TaxTMI 
TaxTMI 
2025 (5) TMI 740
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....o.711/Del/2024 (Revenue's appeal) : 2. The Revenue has filed the appeal with the following grounds: 1. Whether on the facts and circumstances of the case and in law, the Ld. NFAC has erred in deleting the addition of Rs. 319,01,05,617/- made by the AO on account of disallowance of revenue recognition as per POCM method of recording ignoring that the AO has categorically held that the Internal Development Charges (IDC) incurred by the assessee cannot be loaded/apportioned against unlaunched area? 2. Whether on the facts and circumstances of the case and in law, the Ld. NFAC has erred in deleting the addition of Rs. 61,34,84,000/- made by the AO on account of disallowance of Interest capitalization ignoring that the AO has categorically held that the assessee is following POCM method of accounting under which interest expenditure related to projects under construction can only be allowed on proportionate basis to the extent of revenue recognized and the interest of Rs. 61,34,84,000/- are in the nature of cost attributable to the acquisition/construction of asset, therefore, needs to be capitalized. 3. Whether on the facts and circumstances of the cas....
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....10. Whether CIT(A) was Justified in accepting an accounting standard which is in contravention to the method prescribed in the Income Tax Act, 1961. 11. Whether CIT(A) was justified in allowing the assessee to adopt an accounting standard which was not even notified by the Government(Ind AS got effective from 01.04.2018 only). 12. Whether CIT(A) was justified in allowing the assessee a deduction for which Revenue was not even disclosed during the year. 13. Whether the Ld. NFAC under the facts and circumstances of the case and in law was Justified in deleting the addition of Rs. 6,30,05,370/- made by the AO on account of disallowance u/s 40(a)(ia) of Income Tax Act, 1961. 14. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 3. The brief facts leading to this case are that the assessee company, engaged in the business of real estate, having multiple ongoing projects of construction and also selling upon the plots of land, filed its return of income declaring loss of Rs. 20,04,58,93,245/- on 04.11.2017 through electronic medi....
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....ated 11.03.2016 for A.Y. 2006-07 which was subsequently followed up to A.Y. 2016-17 by its order dated 19.07.2023. Both the orders passed by the Co-ordinate Bench was also referred by the Learned AR being annexed to the paper book filed before us. 8. Under these facts and circumstances of the matter, we, thus, considered the order passed by the Co-ordinate Bench dated 19.07.2023. While rejecting the ground preferred by the Revenue the Co-ordinate Bench, observed as follows: "6. The issue arises out of the addition made by Ld. AO on account of Revenue recognition as per POCM. In assessee's own case for A.Y. 2006-07 (supra) issue has been considered against the Revenue with relevant finding in para no. 35 to 42. It can be observed that in A.Y. 2006-07, the issues are restored to the files of Ld. AO to make further inquiries in respect of Mangolia project and Summit project. However, the adoption of POCM was approved. Further in A.Y. 2008-09 the department's appeal had again raised the issue and taken into consideration the determination of issue in favour of the assessee by the Tribunal in assessee's own case for A.Y. 2006- 07. The Co-ordinate Bench had decide....
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....ee for A.Y. 2006-07 by and under the order passed by the Co-ordinate Bench of Tribunal on 11.03.2016 which was, in fact, subsequently, followed up to A.Y. 2016-17. A copy of the order passed by the Hon'ble Co-ordinate Bench has also been duly submitted before us as annexed to the paper book filed by the assessee. Such submission made by the Learned AR has not been able to be controverted by the Learned DR. 14. Heard the parties, perused the records. Considering the assessee's submissions, the Learned AO came to a conclusion that under the percentage of completion method, interest expenditure related to a project under construction can only be allowed on pro-rata basis to the extent of revenue recognition. The impugned amount therefore, are in the nature of borrowing cost attributable to the acquisition or construction of qualifying assets and the same need to be capitalized and thus not allowable as revenue expenditure. Finally, the expenses of Rs. 61,34,84,000/- was added to the total income of the assessee, which was deleted by the Learned CIT(A) with following observation: "6.3.3 It is observed that the facts and circumstances with regard to capitalization of....
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....e subsidiaries have been given for the business purposes and interest has been charged. * The proviso to section 36(l)(iii) is not applicable as: 1. The buildings under construction are not the capital assets 2. These are stock in trade 3. Any borrowing for the stock in trade can never be capitalized. * Accounting standard AS-(16) has no application. Accounting Standards cannot override the provisions of Income Tax Act. It is a matter of record that the borrowed funds have been utilized for the business of the real estate and the loans and advances to the subsidiaries. The company has earned the interest of Rs. 895.62 crore from the loans and advances which has been offered as the income. In view of the above, it is clear that the company has effectively claimed the net interest of Rs. 722.81 crore on the term loans which have been used for the purposes of business of the company and in this respect it is evident that the interest earned by the company is more than the net interest debited in the accounts on the term loans and thus there is no question of making any adhoc disallowance. This is further fortified by the fact that ....
