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TMI Blog2017 (11) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... s per order of the ITAT relating to A.Y. 2006-07. It is further noticed that even though the tribunal worked out disallowance in A.Y. 2006-07 to the extent of ₹ 22,50,000/- but sustained disallowance to the extent of ₹ 1,87,35,000/- on the ground that appellant itself has agreed for such disallowance during assessment proceedings. However, the appellant has clarified that no such admission was made and in clarification of factual mistake in the order of the tribunal, miscellaneous application has been field and same has also been heard, but order is still awaited. Without making any comment on the same, we are of the view that no such issue was raised by the Ld. CIT DR or fact about any such admission was brought on record. In the ultimate analyses, we are of the view that the issue is fully and squarely covered by order of ITAT for A.Y. 2006-07 and accordingly disallowance is confirmed to the extent of ₹ 33.25 lakhs. The Assessing Officer may give necessary effect so as to restrict the disallowance to ₹ 33.25 lakhs. Disallowance and capitalization of amount expanded on repair and maintenance of Generator sets - Held that:- We are of the view that claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. There is no justification for addition of ₹ 12,60,000/- as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted. Disallowance on account of prior period expenses - Held that:- Claim of prior period was on the basis of liability crystallised during the year and same is on the basis of regular system of accounting followed by the appellant. In the light of order of ITAT and detailed finding recorded by CIT(A), no interference is called for in the order of the CIT(A) and this ground of the revenue is dismissed. Addition on account of brokerage and commission - Held that:- Claim of brokerage and commission is permissible deduction as same is in the nature of sales expenses Addition on account of enhancement of revenue under POCM method - Held that:- aking into consideration, the system of accounting being followed by appellant and recognition of revenue on the basis of the said system, the proposed addition by the AO on hypothetical basis is of no relevance unless such adjustments are not in conformity with POCM method. The CIT(A) has appreciated the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gapore Pte.Ltd. vs. ADIT [2013 (10) TMI 751 - ITAT DELHI] as referred to above is also relevant and support the claim of the appellant. The ld. CIT DR has not disputed the factual finding recorded by CIT(A), there is thus no case for any interference in the order of the CIT(A) and this ground of revenue is dismissed. Disallowance u/s 40(a)(ia) - assessee has collected rent from Shri Ram School on behalf of DLF Qutub Enclave Complex Educational Charitable Trust and same has been paid to the trust without deduction of TDS - Held that:- the appellant has neither credited this rental income nor claimed any expenditure on account of payment made to DLF Qutub Enclave Complex Educational Charitable Trust. The entries recorded by appellant were merely pass through entries and as such there is no case of any adverse revenue implication. The order of CIT(A) is confirmed. Addition u/s 40(a)(ia) on account of non deduction of TDS on payments made to two trusts - Held that:- here is no default on the part of the assessee in not deducting TDS on such payment. The order of the CIT(A) is based on proper appreciation of facts and there is thus no justification for any interference and this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of cases and it may be appropriate to make reference to decision of Delhi High Court in the case of CIT v. Gulshan Kumar [2002 (5) TMI 35 - DELHI High Court]. In view of the settled legal position and in the absence of any evidence regarding non-disclosure of full value of consideration, there is no infirmity in the order of CIT(A) and same is confirmed. Disallowance of claim of depreciation on DLF Centre Building - Held that:- CIT(A) has observed that this very issue arose in the preceding year and relief allowed at the first appellate stage was accepted by the revenue as no appeal was filed against the same before ITAT. In the light of above position and as per the decision of Hon’ble Supreme Court in the case of CIT v. J K Charitable Trust [2008 (11) TMI 8 - SUPREME COURT] the revenue could not be permitted to agitate the very same issue in the year under reference. Accordingly, the order of CIT(A) is confirmed. - ITA No. 3846/DEL/2012 And ITA No. 4342/DEL/2012 - - - Dated:- 1-11-2017 - SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER For The Assessee : Shri R.S. Singhvi, CA For The Revenue : Ms. Renu Amitabh, CIT-DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,100.00 2 Form 6B Prior Period Expenses 34 44 2,20,25,324.00 3 TOR-1 Interest on earnest money advanced to group concerns 44 55 4,19,00,000.00 4 TOR-1 Interest on debentures not charged from group concerns 55 64 7,53,00,000.00 5 TOR-1 Interest pertaining to loan for Edward Keventer Project 64 73 7,05,00,000.00 6 TOR-6 Interest capitalization in respect of project Star TowerSilokhara 104 106 45,92,000.00 7 TOR-6 Interest capitalization in respect of project Star TowerSilokhara 73 106 25,92,00,000.00 8 TOR-6 Brokerage Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 352 356 26,05,808.00 24 TOR-23 Expenses for increase in authorized capital to be capitalized 356 366 1,04,32,923.00 25 TOR-23 Interest Expenses on Aircraft to be capitalized 366 387 51,51,360.00 26 TOR-24 Disallowance u/s. 40(a)(ia) Foreign Payments 387 399 1,89,05,487.00 27 TOR-24 Disallowance u/s. 40(a)(ia) Domestic Payments 399 410 49,34,000.00 28 TOR-24 Disallowance u/s. 40(a)(ia) Domestic Payments 410 411 27,08,664.00 29 TOR-24 Disallowance u/s. 40(a)(ia) Domestic Payments 411 411 4,20,000.00 30 TOR-24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant s case in confirming the addition of ₹ 1,01,07,405/- made by the Assessing Officer in respect of Internal Development Charges (IDC) Greater Kailash-II by holding that the same is not related to lands sold during the year and not treated the GK Project as a single project [ Page 139-146 of CIT(A) s Order.] 2.1 That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant s case in confirming the disallowance made by AO u/s. 14A of the Income Tax Act, 1961 to the extent of ₹ 4,66,00,000/-. [ Page 204-220 of CIT(A) s Order]. 2.2 That learned CIT(A) has failed to appreciate that no interest, administrative or any other expenditure was incurred by the appellant in relation to investments during the assessment year 2007-08. That the learned CIT(A) ought to have held that no amount of interest, administrative or other expenditure was disallowable u/s. 14A of the Income tax Act, 1961. 2.3 That the learned CIT(A) has grossly erred in applying section 14A of the Act without appreciating that this section has no application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no rental income has been shown by the appellant, whereas in fact the appellant has not received any rental income from these tenants [ Page 317-321 of CIT(A) s order]. 5.1 That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant s case in appreciating the fact that the taxable income means real income and not a fictional income. 6. That the order passed by the learned CIT(A) is bad in law as well as wrong on facts and erroneous in points of law and right is reserved to assail the same on such other ground or grounds as may be advanced at the time of hearing for which the appellant raves leave to amend, vary or add to the grounds hereinbefore appearing. 6. The revenue has raised following grounds of appeal : 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 20000/- made by the AO on a/c of disallowance u/s. 40A(3) of the IT Act, 1961. 