9911796707
TMI Blog2021 (4) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case the Ld. CIT (A) was justified in holding that the AO has made addition by disallowing development expenses of Rs. 2,93,76,558/- on presumption basis whereas the fact is that the claim made by the assessee for development expenses has been disallowed as the assessee has received this expenditure from the customers therefore the Ld. CIT(A) has grossly erred in holding that the addition was made presuming that the assessee has received the same in cash. 3.The appellant craves leave to add to or deduct from or otherwise amend the above ground of appeal. ITA No.786/Ind/2018 A.Y 2013-14 1.The Ld. CIT(A) has erred in deleting the disallowance made by AO on account of Development expenses of Rs. 7,14,97,410/-, while the development expenses have not yet been incurred in respect of all the plots of the entire 'Infocity' projects and the amount. 2. The Ld. CIT (A) has erred in deleting the disallowance made by AO on account of development charge of Rs. 7,14,97,410/-, while it was contingent in nature. 3.The appellant craves leave to add to or deduct from or otherwise amend the above ground of appeal. 3. Further during the course of hearing Ld. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, the assessee Company decided to change accounting policy and estimated the expenses on development to be incurred in this project at Rs. 33,31,66,000/- (apart from the development expenses which are already incurred by the assessee till A.Y.2012-13). These expenses are estimated on the basis of the report given by Architect & Engineer namely M/s Mathur and Associates (copy enclosed). Since the balance unsold area as on 01.04.2012 was 19,59,785 Sq. Feet and the estimated development expenses as per the Architect was Rs. 33,31,66,000/-, the assessee has worked out average development expenses at the rate of Rs. 170/- per Sq. Feet (Rs. 33,31,66,000 divided by 19,59,785 Sq. Feet). During year under consideration i.e. A.Y.2013-14 the assessee has actually incurred development expenses at Rs.l,94,74,600/- but has amortized development expenses at Rs. 7,14,97,410/- on estimation basis as discussed above. Similarly, in subsequent Assessment Years also, the assessee has followed this system. During the year under consideration, the assessee has sold out 4,20,573 Sq. Feet of land and thus applying the rate of Rs. 170/- per sq. ft. Accordingly, the assessee has estimated development ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Info-city project. In the A.Y. 2013-14, due to introduction of section 43CA in the Income Tax Act, many of the customers who have only booked the plot by paying small amount of advance, but not turning out for registry of the plot, assessee company has rigorously followed them to get their plot registered and pay the difference amount. On such follow up many of the customers (Plot area sold was 4,20,573 Sq. Fts during A.Y. 2013-14, which is about 16% saleable area of 26,34,265 sq. Fts) have got registered their plot in the last quarter of the F.Y. 2012-13. The plots which were sold by the assessee company, were developed plots but however, development work was pending and expenditure needs to be incurred by the assessee company against the sales revenue so booked. Assessee company has no option but to book corresponding expenditure towards the development of the land to match the revenue booked and therefore it has got the report of the qualified valuer, who has estimated the cost of Rs. 170 per sq.ft of remaining area to be developed. Therefore to claim the expenditure on prudent basis on matching concept, this expenses have been booked to follow mercantile system of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and claimed at Rs. 7,14,97,410/- accordingly. As the said expenditure is on projection basis i.e. contingent in nature and has not been actually, incurred during the year, the same is not allowable as an deduction in terms of the provisions of section 37(1) of the Act and hence disallowable. b) In para 14 above, it has been established that the assessee has been charging development charges at the rate of Rs. 170/- per Sq. Feet as also recorded by the assessee in its books of accounts in respect of the buyers who have paid the amounts by cheques. However, in respect of the buyers who have paid the amounts in cash, the assessee has not recorded corresponding development charges receivable at the rate of Rs. 170/- per Sq. Feet even though the assessee has claimed excess deduction on account of development expenses. When confronted with such apparent inconstancy and incongruity between the buyers paying entire purchase consideration by cheque and other buyers, the assessee took the plea of difference in consideration due to different location of plots as discussed in para 16 above. However, the plea of the assessee is inconsistent and contrary to its own accounting of development ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. 12. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O. Reference was also made to the paper book filed on 27.11.2020 which included the comments of Ld. A.O. Ld. Departmental Representative further submitted that the claim of the assessee of having received development charges from 22 persons are with regard to special location is totally misconceived since the Director incharge of the project have refused to have charged extra money for locational advantages. Further he submitted that it is totally unacceptable that the assessee had taken development charges only from 22 plot holders and has not taken any such development charges from the remaining plot holders. He submitted that since Assessment Year 2009-10, 413 plots have been sold and the assessee might have received the development charges in cash from the remaining plot holders. Further as per the direction given by this Tribunal during the course of hearing to file written submission (if any needed) within one week of the conclusion of the hearing, Ld. Departmental Representative has filed following written submissions:- F.No. - CIT (Audit)/BPL/2020-21/ &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company has estimated the expenses on development to be incurred in this project at Rs. 33,31,66,000/- (apart from the development expenses which are already incurred by the appellant till A.Y. 2012-13). These expenses are estimated on the basis of the report given by Architect namely M/s Mathur and Associates. The total expenditure to be incurred w.e.f. 01.04.2012 was estimated at Rs. 33,31,66,000/- by the said Architect. The balance unsold area as on 01.04.2012 was 19,59,785 Sq. Ft. as shown by the appellant and the estimated development expenses as per the Architect was Rs. 33,31,66,000/-. The appellant has worked out average development expense at the rate of Rs. 170/- per Sq. Ft. (Rs. 33,31,66,000 /19,59,785 Sq. Ft.) and applied this rate for working out and claiming this expenditure in various assessment years from A.Y. 2013-14. 3. The details of area sold out, development expenses incurred and development expenses incurable on the basis of estimation at the rate of Rs. 170/- per Sq. Ft. and also the actual expenses development expenses incurred out of the estimation made by the appellant are summarized by AO in the assessment order as under:- Particulars Financial ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by one Architect in the name and style of M/s Mathur and associates who has estimated the remaining part of development expenses to Rs. 33.31crores and the appellant had proceeded to debit the provision of Rs. 7.14 crores during the relevant year proportionately, although the same was simple provision that too contingent to the incurring of same and meeting the standard as specified by the Architect. The AO had recorded the statement of Shri N.M. Mathur of M/s Mathur and Associates. He is none else but the one who was supervising the project right from the beginning. In other words, they were the contractors for execution of work. In his statement, Mr. N. M. Mathur has failed to give any basis for estimation of development expenses to the extent of Rs. 33.31crores @ Rs. 170/- per Sq. ft. even though till F.Y. 2011-12, the same was being shown @ Rs. 78.38 per Sq. ft. as detailed above. 7. Further, in his statement, Mr. N.M. Mathur had clearly stated that debit of proportionate development expenses during the F.Y. 2012-13, also included an amount of Rs. 3.48 crores on account of construction of club house, the ownership of which was to be remained with the appellant as discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound. The concluding finding of AO on the relevant issue is given at page no. 34 of the assessment order which for the sake of convenience is reproduced as under: (a) The assessee has carried out development work on the plots of 'Infocity' Projects which it has debited on actual basis upto A.Y.2012-13. However, during the A.Y. under consideration, the development expenses have been worked out on an estimated basis at the rate of Rs. 170/- per Sq. feet and claimed at Rs. 7,14,97,410/- accordingly. As the said expenditure is on projection basis i.e. contingent in nature and has not been actually incurred during the year, the same is not allowable as an deduction in terms of the provisions of section 37 (1) of the Act and hence disallowable. (b) Actual development expenses when actually incurred would have to be considered for deduction in the relevant A.Ys. subject to fulfillment of the provisions of Section 37 (1) of the Act. 13. The CIT (A), in his order has neither adjudicated this issue nor has discussed the facts, and the assessee has not raised the issues specifically in the ground before CIT (A). It is not understood