2021 (1) TMI 60 - AT - Income Tax

Disallowance of prior period expenses - HELD THAT - Coordinate bench in assessee's own case for assessment year 2008-09 2019 (6) TMI 1288 - ITAT DELHI reliance of the ld. AR on the decision of Hon'ble Delhi High Court in CIT vs. Modipan Ltd. 2010 (12) TMI 836 - DELHI HIGH COURT is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowability of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition on account of prior period expenditure. Addition on account of deduction u/s. 80 IA B - HELD THAT - This issue is squarely covered for assessment year 2008-09 2019 (6) TMI 1288 - ITAT DELHI Addition on account of estimated IDC charges and revenue recognition as per percentage completion method cost of the construction - HELD THAT - This issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for earlier years. The latest order with respect to the above issue is covered in the decision of the coordinate bench for assessment year 2008-09 - We dismiss ground number 3 of the appeal of the learned assessing officer and confirm the order of the learned CIT-A in deleting the disallowance on account of estimated IDC charges and commencement of construction cost. Disallowance on account of brokerage and commission expenses relating to leased out properties - in the alternative, if same is attributable to lease income, adjustment is required to be made while working out rental income as per provisions of section 23(1) - HELD THAT - The issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessment year 2006-07 and assessment year 2008-09 2019 (6) TMI 1288 - ITAT DELHI in favour of the assessee stating that expenditure towards brokerage and commission paid to brokers for booking and sale of certain properties is allowable firstly in view of the facts that assessee's treatment of such expenditure has been decided in favour of the assessee and revenue has not challenged it and secondly such expenditure are allowable. In view of the above facts and following the decision of coordinate Bench as facts are not distinguished by revenue, we confirm the order of CIT (A) in deleting the addition. Capitalisation of the interest expenditure - HELD THAT - As relying on own case we are of the view that presumption is to be assumed in favour of the assessee and not against assessee. Hence, we reject the formulae adopted by CIT (A) of working out proportionate disallowance by adopting artificial formulae. Therefore respectfully following decisions of Honourable Bombay High court in CIT vs. Lokhandwala Constructions Industries Ltd. 2003 (1) TMI 93 - BOMBAY HIGH COURT and CIT V. Reliance Utilities Power limited. 2009 (1) TMI 4 - BOMBAY HIGH COURT - We reverse the order of the CIT (A) confirming the disallowance of expenditure and direct the AO to allow this interest expenditure u/s. 36(1) (iii) . Disallowance of late construction charges received from the customers - HELD THAT - As decided in own case Assessee as following a prudent and consistent accounting policy which was necessitated by the order of Honourable Punjab And Haryana High court. The assessee offered the entire amount as its income on settlement of disputes by the Honourable Supreme Court. Therefore, we hold that the assessee was acting on prudent and consistent accounting policy. Going by this accounting policy, the income cannot be recognised unless it is free from impending and binding litigation which in this case was clarified in A.Y. 2011-12 only Accounting standard 9 issued by ICAI on revenue Recognition also satisfies the accounting policy of the company that when the revenue is saddled with uncertainties same should not be recognised till the uncertainties are resolved. Therefore following the decision of coordinate bench as well as the accounting standard 9 of ICAI we are of the view that assessee has correctly recognised revenue in the year the issue attained certainty. Therefore on perusal of the decision of CIT (A) we are of the view that there is no infirmity in the order. Hence we confirm the order of CIT (A) Addition on account of the contingency deposit - HELD THAT - Respectfully following the decision of the coordinate bench in assessee's own case for earlier years, we confirm the order of the learned CIT-A and dismiss ground of the appeal of the assessing officer. Addition on account of net interest free security deposit, disallowance on account of net registration charges - HELD THAT - It is noted that this is the amount which is collected by the buyers with specific object of getting exclusion of conveyance deed in favour of the buyer. In fact, it is an advance collected by the assessee from the buyer towards registration charges with the office of the Registrar for conveyance deed registration. At the time of registration, assessee incurs this expenditure by debiting to this account of that particular customer. The total receipt of registration charges is identified with respect to each of the buyer and there are movement in respective accounts. In fact, it is a past through cost collected by the assessee from the buyer to be incurred by assessee on behalf of the buyer. These receipts cannot partake character of the revenue in the hands of the assessee. It is also not the case of the AO that the depositors are not identified and despite the conveyance deed executed by the assessee, the amount has not been incurred. In absence of this finding, it is not possible to confirm the disallowance. Therefore, we confirm the order of the CIT (A) in deleting the addition being credit balance of registration charges received from the customers. Addition on account of expenses towards non allocation of overheads to group companies - HELD THAT - On perusal of the expenditure and the orders of the lower authorities, it is apparent that the director's salary is being paid to the directors of the company including a commission thereof is for the purpose of managing the business of the DLF-assessee. Further, for the protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders' activity. Furthermore, the advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all pertaining to the business of the company. No evidence/instances have been cited by AO that any of this expenditure has not been incurred by the company and they are not related to the business of the assessee. It may happen that by incurring certain expenditure by the assessee for the purpose of his business may result into some indirect benefit to the group companies but that cannot be the ground for disallowance of that