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.... prevail. Provisions of section 36(l)(iii) provides that the amount of interest paid in respect of capital borrowed for the purposes of the business or profession deduction is required to be allowed. Proviso inserted w.e.f. 01.04.2004 is the only restriction if condition laid down u/s 36(1) (iii) are satisfied by the assesse. The proviso says that any amount of the interest paid in respect of capital borrowed for acquisition of an asset whether capitalized in books of accounts or not for any period beginning from the date on which the capital asset was borrowed for acquisition of the asset till the date on which such asset was put to use shall not be allowed as deduction. The deduction is to be disallowed even if the interest is capitalized in the books of accounts or not. Hon'ble Supreme Court in the case of Core Healthcare [298 ITR 194] has held that provisions of section 36(1)(iii) is a code in itself. In the present case, the interest paid by the assessee is not for the purpose of acquisition of any capital asset but for its inventory. We do not find any restriction in provisions contained u/s 36(1)(iii) which provides that the interest can be disallowed if incurred for the....
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....was on capital account or revenue account - was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That, the utilization of the capital was irrelevant for the purposes of adjudicating the claim for deduction under section 36(1)(iii) of the Act -Calico Dyeing & Printing Works v. CIT [19581 34 ITR 265 (Bom.) In that judgment, it has been laid down that where an assessee claims deduction of interest paid on capital borrowed, all that the assessee had to show was that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether the capital was borrowed in order to acquire a revenue asset or a capital asset. The said judgment of the Bombay High Court applies to the facts of this case." Further, in the following decisions of various coordinate Benches, the deduction of interest has been allowed u/s 36(1)(iii) even where the assessee has followed the projection completion method : - (i) ACIT vs. Tata Housing Development Company Ltd. - 45 SOT 9 (Bom.); (ii) DCIT vs. Thakar Developers - 115 TTJ 841 (Pune); (....
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....order passed by the Learned CIT(A) in deleting the addition of Rs. 61,34,84,000/- in regard to the claim of interest under Section 36(1)(iii) of the Act on the identical facts and circumstances of the matter is found to be just and proper so as not to warrant interfere. Hence, this ground of the appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed. 17. Ground No. 3: Deletion of disallowance of expenses to the tune of Rs. 54,63,24,512/- under Section 14A read with Rule 8D(2)(ii) & (iii) of the Act made by the Assessing Officer is under challenge before us, which has been claimed to be covered in assessee's own case by and under the judgment passed by the Co-ordinate Bench dated 19.07.2023 for A.Ys. 2014-15 to 2016-17. 18. At the time of hearing of the matter, the Learned DR vehemently supported the order passed by the Learned AO. 19. The order passed by the Co-ordinate Bench has been duly considered by us. The relevant observation whereof is as follows by us as under: "13. The issue arises out of the addition made by Ld. AO u/s 14A r.w.r. 8D wherein the Ld. CIT(A) has restricted the addition to Rs. 9,10,488/- only. The issue ha....
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.... different treatment. The ground is rejected. " 25. Thus, having regard to this order passed by the Co- ordinate Bench in favour of the assessee, we do not find any reason to interfere with the order passed by the Learned CIT(A) in deleting the impugned addition on the identical facts. This ground of appeal is, therefore, found to be devoid of any merit and thus dismissed. 26. Ground No. 5: This ground relates to deletion of disallowance to the tune of Rs. 9,03,15,833/- on account of Helicopter and Aircraft expenses made by the Assessing Officer, treating them as not incurred wholly & exclusively for the business purpose holding them personal in nature. 27. At the time of hearing, the Learned DR supported the order passed by the Learned AO on this ground raised the matter. 28. On the other hand, Learned AR submitted before us that the issue is squarely covered in assessee's own case by and under the order passed by the Co-ordinate Bench dated 29.09.2020 for A.Y. 2010-11, which was subsequently followed up to A.Y. 2016-17, the copy whereof has duly been annexed to the paper book filed before us by the assessee. 29. We find that the order passed by the Co-ordinate ....
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....helicopter and aircraft and chartering of aircraft and other routine expenditure were expended for the purposes of the business. It was further held by him that assessee is a public limited companies are distinct assessable entity as per the definition of person u/s two (31) of the act therefore it cannot be stated that the expenditure identified as expended by the directors and other employees of the company is personal in nature because of the limited company is an in animated person and there cannot be anything personal about such an entity. He further followed the decision in case of Sayaji Iron and engineering Co Ltd 253 ITR 749 and deleted the addition/disallowance. The learned departmental representative could not show us any reason to state that the expenditure incurred by the assessee on such travel expenditure of aircraft and helicopter can be considered as a personal expenditure of a company. There were no contrary decision is pointed out before us. In view of this we do not find any infirmity in the order of the learned CIT - A in deleting the above disallowance. Accordingly ground number 16 and 17 of the appeal of the learned assessing officer is dismissed." T....