how the addition on this account has been deleted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri had confirmed that as per registered sale agreement the consideration was Rs. 5,17,000/-, but he had paid total amount of Rs. 10 lacs by cheque which also included an amount of Rs. 5.98 lacs on account of other charges including development charges which as per the copy of account re-produced at page 12 of the assessment order was Rs. 2.93 lacs. 20. Similarly, in case of other three parties, as per the statements, price of plot as per registered sale deed did not include the component of development charges. Name of party Amount as per deed (in lakhs) Amount actually paid (in lakhs) Component of development charges (in lakhs) Anil Malik 6.30 13 3.57 Ram Purkar Tiwari 7.20 13 4.08 Shailesh 6.75 13.50 5.11 While registering the documents, the assessee has shown only the part of sale amount as per registered sale agreement. At the stage of assessment proceedings, the appellant came out with the list of 22 parties (customers) in regard with whom, the element of development expenditure was not accounted for in the sale consideration during the relevant assessment year. The list is duly reproduced at page no. 18 of the assessment order. 21. In case of these pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es at page No. 18 of assessment order. It can be seen that except in case of 03 parties, all others were non- corner plots and with no other advantages. Moreover, the statement of Director was entirely contrary to the copies of accounts of various parties and statements given by many purchasers. (f) AO vide letter dated 13/01/2016 had required assessee to explain as why the revenue in regard of 22 persons was not recognized in the year of registration of deed. But the assessee has maintained the noble silence on the issue as can be seen in the detailed discussion at page no. 17 of the assessment order. (g) During the course of assessment, Shri Ramesh Jain, Director had also cross-examined Shri Nirmal Chand Tiwari and Shri Ram Purkar Tiwari who has re-confirmed the facts that development charges were paid separately and not accounted for in the sale consideration of plot. 24. Further, two parties namely Shri Anu Kumar Gargav and Shri Vinay kumar Tiwari had given the letters stating that development charges were paid over and above the cost of plots on which the deed was registered. The copies of letters and accounts are duly reproduced by AO at page no. 29 to 33 of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on account of development charges directly recovered from the customers not forming part of sales turn over. The conclusion of A.O. is fully supported by the decision of Hon'ble Supreme Court in the case of Commissioner of Sales Tax,.. Vs M/s H.M. Esufall, H.M. Abdulali on 18th April, 1973 (Equivalent citations: 1973 AIR 2266, 1973 SCR (3) 1005, where the turnover for entire year was estimated on the basis of sales figures for only 19 days. This decision holds the ground even today as no other decision contrary to this has been given by Hon'ble Supreme Court till now. The relevant part of decision is as under:- "The question before us is whether there is a reasonable nexus between the basis adopted by the assessing authority and the estimate of escaped turnover made. We have no doubt that there is such a nexus. On behalf of the assessee, reliance was placed on the decision of this Court in Commissioner of Income-tax., West Bengal v. Padamchand Ramgopal(1). Therein, while investigating into the case of the assessee, the Income-tax Officer found two insignificant mistakes in the assessees accounts relating to the assessment year 1953-54. No mistakes were found in the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority has. no power to make best judgment assessment, all that the assessee need do to escape reassessment is to refuse to file a return or refuse to produce his account-books. If the contention taken on behalf of the assessee, is correct, the assessee can escape his liability to be reassessed by adopting an obstructive attitude. It is difficult to conceive that such could be the position in law. Before making reassessment, the assessing authority has to, under rule 33(1) framed under the Act call upon the assessee to produce his books of account and other documents which the assessing authority may require and any evidence which the dealer may wish to produce in support of his objection. When such a notice is issued to the dealer, he may appear before the assessing authority on the date fixed in the notice and prefer his objections and produce such evidence as he may think necessary. Sub- rule (2) of rule 33 provides that if the assessee appears in response to the notice under s. 3 3 (1)., the assessing authority may make reassessment, if necessary, only after, considering the objections raised