9911796707
TMI Blog2017 (4) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived (Rs.34.40 lakhs) and amount paid to Hariani & Co.(Rs.7.77 lakhs). All the grounds of appeal, raised by the AO, pertain to additions/disallowances mentioned above. 2. First ground of appeal is about deleting the disallowance on account of Sale Support Service and Allocation of Management Fees.During the assessment proceedings,the AO observed that the assessee was following percent is completion method of accounting,that it had completed only 26.32% of the project, that expenditure only to that extent was required to be allowed, that the remaining expenses were to be disallowed and were to be capitalised as part of the work in progress as per Accounting Standard (AS-7),that same were to be claimed in the subsequent years, that the management fees was a capital expenditure, that same was true intangible asset, that the assessee was entitled to claim depreciation At the rate of 25%. Accordingly, out of the management fees of Rs. 8.11 lakhs, he made a disallowance of Rs. 6,08,533/-. 2.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him it was argued that expenditure of Rs. 2.75 crores had been incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Builders Private Ltd.(ITA/310/Mum/2012 and ITA/1566/Mum/2011 AY.s 2008-09 and 2007-08 and other appeals, dated 23/09/2016), Sunny Vista Realtors Private Ltd. (ITA/ 4580/Mum/2013- AY.2009-10,dated 11/01/2017)and Hiranandani Palace Gardens Private Ltd. (ITA/4579/ Mum/ 2013 AY. 2009-10,date 30/12/2015). 2.3. We have heard the rival submissions and perused the material before us. We find that the AO had held that assessee could claim 26.3% of the expenditure incurred by it under the heads Sales Support Services and Management Fee, that it had completed roughly 26% of the project, that the balance expenditure was to be capitalised under the head work in progress, that he had made a reference to AS -7 for making the disallowance. It is true that AS-7 stipulates proportionate allowance of expenditure. But, certain expenditures are not covered by the provisions of the said accounting standard. Expenses related with the day-to-day business of the assessee cannot be capitalised.Depending upon the nature of the job undertaken by the assessee certain expenses have to be incurred on capital side,whereas some expenditure has to be incurred for running the business.What the AS-7 has envisaged is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come that is not included in contract revenue, for example income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract. 17.Costs that may be attributable to contract activity in general and can 10 be allocated to specific contracts include: (a) insurance; (b) costs of design and technical assistance that is not directly related to a specific contract; and (c) construction overheads. Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. Construction overheads include costs such as the preparation and processing of construction personnel payroll. Costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs as per Accounting Standard (AS) 16, Borrowing Costs. 18. Costs that are specifically chargeable to the customer under the terms of the contract may include some general administration costs and development costs for which reimbursement is specified in the terms of the contract. 19. Costs that can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on it @25%. 3.1. The FAA after considering the elaborate submissions of the assessee,held that it had entered into an agreement with the sports company namely India-Win in the month of March, 2010,that the assessee-group became cosponsor of Mumbai Indian IPL cricket team as an associate partner, that as per the agreement the ground logo of the assessee group was displayed permanently in the cricket stadium is also on the playing gear of the players,that in the terms of the agreement and amount of Rs. 4.50 crores was paid towards sponsorship fees during the year under consideration, that the sponsorship fees for different years had been apportioned and allocated to 3 entities of the assessee group which were using the brand logo in the ratio of their respective turnovers during the year, that out of the expenditure of Rs. 2.50 crores and amount of Rs. 21.61 lakhs was allocated to the assessee, that the expenditure incurred on IPL sponsorship did not provide it any benefit of enduring nature,that the expenditure had been incurred year after year by the assessee group with a view to get visibility, that it was in nature of some kind of advertisement expendi - ture,that same should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made its submissions.After considering the same,he held that the assessee had failed to substantiate its claim, that the expenses were not incurred for carrying out its day to day business activities,that expenses were purely of personal nature,that it had failed to co-relate and prove that expenses were spent wholly and exclusively for business activities.Finally he made disallowance1,14,09,190/- and held that expenses were of personal nature and were not incidental to the business of the assessee. 4.1. During the appellate proceedings before the FAA,the assessee made elaborate submissions. After considering the available material,he held that perusal of the travelling expenditure proved that major part of expenditure had been incurred in respect of the directors namely,-Dheeraj Wadhwan and H.Bindra,that they have travelled inside and outside India, that the journeys were claimed to have been undertaken for business purposes.He further found that the directors had travelled with their family members on certain occasions.He held that such journeys were undertaken for personal purposes or that element of personal use could not be totally denied. Finally,he restricted the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction,that there was no discrepancy in the position taken by the assessee or the supplier of the goods, that the amount refunded by KIPL to the assessee and its sister concern was equal to the amount paid as advanced by the group, that no excess payment was received by the assessee. Finally, he deleted the addition made by the AO. 5.2.Before us,the DR stated that matter could be decided on merits.The AR supported the order of the FAA. We find that the assessee had advanced Rs. 3.65 crores to the KIPL for supply of steel, that one of the sister concern also had advanced money to the supplier,that KIPL returned the money to the group by issuing two cheques of Rs. 2 crores each, that the assessee had paid Rs. 65.60 lakhs to its sister concern.The FAA has given a categorical finding of fact that the total amount paid to the assessee and its sister concern,put together, was same as that total advances given by them to KIPL.There is nothing on the record to controvert the finding given by the FAA. Therefore, we are not inclined to interfere with his order.Confirming the same,we decide last ground of appeal against the AO. As a result,appeal filed by the AO stands dismissed. Order pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
