9911796707
TMI Blog2023 (2) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case are, assessee is a Company in which public are not substantially interested and which is engaged in the business of construction. Assessee filed the return of income for A.Y.2007-08 declaring total income of Rs..13,63,310/- on 31.10.2007. The return was processed u/s.143(1) of the Act on 07.02.2009. Subsequently, the case was selected for scrutiny under the "CASS" and notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response AR of the assessee attended and submitted the relevant information as called for. 4. During the assessment proceedings, Assessing Officer observed that assessee had filed its Profit and Loss Account which are as under: - (i). General Profit and loss account (ii). Kapil Malhar Intelligent Homes Phase-1 Contract P & L A/C. (iii). Sale of development rights, Baner Contract P & L A/C. (iv). S.No.146-Baner Contract P & L A/C. (v). S. No.164/4/2 Kalate Property, Wakad Contract P & L A/C. (vi). Business Centre Profit and loss A/c. 5. Assessing Officer observed that out of the above Profit and Loss Account at Sl.No. 4 and 5 had only closing work-in-progress on the credit side of the Profit and Loss Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 of the Act. Therefore, assessee is not pressing these two grounds at this stage. Accordingly, we dismiss these grounds as not pressed at this stage. 7. Ld. AR submitted that assessee is pressing only Ground No. 2 wherein Ld.CIT(A) has estimated the income from the project at the rate of 10% of the work-in-progress and he further submitted that the appeal filed by the revenue is against the same issue raised by the assessee in Ground No. 2. 8. The relevant facts relating to the above grounds are, assessee during the year has transferred its project under construction to its sister concern M/s Indorigin Electric Ltd., by assignment deed dated 31.03.2006 and deed of rectification dated 15.11.2007 and another assignment deed 18.05.2006. From the assignment deeds the Assessing Officer observed that by the assignment dated 31.03.2006 signed by Shri Sharad Bal on behalf of the assessee company and Mrs Vrunda Sharad Bal w/o Shri Sharad Bal on behalf of M/s Indorigin Electric Ltd., both are directors in both the companies. By the above said assignment deed, the development right was transferred by the assessee company to M/s Indorigin Electric Ltd for a consideration of Rs..3.60 Crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s.Indorigin Electric Limited when the said company has to pay the sale consideration to the assessee. 13. Assessing Officer by referring to the confirmation letter received from M/s.Indorigin Electric Limited he observed that there is no mention of above amount receivable by the said company from the assessee. Accordingly, he came to the conclusion that the said liability shown by the assessee in its Books of Accounts is not a genuine and non-existent liability. Accordingly, he disallowed Rs..7,53,12,160/-. 14. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) after considering the detailed submissions of the assessee, came to the conclusion that assessee has transferred two projects during the year to its sister concern i.e., M/s Indorigin Electric Ltd. which was work-in-progress in the books of the assessee and he observed that assessee has transferred the work-in-progress to its sister concern without estimating the profit. Therefore, he estimated the profit @10% attributable to these projects and accordingly, he sustained the addition of Rs..1,41,36,133/- and he deleted the other additions proposed by the Assessing Officer. 15. Aggrieved, both a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred during the year at the value of Rs..7.2 crores. Accordingly, ground raised by the assessee as well as revenue are partly allowed. 19. Revenue has filed additional ground of appeal that Ld.CIT(A) erred in deleting the addition made on account of land cost claimed as expenses by the assessee amounting to Rs..2,47,57,242/- on the basis of the fresh evidence, without giving an opportunity to the Assessing Officer as per the provisions of Rule 46A. 20. At the time of hearing, Ld. DR submitted that Assessing Officer has clearly brought on record that assessee has claimed land cost in other expenses and no record was submitted before the Assessing Officer. However, assessee has submitted the relevant information before the Ld.CIT(A) in violation of Rule 46A. 21. On the other hand, Ld. AR brought to our notice Page No. 12 of the Ld.CIT(A) order and submitted that as per the details mentioned in assignment deed the assessee has assigned the land area of about 6500 sq. Meters to its sister concern as part of sale of development rights. He submitted that it is not a fresh evidence submitted before the Ld.CIT(A). This information was very much available during the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,41,36,133/ Your office has estimated income at 10% of Work-in-progress (W.I.P.). We most humbly draw Your Honour's kind attention towards the fact that our company is following project completion method. The said system was accepted u/s. 143(3) of the Income Tax Act, 1961 by A. O. for A. Y. 2005-2006. In the said circumstances your office should not have erred in estimating income at 10% of W.I. P in the said circumstances, We most humbly request Your Honour to pass an order u/s. 154 of the Income Tax Act, 1961 relying on C.I.T. vs Bilhari investment (P) Ltd. (2008) 299 ITR 1 (SC) and Radhasoami Satsang Vs. CIT 193 ITR 321(SC) Le. consistency of system of accounting adopted in earlier years. 