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 22025324/- made by the AO on a/c of disallowance of prior period expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting the addition of ₹ 20300000/- made by the AO on a/c of disallowance of net registration charges. 14. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 36656071/- made by the AO on a/c of disallowance of closing credit balances initial deposit. 15 Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 207028248/- made by the AO on a/c of disallowance of expenses on account of Non Allocation of Overheads. 16. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 36666458/- made by the AO on a/c of Non Allocation of expenses to Galaxy Mercantiles. 17. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 6190518/- made by the AO on a/c of disallowance of expenses on a/c of Allocation of expenses not allocated at all. 18. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 2722750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in deleting the addition of ₹ 1107190/- made by the AO on a/c of withdrawn of TDS credit on income received from Shri ram Scholl, after verification. 28. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 78731326/- made by the AO on a/c of disallowance of reclassification of income from Income from house property to Income from business profession . 29. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 32852595/- made by the AO on a/c of disallowance of notional rent/Additional annual letting value (ALV) i.r.o. vacant property. 30. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 514734/- made by the AO on a/c of disallowance of reconciliation of rental income as per TDS certificates and withdrawal of TDS credit. 31. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 41674/- made by the AO on a/c of withdrawn of TDS credit on advance rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n given in the special audit report. The assessee has shown total amount of IDC expenditure aggregating ₹ 7,95,35,569/- out of this ₹ 2,84,68,129/- pertains to security charges incurred in respect of all the lands aggregating 18.10 acres as tabulated in Para 8.24 above. The remaining amount of ₹ 5,10,67,440/- have been incurred for payment of shelter fees to the Government against specific lands as tabulated herein under : S.No. Description of land Area in Acres IDC Paid (Rs) 1 E Block, GK-II. 1.15 4,92,27,360.00 2 W Block, GK-II. 2.47 3 W Block, GK-II. 2.47 18,21,000.00 4 E Block, GK-II. 1.15 19,080.00 Total 5,10,67,440.00 Copies of relevant documents evidencing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umulated security expenses aggregating ₹ 2,84,68,129/- are allowable on a pro-rata basis, to the extent to which they relate to the lands sold/transferred during A.Y. 2007-08. The total area of land sold/transferred during the year is 9.545 acres out of total area of 18.10 acres. In percentage terms the area sold/transferred during A.Y. 2007-08 comes to 52.73% (9.545 acres/18.10 acres x 100). Hence, 52.73% of ₹ 2,84,68,129/- which comes to ₹ 1,50,12,613/- is allowable during A.Y. 2007-08 against the claim of ₹ 3,51,20,018/- made by the assessee company and the balance amount of ₹ 2,01,07,405/- is being disallowed since these expenses are not pertaining to the land sold during the relevant financial year. 8.3 Relevant finding and conclusion of ld CIT(A) order s at para 12.10 on Page 144-146 reads as under: 12.10 I have considered the observation of the ASSESSING OFFICER and submission of the appellant and material available on record it is seen that the Assessing Officer has held that the land located at Greater Kailash I and II are clearly and separately identifiable and accordingly the expenses which are pertaining to specific lands are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y different with that of this issue, therefore, the same is not covered with the last year s CIT(A) Order. As such the contention of the appellant s AR is rejected. 8.4 The arguments forwarded by the Ld. Counsel appearing on behalf of the assessee are summarized as under : a. It was contended that the appellant has incurred internal development cost in respect of various projects including project at Greater Kailash Part I and II. The total cost incurred in respect of Greater Kailash project as on 31.03.2007 is ₹ 7,95,35,569/-. b. There is no dispute about genuineness and admissibility of claim of Internal Development Cost (IDC). However, the AO has disallowed proportionate claim of IDC relating to Greater Kailash project with reference to actual sale effected during the year. c. It was explained that the revenue from sale of these lands is recognized as per matching concept in which the cost of land sold is determined by computing per acre cost of the land and adjusting the same against the proportionate land sold. d. Similarly, the claim of IDC is also proportionately recognized on the basis of actual sale of land during the year and such claim is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash, Part-II which were under development by the appellant. It was submitted that these expenses are for the development of whole area and not specific to property sold. There is no dispute that these expenses are of revenue nature and permissible deduction under the law as Assessing Officer himself has allowed part of the expenses which are attributable to property sold during the year. 11. The CIT DR supported the order of AO CIT(A) and argued that AO and CIT(A) have considered the disallowance on the basis of sound accounting principles and in order to determine the correct assessable income. 12. After going through the facts of the case and submission of the appellant, we are of the view that these are business expenses for development of various projects under execution and same could not be related to particular area or apartment and as such the Assessing Officer is not justified in considering the admissibility of part of the expenses on proportionate basis. Further, this disallowance is revenue natural as the appellant has sold the properties in the subsequent years and taking into consideration the principle laid down by Supreme Court in the case of CIT Vs. Excel I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds were utilized for making investment for earning exempt income, no disallowance under section 14A is warranted. However it needs to be noted that after the insertion of Rule 8D, not much choice is left as regards the computation of proportionate expenses incurred for earning the exempt income. From the return of Income filed by the assessee it is evident that no such working has been carried out. But such a situation cannot exist. In other words there is bound to be some expenditure pertaining to earning of exempt income. Since the assessee has failed to carry out the computation exercise, provisions of section 14A are attracted. The said section provides that the where the assessing officer is not satisfied with the correctness of the claim of the assessee, he may work out the same on his own. For carrying out such working Rule 8D has been introduced in the Income Tax Rules. Therefore, it is held that computation of proportionate disallowance of expenses will have to be made as per the formulae prescribed in Rule 8D. It has been discussed in the Special Audit Report that part of Interest expenditure has been capitalised and the balance interest expenditure should be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance u/s 14A (1+2+3) 2722.75 A Amount of expenditure by way of interest other than the amount of interest included in point No. 1. 30,299.24 (directly related to exempted income) B Average of value of investment, income from which does not form part of total income. 64,287.62 C The average of total assets as appearing in the balance sheet 8,11,166.72 Total Assets: As on 31.03.2007 As on 31.03.