by the dealer and after, examining such evidence as may be produced by,, him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred and charged to P & L account". The conclusion of CIT (A) is factually incorrect. The AO has no where stated that an amount of Rs. 7.14 crores was actually incurred. Right from the beginning, the AO has been insisting that the provision (contingent) on account of development expenses have been claimed by assessee and the same was not allowable. Therefore, the CIT (A) has deleted the addition on mistaken understating of AO's conclusion. Para 3.10:- The entire issue was discussed and decided on the factual matrix as per the record, statements and outside inquires. The question of rejection of books did not arise before the CIT (A). Moreover the same was not raised by the appellant in specific grounds or in written submissions. Further the CIT (A) has stated that the addition on account of disallowance of development expenditure by AO was for it's being contingent in nature. But the CIT (A) has failed to adjudicate and decide whether the AO was correct in his conclusion. Para 3.13:- The CIT (A), has stated that none of the customers has admitted of having paid any amount over and above what was recorded in the books of account. He has not considered and appreciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of present case. In that case, the issue before Hon'ble Apex Court was estimation of warranty expenses which was considered as integral part of sale price. "The provision for warranty was recognized as the assessee had present obligation as a result of past events" whereas in the present case, the assessee had been comfortably debiting the expenses on actual basis from A.Y. 2008-09 to A.Y. 2012-13. The average cost on account of development charges @ Rs. 78. 38/- per Sq.ft. was being reflected . But suddenly, during the relevant assessment year, the appellant has estimated the cost of development @ Rs. 170/- per Sq. ft. for remaining part of the project and started claiming the expenses on proportionate basis. Moreover, the Architect, M/s Mathur and associates have themselves stated that the estimates were contingent to the quality of work specified in the report ( refer statement of Shri N.M. Mathur). Therefore, in the present case, the liability was not determinable with certainty. 30. The Hon'ble Supreme Court, in the case as cited Supra had laid down the following principles for recognizing the provision as liability. "A provision is a liability which can be measur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14] Amount transferred to MPEB deposit account (Rs.) Amount transferred to development charges account (Rs.) Rate of development charges per sq.ft PB [AY 2013-14] (A) (B) (C) (D) (E) (F) (G) (H) = (E-G) (I) =(G/D) (J) 1 Meeta Rajesh Panwar 421 420 463 8200 40,40,000 44, 77-78 2,87,000 13,94,000 170 228 2 Seema and Piyush Zalaya 1000 1725 1,82,500 45 60,375 1,22,125 70.80 228 3 Rajeev Kumar Nikhar 991 1725 9,97,500 44 126 60,375 2,93,250 170 228 4 Anu Kumar Gargav 957 1725 7,65,000 43 60,375 2,93,250 170 228 5 Rampukar Tiwari 122 2400 5,80,000 44 84,000 4,08,000 170 228 6 Satyanaray an Dhruv 464 4260 4,22,000 45 1,49,100 2,72,900 64.06 228 7 Anita Suresh Sharma 882 2100 4,20,000 43 172 73,500 3,46,500 165 228 8 Nirmal Rajendra Tiwari 986 1725 6,82,500 187-188 60,375 2,93,250 170 228 9 Anil Malik 391 2100 4,00,000 200 73,500 3,26,500 155.48 228 10 Amit Shantilal 345 2100 2,45,000 43 216 73,500 1,71,500 81.67 228 Total 39,21,275 Out of the above mentioned excess amount as mentioned in colu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2015-16 forming part of the impugned assessment order as Annexure 'A'. 10. It is a settled law that once an amount has been subjected to tax in a given assessment year, it cannot be taxed again in another assessment year. This principle emerged from the decision of Hon'ble Supreme Court in the case of Excel Industries Ltd. 358 ITR 295 (SC) [2013]. It was held - "Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 11. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under an appeal. 15. Up to assessment year 2012-13, assessee had charged actual expenditure incurred on development of land to the Profit and Loss account irrespective of the area sold in that particular year. 16. From AY 2013-14, i.e. the impugned year, assessee changed its accounting policy in this respect owing to following reasons - a) Section 43CA was introduced w.e.f. 01.04.2014 in the Income-tax Act, 1961 because of which buyers who had booked their plots by making part payments and their registry pending were persuaded to get the registry done under the erstwhile law which was to their advantage. Owing to follow up with the buyers, significant portion of land was sold in the impugned year i.e. 4,20,573 sq. ft. which is 16% of the total saleable area of 26,34,265 