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2024 (8) TMI 861 - AT - Income TaxAddition made on Annual Lettable Value (ALV) of properties where rent has been considered as business income - HELD THAT - The assessee is a company engaged in the business of development / construction and sale of flats, plot etc. It is not in dispute that the assessee had held properties as stock in trade and the same are classified in four categories. Flats open for sale, Flats that were actually let out by the assessee, Flats that were used for the purpose of business by the assessee and Flats under litigation for which approval was not granted by Municipal Corporation of Delhi (MCD). The issue is already covered in favour of the assessee by the order of this Tribunal in assessee s own case 2022 (2) TMI 1460 - ITAT DELHI wherein as before the ld. CIT(A), the assessee furnished assessment orders for Assessment Year 2011-12 and 2012-13 wherein the Assessing Officer has excluded the properties which have been given on rent for calculation of notional rental value. Following the findings given in AY 2011-12 and 2012-13, the Id. CIT(A) directed to exclude such properties. Decided in favour of assessee. Determination of ALV in respect of property under litigation - Issue already covered in favour of the assessee by the order of this Tribunal in assessee s own case for Asst Years 2013-14 and 2014-15 2022 (2) TMI 1460 - ITAT DELHI wherein held evidences have not been submitted before the lower authorities, this grievance has been decided against the assessee. In the interest of justice and fair play, we restore this issue to the file of the Assessing Officer. The assessee is directed to furnish necessary documentary evidences to justify its claim of non inclusion of ALV of storage of 7511 sq. ft in Jyoti Shikar, Janakpuri. The Assessing Officer is directed to examine the evidences and decide the issue afresh. Determination of ALV in respect of property under self-occupation - Issue already covered in favour of the assessee by the order of this Tribunal in assessee s own case for Asst Years 2013-14 and 2014-15 2022 (2) TMI 1460 - ITAT DELHI as held section 22 of the Act itself excludes ALV of such properties of which the assessee is owner and has occupied for the purpose of any business or profession carried on by him. Since the assessee has furnished necessary evidences which have been duly verified by the Id. CIT(A), we to interfere with the findings of the CIT(A). Decided in favour of assessee. Addition of business income in respect of sales for the period of first three months on a proportionate basis - addition made by the ld. AO on account of sales for the whole year and sustaining it only for first 3 months - assessee had not offered any revenue from windmills net of expenses during the year under consideration to tax on the ground that the buyer had offered the entire revenue from operations of windmills and its related expenses for the whole year to tax in its income tax returns - HELD THAT - CIT(A) had gone by the specific clause 5(xi) of the Agreement dated 22.7.2014 and had held that the revenue from operation of windmills for the period 1.4.2014 to 30.6.2014 (first three months) would be taxable in the hands of the assessee company. We find that while holding so, the ld. CIT(A) did not give corresponding deduction for expenses incurred for the same period of 3 months under the head income from business . In our considered opinion, the assessee would be duly entitled for deduction of expenses incurred qua the windmill unit for the period of 1.4.2014 to 30.6.2014 subject to verification of the figures stated thereon by the ld. AO . Hence the ld. AO is directed to examine the veracity of the figure stated by the assessee and grant deduction accordingly. The assessee is hereby directed to furnish the break up of figures before the ld. AO and prove that the same were incurred for the purpose of windmill division and pertains to the period of first three months of the year under consideration. Slump sale - Both the buyer and seller had undertaken various acts which demonstrates that the beneficial ownership of the windmills got transferred in favour of the buyer by the seller i.e. the assessee herein. The legal ownership alone stood transferred by the assessee in favour of the buyer by way of Slump Sale Agreement We find that the revenue clause as agreed in the Agreement dated 22.7.2014 is operative and forms integral part of the Slump Sale Agreement dated 23.3.2015. This goes to prove that the original agreement dated 22.7.2014 was acted upon by the parties and it finally stood culminated into Slump Sale Agreement. Thus, we hold that the order of the ld. CIT(A) requires to be modified only to the limited extent of granting deduction for expenses incurred during the period 1.4.2014 to 30.6.2014 in the windmill division and other findings given by the ld. CIT(A) does not require any interference. Action of the CIT(A) in determining the ALV of the property at 50% for basement area in respect of properties located at ground floor on the ground that it is arbitrary in nature - CIT(A) observed that the basement area of the property could at best be used only for storage facilities and ALV of such storage space could be estimated to be roughly 50% of the property. CIT(A) also appreciated the fact that there are lot of restrictions in use of basement area when compared to ground floor and above. The revenue has challenged the relief of 50% granted by the ld. CIT(A). We find that the MCD guidelines do not permit the usage of basement for residential purposes. It could be let out only for storage purposes or car parking purposes. Hence we find that the ld. CIT(A) had fairly estimated the usage of basement area to be 50%. We further find that the assessee had not challenged the action of the ld. CIT(A) before us in this regard. It is a fact that the basement area could not be utilized for residential purposes. We duly appreciate the fact that the basement area could have only restrictive usage and cannot command the same rental value as the ground floor commands. Hence the relief granted by the ld. CIT(A) at the rate of 50% is correct and would meet the ends of justice in the peculiar facts and circumstances of the instant case. Decided against revenue. Disallowance of Employees contribution to PF and ESI - CIT(A) deleted addition - HELD THAT - AR argued that once the date on which cheques were tendered to the bank by the assessee, the assessee loses control over it. He prayed for setting aside of this issue to the file of ld. AO. The ld. DR vehemently relied on the order of the ld. AO. We find that the claim made by the assessee requires factual verification by the ld. AO. Hence we deem it fit and appropriate to restore this issue to the file of ld. AO for denovo adjudication in accordance with law. Accordingly, the Ground No. 2 raised by the revenue is allowed for statistical purpose. Addition made u/s 43CA - AR before us stated that the issue in dispute is to be decided in favour of the revenue and the ld. CIT(A) erred in granting relief to the assessee. Since no arguments were advanced by the ld. AR responding to the arguments of the ld. DR on this issue, the Ground No. 3 raised by the revenue is allowed.