expenditure in the hands of the assessee. The CIT (A) relying upon the decision in the case of Nestle India Ltd. 2007 (4) TMI 299 - ITAT DELHI-F has deleted the addition. No infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with instances that these are not incurred by the assessee wholly and exclusively for the purposes of the business of the assessee. Respectfully following the decision of the coordinate bench in assessee's own case for earlier years and also for the reason that this decision has been accepted by the revenue by not preferring an appeal on this issue before the honourable High Court and also for the reason that the learned assessing officer himself has not made these additions from assessment year 2012-13 onwards, we dismiss ground number 10 of the appeal. Disallowance of expenses u/s. 14A - assessee has earned dividend from mutual fund - HELD THAT - Respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2008-09 2019 (6) TMI 1288 - ITAT DELHI we confirm the order of the learned CIT-A to the extent of deletion of the disallowance of interest expenditure u/s. 14 A read with rule 8D (2) of the act. Coming to the ground number 2 of the appeal of the assessee wherein the confirmation of disallowance of administrative expenditure is challenged, respectfully following paragraph number 11.1 of the order of the coordinate bench for assessment year 2008-09, we set aside the whole issue of administrative expenses with similar direction back to the file of the learned assessing officer. Assessee may raise any ground with respect to above disallowance. Disallowance on account of expenses on commercial projects which are not commenced - HELD THAT - The assessee has incurred this expenditure on proportionate and feasibility of various construction projects in which business the assessee is engaged into. Before embarking on to any of the projects, it is a common practice to obtain a feasibility and economic viability of construction projects at different geographical location. These expenses are for facilitating the existing business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or unrelated to the business of the assessee. Therefore, in our view, this expenditure are wholly and exclusively incurred for the purposes of the business of the assessee. Hence, we confirm the order of CIT (A) and delete this ground of revenue's appeal. Classification of income from income from house property to income from business or profession - HELD THAT - Assessee company is a developer and hence, the decision of Hon'ble Supreme Court in the case of Chennai Properties 2015 (5) TMI 46 - SUPREME COURT is rendered in the context of the company which is formed with the main object of renting up of the properties. In view of the above, respectfully following the decision of coordinate Bench of the ITAT in the case of assessee for AY 2019 (6) TMI 1288 - ITAT DELHI we confirm the order of CIT(A) in taxing the rental income as income from house property. Addition on account of notional rent, additional annual letting value in respect of the vacant and lease of properties - HELD THAT - As decided in the case of assessee for AY 2019 (6) TMI 1288 - ITAT DELHI notional addition made by the Assessing Officer under the head income from house property on account of notional income u/s. 23(1) (a) of the Income Tax Act is deleted. Disallowance of depreciation claimed on DLF Centre building - HELD THAT - As decided in own case 2017 (11) TMI 381 - ITAT DELHI CIT(A) has observed that this very issue arose in the preceding year and relief allowed at the first appellate stage was accepted by the revenue as no appeal was filed against the same before ITAT. In the light of above position and as per the decision of Hon'ble Supreme Court in the case of CIT v. J.K. Charitable Trust 2008 (11) TMI 8 - SUPREME COURT the revenue could not be permitted to agitate the very same issue in the year under reference. Disallowance on account of expenses were bills are not in the name of the company - HELD THAT - As the bulk of expenses are in the nature of electricity and water expenses for which the name of erstwhile tenant has been mentioned. Similar issue was involved in the earlier year also, therefore, respectfully following the precedence this issue is decided in favour of the assessee and against the Revenue. Disallowance on account of excess payment of rent - HELD THAT - In the present case the learned assessing officer has disallowed the sum merely on the basis of increase in the earlier year compared to the increase in the current year. Increase in the earlier year was more than 50% whereas increase in the current year is merely 19%. The learned assessing officer has not brought on record any material to show that what was the market rate of the rent of the flat. In absence of such information it cannot be said that what is paid by the assessee to a related party is excessive. All these exercised by the learned assessing officer are missing in this case. In view of this we do not find any infirmity in the order of the learned CIT-A in deleting the addition. Addition on account on notional rent where security deposits were received but no rental was shown - HELD THAT - No justification for addition as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted. Disallowance on account of interest on late deposit of tax deduction at source - HELD THAT - We hold that such an interest on late payment of deposit of TDS cannot be allowed as expenditure u/s. 37. Consequently, this issue is decided against the assessee. Addition on account of short deposit of Dividend Distribution Tax - HELD THAT - According to Section 220 when assessee is deemed in default, an amount of such tax in default can be determined, the notice of demand u/s. 156 can be issued, and such tax shall be paid within 30 days of service of the notice. The consequence of such non-payment of tax may result into, recovery of tax, penalty payable on such tax and also prosecution u/s. 276B of the income tax act. However on reading of the order of the lower authorities we do not find mention of any of the provisions of the income tax act which provides that short payment of dividend distribution tax may be added to the income of the assessee and assessee can further be saddled with payment of tax on such short payment of dividend distribution tax. The learned departmental representative also could not show us any such provision in the income tax act. Therefore, we are unable to uphold such an addition made by the lower authorities.