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 217-220 of CIT(A) s Order] reads as under: 21.6 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various judicial pronouncements available on this issue. It is seen that during the year the appellant has earned exempt income of ₹ 5,94,63,674/- as share of profit from partnership firms and dividend income. It is also seen that appellant has made average investment of ₹ 642.87 crore in various partnership firms and in the shares of various group companies and mutual funds. The appellant has shown total average assets during the year of 8111.66 crore in the balance sheet. Vide my decision on ground No. 5, 6, 8 and 9, I have held that appellant has shown interest incurred on fixed period loan of ₹ 463.86 crore. Out of this an amount of ₹ 196.02 crore has been capitalized over the project. The appellant has also paid interest on over draft etc. to the tune of ₹ 35.15 crore. As such the total interest payment during the year comes to ₹ 302.99 crore. As against this, the appellant has shown interest receipts of ₹ 284.51 crore in the P L account. If the interest paid on bank overdraft facilities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 438.92 C The average of total assets as appearing in the balance sheet 8,111.66 It is observed that earning of exempt income is not a passive activity. In the present age of making of investment, maintaining or continuing with investment and time of exit from the investment are well informed and well coordinated management decision involving not only inputs from various sources but also acumen of senior management functionaries. Therefore, cost is inbuilt even in so called passive investment. There are incidental expenditure of collection, telephone and follow up etc. Therefore, expenses related to earning of exempt income are embedded in the expenses debited to profit and loss account. The expenditure on administration and management of investment is embedded in the expenditure debited to the profit and loss account. The indirect expenditure incurred on the administration and management of investment is also substantial, considering the total expenditure debited by the appellant in profit and loss account. Therefore, some expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Opening as on 01/04/2006 = ₹ 49 cr Closing as on 31/03/2007 = ₹ 84 cr Total ₹ 133 cr Average investment = ₹ 66.50 cr Disallowance being 0.5% of ₹ 66.50 cr = 33.25 lakhs 17. The ld. DR relied upon the order of AO. 18. We have heard the rival submissions and perused the material on record. The ground is in respect of disallowance u/s. 14A. The Assessing Officer has made disallowance u/s. 14A to the extent of ₹ 27,22,75,000/-, which has been restricted to ₹ 4,66,00,000/- by CIT(A). Both the parties are aggrieved and in appeal against order of the CIT(A) as per respective ground raised by the parties. The Ld. AR contended that the issue is fully covered as per order of the ITAT in the immediately preceding year i.e. A.Y. 2006-07 and on the basis of order of ITAT, the disallowance is required to be restricted to ₹ 33.25 lakhs as per details submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 26,05,808/- expanded on repair and maintenance of Generator sets. The AO has disallowed the claim of expenditure on the ground that same is in the nature of capital expenditure not allowable u/s 37 of the Act. 23. The relevant observation and finding of AO and CIT(A) are extracted hereunder : Observation and Conclusion of AO s Order (Page 352-356 of the Assessment Order) The Special Auditors have reported that : 23.11 The Assessee Company has incurred ₹ 28,17,090/- vide 1st RA bill dated 17.02.2007 WC 10 of M/s HI TECH ENGINEERS CONSULTANTS on account of purchase of 2 No. s D.G. sets installed at Shopping Mall Office. The aforesaid expenditure incurred on account of purchase of 2 No. s D.G. sets has been charged as revenue expenditure under the head Repair Maintenance Others. As this expenditure is of capital nature hence, it can not be claimed as revenue expenditure and needs to be capitalized under the head Plant Machinery. Copies of relevant documents like voucher, invoice, Challan etc. are annexed herewith and marked as Annexure F from page no.183 to 189. I have considered the reply of the assessee and unable to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarely applicable on the facts of the appellant s case. Hence, the expenditure incurred on DG Sets of ₹ 28,17,090/- is held as capital expenditure and the decision of the ASSESSING OFFICER is confirmed. 25. The ld. counsel for the assessee put forth detailed arguments and contended that the expense in dispute are in the nature of routine repair and maintenance expenses connected to DG sets used in commercial complexes. The ld. counsel stressed on the fact that the expenses are not for purchase of new DG sets but were only of repair and maintenance of existing DG sets. Our attention was also drawn to copy of bills enclosed at Paperbook Page 69-72. Reference was also made to following case laws : a. CIT vs Mahalakshmi Textile Mills Limited 66 ITR 710 (SC) b. CIT v. Modi Industries Ltd. 197 Taxman 76 (Delhi HC) c. CIT vs. Chowgule And Co.Pvt. Ltd. 214 / ITR / 523 (Bom) d. CIT v. Gitanjali Mills Ltd. 265 ITR 681 (Mad) e. Nathmal Bankatlal Works Co. Ltd. v CIT 122 ITR 168 (AP HC) f. CIT v. Janakram Mills Ltd 275 ITR 403 (Mad) 26. On the other hand, ld. DR relied upon the orders of lower authorities. It was contended that the expense under dispute are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. X of their Special Audit Report have reported that interest on loan taken for acquiring the Aircraft upto the date of Aircraft being actually put to use needs to be capitalised. The relevant extracts in this regard from the Special Audit Report are reproduced below: 23.2 As per the terms of reference, the scope of audit can be divided into two broad categories (I) whether the asset capitalized is correct with reference to the date for the purpose of claiming depreciation; and (ii) Whether any capital expenditure is claimed as revenue expenditure. One of the major items capitalized during the year is in relation to purchase of an aircraft. The aircraft is stated to be purchased on 3rd July 2006. The company has claimed depreciation for whole of the year, on the cost of Aircraft and 50 % in respect of Customs duty paid. It is stated that the aircraft was purchased from M/s Trans Meridian Aviation LLC. The model is Gulf Stream . The delivery of the said aircraft is stated to be received on 3rd July, 2006. The aircraft purchased is an old aircraft manufactured in November 1993. However, the customs duty in this regard was paid vide Bill of Entry dated 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on loan taken from GE capital Services from July 06 and consequently the deduction of interest for the period 01.07.2006 to 15.08.2006 is disallowed. The same is calculated as under : Interest for July 06 58,08,496/- Interest till 15.08.2006 Calculated Proportionately (Total Interest for Aug ₹ 55,54,207/-) 27,77,103/- 85,85,599/- The interest of ₹ 85,85,599 till 15.08.2006 is disallowed and capitalised since the aircraft was put to use from 16.08.2006. The assessee would be entitled to depreciation on this amount on the rate applicable to aircraft. The rate of depreciation of aircraft is 40% and depreciation allowable comes to ₹ 34,34,239/-. The interest disallowed is ₹ 88,54,351/- and depreciation allowable is ₹ 35,41,740/-, the net disallowance would come to ₹ 51,51,360/-. Finding and conclusion of CIT(A) [ Para 27.7, page 249-250 of CIT(A) s Order] : 27.7 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and the material a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of interest is in accordance with provisions of section 36(1)(iii) and settled legal principle. It was contended that the observation of the AO are factually incorrect and not based on documentary evidences placed on record. Ld. Counsel took us though detailed chart of flight operation details placed at Paperbook Pg 102-179 and contended that the aircraft was put into operation in the month of July 2006 itself and it took first flight on 13.07.2006. It was also submitted that the aircraft was being used for trial run and commercial purposes during the said period and as such the assessing was not justified in disallowing the claim of interest for the intervening period starting from 01.07.2006 to 15.08.2006. 