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TMI Blog2016 (7) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee. Disallowance of transportation expenses - Held that:- We feel that the ld. CIT(A) has rightly restricted the addition towards transportation expenditure to the extent of ₹ 26,537/- considering the facts and circumstances of the case of the assessee. Hence, we find no reason to interfere with the order of the ld. CIT(A) which is sustained.- Decided in favour of assessee. Addition on account of unexplained investment in construction of hotel building - construction expenditure was determined by the DVO - Held that:- We restore the issue to the file of the AO to recompute the self supervision charges at 7.5%( as done by DVO) instead of 12.5% as determined by the by the ld. CIT(A). As regards the cost of construction, the rate of PWD, Rajasthan shall be applied instead of CPWD rates. - Decided partly in favour of revenue for statistical purposes. - ITA No. 680/JP/2014 - - - Dated:- 13-6-2016 - SHRI BHAGCHAND, AM SHRI LALIET KUMAR, JM For The Revenue : Shri G.R. Parikh, JCIT -DR For The Assessee : B.L. Bhojwani, CA ORDER PER LALIET KUMAR, JM This is an appeal filed by the Revenue against the order of the ld. CIT(A), Kota dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration. The AO to this effect issued a letter to assessee firm on 21- 12-2012 and show caused as to why the said sum of ₹ 25,94,176/- should not be disallowed as deducted on account of salary/ remuneration working partners as per Section 40(b)(v) from the firms income. The ld. AR of the assessee vide letter dated 9-01-2013 replied as under:- Central Board of Direct taxes cannot issue a circular which goes against the provisions of the Act. The CBDT can only clarify issues but cannot insert terms and conditions which are not part of the main statute. It is not necessary that the deed shall provide for manner of quantification of the remuneration paid to each individual partner. The Himachal Pradesh High Court in the case of Durga Das Devki Nandan held that the CBDT circular to be invalid being inconstant with the terms of Section 40(b). A reading of Section 40(b) would entail that the statutory requirement is that the remuneration to partners shall be authorized by, and in accordance with, the terms of the partnership deed. Therefore, if the deed provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) 2.4 During the course of hearing, the ld. DR relied on the order of the AO and prayed that the ld. CIT(A) has wrongly allowed the claim of the assessee amounting to ₹ 25,94,176/- which has been disallowed by the AO on account of remuneration to partners. 2.5 During the course of hearing, the ld. AR of the assessee relied on the order of the ld. CIT(A) and submitted that the ld. CIT(A) has rightly deleted the addition made by the AO. The ld. AR of the assessee relied on following case laws to this effect. (i) Eqbal Ahmed Company vs. ITO (2005) 1 SOT 202 (Kol-Tribunal) (ii) Durga Das Devki Nandan vs. ITO (2011) 200 Taxman 318 (H.P.) (iii) ACIT vs. Suman Construction (2009) 121 TTJ 847 (Pune) (iv) CIT vs. Asian Marketing (2012) 254 CTR 453 (Raj.) (v) Medicare Investments Ltd. vs. JCIT , 14 ITD 34 (Del.) 2.6 We have heard the rival contentions and perused the materials available on record. We find that the assessee computed the remuneration as per Section 40(b) of the Act and credited 50% each to both the partners. The AO did not dispute the fact that remuneration was paid to the partners. Secondly, this amount was taxable in the hands of partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and prayed that the ld. CIT(A) has wrongly allowed the claim of the assessee amounting to ₹ 70,433/-. 3.5 The ld. AR of the assessee relied on the order of the ld. CIT(A) and prayed that the ld. CIT(A) has rightly deleted the addition made by the AO based on careful consideration of the facts and the applicable law.Te ld. AR of the assessee relied on decision of Hon'ble Delhi High Court in the case of CIT vs. Dinesh Kumar Goel (2011) 331 ITR 10 (Delhi) to this effect. 3.6 We have heard the rival contentions and perused the materials available on record. It emerges from the records that the assessee furnished the details of the amounts deducted by its clients in earlier years and the same was communicated to the assessee during this year which cannot be treated as bad debt. Hence, we find no reason to interfere with the order of the ld. CIT(A) which is sustained. Thus Ground No. 2 of the Revenue is dismissed. 4.1 Apropos Ground No. 3 of the Revenue wherein brief facts of the case are that the assessee had debited from profit and loss account of ₹ 5,30,674/- under the head of transportation cost. The AO asked the assessee to produce all the bills and v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on labour charges paid of various types of civil construction job which were totally non-verifiable in nature. The deputed his Inspector to enquire about the construction and present status of hostel building who reported that the plot of the building is divided into two parts. In one part, M/s. Associated Engg. And Allied Products is carrying its businesss like fabrication of iron items and in second part there is running a hostel i.e. Neha Residency . The AO also gathered the information that the hostel is running from the year 2010 and such hostel has been given on lease. The hostel building is in three stories and there are approx 69 roms and the building is well furnished and the assessee made huge investment. The AO thus looking to the size of construction and valuation shown by the assessee observed that actual construction cost and investment in furnishing / fitting should be more than what had been declared by the assessee. The AO thus referred the matter to valuation Cell for determination of fair market value of immovable property u/s 142A of the Act. The DVO had sent his report on 25-03-2013 wherein value of the building was determined t ₹ 98,01,608/- against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble Jurisdictional High Court in the case of CIT vs. Elegant Home (P) Ltd. 259 ITR 232 (Raj.), the difference of ₹ 37,53,054/- was added u/s 69 of the Act to the total income of the assessee. 