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TMI Blog2021 (1) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... erties. [Page 129-142: of CIT(A)'s Order] 1.2 That in the alternative, if same is attributable to lease income, adjustment is required to be made while working out rental income as per provisions of section 23(1) of the Income Tax Act, 1961. 2.1 That the 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 Rs. 10,01,00,000/-. [Page 189-205 of CIT(A)'s Order] 2.2 That the 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 2009-10. 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 I 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 to the present case. 2.4 Without prejudice to above, the learned CIT(A) has erred in law, on facts and in circumstance of the case in not appreciating that for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 craves leave to amend, vary or add to the grounds hereinbefore appearing. 3. ITA No. 4436/DEL/2013 is filed by the learned assessing officer raising 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 Rs. 3,09,16,658/- made by the AO on account of disallowance of prior period expenses? 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 7,72,65,10,922/- made on account of disallowance of deduction u/s. 80 IAB of the IT Act, 1961? 2A Whether the CIT(A) under the facts and circumstances of the case and in law was correct in allowing deduction of Rs. 7,72,62,10,922/- u/s. 80 IAB of the Act, without deducting the short allocation of overheads of Rs. 15,48,61,000/- to the SEZ division as worked out by the Special Auditor? 3. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of notional rental income on vacant/leased properties? 15. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 6,36,614/- on account of recalculation of depreciation in respect of earlier let out DLF Centre Building, now converted to self occupied property? 16. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 30,12,202/- on a/c of disallowance of expenses where bills were not in the name of the company? 17. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 3,48,396/- on a/c of disallowance of excess payment of rent? 18. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing. 4. Facts show that Assessee Company is engaged in the business of real estate development. It filed its return of income on 29 September 2009 declaring an income of Rs. 6,91,24,07,270. The above return was further revised on 30 June 2010 wherein the total income declared was Rs. 6,60,40,96,800/-. It further revised its return of income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully considered the rival contentions and perused the orders of the learned lower authorities. The coordinate bench in assessee's own case for assessment year 2008-09 in ITA number 2749/Del/2013 has dealt with this issue as Under:- "42. In so far as the first issue is concerned, the facts in brief are that the Special Auditors have pointed out that assessee has claimed prior period expenses amounting to Rs. 70,12,062/- on the basis of which, ld. Assessing Officer issued a show cause notice to the assessee. In response, the assessee submitted that first of all, an amount of Rs. 14,63,017/- was on account of purchase of assets being the cost of office equipment and computers and was never claimed as admissible expenses but have been capitalized as fixed assets. The balance amount was stated to be on account of reimbursement to their employees on account of telephone expenses, travelling, printing, and stationary and these are reimbursed if the employees submit the claims after proper verification. The claim though relates to earlier years, but bills were presented and settled during the year under reference, therefore, the same is allowable in this year. Similarly, with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdictional High Court in the case of CIT vs. Shriram Piston-174 taxman 147, the disallowance is deleted. The reliance of the ld. AR on the decision of Hon'ble Delhi High Court in CIT vs. Modipan Ltd.- 334 ITR 102 is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowability of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition of Rs. 22,98,510/- on account of prior period expenditure. In the result, ground no. 26 of the revenue's appeal is dismissed." 45. Since, similar issue has been allowed by the Tribunal following the ratio and principle laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Modipon Ltd. (supra), therefore, following the same precedence, we allow the claim of the assessee and consequently the Revenue's ground is dismissed." 10. In view of the above finding of the coordinate bench in assessee's own case, we respectfully following the same dismiss ground number 1 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has not developed the SEZ rather only constructed the buildings. The deduction u/s. 80-IAB is available only in the case of development of SEZ. Mere construction of Bare shell buildings will allow the assessee the deduction u/s. 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co-Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the relinquishment of right is irrevocable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies is development of SEZ and hence administrative activities in these companies are minimal and there is no need for allocation of further overheads. Both these companies have incurred overhead expenditure which formed part of development cost considered in POCM. This argument of the company is not tenable as the two companies DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developer Ltd. during the Asstt. year 2008-09 had earned development income of Rs. 1,68,686.15 lacs and Rs. 1,63,049.03 lacs respectively and against the same the overhead expenditure shown by these companies is Rs. 71.58 lacs and Rs. 1,194.51 lacs respectively. In fact, in case of DLF Cyber City Developers, the expenditure of Rs. 1194.51 lacs includes commission and brokerage expenditure of Rs. 1155.79 Lacs and if this is reduced then the overhead expenditure incurred would be just Rs. 38.72 Lacs. It is difficult to imagine that the two companies earning development income of Rs. 1,68,686 lacs and Rs. 1,63,049 lacs would have incurred overhead expenditure of Rs. 71.58 lac and 38.72 lacs only. This clearly points to the fact that these two companies must have benefited from the overhead expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferring the expenses of associated concerns to the assessee company some portion of such expenses are to be allocated to the associated companies. 12.9 The assessee has also cited judgment in the case of Nestle India Limited Vs. DCIT (2009) 27 SOT 9(Delhi). In this case it was held that the assessee company had incurred expenditure on account of advertisement and sales promotion in respect of only those products in which the Indian company dealing in. Thus, the expenditure had been incurred to promote sales in India. Therefore, those expenses were incurred wholly and exclusively for the purpose of business of the assessee. In this case the associated concerns of Nestle India are situated outside India and it was easily established by Nestle that the advertisement expenses were incurred in respect of products dealt by the Indian company. However, in the case of the assessee the line of business of the assessee company and its associated concerns is identical and therefore the percentage of overhead expenditure incurred by the assessee and its associated concerns would be similar. The Special Auditor in their report have reported that DLF Ltd. have incurred administrative overhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006, the group entities started incurring their own expenses themselves and this fact has been verified by the Special Auditors during the course of Special Audit. It is seen that there are certain heads of expenses which were exclusively pertaining to the appellant company and could not have been allocated to the other group entities. It is also seen from the Special Audit report that the Special Auditors have not brought out any instance of expenditure specifically pertaining to other group companies but has been claimed in the profit and loss account of appellant company during the year. The allocation made out by the Special Auditors was based on the presumption without bringing any material on record. No allocation of overheads is needed in the case of M/s. DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd. because these subsidiaries have their own resources and are meeting out their expenses own their own. In the case of M/s. DLF Info City Developers (Chennai) Ltd. it is seen that this company has only one project that is the development of SEZ at Chennai. The only activity in this company is the development of SEZ building and the administrative activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of the impugned expenditure for the purpose of business has not been disputed by the AO. Further, under the facts and circumstances as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant's business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of Rs. 