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TMI Blog2015 (7) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... page no.28 and the similar plan attached with the agreement is also at page no.39 which also indicates that area of the terrace is not sold to the flat owner and further from the plan it is clear that terrace is not openable from the flat while the way to the terrace is from the passage of the 16th floor. We had also verified the sanctioned plan of the building placed at page 2 of the paper book from which it is also clear that flat no.1602 and 1603 are separate and the terrace is not openable from inside of any flat and access to the terrace is from the staircase and passage of the 16th floor. The terrace is not part of the built-up area, though balcony is part of the built-up area; terrace is a common area shared with the other residential areas, and accordingly, the finding of the AO and CIT(A) merely relying on the higher sale price of flat no.1603, that the terrace has been exclusively given to flat no.1603 is not correct as, from the agreement and the plan and the certificate of the architect, it is clear that terrace is neither attached with the flat nor this has been given to flat no.1603 for exclusive use and it is for the use of all the members. Furthermore, the amended p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are genuine. Keeping in view the totality of facts and circumstances of the case, we restrict the disallowance to the extent of 10% of the expenses. - Decided partly in favour of assessee. - ITA No. 6179/Mum/2011, ITA No. 808/Mum/2011, ITA Nos.920&921/Mum/2011, ITA Nos.1632/Mum/2011, ITA Nos.6771/Mum/2012, ITA Nos.2195 & 4478/Mum/2013 - - - Dated:- 15-5-2015 - R. C. Sharma, AM And Vijay Pal Rao, JM,JJ. For the Appellant : Shri Love Kumar For the Respondent : Shri J P Bairargra ORDER Per R C Sharma These are the cross appeals filed by the revenue and assessee against the order of CIT(A), for the assessment years 2005-06 to 2010-2011, in the matter of order passed u/s.143(3)/271(1)(c) of the I.T.Act. 2. Common grievance of the revenue in all the years relates to CIT(A)'s action for allowing assessee's claim for deduction u/s.80IB(10). 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of real estate development and construction. During the year under consideration the project Ganga Tower II is constructed on CTS No.1565/7-9 641 Sub Plot A of Atur Park at Village Borla, Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 27-12-2007 as under :- During the course of assessment proceedings, your Honour has raised the query regarding claim of deduction u/s.80IB of I.T. Act for project Ganga Tower II. The construction of the project Ganga Tower II is constructed on CTS No.1565/7-9 641 sub plot A of Atur Park at Village Borla, Chembur and area of the plot is 4194.33 sq.mtrs. The commencement certificate was received on 11th June 2001 and the construction of the project started. The construction of the project completed in F. Y. 2004 and occupation certificated received on 5th November 2004. The built-up area of the premises is not more than 1000 sq.ft. for which we are enclosing herewith the chart of premises. To fulfill the condition for claim u/s.80IB sub sec. 10 of I. T. Act provide the following conditions : Such undertaking has commenced on commences development and consideration of the housing project on or after 1st day of October 1998. The project on the size of a plot of land which has minimum area of one acre. The residential unit has a maximum limit up are of one thousand sq.ft. The above all condition are fulfilled in our project Ganga Tower II constructed compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to allow the claim of deduction u/s.80IB in respect of all the flats except flat No.1602 1603 at 16th floor. The CIT(A) also observed that in all the years size of flat sold was less than 1000 sq.ft., except the two flats sold in A.Y.2005-06. The precise observation of the CIT(A) was as under :- 4.3.2 The first issue is that while working out the built-up area of two flats on the 16th Floor, no / the terrace area has to be treated. This issue is clearly linked to the terrace right. It is stated by the learned Assessing Officer that in clause J of the agreement, it is mentioned that built up area includes area of balconies and adjoining terrace area wherever applicable. This stipulation clearly gives the buyer of the flat at 16th Floor an exclusive right to enjoy the terrace, and, therefore, built-up area has to account for the terrace rights. If the agreement had clearly mentioned that terrace rights would be equally enjoyed by all the residents of all floors, the situation would have been different and appellant's claim would have been acceptable. That not being the case, it is reasonable to hold that since the appellant has not challenged Assessing Officer's findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s than the sale price of the Flat No.1603 which has been sold on 26-6-2003 and, therefore, it is presumed that the terrace on the 16th floor is sold to Flat No.1603. He also relied on the clause No.