5.3 Being aggrieved, the assessee carried the matter before the ld. CIT(A) who partly deleted the addition by following observation. I have gone through assessee's submission and AO s findings. Although the AO did not reject the books of account specifically reading the findings given by AO, indicated that AO had reason to believe that there was under reporting of expenses. Therefore, it is held that reference to DVO u/s 142A was justified. It has been held that Hon'ble Rajasthan High Court / ITAT that to arrive at valuation as per Rajasthan PWD, a deduction of 20% should be allowed on CPWD rates. As the assessee is in similar line of business, higher deduction of 12.5% for self supervision is considered reasonable. Considering the above, the value of the property is computed as under:- Value as per DVO s report Rs. 91,46,305 Add: self supervision deduction allowed by DVO (7.5) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 of the Appeal Order, in an attempt to justify the wrong action of the ld. AO. The said reasoning is reproduced below: Although the AO did not reject the Books of Account specifically, reading the findings given by the AO indicated that AO had reason to believe that there was under-reporting of expenses. Therefore, it is held that reference to DVO u/s 142A was justified. Thus, the ld. CIT (A) has erred in holding that the reference to the DVO u/s 142A was justified. It is, therefore, prayed to kindly decide accordingly. B. The Hon ble ITAT, Jaipur Bench has consistently held that the PWD Rajasthan rates should be applied for ascertaining cost of construction instead of CPWD Rates. Therefore, the ld. CIT (A) has rightly applied the rates of PWD Rajasthan instead of CPWD Rates, and has observed as under: It has been held by Hon ble Rajasthan High Court/ ITAT that to arrive at valuation as per Rajasthan PWD, a deduction of 20% should be allowed on CPWD rates. Ravi Mathur Others v. ACIT (1999) 22 Tax World 245 (ITAT, Jaipur Bench) [ ITSSA No. 2316/JP/96; Date of Order 28.01.1999] Whether any other value of construction can be substituted for the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Jodhpur, in the case of Shri Kamal Kishore Baheti, Jodhpur v. DCIT, Central Circle-2, Jodhpur ( 2012) 48 Tax World 155 supports the first two issues involved in the assessee s case and discussed above in relation to the determination of cost of construction. It is, therefore, prayed that the decision of the ld. CIT (A) on this ground may kindly be sustained. 5.7 We have heard the rival contentions and perused the materials available on record. The AO in this ground has observed that the assessee had invested a sum of ₹ 60,48,554/- for construction of hostel building during the year. The assessee had produced copy of ledger with bills and vouchers but the AO observed that the assessee has maintained cash vouchers only on labour charges paid to various types of civil construction job which are non-verifiable in nature. The AO observed that the plot of building is divided in two parts i.e. one part pertain to M/s. Associated Engg. And Allied Products wherein assessee is carrying on its business like fabrication of iron items and on the second part the assessee is running a hostel in the name and style of Neha Residency . This hostel has been running from the year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exactly was the material used and what was the prevailing rate of such material apart from ascertaining the rates from PWD department which rate varies from time to time. Ultimately the assessing officer would take into consideration what was the prevailing rates of PWD in the State of Kerala adopted for the particular assessment year in order to arrive at the cost of renovation and construction claimed by the assessee for the assessment year 2006-07. In that view of the matter, we are of the opinion, the orders of the three authorities based on the Central PWD rates is set aside by remanding back the matter to the assessing officer who shall rely upon the report of the District Valuation Officer at Thiruvananthapuram so far as value of the renovation and cost of construction for the assessment year 2006-07 and then proceed in accordance with the procedure contemplated. Similarly the Hon'ble Jurisdiction high court in the matter of Smt. Prem Kumari Mudria vs. ACIT, 303 ITR 128 held as under:- 9. It is required to be noted that in the instant case, there was no evidence available in any manner regarding the cost of construction and, therefore, in order to find out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals of the revenue are hereby dismissed. 10. It is not in dispute that the appeals of the revenue were dismissed after hearing the present appellant who was respondent in the aforesaid appeals whereby the order in favour of the assessee was confirmed. It is surprising to note that at the time of hearing of the appeal, the assessee had not pointed out that there were cross-appeals which are required to be heard together. We are of the opinion that when there are two cross-appeals pending before the different authority or Tribunal or the Court, the efforts should be made to see that such appeals are heard together so that by a common judgment, the same can be decided. Be that as it may, it is not in dispute that against the very impugned order of CIT(A), the revenue preferred three appeals for different assessment orders which were dismissed by holding that deduction of 20 per cent has been rightly given in favour of the assessee. It is required to be noted that there is no material on record to show that any request was made by the present appellant that his cross-appeals should be heard and decided together and the appellant allowed the Tribunal to decide revenue s appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it. It has taken just and proper decision. In fact, the revenue which was also aggrieved by the said decision has challenged the same and as stated above, the Tribunal dismissed the appeals of the revenue by accepting the view taken by the CIT(A). Considering the aforesaid aspect of the matter as well as considering the question regarding consistency in the orders in connection with the same assessee, in view of dismissal of revenue s appeals and upholding the decision of CIT(A) as well as considering the fact that the finding arrived at by the CIT(A) as well as the Tribunal is a finding of fact, no interference of this Court is called for in this appeal. No other points were canvassed before this Court. In view of the above deliberations, we restore the issue to the file of the AO to recompute the self supervision charges at 7.5%( as done by DVO) instead of 12.5% as determined by the by the ld. CIT(A). As regards the cost of construction, the rate of PWD, Rajasthan shall be applied instead of CPWD rates. Thus the appeal of the Revenue is partly allowed for statistical purposes. 6.0 In the result, appeal of the Revenue is partly allowed for statistical purposes. Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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