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2024 (7) TMI 1485 - AT - Income TaxALV of residential units held as stock-in-trade - Addition on account of notional ALV in respect of unsold spaces/ flats - CIT(A) deleted addition treating the same as income from house property - HELD THAT - There is no dispute that under the identical facts in the assessee s own case pertaining to Assessment Years 1988-89 to 1998-99, the Hon ble Jurisdictional High Court. 2012 (11) TMI 323 - DELHI HIGH COURT has decided the issue against the assessee. The contention of the assessee that the flats were not habitable therefore, notional ALV could not have been computed. It is seen that no such contention was made before the authorities below. Moreover, no material is placed before this Tribunal, supporting the contention. Since, under the identical facts, the Hon ble Delhi High Court has already decided the issue against the assessee and the view of the Hon ble High Court of Delhi has been affirmed by the Hon ble Supreme Court 2013 (7) TMI 1111 - SC ORDER therefore, the finding of Ld. CIT(A) cannot be sustained and same deserved to be reversed. CIT(A) has deleted the impugned addition without giving specific finding regarding the properties being vacant farm land and there was no construction of house property by the assessee. Therefore, the issue of taxability of properties claimed as being vacant farm lands needs verification by the AO for ascertaining the correctness of the claim that no house/building was constructed on such lands. Thus the issue is hereby, restored to AO. If it is found true that during the relevant time, no house property/commercial space were constructed thereon. No addition would be called for. Thus, Ground No.2 of the Revenue s appeal is partly allowed. Allocation of various expenses to eligible projects on the basis sales ratio for computing allowance of deduction u/s 80IB(10) - preliminary objections of the assessee against allocation of expenses is that the assessee company has been maintaining separate books of accounts, qua the eligible projects which is duly supported by the audit report in Form No.10CCB - HELD THAT - We find that Ld. CIT(A) has deeply considered the facts and submissions of the assessee in respect of the allocation of advertisement and publicity expenses and returned finding on fact that the expenditure incurred in current year could not be compared for allocation purpose, the average expenses on advertisement incurred during AYs 2005-06, 2006-07 2008-09 should be taken into consideration. We are of the considered view that this finding of CIT(A) is correct because the benefit of advertisement by the assessee in earlier years i.e. 2005-06, 2006-07 2008-09, would also certainly pass on to the year under consideration. Therefore, CIT(A) has rightly allocated expenditure on pro-rata basis in the sale ratio u/s 80IB(10) of the Act - Hence, no interference is called for on this issue. Disallowance of interest on the borrowed capital - CIT(A) has given a finding on fact that most of the projects are eligible for deduction u/s 80IB(10) of the Act, are more than 90% completed prior to 01.04.2006 and were running in surplus. Therefore, no allocation should have been made qua the interest on borrowed funds on all projects where section 80IB(10) of the Act, was claimed as internal accrual being higher than the investment. This finding of CIT(A) is not rebutted by the Revenue by bringing any contrary material therefore, we do not see any reason to interfere in the same. Decision of the CIT(A) in allocating the expenses of meeting fee of Directors - As we are of the view that Ld.CIT(A) has rightly given a finding that such fee related to meetings of the Directors and such meeting issues related to eligible projects would also be subject matter. The assessee has not furnished Minutes of Board meeting to support its contention that no agenda related to the eligible projects was discussed in these meetings. In the absence of such evidence, we do not see any merit in the contention of the assessee. CIT(A) in respect of Director s travelling has given a finding that foreign travelling by the Directors was not related to any eligible projects. This finding is not rebutted by the Revenue by placing any contrary material on records - Ground of appeal of Revenue against deletion of allocation of expenses to eligible project are dismissed. Allowing setting off losses against profits of succeeding years - Losses of earlier years which had already been set off against other income in earlier years, could not be notionally set off again while computing current income admissible for deduction u/s 80IB(10) of the Act during relevant year. In the light of binding precedent cited by assessee wherein it has been held that loss if already absorbed against the profit of other eligible project could not be notionally brought forward . Revenue has not brought any contrary material to rebut the contention that losses of earlier year which had already been set off against the income of the eligible projects in earlier years could not be notionally brought forward. Therefore, we do not see any reason to disturb the findings of CIT(A), the same is hereby affirmed. Thus, Ground No.7 raised by the Revenue is dismissed. Addition u/s 14A of the Act r.w. Rule 8D - CIT(A) deleted addition - HELD THAT - CIT(A) was of the view that no disallowance u/s 14A should be made in the case of the assessee company as the AO was unable to establish any link between fund borrowed from public deposits and the fund that was used for the purpose of earning of exempt income. We do not find fault with this finding of CIT(A), even before this Tribunal, no material is furnished suggesting that the investments were made out of borrowed fund and/or any expenditure related to earning of exempt income is debited to profit and loss account by the assessee. In the absence of such evidence, we do not see any merit in the grounds of appeal raised before us. Hence, the same is hereby rejected. Allocation of retainership fee - As contended this expenditure ought not to have been attributed to the eligible projects as the assessee has been maintaining separate books of accounts for each eligible projects - HELD THAT - We do not see any merit into the contention of the assessee that no services were rendered qua the eligible projects. No detail has been filed regarding nature and scope of services rendered to the assessee by the retainers. In the absence of such evidences, we do not find fault in the finding of Ld.CIT(A), the same is hereby affirmed. Ground No.2 of the cross-objection raised by the assessee, is rejected. Allocation of Director s meeting fee - Undisputedly, the assessee has not furnished any evidence supporting its contention that no agenda related to eligible projects was discussed. In our considered view, it is highly improbable that no agenda related to eligible projects was discussed in Director s meeting. The assessee has not furnished any register recording minutes of Director s meeting. Therefore, in the absence of the same, it cannot be definitely concluded that no agenda was discussed related to eligible projects. Therefore, Ground raised by the assessee in the cross-objection is rejected.