sq. ft. b) Village 'Arandiya' where the 'Info-city' project under consideration was under construction was brought under Indore Municipal Corporation (IMC) vide notification of the State Government. Prior to coverage under the IMC, it fell under 'village panchayat'. Owing to coverage under the municipal area of IMC, the development norms would change to that of CPWD and equal to Indore Development Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year. - Therefore the CIT(A) was quite correct and justified in following decision in Rotork Control India Pvt Ltd [2009] 314 ITR 62 (SC) and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A)." [emphasis supplied] [refer PB 62 & 67] 21. Ld. CIT(A) has rightly held that development expenses of Rs. 7,14,97,410 charged to profit and loss account on prudent basis of matching concept by applying scientific method is an allowable expenditure. [CIT(A) Para 3.21 Page 19] 22. Considering the facts and circumstance of the case, undisputed fact as to amount of Rs. 39,21,275 already reported for taxation in AY 2015-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tect & Engineer M/s Mathur & Associates as per which the development expenses remaining to be incurred from 1.4.2012 onwards was Rs. 33,31,66,000/- and this amount was divided by the unsold area as on 1.4.2012 which was 1959785 sq.feet. During the assessment proceedings this claim of estimated development expenses as against the actual development expenses prompted the Ld. A.O to investigate the issue during which it was revealed that assessee had received development charges from 22 purchasers of plots. The relevant ledger account of the purchasers were called for. The assessee has also not disputed this fact that it had received development charges from these purchasers of plots through account payee cheque. 16. On the basis of the fact that the assessee has been receiving the development charges from the purchasers of plot Ld. A.O came to a conclusion that other than the purchaser of plot who have paid development charges by cheque duly reflected in the regular books of accounts, the assessee might have received development charges in CASH from the remaining purchaser of plots which assessee has not revealed in the books. Based on this self developed theory Ld. A.O concluded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that his approach is neither here nor there. Ld. A.O is not sure what actually he want to assert upon. 18. We further find that when the matter came up before the Ld. CIT(A) he after examining the facts in detail and also discussing the settled judicial precedents decided in favour of the assessee allowing the claim of development expenses claimed on estimated basis of development expenses at Rs. 7,14,97,410/- for Assessment Year 2013-14 and partly allowing the claim of development expenses at Rs. 2,93,76,568/- for Assessment Year 2010-11. Relevant finding of Ld. CIT(A) for Assessment Year 2013-14 which is squarely applicable for Assessment Year 2010-11 also is reproduced below:- Ground No. 2 to 5 3.0 These grounds of appeal are with respect to disallowing Rs. 7,14,97,410/- considering the expenses debited, on estimate to match the corresponding revenue. I have gone through the assessment order and the submission made by the appellant before me and noted that:- 3.1 The appellant company is engaged in the business of the development of the colony. The appellant company purchases land and sells after developing and plotting them in smaller sizes. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 45,500 129,500 0 0 2011-12 10 PUSHPA WASDEV GABA 215 2800 433,600 335,600 98,000 0 0 2011-12 11 SATISH S/O MOHANLAL, LAHOTI 339 2100 84,000 10,500 73,500 0 0 2011-12 12 SEEMA W/O SATISH LAHOTI 340 2100 84,000 10,500 73,500 0 0 2011-12 13 MEETA W/O RAJESH PANWAR 421, 420, 463 8,200 4,040,000 1,394,000 287,000 16,5000 108,000 2012-13 14 SEEMA AND PIYUSH ZALAYA 1000 1725 182,500 122,125 60,375 0 0 2012-13 15 RAJEEV KUMAR NIKHAR 991 1725 997,500 293,250 60,375 55000 36,000 2012-13 16 ANU KUMAR GARGAV 957 1725 765,000 293,250 60,375 55000 36,000 2012-13 17 RAMPUKAR TIWARI 122 2400 580,000 408,000 84,000 55000 33,000 2012-13 18 SATANARAY AN DHRUV 464 4260 422,000 272,900 149,000 0 0 2012-13 19 ANITA W/O SURESH SHARMA 882 2100 420,000 346,500 73,500 0 0 2012-13 20 NIRMAL S/0 RAJENDRA TIWARI 986 1725 682,500 293,250 60,375 55000 36,000 2012-13 21 ANIL MALIK 391 2100 400,000 326,500 73,500 0 0 2012-13 22 AMIT SHANTILAL 345 2100 245,000 171,500 73,500 0 0 2012-13 TOTAL 12,594,195 6,121,220 2,151,975 449,875 285,000 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en charged on projected basis. 3.12 The appellant had pointed out that on the one hand the learned AO has mentioned that the expenditure debited should be on actual basis and the expenditure actually incurred should be allowed u/s 37(1) but has not allowed the actual expenditure incurred by appellant. 