal, then the deduction allowed in A.Y. 2010-11 also would result in double allowance. The CIT(A), during the course of appellate proceedings took a declaration from the assessee stating that if the assessment for A.Y. 2009-10 is held in favour of the assessee by the Tribunal, then the department can pass a rectification order under section 154 for the year under consideration withdrawing the claim of the excess cost. The CIT(A), based on the said declaration, allowed the claim of ....
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.... Assessing Officer noticed that for AY 2009-10, the cost of acquisition was considered at Re.1 as against what is claimed by the assessee and accordingly questioned the assessee as to why a similar disallowance cannot be made in this year also. The assessee submitted that the right in the lease hold land is a capital asset and therefore the cost of the lease hold right as per the valuation report should be allowed. The Assessing Officer proceeded to consider only Re.1 as the cost of the lease hold right for the reason that the same was considered in AY 2009-10 and that the revenue is in appeal against the order of the CIT(A) allowing the claim. 20. On further appeal, the CIT(A) allowed the claim by relying on his own order for AY 2009-10 where it has been held that "6.2 The appellant adopted 260/- per sq.ft. as fair market value of land as on 1.4.1981 and Rs. 2,150/- p.s.f. as on the date of conversion based on the report dated 23.08.2008 of Government registered Valuer, Shri Santosh Kumar, for the purpose of calculating long term capital gain in respect of 152861.42 sq.ft. of land converted into stock-in-trade during the year. 6.3 The appellant owned freehold ....
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....Mehta [103 TTJ (Pune 209)], 6.6 In this regard, the Id.AR of the appellant submitted that the Textile Mill at Mumbai undertaking manufacturing of Suitings and Shirtings was in existence as on April 1, 1981 on the said freehold land. Thus, as on April I, 1981, the said land was not 'vacant land1 within the meaning of ULCRA and, therefore, was not within the ambit of the said Act. Valuation has to be carried out as per the facts and circumstances prevailing as on the valuation date. In this regard, the Id.AR placed reliance on the judicial pronouncement in the case of CIT v Lady Hirabai C. Jehangir [1990] 186 ITR 60 (Bom.), whereby the Hon'ble High Court held as under: "In view of the admitted position that the identity of shares remained the same and, in any event, the extent of interest represented by each share in the assets of the company certainly remained the same and having regard to the fact that reduction in the face value of shares was an event subsequent1-1- 1954, it, was not possible to import the subsequent facts for the purposes of valuing those shares as on 1-1-1954. If was not in dispute that the shares sold during the previous year were the ....
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....acant and, hence, the provisions of ULCRA were applicable. In the case of the appellant, there was a running textile mill on the said land and there was no vacant land on the date of the "valuation. Also the valuation given by the appellant is based on a scientifically" drawn up valuation report. In the result, - the valuation adopted by the appellant at " 260/- per sq ft is held to be proper and the addition made on this account is directed to be deleted. This ground of appeal is, therefore, allowed." 21. In this regard, the Ld.DR submitted that the CIT(A) has followed his own decision for the earlier year without considering the issue independently for the year under consideration. 22. The Ld.AR on the other hand, submitted that the facts are identical for AY 2010-11 also since the land in question is the same land. The ld AR submitted that the whole basis on which the disallowance is made by the assessing officer is that the land is covered by Urban Land Ceiling & Regulation Act, 1976 (ULC) which the CIT(A) has clearly held as incorrect in AY 2009-10. Further issue is not specifically contested by the revenue before the Tribunal for the assessment year 2009-10 and therefor....