9911796707
TMI Blog2021 (1) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... s carried on by the assessee. The expenses attributable to the industrial unit or profit centre should have relevance to such industrial unit or profit centre. In the given case, the expenses of administrative and other common expenditure have direct relevance to the respective profit centres i.e., 2 projects and other activities of sale of TDR. We notice that the administrative functions carried on by the assessee are common to all the projects and activities carried on by the assessee. The expenses can be direct to the ongoing project, allocable or reasonably estimated with relevance to the respective projects carried on by the assessee. Since all the administrative expenses cannot be linked to the activities reasonably, it can be allocated reasonably to all the activities carried on by the assessee. We notice that assessee is currently carrying on 2 projects by name Classique and Royal and other activities i.e., sale of TDR - common administrative expenses must be allocated on all the activities carried on by the assessee therefore allocated based on gross revenue. Accordingly we direct AO to allocate the expenses relevant for the project Classique in the ratio of gross re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80 IB to the extent of ₹ 14,12,375/ . 4. Aggrieved with the above order, assessee preferred an appeal before CIT(A) and filed a detailed submission. After considering the submissions of the assessee and grounds of appeal, Ld CIT(A) issued enhancement notice vide letter dated 13.11.2013. In response, assessee has filed its submission vide letter dated 6.1.2013. For the sake of clarity, it is reproduced below:- 1. Please refer to your enhancement notice dated 13.11.2013 received on 20.11.2013 fixing hearing on 20.11.2013. Please refer to the adjournment application in the matter when the hearing was adjourned to 10.01.2014 and further adjournment application where the hearing is adjourned to 29.01.2014. We are grateful to Your Honour for granting us adjournment in the matter due to circumstance beyond our control. 2. Your Honour has requested us to show cause why the expenses should not he allocated between Classique Project and Royale Project in proportion to their sales during the year and that no allocation should be made to TDR sale. 3. We request your Honour not to enhance the assessment due to the following reasons which are without prejudice to each o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njust. In the circumstances, administrative, marketing and other expenses had to be allocated to various components of business including TDR sale. 4. In view of the conclusive evidence submitted hereinabove, we most earnestly request Your Honour not to allocate expenses to Classique Project and if Your Honour is of the opinion that there could be some expenses allocable to Classique Project, only a negligible or token part of the said expenses be allocated. 5. It is humbly prayed that no administrative, marketing expenses and general expenses be attributable to the Classique Project and consequently the deduction u/s.80IB(10) he granted at ₹ 29,48,0201- ('without reducing the administrative and marketing expenses) or alternatively consider only 2% of the administrative and marketing expenses attributable to Classique Project and accordingly rewwork the deduction u/s.801B in respect of Classique project. 6. The assessee most humbly request Your Honour to allow the appeal for which kind act of Your Honour, the assessee shall be gratefull 5. Subsequently, assessee filed another letter dated 17.02.2014, for clarity it is reproduced below:- 1. Please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects of the assessee. No such expenses can be allocated to the sale of TDR since TDR sale is a sundry activity and cannot be regarded as business of the assessee. The business of assessee is construction and sale of building project. Therefore, all these expenses have to be allocated to all the projects for parity and also increase in work in progress during the year. In absence of separate records and books of accounts maintained, sale proceeds of the project is a good yardstick for allocating such expenses. Accordingly he directed AO to allocate the general expenses to the projects of the assessee and also increase in work in progress during the year, in proportionate to their turnover and enhance the assessment accordingly. 7. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal:- 1. In the circumstances and facts of our case, the Ld. CIT (A) has erred in directing to allocate the expenses debited to the general profit and loss account to the two projects and work in progress in proportionate to their turnover and enhance the assessment which is unwarranted and unjust considering the facts and circumstances explained by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered for tax calculation should be excluded, with reference to page 31 and 32 of the paper book b. Expenses should be considered prorata basis, for the Classique Project only 2 months expenses should be considered, not for the whole year c. Common expenses should be allocated for all the gross receipts of the business including sale of TDR. 10. On the other hand, learned DR objected to the submissions of the Ld AR and with reference to page 30 of the paper book, he submitted that for recognizing the revenue, what is important is the registration date i.e. relevant for booking the sale of flat. Therefore he supported the findings of Ld CIT(A) with regard to allocation of expenses between the 2 projects. 11. Considered the rival submissions and material placed on record. We notice that the assessee is in business of real estate which includes construction of flats and selling the TDR (transferable development rights). During this year assessee has sold 3 flats of project Classique, which comes under provisions of section 80 IB (10), the profit earned in this project is eligible to claim as deduction under section 80 IB (10). The assessee has declared net profit af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses cannot be linked to the activities reasonably, it can be allocated reasonably to all the activities carried on by the assessee. We notice that assessee is currently carrying on 2 projects by name Classique and Royal and other activities i.e., sale of TDR. In our considered view, the common administrative expenses must be allocated on all the activities carried on by the assessee therefore allocated based on gross revenue. Accordingly we direct AO to allocate the expenses relevant for the project Classique in the ratio of gross revenue and closing WIP i.e. total common expenses divided by total gross revenue including closing WIP multiplied by revenue from Classique Project. (₹ 94,15,838 /₹ 7,11,46,685 * ₹ 29,48,020) = ₹ 3,90,153/-. For the sake of clarity, details are as under:- Gross Revenue Royal ₹ 69,14,987/- Classique ₹ 29,48,020/- WIP Royal ₹ 21,666,729/- TDR ₹ 3,96,13,949/- Total ₹ 7,11,46,685 ..... 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