TaxTMI 
TaxTMI 
2025 (2) TMI 1400
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....f case and in law, the Ld. CIT(A) was justified to delete disallowance of subleasing expenses of Rs. 1,67,71,848/- under section 57(iii) of the Act without appreciating the fact that assessee company has failed to establish the fact that said expenses are incurred wholly and exclusively for the purposes of the earning the sub-lease income shown under the head 'Income from Other Sources' which is necessary precondition to claim deduction under Section 57(iii) of the Act?" 2. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete reduction in the business loss by Rs. 3,51,44,651/- on account of cancellation / revision in area of sale of flats in respect of two parties without appreciating the fact that arriving at negative sales revenue on one hand and debiting cost on other hand is clearly in blatant violation of the provisions of the Income Tax Act and Matching concept as cost can be debited or matched only with the revenue and no cost or expense can be allowed in absence of revenue being offered? 3. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance of cost of c....
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.... to delete disallowance of maintenance expenses amounting to Rs. 34,58,543/- claimed as business expenditure related to Income from House Property ignoring the decision of Hon'ble Punjab & Haryana High Court (HC) in the case of Sunil Kumar Gupta v/s Asstt. Commissioner of Income Tax dated 27 September, 2016 where Hon'ble High Court has held that maintenance charges received in relation to the property should have been included within the ambit of "rent" and be taxed under the head "Income from house property?" 8. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance made on the account of unallocable expenses without appreciating the fact that assessee has failed to prove that these expenses are expanded wholly and exclusively for the purpose of business or profession and thus admissible under provisions of Section 37(1) of the Income Tax Act, 1961? 9. The Applicant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be." 5. Representatives of both the sides were heard at length. Case records carefully perused and with the assistance of the Counsels, the relevant....
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....ted in the year 2008 which consisted of approximately 525 small shops and out of the total constructed area, part of the area was sold and part of the area was held as investments to be given on lease. The small shops admeasuring about 77 to 600 sq.ft., and were mostly sold during the construction phase itself. However, these small shops created a lot of problem as the rental income was not enough and the maintenance was very high and the tenants were not paying maintenance for such small shops. In order that the Raghuleela Mall, does not shut down, the management changed its strategy and attracted large tenants like Pantaloons, Central Fame Cinema etc.. The demand for these brands was large floor space but due to adjacent offices which were already sold to other small businesses the same could not be leased out to such larger retailers. For taking advantage of leasing a larger area and giving comfort to large retailers, the assessee entered into lease agreements with these small buyers to whom the units were sold. Thus the area owned by the assessee along with the area taken by the assessee on lease were leased to Future Retail Ltd., Future Lifestyle Fashion Ltd., & Kambala Hospit....
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....followed by the assessee. 10.2. This explanation of the assessee was not accepted by the AO who was of the opinion that the assessee has claimed original sum of Rs. 3,45,71,165/- as cost of construction in respect of project "Nest" for the year under consideration without offering any additional revenue or increasing the corresponding work in progress of inventory as against the reversal of such sale. The basis of revenue recognition explained by the assessee is as under:- ***This space has been left blank intentionally, P.T.O.*** Project wise Summary of Cost incurred and AREA sold as on 31.03.2020 Sr No. Particular Nest A Projected Saleable Area (in Sq.Ft.) 148,221 B Estimated Cost - Current Land Cost & Stamp Duty Construction Cost Total Projected Cost Less : Land Cost 685,261,000 2,129,420,848 2,814,681,848 685,261,000 Total Projected Cost Exculding Land Cost 2,129,420,848 C Cost to P&L Opening WIP Cost other than Land Cost (already incurred) Opening WIP Land cost Add: Addition during the year Land Cost 2,364,926,725 251,469,3....
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....he submission and understanding the accounting treatment, the ld. CIT(A) observed that the assessee had to refund back Rs. 3,51,44,651/- to two buyers in respect of which income had already been recognized in earlier years. The ld. CIT(A) further observed that the assessee has incurred additional expenses of Rs. 4,04,89,652/- during the year on account of cost of construction of the project "Nest". In the absence of fresh sales being booked during the year and the assessee following PCM method, the ld. CIT(A) was convinced that the actions are appropriate enough so as to reflect the true income of the assessee on the basis of consistent method of accounting followed by it and went on to delete both the disallowances of Rs. 4,04,89,652/- and Rs. 3,51,44,651/-. 11. Before us, the ld. D/R strongly supported the findings of the AO and read the operative part. The ld. Counsel for the assessee reiterated and explained once again the accounting treatment given by the assessee by referring to the relevant documents in the paper book. 12. We have given a thoughtful consideration to the orders of the authorities below. The summary of cost incurred and area sold as on 31/03/2020 & 31/03....