32. Ld. Counsel also made reference to the decision of Hon ble Supreme Court in the case of DCIT v. Core Health Care ltd. [2008] 298 ITR 194 (SC) for the proposition that interest on loan taken for acquisition of capital asset is an allowable deduction u/s 36(1)(iii) of the Act. 33. On the other hand, Ld DR relied upon the orders of AO and CIT(A). 34. We have heard the rival submissions and perused the material on record. The ground is regarding disallowance of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Observations and Conclusion of AO at Pages 463-464 of the Assessment Order. From the reply filed by the assessee it emerges that in four cases in DLF City Centre Mall kiosks have given on rent, the rental agreements for the same filed by the assessee are between DLF Ltd and tenants. The rent received against these agreements has not been reflected in the taxable income of the company even though the security deposit received from these tenants has been shown by the company in their books. The assessee in their reply have stated that the rental income from these tenants have been shown by DLF Services Ltd. a subsidiary of the assessee. The reason for income being shown by DLF Services Ltd as given by the assessee is that DLF Services Ltd being the agency responsible to maintain the building were authorised to received rent to meet its cost of maintenance of building even though the security deposit was received by the assessee company. This contention of the assessee is not acceptable since the place is owned by DLF Ltd, the rental agreement with the tenants for kiosks is entered into with DLF Ltd. and security deposit against this rental agreement has been received by DL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after allowing 30% deduction amounting to ₹ 5,40,000/- for repairs the balance amount of ₹ 12,60,000/- added to the income of the assessee. Finding and conclusion of CIT(A) (Para 37.10 on Page 320-321 of the CIT(A) s Order) 37.10 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various cases relied upon by the appellant in this regard . It is seen that properties given on rent to Belgique Chocolatiers, Swastik Food Solutions, Royal Touch, Vrinka Overseas Pvt. Ltd, owned by the appellant company. It is also seen that lease agreements for giving these properties on rent have been entered into between the appellant and said parties. The deposit received from such parties of ₹ 18,40,260/- has been credited by the appellant in its books of accounts. It is claimed by the appellant that the rent receivable from such parties was assigned to DLF Services Ltd., a company who has been assigned with the responsibility of building to meet the cost of maintenance of building. It is seen that no agreement in this regard has been furnished by the appellant and the income has been diverted through overriding titles which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assigned the lease rental to DLF Services Ltd. as part of maintenance cost. The appellant contended that the diversion of lease rent was towards reimbursement of maintenance services rendered by M/s. DLF Services Ltd. and as such diversion was towards provisions of maintenance services. It was further contended that the rental income as diverted to DLF Services Ltd. has being subjected to tax in the case of M/s. DLF Services Ltd. and there is no case of subjecting the same income again in the case of appellant. In this connection, the appellant made reference to decision of Supreme Court in the case of M/s. Ashish Plastic Industries Vs. ACIT 373 ITR 45, as per which same income cannot be subjected to tax again in the case of the appellant. 44. The Ld. CIT DR supported the order of the Assessing Officer and CIT(A). 45. After hearing both the parties, we are of the view that the appellant assigned DLF Services Ltd. right to recover lease rent for maintenance and upkeep services of Mall and as such there was a genuine business arrangement between the parties. If the lease income is considered as chargeable to tax in the case of appellant, the appellant may be eligible for claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. The CIT(A) has deleted the disallowance on the ground that the expenses are of routine nature and the liability to pay crystallized during the year under consideration. Further, the CIT(A) has placed reliance on decision of Hon ble Delhi High Court in the case of CIT v. Modipon Ltd. 334 ITR 102 (Del). 54. The ld. CIT DR relied on the order of AO and on the other hand the ld. Counsel for the assessee submitted that the issue is covered in favour of assessee by the order of Tribunal in immediately preceding AY 2006-07. 55. We have gone through order of AO CIT(A). It is noticed that the issue of prior period was adjudicated by ITAT for A.Y. 2006-07 vide para 227-231 of the consolidated order. The Ld.AR submitted that claim of prior period was on the basis of liability crystallised during the year and same is on the basis of regular system of accounting followed by the appellant. In the light of order of ITAT and detailed finding recorded by CIT(A), no interference is called for in the order of the CIT(A) and this ground of the revenue is dismissed. 56. Ground No. 3 is against deletion of disallowance of interest to the extent of ₹ 4,19,00,000/-u/s 36(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was chargeable on the same as it was a business advance given for procuring land. The assessee in its accounts has capitalised interest in respect of advance given to DCPC for purchase of land. The total interest capitalised in respect of advance to DCPC is ₹ 124,47,01,773/-. The assessee has admitted that the advance of ₹ 743.73 crores received back from LOC was given to DCPC for purchase land since the assessee later on decided that the land owning process be assigned to an intermediary namely, DLF Commercial Projects Corporation (DCPC), since the number of land owning companies kept on growing with the increased requirement of land. The nature of advance of ₹ 743.77 crores is similar in character to advance given to DCPC. The assessee has capitalised interest on advance given to DCPC in the financial statements as mentioned above and accordingly the interest on advance of ₹ 743.73 crores from 31st August 2006 to 15 November 2006 is to be capitalised and disallowed accordingly. The interest amount calculated comes to ₹ 15,88,17,344/-. The rate of interest has been taken at 10.25% which is the same rate as being paid on loans taken from banks by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on debentures issued to group entities. * Disallowance of Interest on loan for Project- Keventer Lane * Disallowance of proportionate interest on fixed period loan where only part of revenue recognized However, all such disallowance are comprised within the overall figure of ₹ 267.84 crores claimed in the P L Account. As discussed above in the case of mixed use funds the disallowance of gross interest is required to be carried out after carrying out proportionate netting against the interest income earned and credited in the P L Account. Such an exercise in respect of all the above issues has been collectively carried out later in page Nos 106 to 111 and the quantum of disallowance has been worked out separately for each issue. In respect of this issue the disallowance works out to ₹ 4,19,00,000/- . Observation and finding of CIT(A [Para 5.10 at Page 55 to 58 of CIT(A) s Order] 5.10 I have considered the submission of the appellant, observation of the Special Auditors ASSESSING OFFICER and various judicial pronouncements cited by the appellant on this issue. It is seen that the appellant company is engaged in the business of real es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 302.99 