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....tutory transition from IGAAP to IND-AS in the following manner : * "The difference in cumulative margin already recorded in the books of account in respect of the ongoing projects upto 31.03.2016 under the old accounting method (IGAAP-POCM) and the cumulative margin that ought to have been recorded in respect of the ongoing projects upto 31.03.2016 as per the new accounting method Ind- AS POCM) as notified by the Ministry of Corporate Affairs, Government of India. * The difference in the amount of upfront fees paid on loans and debentures amortized under the old method of accounting (IGAAP) upto 31.06.2016 and the amount that ought to have been amortized under the new method of accounting (Ind-AS) upto 31.03.2016. • The working of the same is as follows : Sr. No. Particulars Amount (Rs. lakhs) 1. Gross margin in respect of ongoing projects upto 31.03.2016 under the old method 15,08,342.92 2. Less: Gross margin in respect of ongoing projects upto 31.03.2016 under the new method 9,30,933.81 3. Difference (1-2) 5,77,409.11(A) 4. The amount with respect to upfront fees paid on loans and debentures to be amortized ....
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....s return of income, the assessee has tried to take shelter of ICDS adjustment in respect of POCM adjustment and claim of effective interest adjustment on debentures." 35. The assessee duly filed its submission, which was not found to be acceptable and claim of the assessee was therefore, rejected for the following two reasons: "POCM adjustment "Ind As has been prescribed for preparation of books of account. However, total income has to be computed according to provisions of the Act and ICDS. There is no provision in the Act for claim of deduction in respect of such profit/income which has already been offered on the basis of provision of the Act applicable for the relevant assessment year." Effective interest adjustment on Debentures "The incremental claim of upfront fees has been made stating that higher claim of such deduction should have been made in earlier years. Accordingly, the assessee has applied Ind AS as applicable for the year under consideration to the earlier year in which Ind AS was not applicable. Therefore, such claim of deduction is not as per provisions of the Act." 36. On the contrary, the Learned AO computed the income ....
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.... the rebates will have to be paid, say Rs. 9. Under the erstwhile IGAAP POCM, such rebates/discounts were accounted for on actual basis at the time of credit of such benefit to the customers. However, IND AS 18 requires that such rebates should be estimated and accounted for upfront at the start of project based on a best estimate. Accordingly, while calculating margins as per IGAAP POCM, rebate of Rs. 9.5 is accounted for at the end of the project i.e., year 5 on actual basis and the cumulative margin during the life of the project would be calculated as under: Under IGAAP (A) Budgeted Year- 1 Year- 2 Year- 3 Year- 4 Year- 5 Cumulative Sales 100 100 100 100 100 Less : Rebates - - - - 9.5 Net sales 100 100 100 100 90.5 Cumulative Cost 70 70 70 70 70 Margin 30 30 30 30 20.5 Under IGAAP (A) Budgeted Year -1 Year-2 Year-3 Year-4 Year -5 (B) Actual Cumulat....
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....e showing the amount offered to tax under IGAAP in earlier years being accounted for again the subsequent years under Ind-AS is as under: Sr No. A.Y. Alternate claim filed (IGAAP POCM) (Rs. In lakhs) Alternate claim filed (Borrowing Cost) (Rs. In lakhs) Total of Alternate claim (Rs.In laksh) 1. 2017-18 145,926.57 2,497.15 148,423.72 2. 2018-19 63,208.54 2,123.94 65,332.48 3. 2019-20 104,107.91 118.23 104,226.14 4. 2020-21 172,825.79 350.9 173,176.18 5. 2021-22 150,899.69 197.12 151,096.81 6. 2022-23 162,346.98 - 162,346.98 Total 799,315.48 5,286.82 804,602.31 (iv). No amount has been claimed by the appellant under the provisions of ICDS-I, rather, a mere disclosure has been made under ICDS-I. (v). POCM has been consistently followed by the appellant in the past and has been accepted by the Revenue authorities. In such a case, income offered to tax as per POCM cannot be considered as 'hypothetical' or 'notional'. (vi). Changed method of accounting should not lead to double taxation and non-allowability of deduction claimed by appella....
