2014 (10) TMI 145 - AT - Income Tax

Expenses incurred on real estate project - accrual of expneses Whether the CIT(A) erred in disallowing alternate claim made by the appellant on actual payment basis Held that - all the issues rasied by the assessee in its appeal are covered against the assessee by the different orders of the ITAT for the separate assessment years, as aforesaid. Hence, respectfully following the precedent, we dismiss all the aforesaid grounds of the assessee. - Decided against the assessee.

Summary

Issues Involved:
1. Disallowance of alternate claims on actual payment basis for various expenses.
2. Deletion of deduction on account of interest payable on accrual basis to MCD.
3. Deletion of disallowance on account of interest on interest-free loans.
4. Restriction of disallowance under Section 14A of the I.T. Act.
5. Deletion of disallowance on account of prior period expenses.
6. Deletion of disallowance on account of gratuity and leave encashment.

Detailed Analysis:

1. Disallowance of Alternate Claims on Actual Payment Basis:
The Assessee appealed against the disallowance of alternate claims made on an actual payment basis for various expenses related to a real estate project, arguing that the claims were made because the department did not accept the allowability of expenses on an accrual basis. The Tribunal found that these issues were covered against the Assessee by previous ITAT orders for different assessment years. Specifically:
- Payment on account of flyover cost to MCD (Rs. 605.00 lacs) and interest on flyover cost to MCD (Rs. 172.06 lacs) were previously adjudicated, and the method of computation of income and expenses had been consistently followed and accepted by both the Assessee and the Revenue.
- Payment of principal amount to builders (Rs. 44.00 lacs) was not allowable on an actual payment basis as it had already been allowed on an accrual basis in a previous year.
- Expenditure in respect of approvals and permissions (Rs. 60.09 lacs) and removal of squatters (Rs. 37.25 lacs) were also not allowable on an actual payment basis as they had been allowed on an accrual basis in previous years.

2. Deletion of Deduction on Account of Interest Payable on Accrual Basis to MCD:
The Revenue appealed against the deletion of Rs. 110.08 lacs on account of interest payable on an accrual basis to MCD. The Tribunal found that this issue was covered in favor of the Assessee by previous ITAT orders, where it was held that the method of computation of income and expenses should not be changed arbitrarily, and the expenses were allowable.

3. Deletion of Disallowance on Account of Interest on Interest-Free Loans:
The Revenue also appealed against the deletion of Rs. 22.32 lacs made by the AO on account of notional interest on interest-free advances to the DCP Employees Trust. The Tribunal upheld the CIT(A)'s decision, finding that the issue was covered by previous ITAT decisions in the Assessee's favor.

4. Restriction of Disallowance Under Section 14A of the I.T. Act:
The Revenue challenged the CIT(A)'s decision to restrict the disallowance to Rs. 11,77,550/- as against Rs. 23,66,795/- made by the AO under Section 14A of the I.T. Act. The Tribunal referred to the Hon'ble Delhi High Court's decision in Maxopp Investment Ltd. Vs. CIT, which held that disallowance should be on a reasonable basis and that Rule 8D was not applicable to assessment years prior to 2008-09. The Tribunal upheld the CIT(A)'s decision to restrict the disallowance.

5. Deletion of Disallowance on Account of Prior Period Expenses:
The Revenue appealed against the deletion of Rs. 1,09,128/- made by the AO on account of prior period expenses. The Tribunal found that the AO had made the disallowance based on the Tax Audit Report without considering the details and nature of the expenses. The CIT(A) had observed that the expenses were of a routine nature and allowable. The Tribunal upheld the CIT(A)'s decision.

6. Deletion of Disallowance on Account of Gratuity and Leave Encashment:
The Revenue also appealed against the deletion of Rs. 9,46,196/- made by the AO on account of gratuity and leave encashment. The Tribunal found that this issue was covered in favor of the Assessee by previous ITAT decisions, which had allowed such provisions. The Tribunal upheld the CIT(A)'s decision.

Conclusion:
The Tribunal dismissed both the Assessee's and the Revenue's appeals, upholding the CIT(A)'s decisions on all grounds. The method of computation of income and expenses consistently followed by the Assessee and accepted by the Revenue was maintained, and arbitrary changes to this method were not permitted. The Tribunal's decisions were based on precedents and consistent application of the law.