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2022 (7) TMI 1049 - AT - Income TaxAddition u/s 40(b) - interest payment to partners - reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern - Expenditure on account of interest payment on statutory liabilities - reply of the assessee that the assessee has debited only 12% interest in cost calculated for the purpose of computing profits of the concern - HELD THAT - It is not disputed that the assessee is regularly assessed to tax and the method of capitalizing interest in the cost of construction is not even not disputed in the earlier years. The assessee has supported his contention by filling the detailed calculation showing that excess claim is considered while computing the stock valuation and the same is confirmed by the ld. CIT(A). This fact is also confirmed by the ld. CIT(A). CIT(A) has also confirmed that in the computation of income the interest of partner is added and deducted and thus, the effect while preparing the computation of income is nil and there is no loss of revenue as verified and contended by the ld. CIT(A). Thus, when the assessee has separately adjusted that excess interest while working out the closing inventory and this fact categorically confirmed in the findings of the ld. CIT(A) in his order, we do not find any merit for sustaining the addition merely the assessee has not given effect in the interest account. As rightly argued by the ld. AR of the assessee that if it is to be done so by the assessee then in that case it will result in double addition of that figure one in the interest account and another in inventory holding. The contention of the assessee that the excess interest is adjusted while working out the closing inventory is confirmed by the ld. CIT(A) and is not disputed before us by ther revenue. The ld. AR of the assessee also cited the Annexure C (Page 47 48 of assessee paper book ) of the Tax Audit report annexure carried out as per provision of section 44AB of the act, where in the tax auditor has also confirmed this treatment that the excess interest claim has been corresponding reduction in cost of construction. This has not been challenged or discussed by the lower authorities. Merely the said adjustment not done in the profit loss account the double disallowance cannot be made. Even the ld. CIT(A) has also confirmed that in the computation of income the same is disallowed and allowed giving it the effect as Nil. In terms of these observations the ground no. 1 raised by the assessee is allowed. Addition u/s 43CA - As argued AO made addition without considering the reply of the assessee and without referring to the DVO - HELD THAT - The assessee has to claim that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In the present case the ld. AR of the assessee not placed any evidence that the claim was placed before the ld. AO. All the decision relied upon are applicable where the assessee make a claim and not considered by the lower authority and in that the case the courts have held that the addition made without giving an opportunity to the assessee is not sustainable whereas in this case the assessee has chosen to remain silent on the issue. Assessee reiterated the submissions raised before the lower authorities and has not countered the finding that this issue has never been raised before the assessing officer and assessee has given their reply on this very specific issue without contending the valuation as per their letter dated 19.12.2018 filed before the AO. In the absence of any cogent evidence placed before us we do not find any reasons to depart on the findings of the orders of the lower authorities and thus, this ground no. 2 of the assessee is dismissed.
Issues Involved:
1. Addition of Rs. 1,60,18,918/- under Section 40(b) of the Income Tax Act, 1961. 2. Addition of Rs. 10,72,932/- under Section 43CA of the Income Tax Act, 1961. 3. Other grounds not pressed by the assessee. Detailed Analysis: 1. Addition of Rs. 1,60,18,918/- under Section 40(b) of the Income Tax Act, 1961: The assessee, a limited liability partnership engaged in real estate development, filed its return of income for the assessment year 2016-17. The Assessing Officer (AO) made an addition of Rs. 2,73,79,564/- for interest payments to partners, which was later reduced to Rs. 1,60,18,917/- after considering the assessee's application under Section 154 of the Act. The CIT(A) confirmed this addition, noting discrepancies in the profit and loss account and the interest claimed. The assessee contended that it had debited only 12% interest in the cost calculated for computing profits and had adjusted the excess interest in the closing stock. The CIT(A) acknowledged that the excess interest was adjusted in the closing stock but maintained that it was not reflected in the total expenditure claimed in the profit and loss account, resulting in an excess interest claim of Rs. 1,60,18,918/-. The Tribunal found that the assessee had consistently followed the method of capitalizing interest in the cost of construction, which was not disputed in earlier years. The CIT(A) confirmed that the excess interest was adjusted in the closing stock, and this adjustment was also reflected in the tax audit report. The Tribunal concluded that sustaining the addition would result in double disallowance, as the excess interest was already adjusted in the closing inventory. Therefore, the ground raised by the assessee was allowed. 2. Addition of Rs. 10,72,932/- under Section 43CA of the Income Tax Act, 1961: The AO made an addition of Rs. 10,72,932/- under Section 43CA, as the sale consideration of a property was less than the value adopted by the stamp duty authority. The CIT(A) upheld this addition, stating that the assessee did not raise any objection or claim that the stamp duty value exceeded the fair market value during the assessment proceedings. The assessee argued that the AO did not provide an opportunity to contest the valuation and did not refer the matter to the DVO as required under Section 50C(2). The Tribunal noted that the assessee failed to claim before the AO that the stamp duty value exceeded the fair market value. The Tribunal upheld the CIT(A)'s findings, stating that the assessee did not provide any evidence to substantiate its claim and did not raise the issue during the assessment proceedings. Consequently, this ground was dismissed. 3. Other Grounds: The assessee did not press grounds 3 to 6, which included additions under Section 37 for disallowance of various expenditures, VAT composition provision, and foreign traveling expenses. These grounds were dismissed as not contested. Conclusion: The appeal was partly allowed, with the Tribunal deleting the addition under Section 40(b) but upholding the addition under Section 43CA. The other grounds were dismissed as not pressed. The order was pronounced in the open court on 12/07/2022.
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