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....t of any trade discounts and volume rebates allowed by the entity. • Accordingly, to measure the fair value of consideration received or receivable, rebates/discounts (in the form of timely payment rebate, move in rebate, down payment rebate, subvention cost incurred on behalf of customers and compensation payable to customers for delayed delivery), allowed to the customers, are accounted as a reduction from actual and budgeted revenue and the impact is accordingly accounted for throughout the project cycle as against IGAAP POCM where the impact of rebate and discount was accounted for at the end of the project. 44. As per the Learned AR Pursuant to mandatory change in method from IGAAP to IND AS, the assessee company re- evaluated the budgeted/actual estimates of the ongoing projects, which lead to reduction in margin to the extent of Rs. 5,77,409.11 lakhs. It may be noted that the assessee has already paid tax on this amount in earlier years and the one- time claim in the year under reference is for sake of aligning the revenue recognition process with the changed POCM method under IND-AS 18. It is merely a transitional claim being reversal of margin recognized un....
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....cified by the CBDT. Reference is made to the decision of Apex Court in the case of CIT v. Virtual Soft Systems Ltd. 404 ITR 409 (SC). Reference to various judicial precedents is appearing at Paper Book Page Nos. 245-252. 51. It is worth mentioning that the Assessing Officer has himself accepted the revenue recognition under IND AS-18 POCM in immediate subsequent year i.e. A.Y. 2018-19 vide order under Section 143(3) dated 30.09.2021 and as the rejection of change of method and consequential disallowance of one-time claim in the year under reference is inconsistent and without any basis. 52. In a similar way, the assessee company has also claimed one-time deduction of Rs. 5286.82 lakhs in respect of change in treatment of upfront fee paid on loans and debentures in accordance with Ind-AS 109. The change introduced by the new method is that earlier the assessee used to amortize upfront fee on straight-line basis over the period of loan, however, as per Ind-AS 109, from 01.04.2016, the upfront fee was factored as interest cost by arriving at effective rate of interest. Accordingly, the annual amortized amount debited to Profit and Loss account was re-computed on each loan since ....
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....oes not specify any particular method for recognizing revenue from real estate transactions or recognition of cost of financial instruments and as such this ground is misconceived. In fact, the IndAS being issued by expert statutory body, the same are valid and required to be followed as held by Apex Court in the case of CIT v. Virtual Soft Systems Ltd. 404 ITR 409 (SC) 11 IndAS were Government notified by w.e.f. 01/04/2018 only and as such they are not applicable This ground incorrect. As is factually per MCA notification dated 16th Feb, 2015 placed at PB Pg 688, the IndAS were made mandatorily applicable w.e.f. 1st April, 2016. CIT(A) was not justified in allowing deduction for which revenue was not disclosed during the year. Again, this ground is absurd and contrary to facts as the one- time claim is only with reference to margin already recognized and subjected to tax in earlier years and the claim of deduction is merely a transitional claim to realign the revenue recognition from the various project with changed method as per IndAS- 18. In fact, as clarified above, the deduction so claimed has duly been offered to tax in subsequent years and as such th....
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....e developers and Build Operate Transfer (BOT) projects from ICDS IV on Revenue Recognition, please clarify whether ICDS III and ICDS IV should be applied by real estate developers and BOT operators. Also, whether ICDS applicable for lease. A:12: At present there is no specific ICDS notified for real estate developers, BOT projects and leases. Therefore, relevant provisions of the Act and ICDS shall apply to these transactions as may be applicable." Since no specific ICDS has been prescribed for computation of income, the appellant was mandated, under section 145(1) of the Act, to follow the method of accounting prescribed under section 133 read with section 129 of the Companies Act, 2013 and as recommended by the Institute of Chartered Accountants of India. In the absence of any ICDS applicable to real estate contracts, the taxable income of the appellant, who is a real estate developer, has to be determined in accordance with the method of accounting regularly and consistently followed, including the changed method, where the change in the method of accounting is bonafide and consistently followed thereafter. Therefore, it can be said that in the absence of any p....
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....assessee to determine the real income evidently derived from lease of assets, could be given a go-by. In determining its income and its presentation, the assessee took recourse to the Guidance Note, issued by the ICAI, on accounting for leases. The ICAI's publication on the subject indicates that the Guidance Note on accounting of leases was issued by it, for the first time, in 1988, which was, then revised in 1995 In this background what is required to be considered is whether the books of accounts could be rejected by the AO merely for the reason that recourse to the Guidance Note was taken by the assessee. In this regard, we would be required to examine the provisions of s. 145 of the IT Act. Sec. 145 of the IT Act adverts to the method of accounting followed by an assessee. Sub-s. (1) of s. 145 provides that income chargeable under the head "profits and gains of business or profession" or "income from other sources" shall be computed either on cash basis or on mercantile system, whichever method being regularly employed by the assessee. This provision is, however, subject to the Central Government notifying AS in respect of any class of assessee or class of income.....
