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2013 (11) TMI 1647 - AT - Income TaxDeduction u/s 80IB - Held that - As the evidence brought on record by the Assessing Officer clearly indicates in the first place that the plan approval is not in the name of the assessee and even otherwise the assessee has not completed the entire housing project comprising of 880 units which are required to be built by the assessee as per the approved plan and that too within the time prescribed. Being so the primary condition laid down in S.80IB(10) is not at all fulfilled by the assessee by furnishing the prescribed form in 10CCB of the Act to show that the assessee has complied with the statutory requirements prescribed in S.80IB of the Act. In our opinion therefore the Assessing Officer was correct and justified in disallowing the claim of the assessee for deduction under S.80IB of the Act for the years under appeal. - Decided against assessee. Disallowance of finance charges - Held that - As per the provisions of S.40(ba) of the Income-tax Act any payment by a joint venture to member-constituent under the head interest salary bonus commission and remuneration is not allowable as deduction. Being so the learned Authorised Representative is not able to controvert the findings of the CIT(A) with regard to applicability of provisions of S.40(ba) of the Act to the facts of the present case. Since the assessee itself has not availed the loan and it is the constituent of the assessee s JV which availed the loan assessee is not eligible for deduction in respect of interest on such loan even if it was paid by the assessee directly to the AP Statee Finance Corporation. We therefore find no infirmity in the impugned order of the CIT(A) on this issue. We accordingly uphold the order of the CIT(A) and reject the grounds of the assessee on this issue. Disallowance of direct and indirect expenditure - Held that - Considering the quantum and nature of expenditure claimed which is not verifiable we agree with the CIT(A) that certain element of inflation and personal nature of expenditure cannot be ruled out. Consequently disallowance of a portion of the expenditure claimed by the assessee is called for. The approach of the CIT(A) in estimating such disallowable expenditure at 10% of the cash component of direct and indirect expenditure is quite reasonable. We find no infirmity in his action in sustaining disallowance to that extent. We accordingly uphold the order of the CIT(A) on this aspect and reject the grounds of the assessee on this issue in the appeals for the assessment years 2007-08 and 2008-09. Suppression of receipts on sale of flats situated in Janapriya Utopia - Held that - It is also an admitted fact that the assessee has been following mercantile system of accounting. That being so irrespective of actual receipt or otherwise of an amount income has to be recognised in the year in relation to which it has arisen or accrued. In the facts of the present case since the registration of the sale deed has taken place in February 2008 which falls in the assessment year 2008-09 even though certain amount of consideration is due from the purchaser of the flats as on the date of registration income in respect of sale of the flats has to be recognized in the year under appeal only and not in any other year. Any income is assessable only in the relevant year in which it is assessable as per the method of accounting consistently followed by the assessee. Merely because it was disclosed in a subsequent year it cannot be said that there is no justification for the addition in the year under appeal. In this view of the matter we uphold the orders of the Revenue authorities on this issue and reject the grounds of the assessee in this appeal. Addition u/s 69C - Held that - We agree with the CIT(A) that before fastening any liability on the assessee it is necessary for the Assessing Officer to establish some nexus to the contents of the document relied upon and unless the so called unofficial payments or receipts are linked to any land or construction of the project under taken by the assessee it is difficult to assume that the entries in those documents indicate unexplained expenditure or investment liable for addition under S.69C of the Act. We do not find any infirmity in the reasoning given by the CIT(A) for deleting this addition in para 29.1 of the impugned order. Addition u/s 80IA - Held that - In the case of an assessee engaged in the business of developing industrial park and letting out the same income from letting out is assessable under the head business . Hence the income derived from such letting out should be considered as income from business income only and not otherwise as envisaged in S.80IA(4)(iv) of the Act. Accordingly we set aside the impugned order of the CIT(A) on this issue and direct the Assessing Officer to re-examine the claim of the assessee for relief under S.80IA(4)(iv) of the Act and allow the same if the assessee is otherwise eligible for the same. He shall of course re-decide this issue in accordance with law and after giving reasonable opportunity of hearing to the assessee. The grounds of the assessee on this aspect are treated as allowed. Addition u/s 14A - Held that - While the Assessing Officer has disallowed only part of the finance charges claimed in terms of S.14A of the Act as attributable to the income claimed by the assessee as exempt the CIT(A) observing that the assessee has diverted its entire borrowed funds to the group entities of the assessee and not utilised the same in its own business activities. This finding of the CIT(A) could not be controverted by the assessee before us by bringing on record any cogent evidence on record. In the circumstances we find no justification to interfere with the order of the CIT(A). We accordingly uphold the same rejecting the grounds of the assessee on this issue. Addition towards loan processing charges - Held that - It is an undisputed fact that the loan of 5 crores taken by the assessee from APSFC has been transferred to its joint venture partner Janapriya Engineers Syndicate JV. Since the loan amount has not been utilized by the assessee for its own business purpose it cannot be said that the expenditure incurred by way of processing charges for securing such a loan is an expenditure incurred for the pupose of the business of the assessee. That being so the disallowance made by the Assessing Officer is in order and the CIT(A) in our opinion was justified in sustaining the same.