3.13 The appellant had further submitted during appellant proceedings that out of 4 customers whose statements were recorded and heavily relied on by the learned AO, only 2 were allowed to be cross examined and that too for the limited purpose of confirming the answer to one question asked by learned AO. He also pointed out that none of the customers had admitted to have paid any amount over and above what had been recorded in the books of accounts by the appellant either by way of cheque or cash. 3.14 The learned AO on his own belief had come to the conclusion that the appellant had. received development charge in cash, although he has not brought on record any positive and cogent evidence that any additional money had flown in the hands of the appellant. Statement recorded of customer did not contain any acceptance on their part that any cash in addition to what had been recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OF INDIA (1959) 37 ITR 0001 Business expenditure-Conditions for allowing deduction of expenses-Assessee engaged in the Business of land and property development-Assessee following mercantile system of accounting-Expenditure actually incurred but not during the relevant year is still allowable if such expenditure was incidental to the carrying on of the business. Facts The assessee deals in land and property and carries on land developing business and, in the course of business, it buys land, develops it so as to make it fit for building purposes and sells it at a profit in plots. Whenever a plot is sold, the purchase 1" pays about 25 of the purchase price in cash and undertakes to pay the balance with interest at a certain rate in ten annual instalments which he secures by creating a charge on the land purchased. The assessee undertakes to carry out the developments including laying out roads, provision of drainage system etc., within a reasonable time. The assessee, following the mercantile system of accounting, during the relevant assessment year entered in the credit side of its books of accounts, the whole of the sum representing the full sale price of the lands sold dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) : TC16R.204 overruled." 3.17 The learned AO has not brought on record, any evidence against the appellant, to prove that the actual expenditure incurred is not actual expenditure, except for his own presumption that the appellant would have received development charges in cash. Further, no evidence brought on record by the learned AO to prove that the plot sold was not developed plot. 3.18 From the assessment order it is found that the learned AO had recorded the statement of Shri M. M. Mathur Engineer, who had issued the report for development expenditure required to be incurred @ Rs. 170/- sq. ft. on the remaining project. It is also a fact on record that he was never allowed to be cross examined by the appellant company. 3.19 His report was relied upon by the learned AO to come to the conclusion that the cost estimated includes the cost of club house and the learned AO has completely relied on his report to come to the conclusion that the appellant had received development charges @Rs. 170 per sq. ft from each and every customer. 3.20 No evidence was brought on record by the learned AO to prove that the appellant had received any amount in cash over and above what was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will= be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. The principle is that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts S110W that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37. » ITAT INDORE In Case of BALAJI NEEMUCH INFRASTRUCTURE "Business Expenditure - U/s 37 of the Income-Tax Act, 1961 -AO made addition in respect of provision for repair and maintenance-CIT(A) deleted the additions-HELDS The assessee is under obligation to maintain road for 3/5 years after completion of construction work. Further, when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AL LAHOTI 2012-13 339 2100 10,500 5.00 12 SEEMA W/O SATISH LAHOTI 2012-13 340 2100 10,500 5.00 TOTAL 2012-13 18500 13,21,100 13 MEETA W/O RAJESH PANWAR 2013-14 421, 420, 463 8200 13,94,000 170.00 14 SEEMA AND PIYUSH ZALAYA 2013-14 1000 1725 1,22,125 70.80 15 RAJEEV KUMAR NIKHAR 2013-14 991 1725 2,93,250 170.00 16 ANU KUMAR GARGAV 2013-14 957 1725 2,93,250 170.00 17 RAMPUKAR TIWARI 2013-14 122 2400 4,08,000 170.00 18 SATYANARAYAN DHRUV 2013-14 464 4260 2,72,900 64.06 19 ANITA W/O SURESH SHARMA 2013-14 882 2100 3,46,500 165.00 20 NIRMAL S/O RAJENDRA TIWARI 2013-14 986 1725 2,93,250 170.00 21 ANIL MALIK 2013-14 391 2100 3,26,500 155.48 22 AMIT SHANTILAL 2013-14 345 2100 1,71,500 81.67 TOTAL 2013-14 28060 39,21,275 GRAND TOTAL 61,21,220 20. We are surprised to note that the Ld. A.O has raised no doubt about the genuineness of the actual