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.... it was not mandatory to adopt the methodology professed by the Guidance Note issued by the ICAI, is irrelevant, for the reason that, as long as there was a disclosure of the change in Accounting Policy in the accounts, which had a backing of a professional body such as the ICAI, it could not be discarded by the AO. This is specially so, since the ICAI is, recognized as the body vested with the authority to recommend ASs for ultimate prescription by the Central Government in consultation by the National Advisory Committee of Accounting Standards, for presentation of financial statements .... 10. The change in accounting policy, as noticed by us above, had the imprimatur of a duly recognized professional body, i.e., the ICAI. Therefore, notwithstanding the fact that the opinion of the ICAI was expressed in a Guidance Note which had not attained a mandatory status, would not, in our view, provide a basis to the AO to disregard the books of accounts of the assessee and in effect method of accounting for leases, followed by the assessee." The above judgment has also been referred to in the following decisions: - (i) Prakash Leasing Ltd. Vs DCIT [2012] 208 Tax....
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.... and claimed depreciation on the said capitalized value, the jurisdictional Delhi High Court observed that the assessee was obliged to capitalize the entire cost of spares in consonance with the mandatory provisions of AS-2 and AS-10 and that there was no merit in the submissions of the revenue that the accounting treatment in accordance with the Accounting Standards had no relevance for the purposes of the Act. The relevant extract of the judgment is as under: 16.5 It is to be noted that these Accounting Standards are mandatory in nature and applied to accounts prepared after 1- 4-1999. In that sense the submission of the assessee has to be accepted that the change in the accounting policy had been brought about by virtue of the issuance of the revised accounting standards issued by the Council of the ICAI, which was, applicable for the assessment year under consideration. Furthermore, the provisions of subsections (3A), (3B) and (3C) of section 211 of the Companies Act, 1956, clearly provide that every profit and loss account and balance sheet of a company shall comply with the Accounting Standards prescribed. ................................... Therefo....
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....im of Rs. 5,774.09 cr, the same has been justified through a certificate dated 20.08.2021 issued by the statutory auditor of the appellant company, a copy of which was filed at page 1 to 19 of paper book Volume 1 of submissions dated 25.09.2023. This is on account of reversal of excess margin already offered to tax under IGAAP POCM in the earlier years as a result of mandatory adoption of new accounting method, i.e., Ind-AS POCM as prescribed by the Ministry of Corporate Affairs. In order to substantiate that the cumulative margins of Rs. 15,08,343 lakhs under IGAAP POCM in respect of ongoing projects upto 31.03.2016, have been offered to tax upto A.Y. 2016-17, the appellant filed relevant extract of assessment order for A.Y. 2016-17 as per attachment 4 of its submissions dated 20.11.2023, wherein project-wise details of revenue offered to tax have been given. The summary of the POCM adjustment of Rs. 5,774.09 cr was given as under: Cumulative margin under Ind-AS POCM till 31 March 2016 (Rs. Lakhs) [A] Cumulative margin under IGAAP POCM till 31 March 2016 (Rs. Lakhs) [B] Cumulative net margin reversal (Rs. Lakhs) [C=B-A] 930,933.81 1,508,342.92 577,409.1....
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..... 100, given by the appellant in para C (35) of its written submissions dated 25.09.2023, it is seen that under both the methods i.e., under IGAAP POCM as well as under Ind-AS POCM in the above example, where the life of the project has been assumed to be five years, the cumulative margin during the life of the remains the same i.e. Rs. 20.5. Therefore, it can be seen that over the life-time of the project, either of the two methods leads to the same result in terms of profits and, therefore, it is revenue-neutral. In this regard, I have also taken note of the various judicial precedents cited by the appellant including the judgment of the Hon'ble Supreme Court in the case of CIT v. Bilahari Investment (P.) Ltd. [2008] 168 Taxman 95 (SC), wherein, the Apex Court, while adjudicating on the acceptability of a change adopted by the assessee in the method of accounting, accepted the contention of assessee that the change adopted by him in the method of accounting should be permitted since the same is revenue neutral, i.e. it does not lead to any loss to the exchequer. I have also considered the various judgments mentione any para C (38) of the appellant's submissions wherein it....
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....1,848.80 cr) and margin for the same period as per Ind-AS POCM (Rs. 6,290.41 cr). Thus, out of one-time adjustment of Rs. 5,774.09 cr claimed by the appellant in A.Y. 2017-18 on account of reversal of revenue due to mandatory change in the method of revenue recognition, margin/ revenue to the extent of Rs. 4,441.61 cr has already been off-set on account of higher revenue/margins in respect of ongoing projects upto A.Y. 2023-24. Thus, only an amount of Rs. 1,332.48 cr (Rs. 5,774.09 cr -Rs. 4.441.61 cr) remains to be recognized as revenue till assessment year 2023-24. Accordingly, the one-time adjustment of Rs. 5,774.09 cr on account of reversal of revenue will be off-set in subsequent years and hence the change in the method of accounting adopted by the appellant in the assessment year 2017-18 ultimately will not have any impact on revenue and, therefore, it is revenue-neutral. t is thus evident that the deduction/adjustment claimed by the appellant in A.Y. 2017-18 due to mandatory transition from IGAAP POCM to Ind-POCM shall be offset by higher reporting of revenue in subsequent years because, as already mentioned above, the total revenue under both IGAAP as well as Ind-AS remains ....