Issues Involved:
1. Disallowance of deduction under Section 80IB of the Income Tax Act. 2. Disallowance of finance charges. 3. Disallowance of direct and indirect expenses. 4. Disallowance under Section 40A(3). 5. Addition on account of suppression of receipts on sale of flats. 6. Disallowance under Section 40(a)(ia). 7. Addition of unexplained expenditure under Section 69C. 8. Deemed dividends under Section 2(22)(e). 9. Addition towards unproved liabilities. 10. Addition towards loan processing charges. 11. Addition of 30% of opening work-in-progress. Detailed Analysis: 1. Disallowance of Deduction under Section 80IB: The assessee claimed deductions under Section 80IB for the assessment years 2005-06 to 2008-09. The Assessing Officer disallowed the claim due to non-submission of required documentation and non-completion of the housing project by the stipulated date. The CIT(A) upheld the disallowance, noting the project was incomplete by the deadline. The Tribunal confirmed that the assessee did not fulfill the primary conditions of Section 80IB, thereby rejecting the appeals. 2. Disallowance of Finance Charges: The Assessing Officer disallowed the finance charges under Section 40(ba) since the payments were made to a constituent of the joint venture, which is not deductible. The CIT(A) confirmed this disallowance. The Tribunal upheld the CIT(A)'s decision, noting that the loan was not availed by the assessee but by a constituent of the JV. 3. Disallowance of Direct and Indirect Expenses: For the assessment years 2007-08 and 2008-09, the Assessing Officer disallowed significant portions of direct and indirect expenses due to lack of evidence. The CIT(A) reduced the disallowance to 10% of the cash component of these expenses. The Tribunal upheld the CIT(A)'s decision, finding the 10% disallowance reasonable. For the assessment years 2005-06 and 2006-07, the Tribunal directed the Assessing Officer to make a similar 10% disallowance. 4. Disallowance under Section 40A(3): For the assessment year 2006-07, the assessee did not contest the disallowance under Section 40A(3), resulting in the rejection of this ground. 5. Addition on Account of Suppression of Receipts: The Assessing Officer added suppressed receipts based on seized documents. The CIT(A) upheld this addition, noting that the sale deed was registered within the relevant assessment year. The Tribunal confirmed the addition, emphasizing the assessee's accounting method required recognizing income in the year of registration. 6. Disallowance under Section 40(a)(ia): The CIT(A) deleted the disallowance under Section 40(a)(ia) based on the Special Bench decision in Merilyn Shipping & Transport. The Tribunal remanded the issue to the Assessing Officer for reconsideration in light of the pending High Court decision. 7. Addition of Unexplained Expenditure under Section 69C: The Assessing Officer made additions based on seized documents indicating unofficial payments. The CIT(A) deleted these additions, finding the documents to be non-credible and lacking evidentiary value. The Tribunal upheld the CIT(A)'s decision, noting the documents were dumb and lacked corroborative evidence. 8. Deemed Dividends under Section 2(22)(e): The Assessing Officer treated inter-corporate deposits as deemed dividends. The CIT(A) deleted the additions, following the Special Bench decision in Bhaumik Colour Lab. The Tribunal upheld the CIT(A)'s decision, noting the assessee was not a shareholder in the lending companies. 9. Addition towards Unproved Liabilities: The Assessing Officer added unproved liabilities appearing in the balance sheet. The CIT(A) sustained this addition. The Tribunal, however, deleted the addition, noting the liabilities were opening balances and should have been addressed in the year they arose. 10. Addition towards Loan Processing Charges: The Assessing Officer disallowed loan processing charges as the loan was transferred to a joint venture partner. The CIT(A) upheld this disallowance. The Tribunal confirmed the CIT(A)'s decision, noting the loan was not used for the assessee's business purposes. 11. Addition of 30% of Opening Work-in-Progress: The Assessing Officer made an addition due to discrepancies in the opening work-in-progress. The CIT(A) sustained this addition, relying on a similar case decision. The Tribunal upheld the addition, agreeing with the CIT(A)'s reasoning. Conclusion: The Tribunal dismissed several appeals, partly allowed some, and remanded a few issues for reconsideration. The decisions largely upheld the findings of the lower authorities, emphasizing the need for proper documentation and adherence to statutory requirements.
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