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted." 129. The Tribunal in Assessment Year 2006-07 has dismissed the Revenue's appeal on this issue after observing and holding as under: "121. We have carefully considered the rival contentions. The brief fact is that certain overhead expenses incurred by the assessee have been apportioned to the other group companies for the reason that by incurring those expenses, the assessee has passed on some benefit to those companies. The amount of 75% of that expenditure has been transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue's appeal is dismissed." 130. In view of the aforesaid observation and the finding of the Tribunal which is applicable in this year also, therefore, respectfully following the same, the Revenue's ground is dismissed." 14. Therefore, respectfully following the decision of the coordinate bench in assessee's own case, ground number 2 and 2A of the appeal of the learned assessing officer are dismissed. 15. Ground number 3 is with respect to the deletion of addition on account of estimated IDC charges and revenue recognition as per percentage completion method cost of the construction. The learned authorised representative submitted that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee's own case for assessment year 2006-07 as per paragraph number 35-42 at page number 58-62 and further in assessment year 2008-09 also the coordinate bench following the order of the coordinate bench for assessment year 2006-07 has allowed the claim of the assessee. He further referred to paragraph number 81-87 of the order of the coordinate bench for assessment year 2008-09. 16. The learned departmental representative vehem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Princeton (59, 02,013) (5,902,013) - - - Carlton (38,99,436) (38,99,436) - - - Total Phase-V (A) 12,23,98,82,978 12,66,72,44,430 42,73,61,452 33,99,21,573 2,15,54,13,334 DLF City Court 9,33,58,702 94,652,773 1,294,071 - - CourtYard Office 6,37,92,669 6,38,23,974 31,305 65,641 - Rajarhat Kolkata 59,75,03,936 59,75,03,936 - - - Jalandhar Mall 23,83,66,943 23,83,66,943 - - - Ludhiana Mall 28,96,61,350 28,96,61,350 - - - Star Tower- 5,11,80,289 18,450 - - Silokhera 51,198,739 Cross Point 6,58,07,790 66,245,928 5,12,594 - - Corporate Park 33,75,82,954 33,75,82,954 - - - Grand Mall - - - - - Exclusive Floors - - - - 6,95,96,807 Moulsary Arcade - - - - 6,76,915 Total (B) 1,73,72,54,633 1,73,90,55,150 18,56,420 65,641 7,02,73,722 Net Total (A+B) 13,97,71,37,609 14,40,62,99,580 42,92,17,872 33,99,87,214 2,22,56,87,056 Accordingly, AO made the addition of Rs. 42,92,17,872/-. 85. Ld. CIT(A) after detailed finding has deleted the said addition after observing and holding as under: "9.8 I have considered the submission of appellant, observation of the ASS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred on these infrastructure facilities by the appellant. The sale revenue as well as expenditure on internal development works is inextricably linked with each other and, since the estimated revenue includes charges for internal development work, the corresponding estimated expenditure on internal development work also has to be taken into consideration in the total cost to be incurred. In other words, internal Development Work is inbuilt in the total estimated revenue; the corresponding expenditure has to be necessarily included in the total cost to be incurred. The appellant is bound to apply the matching principles i.e. matching revenue with cost to be incurred to earn the revenue. On this principle alone and by itself the inclusion of IDC in the total cost to be incurred is reasonable and justified, as without applying the principle of matching revenue with cost there would be distortion in the matter of arriving at income. This distortion needs to be avoided for the purpose of ascertaining the true profit/loss of the appellant. As per the initial estimate prepared by the appellant the cost on internal development charges was estimated at Rs. 230 crores for its phase V proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also an accepted fact that whenever project is taken for development, initially flats are constructed and thereafter the basic infrastructure facilities like roads, sewage, lightning, park, water supply line etc. are developed. Therefore, the observation of the ASSESSING OFFICER that only Rs. 60.39 (36.07 + 24.32) crore have been spent on IDC till 31.03.2008 cannot be given much weightage and provision of such facilities has to be taken into account as part of budgeted cost. Merely because the contract for internal development work has not been awarded in the current assessment year or in the absence of actual payment of IDC, cannot lead the revision of the IDC cost from its budgeted level to actual cost incurred. In my considered view, whether one follow project completion method or percentage of completion method, the element of cost cannot change. Once IDC is accepted to be an element of cost, then whichever method one apply, it has to be allowed as a cost of the project for working out the true profit and loss account in respect thereof. 9.10 I am therefore, of the considered view that ASSESSING OFFICER was not justified in replacing budgeted IDC with actual IDC cost inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arh High Court in the latest judgment reported in 323 ITR 252 (Chhattisgarh) in the case of Beekay Engineering Corporation has decided the similar issue. Head Note of the said judgment is reproduced for your ready reference as under:- "The assessee entered into a contract for doing job works and made a payment of Rs. 1,36,767 to B in respect of certain jobs done by it from December 1988 to June 1989. The bills were raised by the party in the month of August 1989. According to the assessee, as it was not aware of the actual liability on the last date of the accounting period, it claimed this deduction only when the bills were submitted by the corporation. The Assessing Officer however, held that as the assessee was following mercantile system of accounting, the expenditure should have been claimed as deduction in the earlier year and not in the subsequent year and accordingly, disallowed the claim. The Commissioner (Appeals) confirmed the order but the Tribunal held that the liability could be ascertained only in the accounting year relevant to the assessment year 1990-91. On a reference: Held, that the expenditure was deductible in the assessment year 1990-91." Thus, by apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon'ble jurisdictional Tribunal that there was no liability to pay interest after the award of the arbitrator and such liability arose only after the decree of the High Court. Thus, the liability to pay future interest had crystallized in the next assessment year and not in the assessment year in question and hence the deduction was not allowable in the current assessment year. Reliance was also placed on the judgment in the case of CIT v. Shri Ram Pistons & Rings Ltd. (2008) 174 Taxman 147 (Del), wherein it was held that: "4. In terms of the scheme, as extended, the assessee incurred a liability of Rs. 1,40,541 and according to the assessee this amount was liable to be adjusted in the assessment year 1983-84. The basis on which the assessee had claimed this deduction for that year was that the liability had accrued and crystallized only on 30-6-1981 when the assessee came to know the actual sales made by its dealers." As far as the purchase of material is concerned the entry of purchases and stocks is made only after receipt of material, inspection of material and Material Receipt Note (MRN). It is, therefore, submitted that liability accrued only when material is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad of shifting expenses from one year to another. In my view, it is only a futile exercise and consequently, the addition based on the said increase of cost of construction is deleted. In this regard, reliance is placed on the judgment of Hon'ble Chhattisgarh High Court in the case of Beekay Engineering Corporation India 323 ITR 252 Chhattisgarh). The head note of the same is reproduced as under:- "BUSINESS EXPENDITURE--YEAR IN WHICH DEDUCTIBLE--ASSESSEE DOING JOB WORK FOR ENGINEERING CORPORATION FROM DECEMBER 1988 TO JUNE 1989--BILLS SUBMITTED BY CORPORATION IN AUGUST 1989--EXPENDITURE DEDUCTIBLE IN ASSESSMENT YEAR 1990-91--INCOME-TAX ACT, 1961, S. 37. The assessee entered into a contract for doing job works and made a payment of Rs. 1,36,767/- to B in respect of certain jobs done by it from December 1988 to June 1989. The bills were raised by the party in the month of August 1989. According to the assessee, as it was not aware of the actual liability on the last date of the accounting period, it claimed this deduction only when the bills were submitted by the corporation. The Assessing Officer however, held that as the assessee was following mercantile system of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... positive income and paid tax thereon. Therefore there was no loss of revenue. Had this expense been allowed in the previous year, the assessee would have paid less tax. There was no necessity to interfere with the order of the Tribunal." The Facts of the above cited judicial pronouncement are identical with the facts of appellant's