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....par Ltd. [2018] 90 taxmann.com 365 (SC). Therefore, the AO's reliance on the decision in the case of Southern Technologies Ltd. is misplaced. 10.5.11 Claim of upfront fees paid on loans and debentures The appellant had incurred certain expenses in the form of upfront fee while raising borrowings in the form of loans and debentures. As per the provisions of IGAAP such upfront fee was amortised and charged to the profit and loss account on a straight-line basis over the period of loan, till 31.03.2016. However, from F.Y. 2016- 17 onwards, under Ind-AS 109, the upfront fee was factored as interest cost by arriving at Effective Rate of Interest ('EIR'), Consequently, the annual amortised amount debited to P&L account was recomputed on each loan since inception. Therefore, on transition from IGAAP POCM to Ind-AS POCM, the appellant recomputed the annual amortized amount to be debited to P&L account and an amount of Rs. 5,286.82 lakhs was arrived, being the difference between the amount of upfront fee recognized under IGAAP and the amount that should have been recognized under Ind- AS up to the date of transition. The said differential (as per Ind- AS vis-&a....
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....ubt that it is an allowable expenditure under the provisions of the Act as the same was incurred wholly and exclusively for the purpose of the appellant's business. The deduction upfront fee paid on spread over basis has been allowed in the assessme completed for A.Y. 2015-16 and 2016-17. Further, as regards the condition of act payment as per section 43B, it is to be noted that the funds received by the appell on account of borrowings were net of upfront fee. In other words, the funds received by the appellant were reduced by the amount of such fee and hence no separate payment in respect of such fee was liable to be made by the appellant. Therefore, in my view there is no violation of the provisions of section 43B of the Act. 10.6 In view of the discussions in the forgoing paragraphs, I am of the considered view that the AO was not justified in rejecting the change in the method of accounting as the same was in accordance with the provisions of the Act and was triggered by the change in accounting policy/method. In the absence of any particular method prescribed under ICDS for real estate developers, the appellant company was obliged to compute its income in accordan....
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.... basis, how the notification dated 16.02.2015 is applicable from 01.04.2016 and on a mandatory basis. iii. To clarify the observation of the AO in para - (e) on page-57 of the assessment order that the Ind AS standard was applicable when assessee has taken a contract for construction and not where the assessee has undertaken construction activity. iv. To clarify the observation of the AO in para (i) on page 56 of the assessment order and in para no. 9.3 (i) on page-55 of the assessment order regarding the details not submitted by the assessee during the assessment proceedings and whether such details were later filed before the Ld. CIT (A) and whether the Ld. CIT (A) called for a remand report or obtained the comments of the AO before passing his order. v. To clarify as to whether the income claimed to be withdrawn from assessment year 2012-13 to 2017-18 on account of Ina AS standard has been offered in assessment year 2017-18 to 2022- 2023 was filed before the AO and examined by him in respect of assessee's claim that if the adjustment claimed in AY 2017-18 on account of Ind AS standard was not allowed will amount to double taxation of the same incom....
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....under: Particulars Amount (In Rs. Lacs) Gross margin in respect of ongoing projects recognized upto 31.03.2016 under old method 15,08,342.92 Gross margin in respect of ongoing projects recognized upto 31.03.2016 under New Method 9,30,933.81 Difference 5,77,409.11 We have already filed detailed synopsis on this issue before the Hon'ble Bench during the course of hearing. 4. In the above background, the query raised by the Honble bench is clarified hereunder: 1. Furnish the basis of the proposition made in 'Statement of Facts' before the Ld. CIT(A) that Ind AS as adopted by the assessee was to be applied to all the projects, which were ongoing and continuing as on the date of transition. A. The basis of proposition is that the notification of MCA, mandating applicability of Ind-AS, contains specific Ind-AS 101 which provides methodology for transition from old accounting method to the new one (refer PB page 689) which is reproduced hereunder: 11. The accounting policies that an entity uses in its opening Ind AS Balance Sheet may differ from those that it used for the same date using its previous GAAP. Th....