development charges incurred by the assessee nor has he pointed out any mistake in the books of accounts maintained by the assessee except about the claim of development c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a plan for its development with all amenities required for establishing the colony which includes land leveling, roads, internal roads, parks, common areas and other incidental expenses relating to development of land till it is handed over to the plot holders and then subsequently for making a particular colony fit for constructing residential houses. In all this process development charges ought to be incurred. They were incurred and were consistently charged to Profit & Loss Account. The change of accounting policy effected from Assessment Year 2013-14 was based on the accounting standard AS-5 issued by Institute of Chartered Accountants of India which permits the change and which was done so to make appropriate presentation of financial statements of the enterprise. The same was taken up since the highest number of plots were sold by the assessee during Assessment Year 2013-14 which were 168 in number. Almost 16% of saleable area was sold during the year. Change in accounting policy is duly disclosed in the audited financials by way of note. Actual development charges incurring during the year are also reported in the balance sheet. 22. We find that the development charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Assessment Year 2009-10 to Assessment Year 2015-16 is Rs. 9,60,85,306/-. Development charges booked on estimated basis from Assessment Year 2013-14 to Assessment Year 2015-16 are Rs. 7,50,00,430/-. For Assessment Year 2014-15 and Assessment Year 2015-16 the estimated development expenses charged to Profit & Loss account are only Rs. 14,62,000/- and Rs. 20,31,020/- as against the actual expenditure of Rs. 1,36,26,544/- and Rs. 1,01,17,084/- respectively which shows that the assessee has duly adhered to the changed accounting policies implemented from Assessment Year 2013-14. For Assessment Year 2013-14 there was certain spike in the claim of development expenses but the revenue for the year were also at a higher side since around 420573 sq. ft area of land was sold during the year as against 87750 sq. ft area sold in the immediately preceding Year. Ld. A.O also failed to appreciate that the assessee had shown a positive income at the end of the year and paid taxes there on. We have also examined the audited balance sheet and Profit & Loss Account and treatment of development charges incurred during the year. The excess amount charged in the preceding years has been offered to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actual maintenance and repair expenses rather the assessee reversed the excess amount of provision than the actual expenditure was credited to profit and loss account and offered as income after the end of 5th year. - Therefore the CIT(A) was quite correct and justified in following decision in Rotork Control India Pvt Ltd [2009] 314 ITR 62 (SC) and ITAT is unable to see any valid reason to interfere with the conclusion drawn by CIT(A)." [emphasis supplied] [refer PB 62 & 67] 29. Under these given facts and circumstances of the case and the judgments referred herein above we are of the considered view that Ld. CIT(A) was justified in allowing the claim of estimated development expenses booked by the assessee in the Profit & Loss Account at Rs. 7,14,97,410/- on matching concept by adopting scientific method allowable u/s 37(1) of the Act and thus the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered in ASSESSMENT YEAR 2010-11 in case of 3 customers, the excess amount paid by these customers should be considered as income in ASSESSMENT YEAR 2010-11 of Rs. 3,70,650/-. 32. Before us the Ld. Counsel for the assessee submitted that the amount of development charges from 3 buyers at Rs. 3,70,650/- has already been offered in the Return of income filed for Assessment Year 2015-16 which is an undisputed fact. The direction of Ld. CIT(A) taxing sum of Rs. 3,70,650/- for Assessment Year 2010-11 would amount to taxing the income again. 33. On the other hand Ld. Departmental Representative supported the finding of Ld. CIT(A). 34. We have heard rival contentions and perused the records placed before us. In view of Rule 27 of Income-tax (Appellate Tribunal) Rules, 1963 and also in view of the judgment of Hon'ble Delhi High Court in the case of Sanjay Sawhney (supra) we accept the application of the assessee. 35. As regards the issue of taxability of development charges received by the assessee at Rs. 3,70,650/- Ld. CIT(A) has held that this sum is to be taxed in Assessment Year 2010-11. Ld. Counsel for the assessee submitted that this amount has already been offered to tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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