Summary

Issues Involved:
1. Disallowance of brokerage and commission expenses.
2. Disallowance under Section 14A of the Income Tax Act.
3. Addition on account of notional rent.
4. Disallowance of interest on late deposit of TDS.
5. Addition on account of short deposit of Dividend Distribution Tax.
6. Deletion of addition on account of disallowance of prior period expenses.
7. Deletion of addition on account of deduction under Section 80 IAB.
8. Deletion of addition on account of IDC charges and preponement of construction cost.
9. Deletion of addition on account of interest capitalization.
10. Deletion of addition on account of late construction charge.
11. Deletion of addition on account of contingency deposits.
12. Deletion of addition on account of interest-free security deposit.
13. Deletion of addition on account of registration charges.
14. Deletion of addition on account of non-allocation of overheads to group companies.
15. Deletion of addition on account of reclassification of income from house property to income from business or profession.
16. Deletion of addition on account of notional rental income on vacant/leased properties.
17. Deletion of addition on account of recalculation of depreciation.
18. Deletion of addition on account of disallowance of expenses where bills were not in the name of the company.
19. Deletion of addition on account of disallowance of excess payment of rent.

Detailed Analysis:

1. Disallowance of brokerage and commission expenses:
The tribunal upheld the disallowance of ?83,02,737/- made by the CIT(A) on account of brokerage and commission expenses relating to leased-out properties. This was consistent with the tribunal's decisions in the assessee's case for earlier years.

2. Disallowance under Section 14A of the Income Tax Act:
The tribunal confirmed the deletion of disallowance of interest expenditure under Section 14A, following its decision for the earlier year. However, the issue of disallowance of administrative expenses was set aside to the AO for recalculating the disallowance based on investments that yielded exempt income.