crores. As against this the appellant has shown receipt of interest from bank deposits, customers and subsidiary and associates to the extent of ₹ 284.51 crore. If the interest payment on over drafts is taken out from the total interest claimed in the profit and loss account, then the total interest claimed in profit and loss account is ₹ 267.84 crore which is less than the interest receipts offered by the appellant from bank deposits and interest received from subsidiary and associates of ₹ 284.51 crores. As such the interest received is much more than the interest claimed in the profit and loss account by the appellant. Therefore, it cannot be said that appellant has diverted interest bearing funds to reduce its tax liability. The formula devised by the ASSESSING OFFICER of mixed funds to work out proportionate notional disallowance of interest is not based on any scientific method. When interest payment claimed by the appellant is less than the interest income offered in the profit and loss account, there was no justification to work out any formula of mixed funds theory which is based on permutation and computation. Hence, the notional interest can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The expression commercial expediency is one of wide important and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. Decisions relating to section 37 will also be applicable to section 36(1)(iii) because in section 37 also the expression used is for the purpose of the business . For the purpose of business includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. To consider whether one should allow deduction under section 36(1)(iii) of interest paid by the appellant on amount borrowed by it for advancing to a sister concern, the authorities and the courts should examine the purpose for which the appellant advanced the money and what the sister concern did with the money. That the borrowed amount is not utilized by the appellant in its own business but had been advanced as interest free loan to its sister concern is not relevant. What is relevant is whether the amount was advanced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmann.com 382 b. Shivnandan Buildcon P Ltd. v. CIT [2015] 60 taxmann.com 347 62. The issue of notional interest was considered by Delhi High Court in the case of CIT Vs. DLF Universal Ltd. and Shivanandan Buildcon Pvt.Ltd. as referred to above. The decision of CIT(A) being based on principle laid down by Delhi High Court and in the absence of specific provision for any addition on notional basis, the order of the CIT(A) is confirmed and this ground of revenue is dismissed. 63. Ground No. 5 is against deletion of disallowance of ₹ 7,05,00,000/- on account of capitalization of interest in respect of Project Keventor Lane at Sardar Patel Marg, New Delhi. 64. The relevant finding and observation of AO and CIT(A) are extracted as under : Observation of assessing officer Pages 70 to 73 of the Assessment Order) The observations and findings in the Special Audit Report and the reply furnished by the assessee have been considered by me. The undisputed fact which emerges is that the Assessee Company has taken Rupee Term Loan of ₹ 370 crores from ICICI Bank for re-financing the acquisition cost part financing the development cost of the Project Keven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The funds available in business have been utilised for twin purposes- firstly for carrying out the activity of real estate development and secondly for giving interest bearing advances to sister concerns and earning interest income of ₹ 270.09 crores. The assessee is stated to have borrowed for the purpose of business and in almost all cases for the specific construction projects. The assessee while utilizing such borrowal has given advance to its subsidiary companies. The assessee has charged interest on such advance also. The amount borrowed is all mixed up with own funds and interest free funds by way of advances received from customers. The amount received by assessee in respect of various construction projects by way of advance from customers are also interest free funds available. These amounts are also utilized either for construction projects or for giving advance to subsidiaries. Thus, there is no direct nexus which can be established to hold that the loans for specific projects were utilized for such projects only. The own funds or other funds available to the assessee by way of interest free funds are mixed up with the borrowed funds and the utilization of such fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an interest related to such project is capitalized over the project. However, if project has not commenced, no interest can be capitalized in terms of para-14 and 16 of accounting standard AS-16. In the case of appellant, the Land and Development Officer has not sanctioned the conversion of this land use from dairy farming to residential . The Writ Petition filed against the order of Land Development Officer, Ministry of Urban Development, Union of India, is pending before Hon ble High Court. Therefore, no development activity could be started on this land. In view of the accounting para 14 and 16 of AS-16, the interest pertaining to this project cannot be capitalized and has to be debited to the P L a/c, as the interest expenditure pertaining to this project is wholly and exclusively for the business purposes of the appellant. It is also seen that shares of M/s Edward Keventor (Successor) Pvt. Ltd. were purchased in F.Y. 2005-06 related to A.Y. 2006-07 and loan was sanctioned by ICICI Bank for ₹ 370 crore for acquiring the shares of this company. This issue was examined by the Special Auditor as well as ASSESSING OFFICER in assessment year 2006-07 and considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional interest cannot be capitalized on Edward Keventor Project. Hence the capitalization of interest of ₹ 7.05 crore is deleted. 65. The ld. CIT DR supported the findings recorded by AO. On the other hand, the ld. Counsel for the assessee submitted that the CIT(A) has rightly deleted the disallowance as the claim of the assessee was in accordance with relevant legal principles. It was also submitted that issue in hand is also covered from the decision of Tribunal for immediately preceding AY 2006-07 wherein the tribunal on the basis of principle laid down by Hon ble Supreme Court in the case of Core Health Care ltd. (Supra) deleted the disallowance. 66. We have considered the rival submission and gone through order of ITAT for the preceding assessment year. The ITAT has allowed relief after taking into consideration decision of Supreme Court in the case of Core Health Care Ltd. (supra). Further, the CIT(A) has considered this issue in great detail and observed that the appellant has declared higher interest receipt then the claim of interest as expenditure and even on the basis of mixed fund theory, there is no case of any adverse revenue implication. Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983-84 and order of Hon ble Delhi High Court in the case of sister concern M/s. DLF Universal Ltd. ITA no 1136/2009 dated 16.04.2015. It was also submitted that identical issue came for consideration before ITAT in immediately preceding AY 2006-07 wherein the Tribunal deleted the addition by relying upon above referred orders. This issue is also covered by order of the ITAT for A.Y. 2006-07. The tribunal made reference to order of Delhi High Court in the case of DLF Universal Ltd., sister concern of the assessee and held that entire claim of brokerage and commission is permissible deduction as same is in the nature of sales expenses. In the light of order of ITAT Delhi High Court, the order of the CIT(A) is confirmed and this ground of revenue is dismissed. 