case. Therefore, ratio of the said judgments is squarely applicable to the appellant's case. Hence, the addition of Rs. 3,39,77,973/- based on preponement of certain expenses is deleted. As a result, the appellant gets a relief of Rs. 42,92,17,870/(Rs. 39,52,39,897/-+ Rs. 3,39,77,973/-)" 86. We find that the similar issue was also involved before this Tribunal in the appeal for the Assessment Year 2006-07, wherein the Tribunal has decided this issue in favour the assessee in the following manner: "42. We have carefully considered the rival contentions and also given a careful thought to the offer of ld. DR for setting aside this ground of appeal to the file of the AO for determination of threshold limit of 30% of the total project cost incurred up to this year or not. Before that we would like to address the issue of threshold percentages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by ICAI is the minimum threshold and it is not prohibited that looking to the business conditions assessee cannot fix up higher threshold. More so when the assessee has stated that many identical companies are also following similar threshold of 30 % of the total project cost, no fault can be found with the estimate made by the assessee. It is also undisputed that in subsequent years the special auditor appointed by revenue has accepted the threshold of 30 % adopted by assessee and AO has accepted the same. In view of above we are of the opinion that assessee has rightly accepted the threshold of 30 % of achievement of total project cost for commencement of revenue recognition. Further the working of the total project should also include all types of development charges required to be included in the same. Ld. AR has stated that the details of percentage of completion of project are available in the assessment order itself. However after careful consideration and agreed by both the parties, we set aside this issue to the file of the AO to determine with respect to Magnolia Project and Summit Project following:- (i) To determine the total project cost of both these projects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guish that facts of the case before us. 21. We have carefully considered the rival contention and perused the orders of the lower authorities. The issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessment year 2006-07 and assessment year 2008-09 in favour of the assessee. The coordinate bench in its order for assessment year 2008-09 has dealt with this issue as Under:- "99. In ground no. 6, the Revenue has challenged the deletion of addition on account of disallowance of brokerage and commission of Rs. 2,99,74,610/-. 100. Ld. Assessing Officer on the basis of comments of Special Auditors observed that certain expenses such as brokerage and commission are being claimed in the P&L account while the matching revenues are not credited to the P&L account. He has discussed in detail various observations and note of the Special Auditors and observed that assessee's reliance on accounting standard-7 is not misplaced as it applies to construction contract and not to development project undertaken by the assessee himself. Further, the reliance placed by the assessee upon the order of the ld. CIT(A) for the Assessment Year 1983-84 is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 9,98,95,581/- pertains to selling of flats and other property. Therefore, such expenses has to be allowed as selling cost in the year in which such expenditure is incurred. The selling cost cannot be capitalized with the inventory as per AS-2 and AS-7 issued by ICAI. Hence, the brokerage paid for selling of flats and property to the extent of Rs. 9,98,95,581/- is an allowable expenditure during the year and disallowance to that extent of Rs. 2,99,74,644/- is deleted. It is also seen that this issue has been decided in favour of the appellant by Hon'ble ITAT in its order for A.Y. 1984-85. However, the ASSESSING OFFICER has observed that the accounting policy followed by the appellant company for recognition of revenue in the A.Y. 1983-84 were different from the accounting policy followed during the year under consideration. It is seen that in A.Y. 1983-84 also the selling cost i.e. brokerage and commission were claimed in the year in which they are incurred and same were not recognized on the basis of revenue recognition. Therefore, the ratio of the said judgment is still applicable in the case of appellant and the brokerage and commission has to be allowed in the year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AS-7. This brokerage expenditure of Rs. 64,51,161/- is inextricably linked with the giving Grand Mall and Town Square Mall on rent. The income of the Grand Mall and Town Square Mall received or receivable from rent is assessable under the head "house property". As per the provisions of IT Act no expenditure is allowable against the income from house property except deduction @30% and interest payment on the loan for construction of house u/s. 24 of the IT Act. There is no provision of deduction of brokerage paid for giving the property on rent, therefore, the expenditure incurred by the appellant of Rs. 64,51,161/- (for Grand Mall Rs. 3,65,378/-+ town square mall Rs. 60,85,783/-) is not an allowable expenditure. In the result, this ground of appeal is partly allowed and appellant gets a relief of Rs. 2,99,74,600/-." 102. Again, this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for Assessment Year 2006-07 in the following manner: "69. We have carefully considered the rival contentions. We have also perused the order of ITAT in assessee's own case for AY 1984-85 submitted before us by the ld. AR. This decision has also been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the coordinate bench in assessee's own case for assessment year 2006-07 and he referred paragraph number 43-50 at page number 63-70 of that order. He further referred to the decision of the coordinate bench in assessee's own case for assessment year 2008-09 dated 27/5/2019 at paragraph number 94-98 at page number 111-118 of the order. 25. The learned departmental representative vehemently supported the order of the assessing officer. However, he could not distinguish the facts of the case in this year compared to the facts in the case for assessment year 2006-07 as well as assessment year 2008-09. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. On perusal of the order of the coordinate benches in assessee's own case for earlier years it is apparent that the issue is squarely covered in favour of the assessee. By the latest decision of the coordinate benches for assessment year 2008-09 which dealt with this issue at paragraph number 94-98 of this issue as Under:- "94. The next issue pertains to deletion of addition on account of disallowance of capitalization of interest of Rs. 7,93,00,000/-. Ld. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 249.54 crores on fixed period term loan. The appellant has also claimed Rs. 176.06 crores as interest on bank overdraft. Thus, the total interest payment claimed in the P&L A/c comes to Rs. 425.60 crores. As against this appellant has offered interest received from banks, customers, loans to subsidiaries and associates to the tune of Rs. 411.99 crore in the profit and loss account. If the interest pertaining to bank overdraft and interest paid to others is excluded from the total interest charged to the profit and loss account, then the remaining interest debited to P&L A/c comes to Rs. 249.54 crores, which is less than the interest income of Rs. 411.99 crores as offered in the P&L A/c. Since, the interest payable is less than the interest received from different sources. No further notional interest can be capitalized over the projects. The interest pertaining to projects has already been capitalized by the appellant to the extent to Rs. 354.89 crores, which is specific to the projects under execution. The further capitalization of Rs. 7.93 crores is based on presumptions, there is no scientific method worked out by the ASSESSING OFFICER for capitalizing the further interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting for Borrowing Cost wherein it is provided that in case of interest expenditure incurred by the company, it is required to be capitalized if the borrowing is related to the qualifying assets. In this case the inventory is a qualifying assets as it is held for more than 12 months and therefore interest attributable to it is required to be capitalized in the books of accounts as per AS-16. Therefore we do not agree with the arguments of AR that AS-16 does not apply to inventory. However, those are the provisions which are applicable for the maintenance of the accounts of the company and interest is allowable according to provisions of section 36(1) (iii) of the act. Further according to us, the provisions of Accounting Standards and provisions of the Act are two different set of regulations and while deciding this issue, it is well settled judicial precedent that is if there is a contradiction between the two, the provisions of the Act shall prevail. Provisions of section 36(1)(iii) provides that the amount of interest paid in respect of capital borrowed for the purposes of the business or profession deduction is required to be