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2015 (9) TMI 1110 - AT - Income TaxDisallowance of Expenditure in respect of approvals and permission and Expenditure on removal of squatters - CIT(A) allowed claim - Held that - As decided in assesee s own case for AY 2007-08 for the relevant assessment year, it is noticed that the AO has changed his stand just because the assessee has transferred the complete rights in the project as a whole to M/s Purearth Infrastructure Ltd. When a particular method of computation of income of the assessee has been followed and has been accepted and is also followed by the revenue and the assessee, just because the total rights in the project has been transferred, such method cannot be changed as by the change of the method, the expenses otherwise allowable to the assessee, is now being denied which is not a permissible act. In these circumstances, we are of the view that the action of the CIT(A) in directing the AO to allow the deduction of the said expenses is on right footing and do not call any interference - Decided in favour of assessee. Addition made u/s 41(1) - payment to Builders and liability for vacation of squatters allowed in assessment years 2004-05 on accrual basis - Held that - On identical ground for A.Y. 2007-08 the finding of the Tribunal concluded In regard to the issue of disallowance of interest on the loans outstanding from M/s DCM Employees Welfare Trust, it is noticed that the issue is squarely covered by the decision of the Coordinate Bench of this Tribunal in the assessee s own case for the A.Y. 2003-04 and consequently respectfully following the decision of the Coordinate Bench of this Tribunal in the assessee s own case for the A.Y. 2003-04, the findings of the ld. CIT(A) on this issue stand upheld. - Decided against revenue. Addition in respect of Sec.14A disallowance - Held that - In the facts of the present case before us, the assessee has suo mote disallowed expenses under section 14A of the Act. Ld. CIT(A) has not compensated for the deficiency by the A.O in recording proper satisfaction. The ld. CIT(A) has restricted the disallowance to an extent of ₹ 9.79 lacs. The ld. CIT(A) fails to appreciate the reasonableness of expenditure that has been disallowed viz-a-viz the exempt income. In the light of the judgment of Maxopp Investments Ltd. vs. CIT (2011 (11) TMI 267 - Delhi High Court ). We, restrict the disallowance to 10.23 lacs as calculated by the assessee. In view of the aforesaid discussion and on the basis of material and evidence on record, to meet the ends of justice, we find no perversity in the calculation of 14 A, disallowance by the assessee. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of expenses on actual payment basis. 2. Addition under Section 41(1) of the Income Tax Act. 3. Disallowance of administrative expenses under Section 14A. 4. Addition under Section 14A read with Rule 8D for book profit determination under Section 115JB. 5. Initiation of penalty proceedings under Section 271(1)(c). Detailed Analysis: 1. Disallowance of Expenses on Actual Payment Basis: The Revenue's appeal contended that the CIT(A) erred in disallowing the alternate claim made by the appellant on an actual payment basis for expenses related to a real estate project, specifically for approvals and permissions (Rs. 72,51,725) and removal of squatters (Rs. 10,00,000). The Tribunal found that this issue was covered in favor of the assessee by the orders of the Tribunal in earlier assessment years (2004-05, 2005-06, 2006-07, and 2007-08). The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. 2. Addition under Section 41(1) of the Income Tax Act: The Revenue challenged the CIT(A)'s decision to uphold the addition of Rs. 260.00 lacs and Rs. 75.53 lacs under Section 41(1) regarding payments to builders and liabilities for the vacation of squatters allowed on an accrual basis in the assessment year 2004-05. The Tribunal noted that this issue was also covered in favor of the assessee by previous Tribunal orders for the assessment years 2004-05, 2005-06, 2006-07, and 2007-08. Consequently, the Tribunal dismissed the Revenue's appeal on this ground. 3. Disallowance of Administrative Expenses under Section 14A: Both the assessee and the Revenue appealed on the issue of disallowance under Section 14A. The AO had worked out a disallowance of Rs. 166.18 lacs under Section 14A, while the assessee had suo moto disallowed Rs. 10.23 lacs. The Tribunal found that the AO had not recorded satisfaction or given reasons for the disallowance as required under Section 14A(2). The Tribunal observed that the AO had mechanically invoked Rule 8D without establishing a nexus between the investments and the expenditure. The Tribunal restricted the disallowance to Rs. 10.23 lacs, as calculated by the assessee, and dismissed the Revenue's appeal while allowing the assessee's appeal on this ground. 4. Addition under Section 14A Read with Rule 8D for Book Profit Determination under Section 115JB: The assessee's appeal on this ground was consequential to the disallowance under Section 14A. Since the Tribunal restricted the disallowance to Rs. 10.23 lacs, this ground became consequential and was addressed accordingly. 5. Initiation of Penalty Proceedings under Section 271(1)(c): The ground regarding the initiation of penalty proceedings under Section 271(1)(c) was also consequential. As relief was granted on the disallowance under Section 14A, the penalty proceedings became consequential and did not require specific determination. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal. The order was pronounced in the open court on 01/09/2015.
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