73. Ground No. 9 is against deletion of addition of ₹ 33,99,87,217/- on account of enhancement of revenue under POCM method. The addition is further bifurcated into two parts, the first part of addition is of ₹ 26.79 crores which is computed by substituting budgeted Internal Development Cost (IDC) with actual IDC and the second part if ₹ 7.21 crores on account of expenses not reckoned for computing the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,61,38,767/- on account of late construction charges. The AO has made addition on the ground that late construction charges recovered by the assessee from the customers and shown as liability is assessable as income of the assessee since the same are being collected in contravention to decision of Hon ble Punjab and Haryana High Court. The CIT(A) deleted the addition on the ground that Hon ble Supreme Court has decided the issue of recovery of late construction in favour of assessee and the assessee has duly offered this amount as income chargeable to tax in FY 2010-11. 77. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 78. The issue of late construction charges is also covered by order of the ITAT for A.Y. 2006-07. The revenue has not disputed factual position to this effect. In any case, the issue being revenue neutral as the appellant itself has offered this amount in F.Y. 2010-11. There is thus no merit in the ground of the revenue and same is dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 85. Ground No. 13 is against deletion of addition of ₹ 2,03,00,000/- on account of net registration charges received during the year. The AO has relied upon the observation of Special Auditor and has held that the treatment of the assessee in showing this amount as liability is not correct and the same should have been forfeited and shown as income. The CIT(A) deleted the addition by observing that charges so collected are towards expenses incurred for registration of property. Further the assessee is maintained a separate account for such charges in which there is regular movement and as such the same are not assessable as income of the assessee. 86. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 87. We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... located and same have been claimed by the assessee. The CIT(A) has deleted the disallowance by holding that the expenses incurred were exclusively for the purpose of business of assessee company and same are not subject matter of allocation. Further, the CIT(A) has given a categorical finding that no expenses has been incurred by the assessee for its sister concerns after October 2006 and as such the disallowance made by AO is merely on the basis presumption in absence of any material. 92. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 93. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld.CIT DR has relied on order of the AO, However, the ld.CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowed in the hands of the appellant then such expenses has to allowed in the hands of M/s Galaxy Mercantiles Limited. The appellant had incurred all the expenses for its own set up and business and allocation of these expenses was not made under any legal obligation or under any contractual obligation. In view of the above facts and circumstances as well as judicial pronouncements available on the issue, the addition made by the Assessing Officer of ₹ 3,66,66,498/- is deleted. 95. The ld. CIT DR relied upon the finding of AO. On the other hand the ld. Counsel for the assessee supported the order of CIT(A) and argued that the genuineness and correctness of the expenses is not in dispute and the disallowance is merely on technical ground. It was argued that expenses are in the normal course of business and as such the claim of the assessee is allowable u/s 37 of the Act. Reliance was also placed on decision of Tribunal in immediately preceding AY 2006-07 in which while deciding the issue of allocation of expenses the court held that genuine business expenses are allowable inspite of the fact that certain indirect benefit has accrued to sister concern. 96. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 99. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld. CIT DR has relied on order of the AO, However, the ld. CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 100. Ground no. 18 is against deletion of disallowance of ₹ 22,56,75,000/- u/s 14A read with Rule 8D of the Act. We have already decided this issue while dealing with Ground No. 2 of the assessee s appeal and our finding vide Para 9.5 is relevant for this ground as well. 101. Ground no. 19 is against deletion of disallowance of ₹ 1,60,000/- u/s 43B on account of claim of unpaid liability of Punjab VAT. The AO has considered the disallowance on technical ground that evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete unity of control, common fund and with the common management is a revenue expenditure and same cannot be held as capital expenditure. The feasibility and viability study was to extend the business of the appellant in same line, therefore, the expenditure incurred on such study is revenue expenditure and by exploring the possibility of obtaining / developing or extension of the existing business at various stations identified, the appellant was only planning to expand its business and no new asset much less capital asset have been created. Therefore, respectfully following the decisions of jurisdictional High Court, the disallowance of ₹ 1,81,95,513/- made by the Assessing Officer on this account is deleted. 104. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition of similar ground has been deleted by the tribunal. It was further argued that assessee is one of biggest real estate company in India carrying our variety of activities. It was submitted that setting up of and development of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts is main business of the appellant and any expenses incurred relating to such projects before their commencement like identification of sites, examination of title deed, soil investigation, environment impact assessment, interior-exterior designs, lay out etc. are expenses incurred for bonafide business requirement of the appellant and such expenses falls within the objectives of the MOA of the appellant company. Any expenditure incurred for the projects is to be undertaken in future and viability of such projects are business expenditure and same has to be allowed as revenue expenditure. The question of capitalization of such expenses arises only when such projects actually commences and are in existence, but there are certain projects for which various expenses were incurred before their intended commencement but due to some reasons such projects could not commenced, therefore, expenses relating to such projects cannot be capitalize and has to be allowed as revenue expenditure as these expenses have been incurred wholly and exclusively for the business requirement of the appellant company. In view of the above, the disallowance made by the ASSESSING OFFICER of such expenses ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant company and disallowed in the computation of income. The remaining amount of ₹ 1,04,32,923/- was claimed as revenue expenditure, as it was pertaining to issue of bonus shares and conversion of debentures into equity shares. In the assessment proceedings, the ASSESSING OFFICER treated the expenditure of ₹ 1,04,32,923/- relating to issue of bonus shares and conversion of debentures in equity shares as capital expenditure following the judgment of Hon ble Bombay High Court in the case of CIT vs. Sessa Goa Ltd. 282 ITR 197 (BOM) wherein expenditure incurred on issue of bonus shares was treated as capital expenditure. During the course of assessment proceedings as well as in the appellate proceedings appellant submitted that expenditure incurred on issue of bonus shares and conversion of debentures in equity shares is revenue expenditure in view of the Hon ble Supreme Court judgment in the case of CIT vs. General Insurance Corp. 156 Taxman 96 (SC) wherein the expenditure incurred in connection with issuance of bonus shares is held as revenue expenditure. It was contended by the appellant that judgment of Hon ble Bombay High Court in the case of CIT vs. Sessa G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case and perused the decision cited by AR and referred to by CIT(A). In our considered opinion, the claim of the appellant is supported from decision referred to above and accordingly no interference is called for in the order of the CIT(A) and this ground of revenue is dismissed. 