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....olding, subsidiary, joint venture or associate companies of companies covered by sub-clause (a) of clause (ii) of sub- rule (1) and sub-clause (b) of clause (ii) of sub- rule (1) as the case may be; and On reading of the above, it is clear that as per clause 4(i) it was optional for the companies to adopt Ind-AS w.e.f. 1^st April, 2015 since the word used is 'may', however as per clause 4(ii), the MCA made it mandatory for specified companies including listed companies to adopt Ind-AS w.e.f 1^st April, 2016 by using the word 'shall'. The assessee is a listed company having net worth in excess of Rs. 500 crores and as such as per clause 4(ii), it was mandatory for the assessee company to adopt Ind-AS for preparation of accounts w.e.f. 1st April, 2016 i.e. FY 2016- 17 and AY 2017-18 onwards. The CIT(A) has considered this aspect in detail vide finding recorded at Page 119, Para 10.5.2 and Page 125, Para 10.5.4 of the CIT(A) order. iii. To clarify the observation of the AO in para-(e) on page- 57 of the assessment order that the Ind AS standard was applicable when assessee has taken a contract for construction and not where the asses....
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....it is submitted that the assessee company has duly furnished the details subsequently before the assessing officer and the factual position to this effect is duly appearing in the assessment order as under: Page 65 of Asst. Order: As desired by your goodself in para 9.4 of the SCN, the assessee wishes to submit a detailed working, of the manner in which the amount of Ra. 577,409.11 lakhs has been determined, duly certified by the Accountants/Auditors as per Annexure 4 of certificate enclosed herewith. Page 69 of the Asst. Order: In accordance with the provisions of IND AS, an amount of Rs. 5,286.82 lakhs was arrived, being the difference between the amount of upfront fee recognized under IGAAP and the amount that ought to have been recognized under IND-AS up to the date of transition. With a view to further support the claim, the assessee wishes to provide herewith detailed workings wherein the underlying amount has been calculated. The workings are enclosed herewith as Annexure B of certificate enclosed herewith. It thus clear that assessee company had duly filed complete details in support of one- time claim of deduction before the assessing officer during the c....
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....epting the claim without any evidence and against the provisions of Income tax act as earlier year losses can be set-off only in accordance with provisions of the Act and not on ad-hoc basis. This ground is wholly misconceived as the one-time claim is on account of implementation of IndAS and supported from auditor certificate. Further, as opposed to the allegation of set-off of earlier year losses, it is case of reversal of profit margin already subjected to tax in earlier years and as such this ground is incorrect and contrary to facts of the case. The change in accounting is contrary to law laid down by Apex Court in the various cases that assessee has to follow consistently one method of accounting. The change of method is in contravention of section 145. As clarified above, it is not a case of change of method by the assessee on its own volition but substitution of mandatory IndAS notified by MCA in terms of Section 133 of Companies Act which is binding on the assessee. In these circumstances, the change of method is in conformity with statutory notification by MCA. In fact, the assessee has followed the changed method consistently as per applicable guidelin....
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....hed the copy of the auditor certificate in respect of one time claim, the income chart of preceding years, chart showing how one-time claim has been subsequently offered to tax, notification dated 7^th December 2006 notifying IGAAP for preparation of accounts, observation regarding notional adjustment. He has further explained the application of Ind-AS 18 and the issue regarding double taxation with illustration. In this regard, he has referred pages 253 to 255 and 263 to 265 of the paper book filed by the assessee. Further the copy of the order passed by the coordinate bench in assessee's own case in ITA No. 674 & 712/Del/2024 for AY 2018-19 was also furnished before us by and under the said submission dated 11.02.2025. Year-wise details of returned income and assessed income u/s 143(3) was shown as follows: (Amount in Core) Assessment Year Returned Income Assessed Income u/s 143(3) Date of Assessment Order u/s 143(3) 2008-09 1,512.17 2,768.17 27.04.2011 2009-10 660.41 1,655.25 30.04.2012 2010-11 473.39 1,047.39 24.09.2014 2011-12 887.54 1,930.77 31-03-2014 2012-13 1,444.82 2,317.17 21.12.2016 201....
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.... For the purposes of clause (f), a company shall qualify as a Small and Medium Sized Company, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period. (2) Words and expressions used herein and not defined in these rules but defined in the Act shall have the same meaning respectively assigned to them in the Act. 3. Accounting Standards. (1) The Central Government hereby prescribes Accounting Standards 1 to 7 and 9 to 29 as recommended by the Institute of Chartered Accountants of India, which are specified in the Annexure to these rules. (2) The Accounting Standards shall come into effect in respect of accounting periods commencing on or after the publication of these Accounting Standards. 4. Obligation to comply with the Accounting Standards .- (1) Every company and its auditors)shall comply with the Accounting Standards in the manner specified in Annexure to these rules. (2) The Accounting Standards shall be applied in the preparation of General Purpose Financial Statements. 5. An existing company, which was previously not a Small and Medium Sized Company (SMC) and subsequently becomes a....
