TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 535
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....e 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 Tower II 153,112,063 55,757,366 208,869,429 Tower III 154,213,67....
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....nbsp; 398,354,372 Tower III to IV 540,728,222 Tower V 1,034,899,317 Profit accrued to SRL &....
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....,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 passed on vide letters dated 24/07/2006, 24/08/2007, 01/12/2008 and 10/03/2012. The assessee further submitted that the claim made is based on estimate of cost to be agreed in the cost of construction and requested the Assessing Officer to make a pointed enquiry with GPL to examine whether GPL hav....
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....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 Tower V respectively. Hence only these costs were allowed and balance cost claimed was added back to the assessee's income. The Learned CIT(Appeals) had also upheld the above additions against . which the assessee is in appeal lo the Hon'ble IT AT. It seems that the assessee is now taking the additional around to claim the cost disallowed during....
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....ear 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 Tower I to V on the ground that the claim of additional cost was not settled among the parties" 11. The Ld.AR submitted that GPL has been issuing letters from time to time revising the cost of construction and for the year under consideration the cost of construction has been claimed by the assessee based on the letter issued by GPL. The Ld.AR in this regard drew our attention to the....
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....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 project. However, it is noticed that GPL vide letter dated 01/12/2008 has communicated a rate of Rs. 3,599/- per sq.ft. It is also noticed that the average cost per sq.ft. claimed by the assessee for the assessment year 2010-11 works out to Rs. 3,438/-. We, therefore, see merit in the submissions of the Ld.AR that the cost of construction as given by GPL keeps changing from time to time and that what the assessee for the year under consideration has taken as cost is less t....
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....o 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 expenditure of Rs. 23,20,35,862/- for the assessment year 2010-11 and the revenue is in appeal before the Tribunal. 17. The Ld.AR during the course of hearing submitted that the Tribunal had quashed the assessment order passed for A.Y. 2009-10 on the technical ground which, in effect, would mean that the claim of the assessee towards cost of construction is allowed. The Ld.AR therefore fairly conceded that the departmental appeal with respect to this ground should be allowed. However, the Ld.A....
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....ght 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 land admeasuring 2871762 sq mtrs bearing Cadastral Survey No. 1960 of Byculla Division at Keshavrao Khade Marg, Byculla, Mumbai. In addition to this land, the. appellant acquired on lease, land admeasuring 7836.18 sq.mfrs, from the Collector of Mumbai vide lease agreement dated 24.12.1884. On going through the computation of income for A.Y.2008-09, the Ld.AO noticed that the appellant declared Capital Gains of Rs. 15,93,42,742/- on account of sale of stock-in-trade of freehold land of 15286142 sq.ft., which was con....
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....ce 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 which the assessee owned and possessed. from long before 1-1-1954. Once that fact was accepted, the valuation of those-shares as on 1-1-1954, would have to be as it was on that' day and no adjustment in that regard would be justified on account of subsequent events." 6.7 The Id.AR claimed that the said ratio has been confirmed by the Hon'ble Pune Tribunal in the case of Ajit Mehta (supr) which has in fact been referred to by the Id. AO in his assessment order. The Id.AR distinguished the facts of his case from Ajit Mehta's ....
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....he 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 therefore, the decision of the CIT(A) has become final. The Ld.AR accordingly prayed that the CIT(A) was correct in deleting the disallowance. 23. We heard the parties and perused the material on record. We notice that the Assessing Officer in AY 2009-10 has disallowed the claim of cost of land for the reason that the land was vacant and as per the ULC regulations certain area of the land in excess of the limits prescribed under ULC. The AO accordingly held the land to be vacant land within the meaning of ULC its fair market value as on 01.04.1981 was taken at....