9911796707
TMI Blog2019 (1) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.04.2008, what is relevant is the completion certificate obtained from the competent authority i.e. CIDCO on 10.06.2008. Therefore whatever expenditure has been incurred between 16.04.2008 and 10.06.2008 needs to be allowed, if the assessee substantiated incurring various expenses for the work stated to be carried out in the project. Hence, we direct the AO to call for necessary enquiries in the light of the claim along with necessary evidence and if the Assessing Officer find that the assessee has substantiated expenses incurred with necessary evidences, then the Assessing Officer is directed to allow the expenses incurred between 16.04.2008 and 10.06.2008 of 13,37,447/. Disallowance of interest - Held that:- Once the Assessing Officer has accepted the fact that interest has been paid after deducting applicable TDS, then there is no reason for the Assessing Officer to disallow interest paid for the current financial year. CIT(A) after considering the relevant facts has directed the Assessing Officer to verify whether interest for the year has been really paid or only provision has been made in the books of account. We do not concur with the findings of the CIT(A) in so far as A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions to reduce remaining part of the expenses from Work-in-progress while completing assessment for A.Y. 2010-11. Hence, we set aside the direction given by the Assessing Officer for A.Y. 2010-11. - Appeal filed by the assessee is partly allowed for statistical purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 99,377/- out of the expenses incurred by the Director of the appellant company inc arrying on the business of the appellant. (b) The CIT (Appeals) failed to appreciate the facts of appellant's case that the construction-site is located 60 kms away from the Registered office of appellant. It was necessary to incur such expenses. (c) At any rate the appellant claims that the disallowance of ₹ 99,377 is arbitrary. 7. (a) The first Appellate authority was not correct in confirming the directions issued by the AO that the following amounts should be reduced out of the expenses in completing the IT assessment for the A.Y. 2010- 11 (i) out of construction expenses incurred after 15.4.2008 ₹ 705580 (ii) Out of interest paid ₹ 648789 (iii) Disallowance of expenses pertaining to earlier years (out of 653153) ₹ 153883 (iv) Out of expenses incurred by Director in carrying on business of the appellant ₹ 30595 (v) Disallowances u/s 40(a)(ia) as expenses relating to the earlier years ₹ 173590 (b) The CIT (Appeals) should have seen that no direction can be given by the AO in so far as such direction related to the next assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after obtaining completion certificate from the authorities. Therefore, the Assessing Officer erred in disallowing such expenses proportionately by allocating expenses to two different projects. In so far as disallowance of interest is concerned, the assessee submitted that it is following mercantile system of accounting, as per which it has provided interest on loan during the year under consideration including for earlier two assessment years, for which necessary explanation has been filed before the Assessing Officer. The said interest has been paid to the lenders after deducting necessary TDS applicable as per the law and, hence, the Assessing Officer was incorrect in disallowing interest expenditure. Similarly, in so far as disallowance of expenses incurred by Director on behalf of the company is concerned, the assessee submitted that the Director- Ms. Falguni Dhuruva has expended various expenses, which are incurred wholly and exclusively for the purpose of business of the assessee. The assessee has filed necessary evidences before the Assessing Officer, but the Assessing Officer has ignored all evidences filed by the assessee to make disallowance, which is incorrect. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us. 5. The first issue that came up for consideration is disallowance of expenses incurred for the project after 15.04.2008. The facts with regard to the impugned dispute are that during the year under consideration total area considered for sales is worked out at 76.46% and the balance 23.54% is treated as Work-in-progress being the second phase of the total area under construction. The assessee has booked total expenditure incurred for the project @76.46% for the current financial year and the balance expenses representing 23.54% has been allocated to Work-inprogress. Similarly, the assessee has booked revenue from sale of 76.46% of constructed area. The Assessing Officer disallowed construction expenses of ₹ 22,91,738/- being 76.46% of total expenses of ₹ 33,73,918/- incurred after 15.04.2008. According to the Assessing Officer, assessee has obtained completion certificate from architect on 15.04.2008 and the Part Occupancy Certificate from CIDCO on 10.06.2008, therefore, whatever expenditure was incurred after 15.04.2008, cannot be deducted from 76.46% of project completed and sold during the current financial year. It is the contention of the assessee that it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sides, we do not find any merit in the arguments of the assessee for the reason that the assessee itself has claimed that the project has been completed in all respect to the extent of 76.46% and also it had obtained completion certificate from the Architect on 15.04.2008 and Part Completion Certificate from CIDCO on 10.06.2008. Once, the project has been complete in all respect and the authorities have issued Occupancy Certificate on being satisfied with the completion of the work, then the assessee cannot claim that it has incurred such a huge expenditure for carrying out further work in the project. Although, the assessee claimed to have incurred various expenditure like POP work, installation of grills & fabrication, internal paintings, alterations in locations of wash basis, alteration in windows etc., it fails to substantiate such claim with necessary evidence in the backdrop of obtaining completion certificate for the project. Therefore, we are of the considered view that the Assessing Officer was right in disallowing expenses incurred after 15.04.2008 @76.46% and balance amount of 23.54% to be reduced from Work-in-progress. 8. Coming to the alternative claim of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer further observed that once mercantile system of accounting is followed, all expenses incurred for the particular period needs to be provided in the books of account whether the same has been paid or not. Since the assessee has not chosen to pay any interest for earlier period and paid interest during the current financial year, disallowed interest paid by the assessee and apportioned on the basis of completion of project and, accordingly, 76.46% of interest has been disallowed and the balance amount of ₹ 6,48,749/- being 23.54% is reduced from Work-in-progress. 10. We have heard both the parties and perused the material available on record. There is no dispute with regard to the fact that the assessee is following mercantile system of accounting. It is also undisputed fact that the assessee has not provided any interest for the earlier two financial years. The assessee has provided interest for the current financial year including F.Y. 2005-06 and 2006-07. The assessee has given reasons for providing such interest that during current financial year the project has yielded good return therefore, the management has decided to pay interest retrospectively fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities have not disputed the fact that the assessee has paid interest after deducting applicable TDS. Therefore, we are of the considered view that the Assessing Officer has erred in disallowing interest for A.Y. 2009-10 and, hence, we direct him to allow interest paid for A.Y. 2009-10. 11. The next issue that came up for consideration is disallowance of expenses incurred by the Director on behalf of the company. The Assessing Officer has disallowed expenditure incurred by the Director on the ground that assessee has failed to file any evidence to prove that the Director has incurred expenses wholly and exclusively for the purpose of business of the assessee. It is the contention of the assessee that the Director had incurred various expenses on behalf of the company and such expenses are incurred wholly and exclusively for the purpose of business. The reason for incurring expenses by the Director is that the project executed by the assessee is almost 60 km away from the registered office and the Director travels to the project office by incurring various expenses like travelling etc. and later the assessee company reimbursed such expenses. The relevant details have been filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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