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2023 (2) TMI 297 - ITAT MUMBAIEstimation of income from the project at the rate of 10% of the work-in-progress - assessee has transferred two existing projects to its sister concern as per the value declared in balance sheet and it is fact on record that assessee has transferred the project at the work-in-progress value to its sister concern without adding any profit to the above said project cost - HELD THAT:- Assessee has partly completed the two projects namely Kapil Malhar Intelligent Homes Phase-II and development rights and transferred the same at the end of the current assessment year to its sister concern M/s Indorigin Electric Ltd. It is fact on record that assessee has transferred the same as per the Books of Accounts at cost without adding any profit of the effort put in by the assessee on these projects. On enquiry assessee has declared profit earned by sister concern i.e. M/s Indorigin Electric Limited at 7.71% after completion of the projects. Therefore, to the extent the assessee has completed the project which was declared in the Books of Accounts as work-in-progress at the end of the year which was subsequently transferred to its sister concern. Therefore, it is proper and just to estimate the profit @7.71% on the value of work-in-progress transferred to its sister concern. AO is directed to add the profit on these projects @7.71% on the value of work-in-progress transferred during the year at the value of ₹.7.2 crores. Accordingly, ground raised by the assessee as well as revenue are partly allowed. Addition made on account of land cost claimed as expenses by the assessee - CIT-A deleted addition on the basis of the fresh evidence, without giving an opportunity to the Assessing Officer as per the provisions of Rule 46A - HELD THAT:- Considered the rival submissions and material placed on record, we observe from the record that the Ld.CIT(A) considered the various submissions of the assessee and while deleting the addition made by the Assessing Officer he heavily relied on the information contained in the assignment deed based on which the project was transferred to its sister concern. Therefore, it clearly shows that it is not an additional evidence submitted before the Ld.CIT(A). Accordingly, the additional ground raised by the revenue is dismissed. Rectification of mistake u/s 154 - CIT(A) allowed the claim of the assessee with regard to interest expenditure and on the issue of transfer of outstanding sundry creditors to the sister concern - HELD THAT:- Assessee has taken loan from Bank of Maharashtra for the project Kapil Malhar and the loan was utilized in the project. During the year the above said project was sold to a third party. The profit from the sale of the remaining part of the project was declared and assessed as 'Business Income”. Against this 'Business Income” the assessee has claimed the interest expenditure incurred by it for the said project. We are in agreement with the findings of the Ld.CIT(A) that the interest expenditure claimed by the assessee is towards the loan taken from Bank of Maharashtra and the funds were utilized in the said project was subsequently transferred. Therefore, the assessee declared the income earned from this project as the business income. Accordingly, assessee is eligible to claim the above said interest expenditure as business expenditure. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A). Accordingly, Ground No. 2 raised by the revenue is dismissed. Outstanding creditors liability in its Books of Accounts - HELD THAT:- As during the year assessee has transferred the development rights and projects to its sister concern and as per the assignment agreement they agreed to transfer the remaining project on “as is and where is basis” and the liability in respect of the sundry creditors outstanding in the above said projects are automatically transferred to the sister concern. Therefore, there is no liability in the Books of Accounts as per the transfer of the projects to its sister concern. Therefore, the Assessing Officer has merely presumed that the assessee has written off these sundry creditors and he presumed that this falls under deemed income of the assessee. Ld.CIT(A) has verified the development agreement and came to the conclusion that the assessee has transferred the project along with the liability to its sister concern. Therefore, there is no reason to interfere with the findings of the Ld.CIT(A). Accordingly, Ground No. 3 raised by the revenue is dismissed.
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