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.... to the tune of Rs. 1,38,40,000/-, Infrastructure Augmentation Charges ('IAC') to the tune of Rs. 2,52,23,400/- to the Director, Town & Country Planning ('DTCP'), Haryana Urban Development Authority ('HUDA') on which no tax was deducted at source by the appellant company. In reply to the show-cause dated 30.08.2021 issued by the AO as to why disallowance under Section 40(a)(ia) of the Act should not be made due to non- deduction of TDS on these payments, the assessee replied that IDC and IAC paid to DTCP was, in fact, payment made to the Govt. and therefore, tax at source was not liable to be deducted on such payments. Similar payment of EDC to HUDA under Haryana Development and Regulation of Urban Areas Act, 1975 should also be treated as payments to the Govt. as the same was in the nature of statutory fees mandatorily required to be paid for the purpose of obtaining licence from DTCP. Such submissions made by the assessee was not found acceptable by the AO and addition @ 30% of total income of Rs. 21,00,17,900/- i.e. ultimately Rs. 6,30,05,370/- was made by the AO which was in turn deleted by the Learned CIT(A). Hence, the instant appeal before us. 64. ....
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....partment, DTCP in this case, u/s 196 of the Act as the payment was made to HUDA on behalf of DTCP only. 7. It is the case of the assessee that the payment of EDC has been made for carrying out any work in pursuance of the contract entered into between assessee and DTCP, which is a Government Department, and not in pursuance of any contract between the assessee and HUDA. This proposition mooted out by assessee is sustainable because payment of EDC were made by the assessee not for carrying out any specific work to be done by HUDA for and on behalf of the assessee rather DTCP, a Government Department of Haryana, levy these charges for carrying out external development from the developer and engages the services of the HUDA for execution of the work. 8. On the other hand, Id. DR for the Revenue laid emphasis on section 194C of the Act and contended that HUDA is neither a Government Department not a local authority, hence payment made to it is subject to deduction of TDS u/s 194C of the Act. 9. We are of the considered view that when payment of EDC has been made by the assessee in accordance with license granted by the DTCP, the payment made to HUDA was not m....
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....39;ble Delhi High Court relied upon by the appellant allowing bunch of writ petitions, where the case of a group company, DLF Homes Panchkula Pvt. Ltd in W.P. No. 4351/2021 was treated as a lead matter. While referring to the decision of the Coordinate Bench of Delhi High Court in BPTP Limited vs Principal Commissioner of Income tax, Central-III, the Hon'ble Court held that EDC payments are not in the nature of rent and, therefore, not amenable to the provisions of section 194I of the Act and hence no TDS was required to be deducted on these payments. I have also considered the decision of ITAT, Chandigarh in the case of ITO TDS, Chandigarh vs Sukham Infrastructure Pvt. Ltd where vide order dated 07.06.2018, it was held that TDS provisions u/s 1946 are not attracted on EDC payments made by the assessee to GMADA (this is an authority in Punjab exactly similar to HUDA in Haryana). The facts of the present case in respect of EDC payments are similar to the facts in these cases. 12.3.5 In view of the above facts and judicial pronouncements including the decision of the jurisdictional High Court of Delhi cited by the appellant, I am of the considered view that no TDS was de....
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....t' under an arrangement to use land. * It was specifically contended on behalf of the petitioner that provisions of section 194C/194I did not apply. The Assessing Officer did not allude to the said provisions, which requires a resident person paying any amount to a contractor to deduct TDS; according to the Assessing Officer, the nature of the EDC is rent. Further, he reasoned that the agreement between the petitioner and the State Government of Haryana (license under the HDRUA Act and the HDRUA Rules made there under) would be covered under the expression, "any other agreement or arrangement for use of land". * As noted above, it is conceded by the respondents that the view of the Assessing Officer is patently erroneous. * In the instant case, the revenue does not seek to support the decision of the Assessing Officer that EDC are 'rent' or in the nature of 'rent'. Thus, concededly, the fundamental reasoning on which the impugned order rests is fundamentally flawed. * The contention that the Assessing Officer has merely referred to a wrong section and therefore, the said reference may be ignored is also without merit. As notic....
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....ng grounds: 1. That the learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the disallowance of Rs. 95,12,768/- on account of alleged unverified purchase transaction. 2. That the claim of expenses is supported from documentary evidences and the correctness of same being not dispute, the upholding of disallowance by CIT(A) is mechanical and on arbitrary basis. 3. That the appellant craves leave to add, alter, amend, substitute, withdraw and / or vary any grounds of appeal at or before the time of hearing. " 71. The assessee has come in appeal challenging the disallowance of Rs. 95,12,768/- on account of alleged unverified purchase transactions. 72. During the course of assessment proceedings, in order to verify the genuineness of transaction in regard to the purchase shown to have been made by the assessee, notice under Section 133(6) of the Act was issued to 15 parties one of that namely; M/s. SMS Interiors Pvt. Ltd. did not file any reply of such notices. The assessee submitted the ledger account of this party in its books of account along with the reconciliation and supporting....