TaxTMI 
TaxTMI 
2023 (11) TMI 981
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....36/-. 3. The brief facts qua the first issue raised vide ground No.1(a) to 1(c), where department has challenged deletion of addition of Rs. 46,75,48,739/- are that assessee is a builder and developer. For the year under consideration assessee had sold some units and its building constructed by it namely, 'Universal Majestic' near Chembur, Mumbai. The Assessing Officer noted that there was a huge variation in the sale price of individual units and found that assessee had sold various units at different rates ranging from Rs. 13,513/- per sq. ft to Rs. 27,951/- per sq.ft. He has noted the comparable sale instances at page 2 of the assessment order. In the reply to show-cause notice assessee has given various factors and reasons for the variation in the prices for example, firstly some units had additional flower bed area; secondly due to various Vaastu angles and passage for the flat which commanded different prices; thirdly, certain units had additional areas like store room, flower bed and passage area and lastly, some of the units had no natural ventilation and due to certain market conditions also, the price bookings and rates are varied. Apart from that, it was also submitte....
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....1.8.10 50980000 NIL 2. Premal Thakar/ Darshana P. Thakar 1102 101.18 1088 17,463 31.8.10 19020000 11410944 3 Black Stone Infra Projects P. Ltd. 1104 207.65 2233 16,650 30.8.10 40000000 25235133 4 Sushil Budhia / Suchitra Budhia/ Usha Gopalan 1103 117.50 1264 16,650 16.6.10 21645500 14284464 5 Sterling & wilson Powergen P. Ltd. 1001-1006 962.50 10352 16,650 26.5.10 172500000 116987952 6 Pratibha Pipes & Structural Ltd. 1301-1306 962.50 10352 16,650 09.4.10 172500000 116987952 Total 284906445 Comparable - III Sr. no Name of Buyer Flat No. Area Sq. mtrs. Area Sq. Ft Rate Date of Booking Agreement value Addition 1. SHL Property Holdings Ltd. 1108 193.25 2078 23,172 23.12.10 48202155 9330762 2. Thakkar Constructions P. Ltd. 1105 207.65 2233 15,538 11.10.10 34730000 27718229 3. Techno Force (I) P. Ltd. 1107 164.07 1764 19,818 08.02.11 35000000 14346612 ....
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....nsidered, it can be seen that the rate per sq.ft. Is within the permissible range of variation. Further, the appellant also submitted that the pure comparison of the rates is also not possible since every unit has its own peculiarity because of which it can either fetch a better price or has to be subjected to a discounted rate. The appellant has demonstrated various reasons and factors which affected price of various units like shape of various units, location of the units etc.. The appellant further contended that the addition made by the Assessing Officer by estimating the sale rate of unit no. 1101 to all the units sold during the year is contrary to the Assessing Officer's own action of preparing comparables in 4 different categories. This itself showed that while the Assessing Officer has initiated the enquiry for different purposes and ended the proceedings in a different manner. The very purpose for which 4 application of comparables were made as evident from the assessment order was that different period of booking were found in respect of 4 groups of comparables. However, while making that addition of a single rate was applied to all the sales instances in the various....
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....ments is not doubted, the Assessing Officer has no right to replace the figures adopted on basis of these registered sales deeds with the figures estimated by him without any contrary evidences. c. The Ld. AO has not inquired with the buyers to ascertain the amount paid by them for purchase of units. The Assessing Officer cannot re-write the terms of the agreement arrived at between the parties when there are no evidences of collusion between them. d. The Ld. AO has referred to past survey proceedings conducted on 09.03.2010. However, the same does not have any bearing for the subsequent years which are under consideration. In any case, in proceedings for A.Y. 2010-11 consequent to survey, no addition is made on account of suppressed sales. e. The sale consideration for all the units is above stamp duty value. The details of the same are enclosed at Page 16 of PB. There is no provision under the Income Tax Act except S. 50C and s. 43CA to revise the sale consideration. The provisions of s. 43CA of the Act are applicable from 01.04.2014 and hence not applicable for the years under consideration. Moreover, the provisions of s. 50C of the Act will also not a....
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.... the common uses of all the residents/ occupants of the building. Also such areas are demarcated by Municipal Authorities keeping in consideration issues like fire safety, health & hygiene, evacuation in case of natural disasters and providing the residents unhindered civic amenities Therefore, if the assessee argues that such areas can be sold by cutting an informal deal with some specific customers then it is not only a false statement rather it would have been a clear violation of civic/municipal laws of the City. Also, when the additional area is not exclusive and not mentioned in agreement, can it be charged at the same rate as claimed by the assessee. Further, during the course of arguments, before the Hon'ble Bench, it was shown from the Paper Book filed by the assessee, that other units also had similar common area as balcony, flower bed etc, yet the rate per sq.ft. was not comparable. For eg. 1101 & 1103 on P.No.3 are similar on P. No.4 of PB 1108 is although comparable with 1105 & 1107 but there is a huge difference in rate. (ii) A survey action in the case of the assessee u/s. 133A of the Act on 09.03.2009 was carried out where it had decla....
