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TMI Blog2016 (12) TMI 1783X X X X Extracts X X X X X X X X Extracts X X X X ..... st of construction determined by the DVO and there will be no case for addition on account of excess cost of expenditure incurred by the assessee. In aforesaid view of the matter, the additions cannot be sustained, hence we direct for deleting the same. - Decided against revenue - ITA No.915/Hyd/2015 (Assessment Year: 2009-10) - - - Dated:- 30-12-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accountant Member For Revenue : Shri K.J. Rao, DR For Assessee : None ORDER Smt. P. Madhavi Devi, This is Revenue s appeal for the A.Y 2009-10. In this appeal, the Revenue has raised the following grounds of appeal: 2. The CIT (A) erred in allowing the rebate of 15% from the cost of construction determined by the valuation officer by following the CPWD rates . 2. Initially, the Revenue had filed three grounds of appeal which are as under: 1. The learned CIT (A) ought to have confirmed the additions made by the AO vide order passed by him dated 30.12.2010. 2. The learned CIT (A) ought to have given the opportunity to the AO under Rule 46A to verify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO found that the valuation cell has estimated the cost of construction at ₹ 6,54,08,103 after allowing self supervision @3% against the cost on construction shown by the assessee at ₹ 4,65,00,000. AO found that there is a difference of ₹ 1,89,08,103 and therefore, the assessee was asked to explain the difference in the cost of construction and other discrepancies found by the valuation cell. The AO asked the assessee to produce the books of account, valuation report of the registered valuers and the receipts and payments, statement of affairs and year-wise break-up of cost of construction. The assessee furnished the said details, but however, the AO was not convinced with the said valuation. The assessee claimed 15% of the cost as attributable to self supervision, whereas the valuation cell has allowed 3% for supervision. The AO however, allowed 7% for supervision on cost of construction and taking the assessee s share on the property to be 1/4th, he computed the cost of construction and made an addition of ₹ 32,53,978 and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) who partly allowed the appeal and the Revenue is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvision is to be allowed. So far the benefit towards rate variance between CPWD and State PWD is concerned, the learned Departmental Representative submitted that the DVO having taken the cost of materials as disclosed by the assessee there was no need to allow further benefit towards rate variance. 14. We have heard the rival submissions on the issue and also perused the material on record. We have also applied our mind to the decisions cited before us. Though the Assessing Officer rejected the books of accounts by observing that they cannot be relied upon for arriving at a conclusion on the quantum of material consumed and the cost incurred thereon but, the DVO while estimating the cost of construction has adopted the accounts method by relying upon the same set of books of accounts and observing that the assessee has maintained books of accounts for each and every material supported with vouchers. However, the DVO while considering the quantity of materials like steel, cement, bricks, stone, sand etc., has not gone by the books of accounts but has arrived at the cost on the basis of standard coefficient as per the hand book of CBRI, Roorkie. Similarly, in para 5.8 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (supra) while considering a similar issue of applicability of State PWD rates and deduction for self supervision charges has observed in the following manner:- Plinth area rate as prescribed by CBDT of curse contain provisions for cost indexing and adjustment of location variation to arrive at cost of construction of a particular location. But the facts remains that such valuation rests CPWD rates fixed on uniform basis. As observed in the case of ITO vs. Tek Chan, 52 ITD 1995 by the Jaipur Bench that CPWD rates are general in their nature and purpose in view of the wide area of their applicability, the State PWD rates take into account the special conditions in a particular area in the territories of the State. The availability of cost of construction material, the availability of labour and wages to be paid to them and other like factors do affect the cost of construction and, therefore, it was quite logical for the person concerned to follow the State PWD rates while estimating the cost of construction of building in different area. However, the facts remains that the PWD rates are for the purpose of determining fair market rent of a property, whenever the State P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h area method works out to ₹ 5,22,000/-. In that view of the matter, the cost of construction of ₹ 5,16,750/- arrived at by us after giving 15% reduction for higher CPWD rates and 10% deduction for personal supervision, appears to be quite reasonable. It can be rounded to ₹ 5,16,000/-. 24. We are in respectful agreement with the aforesaid order of the Tribunal and hold that CIT(A) was justified in upholding plinth area basis for determining cost of construction over the CPWD rates and further reduction of 10% on account of persona! supervision. We do not find force in department's submission that the object of determining that rate of 10% for personal supervision was given only because, the assessee in that case himself was an engineer. That may be a fact when a but property being constructed, every person takes care and supervises the property personally, and the rate allowed by the Tribunal by 10% would be applicable in all such cases. We may, however, say here that the property in case of Smt. Salma A. Mehdi, was of about 3000 sq.ft., which is a very small area, as compared to 1,22.985 sq. ft., area in the present' case. It is an admitted fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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