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TMI Blog2015 (1) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... rchid' project by Rs. 3,48,270/- on account of income received under the head 'Other income received from the buyers of the flats. 3. The learned commissioner of income tax (appeals) further erred in confirming the action of the Assessing Officer in reducing the deduction u/s. 80-IB in respect of 'Luv Kush' project by Rs. 1,14,27,303 being income under the head 'Other income' received from buyers of the flats. 2. Ground no. 1 is regarding part confirmation of disallowance in respect of business centre charges and administrative charges. 3. During the course of assessment proceedings, the Assessing Officer found that the assessee had made payment of Rs. 21.50 lakh to its sister concern M/s Kukreja Services. Out of this sum of Rs. 21.50 lakh, an amount of Rs. 17.20 lakh was paid towards business centre facility and a sum of Rs. 4.30 lakh was paid towards administrative charges. The Assessing Officer asked the assessee to justify as to why the payment made to related concern should not be disallowed. The assessee furnished the details of payment made to the sister concern M/s Kukreja Services Pvt. Ltd. for business centre facility and administrative charges and submitted that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure is based on the volume of work in each company and depends upon the progress of a particular project in each year, therefore, the allocation of expenditure varies as per the volume of work completed in a project or starting of new project. The Ld. Authorized Representative thus submitted that the charges paid to M/s Kukreja Services Pvt. Ltd. depends on the activities carried out by a particular firm. The assessee firm is making the payment on the basis of debit note raised by M/s Kukreja Services Pvt. Ltd and TDS is deducted. This payment as per the allocation charges has been made in last November of every year. He has referred the details regarding sales, advances received, work in progress and profit earned by the assessee since A.Y. 2000-01 and payment made to M/s Kukreja Services Pvt. Ltd. in each year. For the A.Y. 2003-04, the matter went up to this Tribunal and this Tribunal allowed the payment of Rs. 10 lakh paid to M/s Kukreja Services Pvt. Ltd vide order dated 24th February 2009. He has further submitted that for the A.Y. 2000-01 and 2001-02, an identical issue came before this Tribunal in the other group concerns case M/s Tolaram & Co., wherein the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e making the payment towards reimbursement of the expenses to M/s Kukreja Services Pvt. Ltd on account of payment of rent, electricity charges, security charges, gardening expenses, computer expenses, accounting expenses and all other maintenance expenses. These expenses are categorized under two head namely business centre charges and administrative charges. The Assessing Officer has disallowed the entire amount paid by the assessee towards reimbursement of charges despite the fact that the assessee is using the same building which is maintained and managed by the M/s Kukreja Services Pvt. Ltd. Thus the disallowance of expenses in toto is not justified and it is contrary to the bare fact that all the group concern of the assessee company is using the same building and the facilities. The objective of the provisions of section 40A(2) is to check evasion of tax through excessive or unreasonable payments to the associate concern. As per Board's circular dated 6.7.1968, the provisions of section 40A(2) should not be applied in a manner which will create hardship in bonafide cases. The assessee has produced the details in respect of the business activity carried out by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter we hold that the authorities below were not justified in their respective action in disallowing an amount of Rs. 4 lakhs by invoking provisions of section 40A(2)(b). We delete the disallowance. 8. We further note that in case of other group companies namely M/s Tolaram & Company, M/s Vazirani Land Developers Pvt. Ltd., and M/s Motiram Tolaram who are paying the similar amounts to M/s Kukreja Services Pvt. Ltd., for using their building for there business activities. The Tribunal has repeatedly decided this issue in favour of the assessee. In the case of M/s Vazirani Land Developers Pvt. Ltd., for A.Y. 1998-99, the Tribunal vide order dated 7-11-2006 has considered and decided an identical issue in para 12 as under:- "Having carefully examined the order of lower authorities, in the light of the rival submissions, we find that undisputedly assessee is ngaged in the construction activities and. is required to appoint certain staff as per its requirement. Keeping in view the volume of work, the strength of staff can be increased or decreased. The contention of the assessee that when trained staff is available with the sister concern there is no justification to appoint a new s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities below was deleted by Tribunal to which one of us is a party (JM). Hence, following the decision of the Tribunal in assessee's own case for assessment years 2003-04 and 2006-07 & 2007-08 (supra) and also in the absence of any contrary decision brought to our notice, respectfully following the same, we delete the addition of Rs. 10,80,000/- for assessment year under consideration confirmed by ld. CIT(A). 