112. Ground No. 23 is against deletion of disallowance of ₹ 1,89,05,487/- made u/s 40(a)(i) of the act. The assessee has paid an amount of ₹ 1,46,03,295/- to M/s. Paul, Hastings, Janofsky Walker LLP for assisting in the contemplated joint venture agreement with Hilton International and ₹ 43,02,192/- to Control Risks Group (S) Pte. Ltd. for obtaining report on corporate risk assessment of the assessee company. The AO has considered the disallowance by observing as under : Page no. 395 to 399 of the assessment order On going through the reply filed by the assessee it emerges that the assessee has raised two main grounds for non deduction of TDS on these payments. The assessee has stated that with regard to the legal fees of ₹ 1,46,03,295/- paid to Paul, Hastings, Janofsky Walker LLP for assisting in the contemplated joint venture agreement with H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the other payment of ₹ 43,02,192/- made to Control Risks Group (S) Pte. Ltd. The assessee has stated that Control Risk group has merely issued a report and it therefore would not fall within the definition of technical and consultancy services. The assessee has further stated that even if the payments fall within the ambit of technical and consultancy services as per section 9(1)(vii) then the non-resident company being a resident of Singapore, the Singapore DTAA with India will need to be seen for any exemption available. Article 12 of the Indo-Singapore Treaty is the relevant Article under which such payments are covered. This definition as per clause (b) of section 4 of Article 12 states that technical services are such that, they make available to the recipient knowledge or skill such that it enables the person acquiring the services to apply the technology contained therein, themselves. In the present case, the non-resident company has conducted this assessment exercise and issued a report after assessing the personal and corporate risk for DLF. The non-resident has in no way made available to the assessee any skill/knowledge such that the assessee may be able to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x thereon to two Non Residents namely M/s. Paul, Hastings, Janofsky Walker LLP and Controlled Risk Groups (S) Pte. Ltd of ₹ 1,46,03,295/- and ₹ 43,02,192/- respectively for assisting in the contemplated join venture with Hilton International Ltd. and for obtaining report on the personal and corporate risks assessment of the appellant company. The appellant claims that chargeability of income as per domestic Indian Income Tax Act is to be seen in relation to section 4 read with section 5(2) and section 9 of the IT Act. The section 5(2) brings to tax income that accrues or arise in India or received or deemed to be received in India or deemed to accrue arise in India. The said legal services obtained from M/s Paul Hastings, Janofsky and Walker LLP does not fall with the earlier part of the definition i.e. neither it has accrue or arise in India nor it was received or deemed to be received in India. The section 9 is a deeming section as per which income which do not accrue and arise in India is deemed to accrue or arise in India. The said section seeks to tax income of the nature of technical services earned by Non Resident, even though such income does not accrue or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings, Janofsky and Walker LLP has a permanent place of business and has state more than 90 or more days with the relevant taxable year in India. In the absence of such information it can be concluded that Indo-US DTAA exempts such legal services from taxed in other contracting state i.e. India in this case. The provisions of the Indo-US DTAA override the provisions of Indian Income Tax Law, therefore, the payment made to M/s Paul Hastings, Janofsky and Walker LLP cannot be taxed in India in view of Article 15 of Indo-US DTAA which prevails over the provisions of section 9 of the IT Act. Hence, the withholding tax was not required to be deducted in this case and provisions of section 40(a)(i) are not applicable. Reliance in this regard is placed on the judgment of Hon ble Supreme Court in the case of Azadi Bachao Andolan vs. UOI 263 ITR 706 (SC) As regards the remittance of ₹ 43,02,192/- made to M/s Controlled Risk Group (S) Pte. Ltd. for personal and corporate risk assessment of the appellant company done by them. It was submitted by the appellant that in this payment charging section i.e. section 4 itself is not applicable since there is a difference between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y out such risk assessments in the future itself. Thus, the non-resident has not made available any knowledge or technology or skill to the appellant, which falls within the definition of fees for technical services as per the Indo-Singapore DTAA. Therefore, the remittance made to M/s Controlled Risk Group (S) Pte. Ltd. for personal and corporate assessment of the appellant does not fall under the term fee for technical services as per Article 12 of Indo-Singapore-DTAA. The M/s Controlled Risk Group (S) Pte. Ltd has not made available technical knowledge, experience, skill, know how or processors, which enables the person acquiring the services to apply the technology contained therein. Since the condition of make available of technical knowledge is not satisfied. Therefore, the provision of the Article-12 of Indo-Singapore-DTAA is not fulfilled. Therefore, the remittance made is not covered under fee for technical services and same is not taxable in other contracting states i.e. India in the present case. In view of the above, the provision of section 40(a)(i) are not applicable and the remittance made of ₹ 43,02,190/- cannot be disallowed. 114. The ld. CIT DR r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such there is no question of any disallowance u/s 40(a)(i) of the Act. 118. In respect of second issue of payment of ₹ 43,02,192/- to Control Risks Group (S) Pte Ltd. for obtaining assessment report. The AO has held the payment to be in the nature of Fees for technical service as per Article 12 of Indo-Singapore DTAA. We find that satisfaction of Make Available clause is sine qua non for a payment to be considered as Fees for technical Services in terms of Article 12 of Indo-Singapore DTAA. Further, the CIT(A) has categorically held that mere issuance of report does not tantamount to making technology available in India. The ITAT Delhi bench decision in the case of Romer Labs Singapore Pte.Ltd. vs. ADIT 22 ITR 224 as referred to above is also relevant and support the claim of the appellant. The ld. CIT DR has not disputed the factual finding recorded by CIT(A), there is thus no case for any interference in the order of the CIT(A) and this ground of revenue is dismissed. 119. Ground No. 24 is against deletion of disallowance of ₹ 49,34,000/- u/s 40(a)(ia) of the Act. The brief facts are that assessee has collected rent of ₹ 49,34,000/- from Shri Ram Schoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee reiterated the submissions made before CIT(A) and argued that the impugned entry is merely a pass through entry as DLF Qutub Enclave Complex Educational Charitable Trust is the rightful recipient of the said amount. Further, it was submitted no entry has been passed through profit and loss account and there being no case of any claim of deduction, the disallowance u/s 40(a)(ia) is without any basis. 121. We have considered the facts brought out by CIT(A) in para 29.12 to the effect that the appellant has neither credited this rental income nor claimed any expenditure on account of payment made to DLF Qutub Enclave Complex Educational Charitable Trust. The entries recorded by appellant were merely pass through entries and as such there is no case of any adverse revenue implication. The order of CIT(A) is confirmed. 