Issues Involved:
1. Deletion of addition on account of notional Annual Letting Value (ALV). 2. Allocation of various expenses to eligible projects for deduction under Section 80IB(10). 3. Allowing set-off of losses against profits of succeeding years. 4. Deletion of addition under Section 14A read with Rule 8D. 5. Allocation of advertisement expenses, retainership fees, and Director's meeting fees. Detailed Analysis: 1. Deletion of Addition on Account of Notional Annual Letting Value (ALV) The Revenue challenged the deletion of INR 58,09,780/- added by the AO on account of notional ALV for unsold spaces/flats treated as income from house property. The Assessee conceded that the issue was decided against them by the Delhi High Court in their own case for earlier assessment years. The Tribunal noted that no material was presented to support the contention that the flats were not habitable. Therefore, the Tribunal upheld the AO's addition but remanded the issue of farm lands to the AO for verification. Thus, the Tribunal partly allowed the Revenue's appeal on this ground. 2. Allocation of Various Expenses to Eligible Projects for Deduction Under Section 80IB(10) The Revenue disputed the substantial relief granted by the CIT(A) regarding the allocation of expenses to eligible projects. The Tribunal analyzed the following expenses: - Advertisement & Publicity Expenses: The CIT(A) allocated INR 38,22,503/- based on average expenses from previous years. The Tribunal upheld this finding. - Interest on Borrowed Capital: The CIT(A) found that most projects were 90% complete and running in surplus, so no allocation was warranted. The Tribunal upheld this finding. - Professional Charges: The CIT(A) allocated INR 1,04,23,153/- for retainership fees but excluded other professional expenses. The Tribunal upheld this allocation. - Director's Meeting Fee: The CIT(A) upheld the allocation of INR 9,65,000/-. The Tribunal agreed, noting the absence of evidence from the Assessee. - Director's Travelling Expenses: The CIT(A) found no allocation was warranted as the expenses were unrelated to eligible projects. The Tribunal upheld this finding. Thus, the Tribunal dismissed the Revenue's grounds on these allocations. 3. Allowing Set-off of Losses Against Profits of Succeeding Years The Revenue contested the CIT(A)'s decision to allow set-off of losses from earlier years against profits of succeeding years. The Tribunal noted that losses already set off against other income in earlier years could not be notionally set off again. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground. 4. Deletion of Addition Under Section 14A Read with Rule 8D The Revenue challenged the deletion of INR 10,80,927/- disallowed by the AO under Section 14A read with Rule 8D. The Tribunal noted that the AO failed to establish any nexus between borrowed funds and exempt income. The Tribunal upheld the CIT(A)'s deletion, dismissing the Revenue's ground. 5. Allocation of Advertisement Expenses, Retainership Fees, and Director's Meeting Fees The Assessee's cross-objection included: - Advertisement Expenses: The Tribunal upheld the CIT(A)'s allocation of INR 38,22,503/-. - Retainership Fees: The Tribunal upheld the CIT(A)'s allocation of INR 1,04,23,153/-. - Director's Meeting Fees: The Tribunal upheld the CIT(A)'s allocation, noting the absence of evidence from the Assessee. Thus, the Tribunal dismissed the Assessee's cross-objection. Conclusion - The Revenue's appeal was partly allowed. - The Assessee's cross-objection was dismissed.
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