allowed. Proviso inserted w.e.f. 01.04.2004 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of deciding the claim of deduction under section 10(2)(iii) of the Income-tax Act, 1922 [section 36(1)(iii) of the present Income-tax Act], it was irrelevant to consider the purpose for which the loan was obtained. In the present case, the assessee was a builder. In the present case, the assessee had undertaken the Project of construction of flats under the Kandivali Project. Therefore, the loan was for obtaining stock-in-trade. That, the Kandivali Project constituted the stock-in-trade of the assessee. That, the Project did not constitute a fixed asset of the assessee. In this case, we are concerned with deduction under section 36(1)(iii). Since the assessee had received loan for obtaining stock-in-trade (Kandivali Project), the assessee was entitled to deduction under section 36(1)(iii) of the Act. That, while adjudicating the claim for deduction under section 36(1)(iii) of the Act, the nature of the expense-whether the expense was on capital account or revenue account-was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That, the utilization of the capital was irrelevant for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Hence, we reject the formulae adopted by CIT (A) of working out proportionate disallowance by adopting artificial formulae. Therefore respectfully following decisions of Honourable Bombay High court in CIT vs. Lokhandwala Constructions Industries Ltd. 131 taxman 810] and CIT V. Reliance Utilities & Power limited 313 ITR 340] We reverse the order of the CIT (A) confirming the disallowance of expenditure of Rs. 27.40 crores and direct the AO to allow this interest expenditure u/s. 36(1) (iii) of the Act." 98. Accordingly, respectfully following the aforesaid precedence which is applicable on the facts of the present year also, we decide this issue in favour of the assessee." 27. Therefore respectfully following the decision of the coordinate bench in assessee's own case as there is no change in the facts and circumstances of the case, we dismiss ground number 5 of the appeal of the learned assessing officer confirming the order of the learned CIT-A. To the deletion of addition on account of interest expenditure of Rs. 54,683,000/-. 28. Ground number 6 is with respect to the deletion of addition on account of disallowance of late construction charges received from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. Town Country Planning, the late construction charges received by the assessee-company is to be taxed in the year of receipt. 105. Ld. CIT(A) has deleted the said company in the following manner: "14.9 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and judgment of Hon'ble Supreme Court in this regard. It is seen that Hon'ble Supreme Court has set aside the judgment of Hon'ble Punjab & Haryana High Court and has accepted the appellant's right to collect the late construction charges from customers, if they fail to commence the construction activities within stipulated time. It may be seen that Hon'ble Punjab & Haryana High Court had declared such levy as illegal, therefore, appellant was showing such charges as its liability instead of showing such late construction charges as its income. Because of that judgment these charges were not treated as appellant's income and the amount of late construction charges cannot be said to have accrued to appellant unless the appellant acquires a right to receive it. Had the Hon'ble Supreme Court would have approved the judgment of Punjab & Haryana High Court, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as its income, in view of the matter being under litigation. The assessee himself has stated that if the Hon'ble Supreme Court decides that the assessee cannot collect late construction charges then only charges will be returned to concerned customers. It is noted that as per the High Court order, the assessee company had no right to collect late construction charges from its customers. However, the Supreme Court by its order dated 19.11.2010 has set aside the order of the High Court and therefore, it cannot be said that receipts in question are not accrued income. As the order of the Hon'ble Supreme Court is dated 19.11.2010 the amount collected is the income for financial year 2010-11. 26.11 An amount cannot be said to accrue unless enforceable debt is created in favour of assessee. Reference can be made to the judgment of Hon'ble Supreme Court in the case of E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27. Their Lordships at page 51 observed as under: "That the words 'arising or accruing' are general words descriptive of a right to receive profits... If the assessee acquires a right to receive the income, the income can be said to have accrued to him. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee has correctly recognised revenue in the year the issue attained certainty. Therefore on perusal of the decision of CIT (A) we are of the view that there is no infirmity in the order. Hence we confirm the order of CIT (A) and dismiss ground no. 25 of the appeal." 107. Accordingly, following the aforesaid order of the Tribunal in assessee's own case, this issue is decided in favour of the assessee." 32. Therefore respectfully following the decision of the coordinate bench, ground number 6 of the appeal of the learned assessing officer is dismissed. 33. Ground number 7 is with respect to the deletion of addition on account of the contingency deposit of Rs. 28,837/-. 34. Both the parties confirm that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for assessment year 2006-07 and further it was also confirmed that the revenue has not preferred appeal before the higher forum. The learned authorised representative that in the subsequent years that is in assessment year 2016-17 no such disallowance has been made also stated it. The learned departmental representative however supported the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue. It is seen that that these deposits were received in terms of sale agreement from customers as interest free security deposits on account of buyers obligation to regularly pay to the appellant or any other agency appointed by the appellant in respect of insurance premium, maintenance etc. These amounts are refundable to customers/resident associations, once a society or association is formed. In the agreement to sell, it is specifically mentioned that these interest free deposits were taken from the customers to meet certain future liabilities like insurance premium and maintenance charges of the building. For these receipts, a separate account is maintained and as and when the buildings or the complex is handed over to the resident association or condominium association such deposits are handed over to them for maintaining the building and payment of insurance premium of building out of interest received from such deposits. Such deposits are not forming part of sale proceeds, therefore, the same cannot be treated as trading receipts in the hands of the appellant. There is a regular movement of funds for utilization of the same for maintenance and payment of insurance premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer has not made such disallowance from assessment year 2012-13 onwards. The learned authorised representative therefore submitted that this issue is squarely covered in favour of the assessee. 42. The learned departmental representative supported the order of the learned assessing officer however stated that issue is already been decided in favour of the assessee. 43. We have carefully considered the rival contention and perused the orders of the lower authorities. The coordinate benches in assessee's own case have considered this issue for assessment year 2006-07 and 2008-09. Further the revenue has accepted the order of the coordinate bench and has not preferred any appeal before the honourable High Court. The coordinate bench for assessment year 2008-09 has decided this issue as Under:- "116. The next issue relates to deletion of addition on account of net registration charges received at Rs. 8,49,20,884/-. 117. Ld. Assessing Officer noted that as per clause 13 of the 'Buyers' agreement', it is mentioned that the company along with subsidiary company will prepare and execute Conveyance Deed in favour of the buyer only after receiving the full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d various judicial pronouncements on the issue. It is seen that registration charges are received from the buyers of the plots/flats alongwith other charges to get the flats/plots registered in the name of buyer. There is time gap between the receipt of such charges and actual registration of the flat/plot. Before actual registration takes place, the appellant has to pay stamp charges or it has to get the documents franking for the stamp charges. Therefore, after payment of franking/stamp charges a date is fixed for registration of the property. This procedure takes time, therefore, the amount received on account of registration charges are credited in the account maintained under the head 'registration charges'. These registration charges have been shown as liability in the balance sheet of the appellant. It is also seen that some time registration charges are received from the customers but actual registration could not takes place due to non availability of person concerned or for want of other formalities or documents. Therefore, the money received in this account is kept in a separate account under the head 'Current Liability' as the same does not belong to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2012-13 onwards and no addition has been made in this regard." 