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TMI Blog2014 (6) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... icer had made on account of the fact that as per agreement with M/s DCM Estates & Infrastructures Ltd. (DEIL), the assessee was entitled to interest on advances made by it but it had not accounted for it on accrual basis. The facts regarding this addition are that assessee had invested an amount of Rs.1,93,10,000/- by way of investment in DEIL for purchase of flats in DCM Techno Plaza, Bara Hindu Rao, Delhi. It was agreed between the assessee and DEIL that in case sale is not executed then DEIL will pay interest on the amount advanced @ 20% p.a. M/s DEIL did not pay interest and had expressed its inability to pay interest on the outstanding balance and therefore the assessee company also did not provide interest accrued as income for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vacated by the High court of Delhi. In the event the restraint order is not vacated within six months from the date of payment of the advance, the company will not have any lien in sale of property and will be entitled to collect principal amount along with interest of 20% per annum. v) The DEIL informed the appellant company that they are not in a position to pay or provide interest on the advances. vi) In subsequent years the appellant company had never cancelled the booking. At the same time DEIL has never stopped recognizing the lien of the appellant company on the said units. On the contrary both the companies have made transactions to strengthen the lien on these units which is evident from the documents filed during the appeal pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient for giving advance. Since no interest was payable on this amount of share capital and reserve & surplus no disallowance of interest is warranted. As a result the addition of Rs.28,96,500/- is deleted. Regarding 3rd addition on account of brokerage: A sum of Rs.1,85,324/- was disallowed out of brokerage paid to Shri Vinay Jain and Shri RS Dhingra in the absence of any confirmation by the Assessing Officer. While passing the order the Ld Assessing Officer has ignored all the facts and submissions of the case. We had already placed on records that the appellant had started its business with the collaboration of Unitech Ltd. There was an agreement between the appellant company and Unitech Ltd. for the authorization to Unitech Ltd. to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount and it was entitled to interest @ 20% and since it was following mercantile system of accounting the interest got accrued to it and therefore the Assessing Officer had rightly made the addition for interest not taken into aqccount by the assessee as its interest income. Arguing upon 2nd & third addition, the Ld DR relied upon the assessment order. 7. The Ld AR regarding first disallowance invited our attention to paper book pages 24 to 26 where an order u/s 143(3) was placed for assessment year 2006-07 in the assessee's own case and submitted that no such addition was made by the Assessing Officer with respect to accrued income though facts were same. In this respect he invited our attention to paper book page 20 where the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly deleted the addition. 9. Regarding third addition the Ld AR submitted that though bills were raised against Unitech Ltd. but the amount was payable by the assessee and Ld CIT(A) has allowed relief after finding the submissions of assessee as correct. 10. As regards cross objections filed by assessee, the Ld AR submitted that he is not interested in pressing the same. 11. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that the addition on account of Rs.38.62 lakhs on account of notional interest was not justified as the assessee had not earned any income as M/s DEIL had already expressed its inability to pay the interest. It is correct that the assessee was fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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