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TMI Blog2015 (2) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... n view our above observation. Needless to say the assessee should be given full opportunity before finalizing the assessment. - Decided in favour of assessee for statistical purposes. Disallowance of business expenditure - Held that:- It is clear from the record that payments so made was towards compensation to the customers, who have booked their flats and the same was paid for the reason of commercial expediency. It is pertinent to mention that assessee has not claimed expenditure in respect of refund of sale consideration of ₹ 1,43,97,500/-, however, only amount of compensation termed as buy-back expenses aggregating to ₹ 65,68,500/- which has been claimed as deduction which amount as has been informed in the course of regular business. Thus, there is no reason to disallow such expenses as revenue expenses. Accordingly, we direct the AO to allow expenses of ₹ 65,68,500/- as revenue expenses. - Decided in fvaour of assessee. - ITA No. 5195/Mum/2012, ITA No.3380/Mum/2012 - - - Dated:- 11-12-2014 - R. C. Sharma, AM And Amit Shukla, JM,JJ. For the Petitioner : Shri Pradip N. Kapasi For the Respondent : Shri Sujit Bangar ORDER Per R. C. Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree projects, namely, Woods, Meadows and Hermitage by observing that these projects have already been completed in the immediately preceding year i.e. 2007-08. However, in respect of the remaining two projects, namely, Costarica and Iraisaa, the CIT(A) has confirmed the addition made by the AO. Relevant observation of the CIT(A) in this regard was as under:- 3.2 I have carefully considered the findings of the AO as well as the submissions of the appellant. After considering the rival submissions, it is noted that during the year, the appellant has disclosed profit/loss on it's five running 'projects, Out of these projects, three projects have already been completed in the immediately preceding year i.e. 2007-08, These projects are Woods, Meadows and Hermitage. The remaining two projects are new projects and these are Costarica and Iraisaa, whereas Costarica is still in initial phase, where only 1% saleable area is sold and in project 'Iraisaa' more than 43% area has been sold upto the year under consideration. Under these circumstances, in my considered opinion, it would not be appropriate to apply the changed method adopted by the AO in the cases of old project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), assessee is in further appeal before us. 6. Learned AR reiterated the contentions taken before CIT(A), which are as under :- The AO's observations that the assessee is recognizing the revenue by following the project completion method is not correct at all. The correct method, which has consistently been adopted by the assessee is on the basis of percentage completion method. It was further pointed out that the another observation of the AO that no profit is disclosed on project 'Iraisaa' and 'Costarica' is also incorrect, because the assessee has disclosed profits of ₹ 3,60,509/- for project 'Iraisaa' and ₹ 4,74,060/- for project 'Costarica'. It was further submitted that as against the estimated addition made by the AO on the basis of 10% profit on work-in-progress, the assessee has adopted a different percentage completion method on the basis of sales made during the year and not on the basis of work in progress during the year. It was further submitted that the percentage of profit declared in 'Costarica', where only less than 1% area is sold, is worked out at 25.48% whereas in 'the case of 'Iraisaa' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion method. We also found that percentage completion method followed by assessee in earlier year was accepted by the department in earlier years. We found that for the assessment year 2004-05 to 2007-08, the accounts were finalized by following percentage completion method of account, total profit thereon was accepted by the AO under scrutiny assessment framed u/s.143(3). The project Iraisaa was undertaken on a plot 1, Sector 19, Sanpada in Navi Mumbai in the year 2005. The said housing project was commenced on 19th May,2005 as certified in the Commencement Certificate issued by the Navi Mumbai Municipal Corporation and completed on 20th September, 2008 as noted in the Occupancy Certificate issued by the Navi Mumbai Municipal Corporation. Profits for the assessment year 2008-09 was determined at ₹ 3,60,509/- on percentage completion method of ₹ 12,14,16,969/- 10. In respect of Costarica project, it was undertaken on a plot 1 and 2, Sector-18, Sanpada in Navi Mumbai in the year 2007. The said commercial project is still in progress. Profits for the year is determined at ₹ 4,74,060/- on percentage completion method of ₹ 12,75,62,614/-. The objection of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain persons, to whom the assessee had agreed to sell the premises under construction in the preceding financial years. The said amount was debited to the profit loss account and was claimed as business expenditure u/s.37 or as a business loss u/s.28 of the Act. The reasons for disallowance has been recorded by the AO at para 9 9.7 of his order. The AO held that such expenditure was capital in nature. By the impugned order, the CIT(A) confirmed the action of the AO. 13. We have considered rival contentions and found that assessee is engaged in the business of development and construction of buildings comprising of several units to be used for the purposes of residence and/or office. In the preceding years, the assessee had agreed to sell certain premises in the buildings under construction to various persons on the terms and conditions and for consideration mutually agreed upon with such persons. The aforesaid sales were duly reflected in the books of accounts of the respective year/years of sales and the profit thereon was duly recognized in the books and was offered for taxation in spite of the fact that the work was in progress and the possession of the flats was not gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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