120. Further, learned counsel has informed that this issue is decided in favour of the assessee by ld. CIT (A) in assessee's own case for Assessment Year 2007-08 and the Department has not preferred any second appeal and further, no addition has been made from Assessment Year 2012-13 onwards. In view of the Tribunal order and as a matter of consistency, in this year also we delete the said addition." 44. In view of the facts stated above, respectfully following the decision of the coordinate bench, we dismiss ground number 9 of the appeal of the AO. 45. Ground number 10 of the appeal is with respect to deletion of addition on account of expenses towards non allocation of overheads to group companies amounting to Rs. 1,35,381,038/-. 46. Both the parties confirm that this issue is identical to the facts of the case for assessment year 2006-07 and 2008-09 wherein the coordinate bench deletes the identical disallowance made by the learned assessing officer. The learned authorised representative further submitted that the revenue has not challenged the same before the honourable High Court and further the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mere construction of Bare shell buildings will allow the assessee the deduction u/s. 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co-Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the relinquishment of right is irrevocable. c. Though SEZ Act prohibits for sale of land thereby implicitly denying any benefit to a developer who is basically interested in deriving income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads. Both these companies have incurred overhead expenditure which formed part of development cost considered in POCM. This argument of the company is not tenable as the two companies DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developer Ltd. during the Asstt. year 2008-09 had earned development income of Rs. 1,68,686.15 lacs and Rs. 1,63,049.03 lacs respectively and against the same the overhead expenditure shown by these companies is Rs. 71.58 lacs and Rs. 1,194.51 lacs respectively. In fact, in case of DLF Cyber City Developers, the expenditure of Rs. 1194.51 lacs includes commission and brokerage expenditure of Rs. 1155.79 Lacs and if this is reduced then the overhead expenditure incurred would be just Rs. 38.72 Lacs. It is difficult to imagine that the two companies earning development income of Rs. 1,68,686 lacs and Rs. 1,63,049 lacs would have incurred overhead expenditure of Rs. 71.58 lac and 38.72 lacs only. This clearly points to the fact that these two companies must have benefited from the overhead expenditure incurred by DLF Ltd. In the previous year's also DLF Ltd. has itself allocated overhead expenditure to its associated concerns. 12.6 The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12.9 The assessee has also cited judgment in the case of Nestle India Limited Vs. DCIT (2009) 27 SOT 9(Delhi). In this case it was held that the assessee company had incurred expenditure on account of advertisement and sales promotion in respect of only those products in which the Indian company dealing in. Thus, the expenditure had been incurred to promote sales in India. Therefore, those expenses were incurred wholly and exclusively for the purpose of business of the assessee. In this case the associated concerns of Nestle India are situated outside India and it was easily established by Nestle that the advertisement expenses were incurred in respect of products dealt by the Indian company. However, in the case of the assessee the line of business of the assessee company and its associated concerns is identical and therefore the percentage of overhead expenditure incurred by the assessee and its associated concerns would be similar. The Special Auditor in their report have reported that DLF Ltd. have incurred administrative overheads of 3.18% of the total turnover but in the case of DLF Info City Developers (Chennai) Ltd. the company has incurred administrative overheads of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Audit. It is seen that there are certain heads of expenses which were exclusively pertaining to the appellant company and could not have been allocated to the other group entities. It is also seen from the Special Audit report that the Special Auditors have not brought out any instance of expenditure specifically pertaining to other group companies but has been claimed in the profit and loss account of appellant company during the year. The allocation made out by the Special Auditors was based on the presumption without bringing any material on record. No allocation of overheads is needed in the case of M/s. DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd. because these subsidiaries have their own resources and are meeting out their expenses own their own. In the case of M/s. DLF Info City Developers (Chennai) Ltd. it is seen that this company has only one project that is the development of SEZ at Chennai. The only activity in this company is the development of SEZ building and the administrative activity is bare minimum and hence there was no requirement of the allocation of further expenses. Apart from the above the company had incurred overhead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant's business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of Rs. 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted." 129. The Tribunal in Assessment Year 2006-07 has dismissed the Revenue's appeal on this issue after observing and holding as under: "121. We have carefully considered the rival contentions. The brief fact is that certain overhead expenses incurred by the assessee have been apportioned to the other group companies for the reason that by incurring those expenses, the assessee has passed on some benefit to those companies. The amount of 75% of that expenditure has been transferred to the group companies and 30% of that expenditure is borne by the assessee company. During the course of assessment proceedings, the AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is year also, therefore, respectfully following the same, the Revenue's ground is dismissed." 49. In view of above facts, respectfully following the decision of the coordinate bench in assessee's own case for earlier years and also for the reason that this decision has been accepted by the revenue by not preferring an appeal on this issue before the honourable High Court and also for the reason that the learned assessing officer himself has not made these additions from assessment year 2012-13 onwards, we dismiss ground number 10 of the appeal. 50. Ground number 11 of the appeal is with respect to the deletion of addition on account of disallowance of expenses u/s. 14 A of the income tax act. The brief facts of the case show that the assessee has earned dividend from mutual fund amounting to Rs. 79,276,451/-. Before the assessing officer assessee submitted that it has not incurred any expenditure in the nature of administrative expenditure or interest expenditure which is related to the earning of tax free income as it had enough resources of its own to make the investment for earning the tax free income. However the learned assessing officer applied the provisions of rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue with respect to the disallowance u/s. 14 A of the income tax act was considered as Under:- 3. Coming to the issue of disallowance u/s. 14A, the facts in brief are that the Assessing Officer has made disallowance u/s. 14A to the extent of Rs. 35,40,91,000/- in accordance with Rule 8D. The Assessing Officer noted that the special auditors to whom matter was referred u/s. 142A have pointed out that assessee-company has made investment for an amount aggregating to Rs. 89.97 crore as on 31st March, 2008 in 12 partnership firms as its capital contribution. These investments have been made out of interest bearing funds having direct nexus between the funds borrowed and capital contribution made in the partnership firm, since share of profits earned by the assessee company aggregates to Rs. 87.20 lac which is exempt u/s. 10(2A). Apart from that, assessee has also made investment in various private limited companies. The closing balance as on 31st March, 2008 was Rs. 1,63,342.19 lacs. The assessee has paid over all interest of Rs. 425.61 crore. The Assessing Officer rejected the assessee's contention that no interest bearing funds were utilized for making the investment for earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets during the year of 17,319.40 crore in the balance sheet. Vide my decision on ground No. 6 and 7, 1 have held that appellant has shown interest incurred on fixed period loan of Rs. 604.43 crore. Out of this, an amount of Rs. 354.89 crore has been capitalized over the project. The