10. In view of the consistent findings of this Tribunal in a series of decision and in the absence of any specific finding given by the Assessing Officer by the CIT(A) regarding the fair market value/fair market price of the services, the payment made by the assessee to the sister concern on account of using the business centre facility cannot be held as excessive or unreasonable. Further it is not the case of the Assessing Officer that by making the payment to the sister concern the assessee is avoiding the tax liability as the sister concern is not assessed to tax. Accordingly, we delete the disallowance confirmed by CIT(A) on this account for both the years. 11. Ground no. 2 and 3 are regarding disallowance of deduction u/s 80-IB in respect of other income received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in the case of Tolaram & Co. dated 19.10.2011 for A.Y. 2006-07 and 2007-08. Thus the Ld. Authorized Representative has submitted that the claim of deduction u/s 80-IB in respect of the income received from the buyers should be allowed. 15. On the other hand, the Ld. DR has relied upon the orders of authorities below and submitted that these items of income has not direct nexus with the assessee's construction activity, therefore, they cannot be said to be the income derived from the construction business of the assessee but from the amenities and other services provided by the assessee which is not eligible for deduction u/s 80-IB. 16. We have considered the rival submissions as well as relevant material on record. For A.Y. 2006-07, the assessee has received the following income from the buyers of the flat in orchid project:- g Share money 33,348 h Society deposit 16,15,643 Society formation charges 1,39,500 Total 17,88,991 17. Whereas for the A.Y. 2007-08, the assessee has received the various income in respect of Luv Kush project and orichid project as under:- Items of other income Luv kush project Orchid project Car parking charges 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. D.R. vehemently submits that it is an extra income to the assessee and as it has not a first degree income. The Ld. D.R. has supported the action of the authorities below. We find on page no.2 of the paper book that the assessee has given the break-up of 'other income' of Rs. 83,82,964/- which is as under:- Particulars Amount Rs. Development charges 515,616.00 Electricity Charges 870,000.00 Extra Work 1,387,216.00 Interest received 336,892.00 Water charges 429,680.00 Society deposit 1,275,000.00 Society maintenance received 949,300.60 Share money 21,771.00 Society formation 88,500.00 Car parking charges 545,000.00 Grill charges 494,739.00 Video door security charges 1,425,000.00 Legal charges 44,250.00 Total 8,382,964.00 7. Present assessee has collected the different charges from the flat buyers as builder for the specific purposes but as comparative expenditure is lesser hence, the balance credit was taken to the profit and loss account. No further description is available before us to clarify the nature of the receipts. So far as development charges are concerned. as explained by the Ld. Counsel the same are collected from flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,75,769/- from the deduction u/s. 80-IB in respect of "Orchid Project". 3. The Ld. Assessing Officer further erred in reducing the deduction u/s 80-IB in respect of 'Orchid' Project by Rs. 3,48,270/- being income received under the head 'Other income received from the buyers of the flat.' 4. The Ld. Assessing Officer further erred in reducing the proportionate indirect expenses of Rs. 72,94,470/- while granting deduction u/s. 80-IB in respect of of " Lav Kush" Project. 5. The Ld. Assessing Officer further erred in reducing the deduction u/s. 80- IB(10) in respect of "Lav Kush" project by Rs. 1,14,27,303/- being income under the head 'Other income received from the buyers of the flat. 6. The Ld. Assessing Officer further erred in making disallowance out of indirect expenses in respect of "Orchid project" of Rs. 5,75,769/- and in respect of Lav Kush project of Rs. 72,94,470/- 21. Ground no. 1 is regarding disallowance u/s 40A(2)(b). This ground of revenu's appeal is common to the ground no. 1 of the assessee's appeal for A.Y. 2006-07 and 2007-08. In view of our finding on this issue in the assessee's appeal, this ground of the revenue's appeal is dismissed. 22. Ground n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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