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....e 117 CTR 208 ITAT, Mumbai, wherein it was held that 'prevailing practice of paying on money should be considered even if purchaser denies'. (v) As the final fact finding authority, the Hon'ble ITAT must see whether the claim by the assessee is correct or not, as there are several discrepancies discussed above. Even if, identical properties have been sold at higher rate there should be a satisfactory explanation from the assessee justifying the difference. However, the assessee here has grossly failed in giving any reasonable and satisfactory explanation. The ld. CIT(A) fails to examine the reason for huge variation and therefore, the department humbly urges the Hon'ble ITAT to decide for preventing miscarriage of justice. 8. We have heard both the parties at length and also perused the relevant finding given in the impugned orders. From the perusal of the assessment order as well as the impugned order, we find that the entire controversy revolves around that, assessee had sold its units at a varied prices ranging from Rs. 13,513/- per sq. ft to Rs. 27,951/- per sq. ft in the same project. Such a huge variation prima facie was not found to be justifiable....
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....tor of Oasis Infra Pvt, Ltd. at Sr. No. 4 above 6 Premal Thaker/ Darshans P Tliaker 1,102 1,90,20,000 1,089 17,464 - - - 7 Black Stone Infra Projects Pvt. Ltd. 1,104 4,00,00,000 2,235 17,896 - - - , 8 Sushil Budhia/ 1,103 2,16,45,500 1,265 17,114 58 73,146 0.34 Suchitra Budhia/ Usha Gopalan 9 Sterling and Wilson Powetgen Pvt Ltd. 1001-1006 17,25,00,000 10,360 16,650 522 54,08,056 3.14 Another group company, Transtel Systems Pvt. Ltd. purchased entire 9thfl. @ 16,650/- 10 Pratibha Industries ltd 1301-1306 17,25,00,000 10,360 16,650 522 54,08,056 3.14 This company purchased entire i4th Fl 25,026 sq. ft. @ 13.222/-.Further, balance units- 1307-1312admeasuring 2,508 sq.ft. pur. in A.Y. 1213 @16,789/- 11 SHL Property Holdings Ltd 1,108 4,82,02,155 2,080 23,173 12 D. Thakkar Construction Pvt Ltd 1,105 3,47,30,000 2,235 15,538 1,634 36,51,851 10.51 T....
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....,832 - - - 4 Pan Asia Logistics Pvt. Ltd. 1202 7,00,00,000 3,380 20,710 - - . 5 KL Crescent Infrastructure Pvt. Ltd. 1207 2,21,00,000 1,249 17,694 442 5,51,685 2.50 6 Aquatic Formulation India Ltd. 1208 1,89,12,500 1,194 15,840 2,296 27,41,713 14.50 7 Aquatic Formulation India Ltd. 1209 to 1211 8,39,72,000 4,151 20,229 - - - TOTAL 32,17,84,500 17,743 1,92,40,167 5.98 Weighted Average 18,136 9. Thus, the weighted average rate for A.Y.2011-12 comes to Rs. 17,172/- per sq.ft. However, we find that there is one unit which is a shop cum garage and definitely it cannot be compared with other units where the agreement rate was very low and therefore, the same rate of Rs. 17,172/- cannot be applied. Firstly, this was a major area of 5091 sq.ft for agreement value of Rs. 8 Crores. Accordingly, in the weighted average this particular unit sold to Deonar Weight Bride Pvt. Ltd. Unit No.G-1 shop / garage is directed to be excluded from while calcul....
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.... appraisal of the submissions and the evidences filed and after considering all the averments of the ld. AO, the ld. CIT(A) held that the expenditure incurred is allowable to the assessee and thereby deleted the additions. The various reasons considered by ld. CIT (A) while deleting the disallowances can be summarised as under:- a. The details and evidences of all the expenses incurred by the assessee were filed. These details have not been doubted or disputed. The only objection of the Ld. AO was that the expenditure was incurred after the date of OC, i.e., 16.02.2010 and hence the expenditure incurred after the said date are not eligible for deduction. b. The assessee submitted that the incurrence of the expenditure has no connection with the OC issued by the Commissioner. Reference was drawn to the provisions of s. 353A of the Mumbai Municipal Corporation Act and the DCR Regulations applicable to the Mumbai region under which OC is issued by the Commissioner. As per the provisions, the OC issued by the Commissioner after inspecting the work and satisfying himself that the work has been done as per the sanctioned plans. The assessee also referred to the letter i....
