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TMI Blog1998 (9) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... ision for cost of construction of building No. 9 at Kalpak Estate (Wadala) to the tune of ₹ 23,73,685. 2. On the facts and in the circumstances of the case, the learned CIT(A) XIV, Bombay has further erred in allowing relief for the addition made under section 69 of the Income-tax Act, 1961 for ₹ 2,00,000. 2. The assessee-firm is a builder. On 09-04-1986, it entered into an agreement with M/s. Kalpak Development Corporation to construct building and flats for them in Wings B-8, B-9, B-11 B-12 and also a shopping centre. The assessee was to take and appropriate sale proceeds of 57 flats and balance flats in Wings B-9, B-11 and B-12 and the shopping centre was to belong to the other party (hereinafter referred to as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer accordingly disallowed the claim of deduction of ₹ 30,13,200. 4. The assessee challenged the disallowance of liability in appeal before the CIT(A) and reiterated its submissions. The learned CIT(A) examined the agreement, the actual construction carried on by the assessee in different years, the number of flats and shops built as also the number of flats the assessee was entitled to sell. The CIT(A) also took into account number of flats which the assessee was liable to hand over to the owners. He noted submissions of the assessee at pages 6, 7, 8 9. He has observed that method of accounting followed by the assessee is mixed. The learned CIT(A) noted that there was no doubt about validity or genuineness of agreement dated 9- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flats was completed in the period under consideration and those flats were sold for total sum of ₹ 77,18,400. The assessee claimed liability of ₹ 30,13,200 representing estimated cost of 24 flats which were to be constructed and given to the owners. The Assessing Officer denied this liability to the assessee as in his view, the same accrued on 6-4-1986 and pertained to the assessment year 1987-88 and not to the assessment year 1989-90. 5.1 After considering rival submissions of the parties, in the light of material available on record, we are of the view that claim made by the assessee is well founded. The right of the assessee to construct and sell 57 flats was fastened with the undertaking to construct 39 flats and 24 shop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no liability to build flats and shops for the owners. This liability could not be divorced from exercise of right of the assessee to build flats and earn income. As flats were constructed and sold in the assessment year 1989-90, the liability is also to be computed and allowed in the said year. The terms and conditions of the agreement are such that income earned by assessee from sale of flats is subject to the liability to build flats and shops for the owners. Therefore, the liability had to be computed and allowed to the assessee in the assessment year 1989-90. The above view of ours is fully supported by the decision of the Hon ble Supreme Court in the case of Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 and that of Bombay High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n books of account which are more reliable. Therefore, there is no evidence to show that the assessee made any undisclosed investments. The above addition was rightly deleted by the CIT(A). We confirm his action. 7. The only other ground left in the cross appeal of the assessee pertains to addition of ₹ 75,000 made on account of interest not charged by assessee from M/s. J. Tarachand and J.J. Somaiyya. The agreements under which loans were given to above parties stipulated that interest would be charged in case the amount due to the assessee was not paid in time. It is the case of the revenue that flats were handed over to these parties without charging interest although these purchasers did not pay instalments of sale proceeds in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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