Issues Involved:
1. Addition on account of notional annual letting value (ALV) under section 22 of the Income Tax Act, 1961. 2. Determination of ALV in respect of properties under litigation. 3. Determination of ALV in respect of property under self-occupation. 4. Application of section 43CA of the Income Tax Act. 5. Addition in respect of revenue from windmill operations. 6. ALV value of basement area properties. 7. Deletion of disallowance on account of Employees' Contribution to PF and ESI. Issue-wise Detailed Analysis: 1. Addition on Account of Notional Annual Letting Value (ALV) Under Section 22 of the Income Tax Act, 1961: The assessee challenged the addition of notional ALV for properties classified as stock in trade. The Tribunal noted that the issue was covered in favor of the assessee by its earlier decision in ITA Nos. 5010 & 5011/Del/2017 and ITA Nos. 5679 & 5680/Del/2017 for AYs 2013-14 and 2014-15, where it was held that properties actually let out and offered to tax should not be included for notional ALV. Consequently, Ground Nos. 1.1, 2, and 2.1 raised by the assessee were allowed. 2. Determination of ALV in Respect of Properties Under Litigation: The Tribunal noted that the issue was covered by its earlier decision in the assessee's case for AYs 2013-14 and 2014-15, where it was held that properties under litigation should not have notional ALV added. The Tribunal restored the issue to the Assessing Officer (AO) for fresh examination with necessary documentary evidence. Thus, Ground Nos. 3 and 3.1 were allowed for statistical purposes. 3. Determination of ALV in Respect of Property Under Self-Occupation: The Tribunal referenced its earlier decision where it was held that properties used for business purposes should not have notional ALV added, as per section 22 of the Act. Consequently, Ground No. 4 raised by the assessee was allowed. 4. Application of Section 43CA of the Income Tax Act: The assessee did not press Ground Nos. 5 to 5.2, which were dismissed as not pressed. 5. Addition in Respect of Revenue from Windmill Operations: The Tribunal examined the agreements and transactions related to the sale of windmills to M/s Rugby Renergy Pvt. Ltd. It was held that revenue from windmill operations for the period 1.4.2014 to 30.6.2014 should be taxable in the hands of the assessee, with corresponding deductions for expenses incurred during this period. The AO was directed to verify the expenses. Ground Nos. 6.1 and 6.2 raised by the assessee and Ground No. 4 raised by the revenue were disposed of accordingly. 6. ALV Value of Basement Area Properties: The Tribunal upheld the CIT(A)'s decision to estimate the ALV of basement areas at 50% of ground floor properties, considering the restrictive usage of basements. Ground No. 1 raised by the revenue was dismissed. 7. Deletion of Disallowance on Account of Employees' Contribution to PF and ESI: The Tribunal noted the recent Supreme Court decision in Checkmate Services Pvt Ltd vs CIT, which held that employees' contributions to PF/ESI remitted after the due dates prescribed under respective Acts are not deductible. The issue was restored to the AO for verification of the actual dates of cheque issuance and clearance. Ground No. 2 raised by the revenue was allowed for statistical purposes. 8. Deletion of Addition Made U/S 43CA: The Tribunal noted that the issue was to be decided in favor of the revenue, as the assessee did not advance arguments against the revenue's position. Ground No. 3 raised by the revenue was allowed. Conclusion: Both the appeals of the assessee and the revenue were partly allowed for statistical purposes. The Tribunal provided detailed directions for the AO to re-examine specific issues, ensuring compliance with legal precedents and factual verification.
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