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....e submitted that the same would be attracted only if the expenditure is incurred by the assessee for any purpose which is an offence or which is prohibited by law. In the present case, the nature of work done and purpose for which the expenditure is incurred is not an offence of an Act which is prohibited by law. It was submitted that incurrence and the genuineness of expenditure has not been doubted by the Assessing Officer Under these circumstances it is incorrect on part of the Assessing Officer to invoke the provisions of Explanation to s. 37(1) of the Act. e. As regards the contention of the Assessing Officer that the construction cost was on a higher side, the assessee has submitted the working of construction cost and contended that construction cost is reasonable and commensurate with the nature of construction, various types of amenities and the facilities provided within the building for a commercial building. The details of construction cost are enclosed at Page 159 of PB. The assessee has stated that it has earned reasonable profits from such activity and thus it cannot be presumed without any basis that the construction expenses are on a higher side. The alleg....
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....m, boom barrier/loop defector, air conditioning work, LED track lightening of etc. Out of the total estimated cost of the project of Rs. 188.20 crore, assessee claimed that a sum of Rs. 21.65 crore was incurred in FY 2010-11 and Rs. 5.71 crore in FY.2011-12, Rs 1.84 crore in FY. 2012-13 & Rs, 0.32 crore in FY 2013-14, post receipt of occupancy certificate. (ii) Once the building has been completed and sold, the expense cannot be business expenses, unless the assessee proves the rationale and the business connection. Some of these expenses a evidently in the nature of prior period expenses. The assessee has failed to establish that they were actually quantified and crystallized during the relevant assessment year. (iv) The assessee has failed to show that it was incumbent upon it to make these expenses and there was no society in existence. It has also failed to show that why it is claiming the same as expenses and whether no deposit/charges have been collected from the occupants for the repairs and maintenance of the project post occupation; and also, if so, whether the deposit and charges collected are being reflected as taxable revenue by the assessee 16. Aft....
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....ting the addition is confirmed and accordingly, this ground raised by the Revenue is dismissed. 18. Lastly, with regard to disallowance of interest expenditure of Rs. 37,98,236/-, the ld. AO in his assessment order has stated that the assessee had taken secured loans from various parties at the interest rate ranging from 14.50% to 23% p.a. and unsecured loans taken at the interest rate ranging from 12% to 15% pa. As against the same, the assessee had given ICDs to its sister concern, i.e., M/s Tulip Shares & Structures Pvt. Ltd. at interest rate of 9% p.a. The total quantum of loans taken from various parties is Rs. 60,27,55,727/- whereas the quantum of loans given to sister concern is Rs. 7,40,39,682/- The ld. AO observed that the interest-bearing funds were diverted by the assessee to its sister concern at a lower interest rate. Accordingly, the Assessing Officer disallowed the entire interest expenditure paid to various 10 parties on which interest was paid at a higher 9% resulting in addition of Rs. 2,05,40,403/- u/s 36(1)(iii) of the Act. 19. The ld. CIT (A) has restricted the disallowance of expenditure to the extent of loans given to the sister concern instead of disal....
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....fficer in his assessment order is in respect of loans aggregating to Rs. 60,27,55,727/- The Assessing Officer has disallowed interest on all the loans where the interest was charged more than 9% ignoring the fact that the advances made to the sister concern were only to the tune of Rs. 7,40,39,682/-. This is factually and legally Incorrect in as much as the interest on all these loans to the tune of Rs. 60,27,55,727/- cannot be disallowed merely because some loan to the tune of Rs. 7,40,39,682/- was given by the appellant to a sister concern at a lower rate of interest. The appellant therefore prayed that the disallowance of interest of Rs. 2,05,40,403/- made by the Assessing Officer is untenable and unjustified and hence deserves to be deleted. It is noted that on the unsecured loans taken by the appellant of a sum of Rs. 3,05,85,730/- was paid as interest and claimed as expenditure. The average cost of borrowing of the appellant for these loans has been submitted to be 14.13% during the year. As against this the assessee had given advance to Tulip Shares & Structures Pvt. Ltd. a sister concern to the tune of Rs. 7,40,39,682/- & 9% which means the assessee has made advances to the....
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.... in A.Y.2011-12, wherein we have directed to take weighted sale rate as incorporated above. Similarly ground No.2 with respect to disallowance of construction expenses which we have already dealt and decided in favour of the assessee and therefore, ground No. 2 raised by the Revenue is dismissed. Similarly, disallowance of interest expenditure of Rs. 22,33,183/- is identical to the ground No.3 in A.Y. 2011-12 and same facts and reasoning have been given by the ld. CIT(A) and therefore, in view of the finding given above wherein we have confirmed the order of the ld. CIT(A), the ground raised by the Revenue is dismissed. 24. Lastly, another issue which has been raised is disallowance of interest made u/s. 14A of Rs. 2,76,32,741/- which was made on account of interest expenditure by the ld. AO. We find that the ld. CIT (A) has deleted the disallowance on the ground that assessee has sufficient own funds to make the investment which were to the extent of 53.61 Crores as against value of investment of Rs. 33.5 Crores. This issue now stands covered by the decision of the Hon'ble Supreme Court in the case of South Indian Bank Ltd. vs. CIT reported in 438 ITR 1(SC). Accordingly, the ac....