appellant has also paid interest on over draft etc. to the tune of Rs. 176.06 crore. As such the total interest payment during the year comes to Rs. 425.60 crore. As against this, the appellant has shown interest receipts of Rs. 411.99 crore in the P&L account. If the interest paid on bank overdraft facilities of Rs. 176.06 crore is reduced then balance interest paid comes to Rs. 249.54 crore which is less than the interest receipt from subsidiary companies and banks. On the basis of above working it can be said that investment made by the appellant company was interest neutral. Therefore, on this basis the disallowance of interest for earning exempt income will be nominal or nil. At the same time the appellant has been sanctioned loan of Rs. 370 crores by ICICI Bank and has invested in the shares of M/s. Edward Keventor (Successors) Pvt. Ltd. for acquiring shares of said company. The appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Balance sheet 1,75,349.69 6. He further provided us the details of investment and the details of exempt income in the following manner: (a) Details of investment are given hereunder: (Rs. in crores) 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 -Quoted Mutual Funds 31 1 0 - - - -Quoted Shares -Unquoted Shares 16 33 5 8 8 5 6 5 1 3 3 1 3 3 -Partners hip Firm 90 8 4 4 9 4 1 4 5 (b) Details of exempt income: Particulars Assessment Year 2008-09 2007-08 2006-07 Share of Profit from Partnership Firms (net) 1,87,02,005 5,66,24,572 4,88,69,429 Exempt income from subsidiary Companies Other Exempt Income (Dividend) 85,33,09,842 (Mutual funds) Total 87,20,11,847 87,20,11,847 5,66,24,572 4,88,69,429 7. He further submitted that the same was also come up for consideration before this Tribunal for the Assessment Yea ' 2006-07 and 2007-08, wherein the Tribunal after detailed discussion has deleted the disallowance on the grounds. * firstly, there is no satisfaction recorded by the Assessing Officer u/s. 14A(2). * secondly, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood at Rs. 1197.30 crore in various partnership firm and the shares of various group and mutual funds. The total average assets during the year in the balance-sheet were Rs. 1,754 crores. The assessee's case has been that it has huge surplus fund in the form of reserves and surplus and share capital at Rs. 1126.91 crore out of which investments in shares and in partnership firm was only 175.30 crore. From a perusal of the impugned appellate order which is based on perusal of material placed on record, it is seen that ld. CIT (A) has taken note to the fact that assessee has paid Rs. 176.06 crores interest on bank overdraft facilities and the balance interest of Rs. 249.5 crore is much less than total interest received from subsidiary companies and banks which was more than 411.99 crore. On these facts, he has held that on investment made by the assessee-company no disallowance of interest can be made. Apart from that, he has noted that assessee has been sanctioned loan of Rs. 370 crores by ICICI bank which was invested in shares of M/s. Edwart Keventor P. Ltd. for acquiring the shares of a said company for which assessee has paid Rs. 7.39 crore interest. The other loans take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. The calculation of average investment in partnership firm and mutual fund has been given by the learned counsel as has been incorporated above and accordingly we direct the Assessing Officer to verify the same and work out the disallowance of 0.5%. Accordingly, appeal of the assessee is partly allowed." 56. Therefore, respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2008-09 we confirm the order of the learned CIT-A to the extent of deletion of the disallowance of interest expenditure u/s. 14 A read with rule 8D (2) of the act. Further coming to the ground number 2 of the appeal of the assessee wherein the confirmation of disallowance of administrative expenditure is challenged, respectfully following paragraph number 11.1 of the order of the coordinate bench for assessment year 2008-09, we set aside the whole issue of administrative expenses with similar direction back to the file of the learned assessing officer. Assessee may raise any ground with respect to above disallowance. In view of this ground number 11 of the appeal of the AO is dismissed and ground number two of the appeal of the assessee is set aside to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint collaboration relating to Airport projects. Legal & Professional 5,05,620.00 FEES FOR VALUATION OF GUJRAL DESIGN PLUS OVERSEAS PVT. LTD. For buying stake in company. Legal & Professional 19,66,300.00 PROF. FEES IN CONNECTION WITH IMPLEMENTATION AND ACQUISITION OF CYPRUS HOLDING COMPANY, INCLUDING ASSISTANCE IN ACQUISITION & IMPLEMENTATION OF CYPRUS HOLDING COMPANY. Legal & Professional 1,61,236.60 OUT OF POCKET EXPENSES FOR TRAVEL TO CYPRUS Legal & Professional 10,67,420.00 PROF. FEES IN RESPECT OF CROSS BORDER INVESTMENT STRUCTURING FOR HOSPITALITY BUSINESS EVALUATION FOR SETTING UP AN OFFSHORE COMPANY FOR ACQUIRING 141. Ld. CIT (A) has deleted the addition in the following manner: "23.11 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, and various judicial pronouncements relied upon by the appellant and my own order for AY 2007-08 in the case of the appellant company wherein the issue was decided in favour of the appellant. It is seen that the appellant is engaged in the business of developing real estate like developmeAssessing Officer nt of plots, multi storey buildings, commercial complexes etc. During the year, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when such projects actually commence & 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 be commenced. Therefore, expenses relating to such projects cannot be capitalized 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. The Assessing Officer was not justified in treating these expenses as pre-operative expenses and same is to be capitalized. The question of capitalization does not arise as these expenses were incurred on legal and professional advice and preparing joint venture agreements. However, after the feasibility and viability study these proposed joint ventures or valuation reports were not found suitable for carrying out further investments and same were abandoned. The expenses were incurred for extension of same line business and such expenses has to be allowed as revenue expenditure. In view of the above, the disallowance made by the ASSESSING OFFICER on account of capitalisation of such expenses cannot be sustained. Therefore, respectfull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue is squarely covered in favour of the assessee by the decision of the coordinate bench for assessment year 2008-09 wherein paragraph number 155-160 deals with the issue and decide the same in favour of the assessee as Under:- "155. In ground no. 18, the Revenue has challenged the deletion of addition of Rs. 94,52,455/- on account of reclassification of income from house property to income from business and profession. 156. Ld. Assessing Officer had noted the following observation of the Special Auditor that following properties have been reflected as fixed assets in the balance sheet as on 31st March, 2008 and also noted their comments in the following manner: Properties reflected as Fixed Assets in the Balance Sheet:- S. No. Name of the property 1. DLF, Centre, Sansad Marg, New Delhi (Partly held as office). . 40F Connaught Place New Delhi. . Shops at Belvedere Park, Gurgaon (CWIP) . Shops at Belvedere Tower, Gurgaon (CWIP) . Shops at Grand Mall, Gurgaon (CWIP) Copy of fixed assets register in substantiation of the above is enclosed as Annexure "A" (Page 15). b) Properties shown as current assets:- S. No. Name of the property 1. Corporate Park. 2. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Gurgaon 5,89,25,991.00 i) Felicite Builders & Construction Pvt. Ltd., I-E, Jhandewalan 88,000.00 j) DLF Centre, Sansad Marg, New Delhi 19,39,85,629.00 Less: Expenses-House Tax Paid 31,35,08,184.00 2,90,59,948.00 16,49,25,681.00 TOTAL INCOME a) Income from House Property Shown in Computation of Income 32,48,42,408.00 b) Income under stated by the Company 23,07,89,953.00 (a) -(b) 9,40,52,455 In view of the above a sum of Rs. 9,40,52,455/- has been under stated by the company by including it as income from House Property instead of Business Income/Income from other Sources." 157. Ld. Assessing Officer based on similar observation and following the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Neha Builders, 296 ITR 661, reiterated the addition and computation made by the Special Auditor. 158. Ld. CIT (A) has deleted the addition in the following manner: "27.13 I have considered the submission of the appellant and observation of the ASSESSING OFFICER and decision of Hon'ble ITAT for A.Y. 1996-97 in appellant's own case and decision of the Hon'ble CIT(A)-XVIII for A.Y. 2006-07 and my own decision in appellant& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent is turned out of that, the character of that income shall be income from house property. Therefore, in this case too, the assessee company is a developer and hence, the decision of Hon'ble Supreme Court in the case of Chennai Properties is rendered in the context of the company which is formed with the main object of renting up of the properties. In view of the above, respectfully following the decision of coordinate Bench of the ITAT in the case of assessee for AY 2005-06, we confirm the order of CIT(A) in taxing the rental income as income from house property. In the result the ground no. 17 of the revenue's appeal is dismissed." 