(j) of the agreement, which is a printed agreement, which mentions that built-up area includes area of balcony wherever applicable and area of terrace, if applicable. The AO also observed that terrace, being a projection, is included in the definition of built-up area w.e.f.1-4-2005, accordingly, he disallowed the entire deduction claimed by the assessee u/s.80IB in the A.Y.2005-06. In the A.Y.2006-07 to 2008-09, the AO declined deduction on the plea that flats of Ganga Tower were sold in subsequent years and since claim was declined in A.Y.2005-06, the AO disallowed the claim in the subsequent years also. 8. By the impugned order the CIT(A) after following the decision of Saroj Sales Organisation, Seth Builders Pvt. Ltd. and Hirannandani Akruti JV, held that assessee is eligible for claim of deduction u/s.80IB on all flats except flat No.1602 1603, in all the years under consideration. 9. We found that all the conditions for claiming deduction u/s.80IB has been fulfilled and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. In view of the above discussion and respectfully following the proposition of law laid down in the case of Saroj Sales Corp., 115 TTJ 485, Seth Developers, 33 SOT 277, Hiranandani Akruti JV, 39 SOT 498, Manan Corp. 255 CTR (Guj) 415, Anriya Project Management Services Pvt. Ltd. 209 taxman 1 (Kar) and CHD Developers Ltd., 43 taxmann.com 249 and the decision of the ITAT in the case of Haware Construction Pvt. Ltd., ITA No.5601/M/2009, order dated 5-8-2011, we direct the AO to allow assessee's claim of deduction u/s.80IB in respect of all the 61 flats in Ganga Tower II. 13. In the result, ground taken by the revenue in assessment years 2005-06 to 2008-2009 are dismissed, whereas the ground taken by the assessee in assessment year 2005-06 in regard to decline of claim of deduction u/s.80IB(10) in respect of flat No.1602 1603 on 16th Floor of Ganga Tower II is allowed. 14. In the assessment years 2006-07 to 2008-09, the revenue has taken a ground with regard to disallowance u/s.40A(2). 15. We have considered rival contentions and found that the AO has discussed the issue in para 6 of his order for A.Y.2006-07. The assessee is one of the group concerns of Kukreja B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 960/Mum/2004, order dtd.27-10-2004 (AY 2000-01); ii) M/s Vazirani Land Developers Pvt. Ltd., ITA No.5113 5114/Mum/2002, dated 7-11-2006 (AY:1998-99 1999-2000); iii) In the recent decision of Tribunal dated 8-5-2013 in the case of group concern Motiram Tolaram ITA Nos.1219 2040/Mum/2010(AY 2006-07 2007-2008) dated 8-5-2013; and iv) the order of the Tribunal dated 24-12-2013 in the case of group company Motiram Tolaram ITA No.3683/Mum/2012 for A.Y.2008-09. Respectfully following the decision of the Tribunal in group cases of the assessee vis- -vis the finding recorded by the CIT(A), we do not find any reason to interfere in the order of CIT(A) with regard to deletion of disallowance made u/s.40A(2). 17. In the assessment year 2008-09, the department is aggrieved for distribution of proportionate indirect expenses on the basis of work-in-progress in place of profit of each year. 18. We have considered rival contentions and found that while computing the profit of eligible project, the AO has allocated indirect cost on the basis of proportionate sale of each year. By the impugned order the CIT(A) relocated such indirect cost on the basis of work in progress in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of ₹ 2.39 crores during the year as against financial charges of ₹ 1.12 lakhs in the immediately preceding assessment year. The AO also observed that in the immediately preceding assessment year 2008-09 unsecured loan was ₹ 7.98 crores which has increased to ₹ 20.34 crores as on 31.3.2009 i.e. during the year under consideration. AO also observed that all these loans and advances were given interest free. By observing that assessee has sanctioned interest bearing loan of ₹ 20 crores from the Axis bank for acquisition of fixed assets, the assets in the group concern and repayment of unsecured loans etc. whereas assessee has used the funds for advancing interest free funds to the sister concern, therefore, deduction on account of interest on loans taken from bank cannot be allowed. The AO also observed that no new assets have been purchased during the year nor any unsecured loans were repaid. The AO also disregarded assessee's contention regarding availability of interest free funds. The ld.CIT(A) has discussed the issue in para 4 of his order. The CIT(A) has incorporated the cash flow of the assessee firm in para 4.3 from which it is clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption is that the same has been utilized for advancing interest free loans, therefore, no disallowance is to be made. The AO is directed to decide the issue after verifying interest free funds available with the assessee in terms of decision of Hon'ble jurisdictional High Court as well as other High Courts cited hereinabove. We direct accordingly. 25. The AO has also disallowed sales promotion expenses of ₹ 3,97,515/- in the assessment year 2009-10. The AO has discussed the issue in para 8 of his order and held that during the year the assessee has incurred sales promotion expenses of ₹ 15,90,061/- as against ₹ 12,96,432/- incurred in last year i.e. AY.2008-09 for its business unit K-Star Hotel. The AO observed that these expenses are incurred in cash and in self made vouchers. The AO also observed that the sales of K-Star Hotels had not increased during the year on the contrary it had decreased. Therefore, he disallowed 50% of the sales promotion expenses amounting to ₹ 7,95,061/-. By the impugned order the CIT(A) restricted the disallowance to 25% of the expenses so claimed. 26. We have considered rival contentions and found that the hotel is s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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