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2013 (12) TMI 1200 - HC - Income TaxGenuineness of unsecured loans - Held that - The Tribunal found that both the creditors had appeared and confirmed the advances - The assessee had discharged the initial onus that lay upon it by bringing on record necessary confirmation, source of deposits and had produced the creditors, who had admitted making of advances - The nature and source of the credit was proved, and thus the assessee had discharged the burden - Decided against Revenue. Valuation - Deduction of self supervision charges - Determination of cost of construction as the supervision charges as against 10% claimed by the assessee by its Directors - Held that - The Tribunal found the allowance for self supervision at 10% to be justified on the basis of several decisions of the Tribunal. On the architect s fees as added by DVO at 1% of the cost, the Tribunal did not find any error in the order of CIT (A) in directing the AO to substitute the estimated cost on account of architect fee with the actual cost incurred at about 2% - The Tribunal found that the findings of CIT (A) on the expenses or constructions such as supervision charges, bank commission, plans approval, expenditure, expenses for Form 32 for purchase of material, municipal taxes and fertiliser were justified - The CIT (A) had worked out the difference between the estimated cost in terms of DVO s report and modified the cost after allowing the supervision charges and adjusting architect fees - These, according to the Tribunal, were findings of fact - Decided against Revenue.
Issues:
1. Discharge of primary burden to prove genuineness of unsecured loans. 2. Treatment of difference in cost of construction. 3. Inclusion of supervision charges in cost of construction. 4. Addition of architect fee to cost of construction. 5. Deduction of self-supervision charges in cost of construction. Analysis: Issue 1: Discharge of primary burden to prove genuineness of unsecured loans The Income Tax Appeal involved the question of whether the assessee had discharged the burden of proving the genuineness of unsecured loans. The AO had added the amounts of unsecured loans to the income of the assessee under Section 68 of the Income Tax Act. However, the Tribunal found that the creditors had confirmed the advances, and the assessee had produced necessary confirmation and sources of deposits. As a result, the Tribunal concluded that the nature and source of the credit were proved, and the burden was discharged. The High Court held that this issue did not raise any question of law for consideration. Issue 2: Treatment of difference in cost of construction The dispute arose regarding the difference in the cost of construction as determined by the DVO and the assessee. The CIT (A) allowed a deduction for supervision charges based on the assessee's claim, considering the assessee's accounting practices and standards. The Tribunal upheld the deduction for self-supervision at 10% based on the local supervision by the assessees. Additionally, the Tribunal found no error in the CIT (A)'s decision to substitute the estimated architect fee with the actual cost incurred. The High Court determined that these issues were questions of fact rather than questions of law, as they were considered by the CIT (A) and ITAT. Issue 3: Inclusion of supervision charges in cost of construction The Tribunal found the allowance for self-supervision charges at 10% to be justified based on the local supervision by the assessees. The CIT (A) had worked out the difference in estimated cost after allowing supervision charges and adjusting architect fees. The High Court deemed these findings as factual and not questions of law for adjudication. Issue 4: Addition of architect fee to cost of construction Regarding the architect fee, the Tribunal supported the CIT (A)'s decision to substitute the estimated architect fee with the actual cost incurred by the assessee. The High Court agreed with the Tribunal's findings that these were factual determinations, not legal questions for consideration. Issue 5: Deduction of self-supervision charges in cost of construction The Tribunal upheld the deduction for self-supervision charges at 10% based on various decisions. The High Court concurred with the Tribunal's view that these issues were factual in nature and had been appropriately considered by the lower authorities. Consequently, the Income Tax Appeal was dismissed by the High Court.
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