160. Since this issue has been dealt by the Tribunal in various years, therefore, consistent with the view taken, the order of the ld. CIT (A) has confirmed and consequently the Revenue's ground is dismissed." 65. Therefore, respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2008-09 is above we dismiss ground number 13 of the appeal of the learned assessing officer. 66. Ground number 14 is against the deletion of addition on account of notional rent, additional annual letting va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worked out under section 23(1)(c) of the IT Act and according to this clause, if the actual rent received/receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property." In the case of appellant, the appellant had intention to let such properties but could not get suitable tenant. In such a situation, the ALV will be Nil as per provision of section 23(1)(c) of the IT Act. Section 23(1)(a) r.w.s. 23(1)(c) clearly provides that if the property remain vacant wholly or partly during the party, then actual rent received or receivable will be taken as the ALV of such properties. In the case of appellant the property is remained vacant, therefore, the ALV of such properties will be Nil. Hence, no notional rent can be estimated in the case of vacant properties. The decision of the ASSESSING OFFICER was not justified." 164. The Tribunal also in assessee's own case for Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: "196. We have carefully considered the rival contentions. We have also perused the order of the coordinate Bench of the ITAT in ITA No. 3561/D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee taking assistance of the cited decisions before him. We find that the Ld. CIT (A) has discussed the issue in appeal and has passed a speaking order, which is being reproduced hereunder: 7.15 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various judicial pronouncements available on the issue and order of Commissioner of Income Tax (Appeals)-XVIII for AY 2006-07 and my own orders for A Y 2007-08 & 2008-09 in the case of appellant wherein this issue was decided in favour of appellant. It is seen that impugned addition made on account of notional rent on properties that remained vacant for part of the previous year, the AR reiterated submissions made before the AO and emphasized that the matter is covered in favour of the appellant by judgment in the case of one of the appellant's group concerns M/s. DLF Office Developers Vs. ACIT reported in 23 SOT 19 (Del) and orders of CIT (Appeals) in appellant's own case for the Assessment yea ' 2006-07, 2007-08 & 2008-09. It is observed that "where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and third parties cannot be disregarded without having any adverse information in this regard and based on conjectures and surmises. Hence, the addition made by the Assessing Officer on this issued is deleted. Facts of the above cited judicial pronouncements are identical with the facts of the appellant's case. Therefore, ratio of the said judgment is squarely applicable to the facts of the appellant's case. Hence, the notional addition made by the Assessing Officer of Rs. 3,02,61,251/- under the head "income from house property" on account of notional income u/s. 23(1) (a) of the Income Tax Act is deleted." 22. We find that the first appellate order on the issue as discussed above is reasonable and view supported with this decision. Hence, we are not inclined to interfere with the order, the same is upheld. Ground no. 3 is accordingly rejected." 197. Therefore, following the decision of the coordinate Bench of the ITAT in the case of the assessee for AY 2005-06, the addition of Rs. 3,27,52,542/- is deleted. In the result, ground no. 19 is dismissed." 165. Once this issue has been consistently decided in favour of the assessee, then in this year, without any change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d my own order for AY 2007-08 in appellant's case, where this issue was decided in favour of the appellant company. It is seen that the AO has recalculated written down value as on 01.04.2005 by notionally deducting depreciation from the WDV as on 01.04.1999. The amount of notional depreciation for the period 01.04.1999 01.04.2005 during which period the property had been leased and the income taxed under the head "Income from House Property" after allowing deductions permissible under Section 24 of the Income Tax Act. Deductions by way of depreciation allowance are dealt in section 32 of the Income Tax Act which provides for allowing depreciation on the basis of Written Down Value of the assets under section 32(1)(ii). The definition of the word written down value is in section 43(6)(b) of the Income Tax Act which provides that in the case of assets acquired before the previous year written down value means the actual cost to the appellant less all depreciation actually allowed under the Act. From the facts and the judgment of Hon'ble Supreme Court in the case of CIT vs. Doomdooma India Limited (2009) 178 Taxman 261 (SC), it is clear that the depreciation is to be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case wherein the issue is decided in favour of the assessee. The latest order with respect to the assessment year 2008-09 paragraph number 171 to 175 considered this issue and decides in favour of the assessee as Under "171. In ground no. 21, the Revenue has challenged the deletion of addition of Rs. 58,50,162/- on account of disallowance of expenses where bills are not in the name of the company. 172. The Assessing Officer has made the disallowance on the ground that no documentary evidences have been filed in respect to certain expenses as bills does not contain the name of the assessee company. 173. Ld. CIT(A) has deleted the addition in the following manner: ""32.7 I have considered the facts available on records and the contention of the appellant and order of CIT (A) XVIII for AY 2006-07 and my own order for AY 2007-08 in appellant's own case where this issue was decided in favour of the appellant company. It is observed that the impugned disallowance of expenditure of Rs. 58,50,162/- have been made on the ground that the bills are not in the name of appellant. It is observed from pages 403 to 406 of the assessment order that the appellant has explained each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of owner of the property and not tenant in case the property is rented. Therefore we do not find any infirmity in the order of CIT (A) in deleting disallowance. In the result ground no. 38 of the appeal is dismissed." 175. Here, in this case also, the bulk of expenses are in the nature of electricity and water expenses for which the name of erstwhile tenant has been mentioned. Similar issue was involved in the earlier year also, therefore, respectfully following the precedence this issue is decided in favour of the assessee and against the Revenue. Accordingly, the Revenue's grounds are dismissed." 80. In view of the decision of the coordinate bench in assessee's own case for assessment year 2008-09 ground number 16 of the appeal of the learned assessing officer is dismissed. 81. Ground number 17 of the appeal is with respect to the deletion of disallowance on account of excess payment of rent of Rs. 3,48,396/-. The fact shows that that appellant has paid rent of Rs. 21,62,796/- to Ms. veena Swarup. The special auditor reported that the learned assessing officer may examine the reasonableness of these expenditure u/s. 40 A (2) (a) of the act. The AO noted that rent c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders of the learned lower authorities. 85. It is undisputed that the assessee and Veena Swarup are persons referred to in clause (b) of sub-section (2) of section 40A. However, in order to invoke sub-section (2) of section 40A, the Assessing Officer has to come to the conclusion that such expenditure incurred by the assessee being a payment to a person referred to in clause (b), the expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities, for which the payment is made or the legitimate needs of business or profession of the assessee or the benefit delivered by or accruing to him. In the present case the learned assessing officer has disallowed the sum merely on the basis of increase in the earlier year compared to the increase in the current year. Increase in the earlier year was more than 50% whereas increase in the current year is merely 19%. The learned assessing officer has not brought on record any material to show that what was the market rate of the rent of the flat. In absence of such information it cannot be said that what is paid by the assessee to a related party is excessive. All these exercised by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal of the assessee for assessment year 2008-09 the coordinate bench has decided this issue in favour of the assessee as Under:- "21. Coming to the issue of addition on account on notional rent where security deposits were received but no rental was shown, amounting to Rs. 10,91,270/-. It has been pointed out by both the parties that this issue now stands covered in favour of the assessee by the Tribunal in assessee's own case for the Assessment Year 2007-08 vide order dated 01.11.2017 in ITA No. 3846/D/2012. 