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....74,142 less Reversal of Cost due to Flat Cancellation Cost Incurred as on 1.4.2019 2,364,926,725 Deferential Sales Ratio 1.61% 38,053,651 Total Impact on Cost 35,620,491 12.1. The reversal entry can be understood from the following chart :- Details of Sales more than Rs. 10 lakhs Sr No Name of the Party Address PAN Amount A) Sale of Hats 1 Suresh Balkrishnanan 102, 1st Floor, Brookvllle-W, S B Cross Lane, Off Mughal Lane, Mahim (West), Mumbai- 400 016 AERPB3730R 146,090,000 B) Less: Sales reversal due to cancellation of flats 34,571,314 1 Sushil Rambilas Gupta 301, Pooja Apts, Gulmohar Road No. 1, Juhu, Mumbai-400 049 573,337 2 Haresh Mehta Mumbai 35,144,651 A-B) Net Sale of Flats as per Note 21 of 110,945,3449 12.2. It can be seen from the above that the cost ratio which was 92.60% as on 31/03/2019, increased to 92.96% as on 31/03/2021. The sales ratio was 30.91% which came down to 29.30% with a difference of (-)1.61% because of which, the sales re....
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....ty, investments, project work in progress and other financial assets like loans and only a nominal portion of funds have been invested in other business assets like stock of raw material, finished goods, property plant and equipment and debtors. The AO further observed that the assessee in its return of income considered interest income under the head "income from other sources" where no deduction is claimed for interest expenses meaning thereby that assessee itself has accepted that the loans advanced are out of interest free funds available with the assessee. The AO went on to recompute the liability of interest expenses which are mentioned at pages 20 to 24 of the assessment order and in doing so, the AO rubbished the contention of the assessee that its project has been stalled by the local authorities and went on to compute the disallowance of interest as under :- Sr No Name of Project Interest expense not allowable as business expense as claimed by the assessee 1. The Capital & Trade Centre 1242088620 2. Raghuleela Arcade & Vishroop 795204416 3. Raghuleela Mall 4716995 4. Palm Beach Arcade 168974776 Total Interest 22....
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....evenue is dismissed. While doing so, Ground No. 2 of the assessee's appeal is also dismissed. The interest cost of Rs. 16,89,74,776/- has to be capitalized in the Palm Beach Arcade property, following the matching concept followed by the assessee. 17. Ground No. 6 relates to the restriction of disallowance u/s 14A of the Act to the extent of exempt income earned by the assessee. 18. This issue is no more res integra as has been held in plethora of judgements for example PCIT v. Caraf Builders and Constructions Pvt. Ltd. (2019) 414 ITR 122 (Delhi)(HC). Respectfully following the same, we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, Ground No. 6 is dismissed. 19. Ground No. 7 relates to the deletion of common area maintenance (CAM) charges of Rs. 44,60,16,088/- as business income instead of income from house property and the addition of disallowance of maintenance expenses of Rs. 34,58,543/-. 20. The AO noticed that the assessee has received maintenance charges of Rs. 48,72,29,783/- u/s 194C of the Act and other income of Rs. 10,94,88,979/- u/s 194I(a) but found that the assessee has not disclosed this income but has netted off....
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....ssee has received Gross rent of Rs. 1,93,92,10,908/- against which it claimed statutory deduction on account of repairs and maintenance amounting to Rs. 55,84,20,510/-. However, the assessee as incurred expense of only Rs. 50,12,47,569/- and the electricity expenses of Rs. 6,50,36,596/- has been recovered by the assessee. The maintenance charges received from tenants is considered as the part and parcel of rent and considered as part of ALV. This observation of the AO does not carry any weight. The assessee has received over and above the rental income, reimbursement on account of CAM and electricity charges which is netted off against the actual expenses incurred by the assessee and the net expenditure has been debited to the profit and loss account. The point of dispute is whether the recovery of CAM charges are to be considered as part of rent eligible for statutory deduction @30% or has to be assessed as business income. 23.1. The Hon'ble Bombay High Court in the case of CIT vs. Runwal Developers (P) Ltd. 15 taxmann.com 196 (Bom), has held as under :- "9. We see no merit in the aforesaid contention. The fact that the assessee apart from carrying on the construct....
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....penses. The expenses have been disallowed on the ground that the same has not been incurred wholly and exclusively for business purposes and further depreciation has also been disallowed on the ground that the premises were not used for the purpose of business. 26. The root cause for the disallowance is that the assessee has not allocated expenses to its various purchases. 27. After perusing the orders of the authorities below and considering rival submissions, we are of the considered view that the expenses incurred at the head office level which pertains to the overall business of the assessee need not be allocated to various schemes as long as the same are incurred wholly and exclusively for the purpose of business. Therefore, the impugned disallowance is uncalled for and the ld. CIT(A) has rightly deleted the same which calls for no interference. Insofar as, the claim of depreciation is concerned, the following factual findings of the ld. CIT(A) will suffice :- "11.5. As regards the depreciation of Rs. 43,69,000/-, it is the contention of the appellant that no such sum of Rs. 43.69 lakhs has been claimed by the appellant. I find that Schedule 27 to Financial Stat....