122. Ground no. 25 is against deletion of disallowance of ₹ 27,08,664/- u/s 40(a)(ia) on account of non deduction of TDS on payments made to two trusts. The AO has made the disallowance on the ground that the assessee has not produced certificate u/s 197 and as such the payment made by it were liable for TDS deduction. The CIT(A) delete th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand ld. Counsel for the assessee supported the finding of CIT(A) and relied upon decision of Hon ble Delhi High Court in the case of CIT vs. Rajinder Kumar [2014] 362 ITR 241 in which it has been held that first proviso to section 40(a)(ia) inserted vide Finance Act 2010 is retrospective in nature. 127. The issue under consideration is disallowance of ₹ 4,20,000/- u/s. 40(a)(ia) on the ground that there was delay in deposit of TDS. The CIT(A) has taken note of the fact that TDS was deposited before due date of filing of return u/s. 139(1) of the Act and also made reference to order of Delhi High Court in the case of CIT Vs. Rajendra Kumar 362 ITR 241. In view of the above position, the order of the CIT(A) is confirmed. 128. Ground no. 27 is against deletion of disallowance of ₹ 11,07,190/- on account of rejection of claim of TDS on rent received from Shri Ram School. The AO has withdrawn the TDS benefit on the ground that since rent received from Shri Ram School has not been offered to tax by the assessee, the claim of TDS in respect of same amount is not allowable. The CIT(A) allowed the relief by observing that as the TDS has been deducted and deposited wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld.CIT DR has relied on order of the AO. However, the ld. CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 134. Ground No. 29 is against deletion of addition of ₹ 3,28,52,595/- on account of notional rent on vacant properties. The AO has made reference to observation of special auditor and finding in preceding AY 2005-06 and 2006-07 wherein identical addition was considered. The CIT(A) has deleted the addition by relying upon decision of Tribunal in the case of sister concern of the assessee M/s DLF Office Developers Ltd. Vs. ACIT reported in 23 SOT 19 (Del) . Further, CIT(A) has also discussed relevant legal provisions while holding that only actual rent received is assessable under income from house property and no notional rent could be charged. 135. The ld. CIT DR relied upon order of AO. On the other hand, ld. Counsel for the assessee argued that this issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o argued that the addition is revenue neutral in nature as the excess has been offered for taxation in subsequent year. 139. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld. CIT DR has relied on order of the AO. However, the ld. CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 140. Ground No. 31 is against deletion of disallowance of 41,674/- by way of rejection of claim of TDS on advance rent on the ground that since rent has not been offered for taxation in the year under consideration, the claim of corresponding TDS cannot be allowed. The CIT(A) allowed relief to the assessee by holding the assesee has duly offered the advance rent as income in subsequent AY 2008-09 in which no TDS has been claimed and as such the claim of TDS in present AY 2007-08 is in accordance with law. 141. The ld. CIT DR relied upon order of AO. On the other hand, ld. Counsel for the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profits and the net worth of the company as on 31.03.2006 was ₹ 185.56 which had fallen to ₹ 184.47 per share as on 31.03.2007. These shares were sold during the financial year 2006-07 and therefore the NAV of ₹ 184.47 per share as on 31.03.2007 is to be taken as fair market value of these shares to arrive at the gain on sale of shares. After taking the fair market value of shares in place of sale price accounted by the assessee, the amount to be added is as under: S. No. Name of company Net Asset Value as on 31.3.2007 (Rs.) Sale Price as per Books of Account (Rs.) Addition al consider ation (Rs.) No. of Shares Amount of Addition (Rs.) 1 Diwakar Estates Limited 6359.53 10.11 6349.42 1880 1,19,36,910 2 Monishka Builkders Developers Pvt. Ltd. 184.47 10.00 174.47 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price of the sale of ₹ 10/- per share was mutually agreed between seller and purchaser. It is seen that actual transaction has taken place between appellant and DLF Home Developers Ltd. They are sister concerns but in the eyes of law they are distinct entity. The ASSESSING OFFICER has not brought any information on record that shares were sold at a price other than actual price of ₹ 10/- per share. The transaction is not in doubt and same has been confirmed by both the parties. The ASSESSING OFFICER has not brought any positive evidence which could suggest that transaction of sale of shares had actually taken place at a price higher than apparent sales consideration. Section 48 of the IT Act provides the mode of computation which read as under:- The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely- (i) Expenditure incurred wholly and exclusively in connection with such transfer; (ii) The cost of acquisition of the asset and the cost of any improvement thereto: As per the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 145. We have considered the facts of the case and gone through the order of AO and CIT(A). The only issue in dispute is whether the capital gain is to be worked out on the basis of full value of consideration received or accrued as a result of transfer of capital asset or it is open to substituted NAV as against actual sale consideration. For the purpose of computation of capital gain, provisions of sec. 45 make reference to full value of consideration and it is not open to consider any notional or hypothetical value unless there is a case of understatement and non disclosure of full value of consideration. The principle laid down by Supreme Court in the case of K.P. Verghese 131 ITR 597 has been considered by Delhi High Court in number of cases and it may be appropriate to make reference to decision of Delhi High Court in the case of CIT v. Gulshan Kumar[2002] 257 ITR 703. In view of the settled legal position and in the absence of any evidence regarding non-disclosure of full value of consideration, there is no infirmity in the order of CIT(A) and same is confirmed. 146. Ground no. 33 is against deletion of disallowance of ₹ 65,08,264/- on account of claim of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable. This issue has been decided by learned CIT(A)-XVIII, New Delhi, vide his order dated 25.03.2011 in appeal No.35/2010-11, in favour of the appellant company in the immediately preceding assessment year relevant to assessment year 2006-07 (page Nos.243-254 of the said order). Therefore, the disallowance of ₹ 65,08,264/- is deleted. 147 The ld. CIT DR relied upon finding of AO. On the other hand, the ld. Counsel for the assessee submitted that this issue is covered in favour of assessee by the order of Tribunal for immediately preceding AY 2006-07 wherein the disallowance made on identical ground was deleted by Tribunal. 148. Both the parties have agreed that these issue is covered in favour of the assessee vide order of ITAT vide para 273-276 for A.Y. 2006-07. In the light of above position, order of the CIT(A) is confirmed as covered by order of ITAT and this ground of revenue is dismissed. 149. Ground no. 34 is against deletion of disallowance of ₹ 8,09,837/- on account of claim of depreciation on DLF Centre Building. The AO has made the disallowance on the basis of observation recorded in assessment order for preceding AY 2006-07 wherein identical di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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