22. The addition has been made on the ground that assessee despite being owner of the Kiosks has not disclosed rental income in its books and the same has been transferred to M/s. DLF Services Ltd. by over riding title. M/s. DLF Services Ltd. is providing maintenance and upkeep services of the mall including Kiosks. In return for consideration for these services, the appellant vide authority letter dated 12/12/2005 has granted M/s. DLF Services Ltd., right to recover the rental receipts from the third parties using said Kiosks. Assessee has not claimed any expenditure in the name of M/s. DLF Services Ltd. in connection with maintenance services of the mall. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such appellant has not derived any tax benefit on the basis of such arrangement and for diversion of lease rent. It is further relevant to take note of the fact that such lease rent has been subjected to tax in case of M/s. DLF Services Ltd. 46. After considering the facts of the case, we are of the view that there is no justification for addition of Rs. 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." 24. Thus, following the aforesaid precedence in assessee's own case, we decide this issue in favour of the assessee and the impugned addition is directed to be deleted." 93. Therefore, respectfully following the decision of the coordinate bench we allow ground number three of the appeal. 94. Ground number 4 of the appeal is regarding the disallowance on account of interest on late deposit of tax deduction at source of Rs. 116,935/-the learned authorised representative submitted that this issue is covered against the assessee by the order of the coordinate bench in assessee's own case for assessment year 2008-09 is per paragraph number 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax of the deductee, i.e., other party and not that of the assessee and as such the interest on late deposit of TDS is allowable expenses u/s. 37 of the Act. In support, following observations and findings of the Tribunal in para 7 was referred:- "...in the case before us the interest was paid for delayed payment of service tax & TDS. The interest for the delay in making the payment of service tax & TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand. The issue of delay in the payment of service tax is directly covered by the judgment of Hon'ble Apex Court in the case of Lachmandas Mathura Vs. CIT reported in 254 ITR 799 in favour of assessee. The relevant extract of the judgment is reproduced below: "The High Court has proceeded on the basis that the interest on arrears of sales tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on its Full Bench's decision in Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387 (All.) The learned counsel appearing for the appellant assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s. 37(1) of the Act. In this view of the matter, we find no reason to interfere in the order of the ld. CIT(A) and we uphold the same. Hence, this ground of Revenue is dismissed." 36. Before us, the ld. Special Counsel for the revenue submitted that there is one direct judgment of Hon'ble Madras High Court in the case of Chennai Properties and Investment Ltd., 239 ITR 435 (Mad) and submitted that now in view of this only judgment of Hon'ble High Court, in this issue, the matter should be decided against the assessee. 37. After considering the rival submissions, we find that the assessee-company has received an interest on income tax refund of Rs. 30,31,199/- and such an interest was credited in the account of "interest paid others-Income Tax" and such an interest of refund was adjusted against the interest paid on late payment of TDS of Rs. 28,79,372/- and only the balance amount has been offered as interest income. Thus, in this manner, interest paid on late payment of TDS has been claimed as expenditure u/s. 37 of the Act. 38. Learned counsel for the assessee had contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, in the nature of a penalty though not described as such in sub-s. (1A) of s. 201 of the Act. The fact that the income-tax required to be remitted was not income-tax payable by the assessee, but is ultimately for the benefit of and to the credit of the recipient of the income on whose behalf that tax is payable does not in any manner alter the character of the payment, namely, its character as income tax. 6. Learned counsel for the Revenue submitted placing strong reliance on the recent decision of the Supreme Court in the case of Bharat Commerce & Industries Ltd. vs. CIT (1998) 145 CTR (SC) 340: (1998) 230 ITR 733 (SC): TC S17.1878 that payments required to be made by way of income-tax under the IT Act are not deductible as expenditure and the further amounts which a person may be required to pay by a reason of failure to comply with the provisions requiring the payments of the tax are also amounts which cannot be regarded as deductible expenditure under s. 37 of the Act. In that case the question considered was as to whether interest paid on delayed payment of income-tax and surtax by way of instalments, on income voluntarily disclosed under the Voluntary Disclosure of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. Learned counsel for the Revenue also referred to the decisions of the Bombay High Court in the case of Ferro Alloys Corpn. Ltd, vs. CIT (1992) 196 ITR 406 (Bom): TC 17R.817 and the decision of the Calcutta High Court in the case of Martin & Harris (P) Ltd. vs. CIT (1994) 73 Taxman 555 (Cal). It was held in those cases that the interest paid under s. 201(1A) of the Act was not deductible as business expenditure under s. 37 of the Act. 9. As already noticed the payment of interest takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be but not paid in time, which rendered the assessee liable for payment of interest was in the nature of a direct tax and similar to the income-tax payable under the IT Act. The interest paid under s. 201(1A) of the Act, therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by learned counsel for the assessee. 10. Counsel for the assessee in support of his submission that the interest paid by the assessee was merely compensatory in character besides relying on the case of Mahalakshmi Sugar Mills Co. (supra) also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tax audit report assessee has shown final dividend paid of Rs. 3,40,96,65,361 on 1 October 2008 and on the same sum Dividend Distribution Tax of Rs. 2,81,418,489/-was deposited on 13/10/2008. In the profit and loss account the assessee has shown proposed dividend of Rs. 33,94,388 lakhs. On the same amount the provision for tax on dividend is shown at Rs. 2,89,121 lakhs. In the return of income the assessee has shown dividend distribution tax payable at Rs. nil. Therefore, the learned assessing officer asked the assessee to explain the same. The assessee submitted a detailed reply on 12 September 2011 and submitted that assessee has special economic zone undertaking [ SEZ] and profit of that undertaking, if distributed as dividend, is not subjected to dividend distribution tax in terms of the provisions of Section 115 O(6) prevailing at that time. Therefore, assessee submitted that on that sum assessee has not paid dividend distribution tax. For working out that amount on which dividend submission tax is not payable, assessee submitted working, which was disputed by the AO. According to the AO the computation given by the assessee is not correct, therefore, he held that assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the payment of tax payable and all the provisions of this act for the collection and recovery of income tax shall apply. Chapter XV II of the income tax act deals with the collection and recovery. Part D of that chapter deals with collection and recovery of taxes. According to Section 220 when assessee is deemed in default, an amount of such tax in default can be determined, the notice of demand u/s. 156 can be issued, and such tax shall be paid within 30 days of service of the notice. The consequence of such non-payment of tax may result into, recovery of tax, penalty payable on such tax and also prosecution u/s. 276B of the income tax act. However on reading of the order of the lower authorities we do not find mention of any of the provisions of the income tax act which provides that short payment of dividend distribution tax may be added to the income of the assessee and assessee can further be saddled with payment of tax on such short payment of dividend distribution tax. The learned departmental representative also could not show us any such provision in the income tax act. Therefore, we are unable to uphold such an addition made by the lower authorities. Accordingly we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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