3. Addition on account of notional rent:
The tribunal deleted the addition of ?11,55,271/- made by the AO on account of notional rent where security deposits were received but no rental income was shown. This was based on the tribunal's decision in the assessee's case for earlier years.

4. Disallowance of interest on late deposit of TDS:
The tribunal upheld the disallowance of ?1,16,935/- on account of interest on late deposit of TDS, following the decision in the assessee's case for the earlier year.

5. Addition on account of short deposit of Dividend Distribution Tax:
The tribunal deleted the addition of ?4,61,57,388/- made by the AO on account of short deposit of Dividend Distribution Tax, stating that there is no provision in the Income Tax Act that allows for such an addition to be made to the income of the assessee.

6. Deletion of addition on account of disallowance of prior period expenses:
The tribunal confirmed the deletion of the addition of ?3,09,16,658/- made by the AO on account of disallowance of prior period expenses, following the decision in the assessee's case for earlier years.

7. Deletion of addition on account of deduction under Section 80 IAB:
The tribunal upheld the deletion of the addition of ?7,72,65,10,922/- made by the AO on account of disallowance of deduction under Section 80 IAB, following the decision in the assessee's case for earlier years.

8. Deletion of addition on account of IDC charges and preponement of construction cost:
The tribunal confirmed the deletion of the addition of ?77,83,55,804/- made by the AO on account of IDC charges and preponement of construction cost, following the decision in the assessee's case for earlier years.

9. Deletion of addition on account of interest capitalization:
The tribunal upheld the deletion of the addition of ?54,683,000/- made by the AO on account of interest capitalization, following the decision in the assessee's case for earlier years.

10. Deletion of addition on account of late construction charge:
The tribunal confirmed the deletion of the addition of ?1,66,71,710/- made by the AO on account of late construction charge, following the decision in the assessee's case for earlier years.

11. Deletion of addition on account of contingency deposits:
The tribunal upheld the deletion of the addition of ?28,837/- made by the AO on account of contingency deposits, following the decision in the assessee's case for earlier years.

12. Deletion of addition on account of interest-free security deposit:
The tribunal confirmed the deletion of the addition of ?63,159/- made by the AO on account of interest-free security deposit, following the decision in the assessee's case for earlier years.

13. Deletion of addition on account of registration charges:
The tribunal upheld the deletion of the addition of ?25,37,61,992/- made by the AO on account of registration charges, following the decision in the assessee's case for earlier years.

14. Deletion of addition on account of non-allocation of overheads to group companies:
The tribunal confirmed the deletion of the addition of ?25,37,81,038/- made by the AO on account of non-allocation of overheads to group companies, following the decision in the assessee's case for earlier years.

15. Deletion of addition on account of reclassification of income from house property to income from business or profession:
The tribunal upheld the deletion of the addition of ?13,82,35,746/- made by the AO on account of reclassification of income from house property to income from business or profession, following the decision in the assessee's case for earlier years.

16. Deletion of addition on account of notional rental income on vacant/leased properties:
The tribunal confirmed the deletion of the addition of ?15,41,010/- made by the AO on account of notional rental income on vacant/leased properties, following the decision in the assessee's case for earlier years.

17. Deletion of addition on account of recalculation of depreciation:
The tribunal upheld the deletion of the addition of ?6,36,614/- made by the AO on account of recalculation of depreciation, following the decision in the assessee's case for earlier years.

18. Deletion of addition on account of disallowance of expenses where bills were not in the name of the company:
The tribunal confirmed the deletion of the addition of ?30,12,202/- made by the AO on account of disallowance of expenses where bills were not in the name of the company, following the decision in the assessee's case for earlier years.

19. Deletion of addition on account of disallowance of excess payment of rent:
The tribunal upheld the deletion of the addition of ?3,48,396/- made by the AO on account of disallowance of excess payment of rent, stating that the AO had not shown what the market rate of rent was and had not brought any material to show that the payment was excessive.