3) Addition of Interest paid of Rs. 50,96,138/ paid to Bank of Maharashtra. 06.02.2014 We most Humbly want's to draw Your Honour's kind attention towards the fact that your office has inadvertently stated that our company does not have any business activity, hence interest of Rs. 50,96,138/- be not allowed. In fact our income has been assessed as business income for the year at Rs. 3,50,35,867/- after giving effect to your order dated 7th January. 2013. In addition vide ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from time to time. In the said circumstances the addition of Rs. 1,38,16,738/- be deleted by passing an order u/s 154 of the Income Tax Act, 1961. In the said circumstances, you are requested to allow following deduction u/s. 154 of the Income Tax Act, 1961. In view of the above we most humbly request Your Honour to kindly: i. The Income from Business Centre be treated as business income and not as Income from Other Sources. ii. Estimated income of Rs. 1,41,36,133/, being 10% of W. I. P. be deleted. iii. Addition of Rs. 50,96,138/- on account of disallowance of interest be deleted. iv. Unexplained cash credit on account of transfer of sundry creditors of Rs. 1,38,16,1738/-be deleted." 25. After considering the above rectification application, Ld.CIT(A) allowed the claim of the assessee with regard to interest expenditure of Rs..50,96,135/- and on the issue of transfer of outstanding sundry creditors of Rs..1,38,16,738/- to the sister concern with the following observations:- "6.9. The appellant had taken loan from Bank of Maharashtra for the project Kapil Malhar. The said loan has been utilised for the said project Kapil Malhar. During the year under consideration, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be noted that earlier the income from Business Centre of the appellant was being assessed as Business Income and hence there was no need to consider the allowability or otherwise of the interest liability in respect of the bank loan against the Business Income of the appellant. e. It can be seen that the interest expenditure which has been incurred in respect of the deposit given for taking on lease the Business Centre is related to the income earned from Business Centre; hence, the same, in the alternative has to be allowed to the appellant against the income from Business Centre. f. Further, during the course of appellate proceedings, the appellant had given following details to establish the nexus of borrowed funds with the investments: Borrowed funds Amount (Rs.) Investments Amount (Rs.) HDFC Ltd A/c No. 22437 (rent discounting) 93,17,799.00 Bank of Maharashtra TL/NPG-49 (cash credit) 2,53,76,467.00 Deposit with Shree Bal Properties & Finance Pvt. Ltd 2,95,00,000.00 Deposit with Deccan Education Society 8,23,000.00 Deposit - BSNL 11,000.00 Deposit - MSEB 86,500.00 Income Tax R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said portion of land shall be borne exclusively by the Developers and the Owners and the Promoters shall not be liable in respect thereof. All materials required by the Developers for the Development of the said portion of land and construction of the proposed 3 buildings shall be purchased by it in its own names and to its own account and the Owners and the Promoters shall have no liabilities to the parties supplying the same. Page No. 18, Column No. 14: That all claims whatsoever nature, made by the suppliers of materials. equipments used or to be used in the development of the said portion of land and construction and completion of the proposed 3 buildings, as aforesaid, under this agreement including all claims for damages or otherwise made by the purchasers of the new tenements or any part of the said buildings in the aforesaid scheme or for any delay in the performance of their contract or on account of any defect in the construction or completion of the said buildings or all claims, damages, compensation or expenses payable in consequence of any accident or injury sustained by any workmen or other person whether in employment of the Developers or not shall be paid by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed in the project. During the year the above said project was sold to a third party. The profit from the sale of the remaining part of the project was declared and assessed as 'Business Income". Against this 'Business Income" the assessee has claimed the interest expenditure incurred by it for the said project. We are in agreement with the findings of the Ld.CIT(A) that the interest expenditure claimed by the assessee is towards the loan taken from Bank of Maharashtra and the funds were utilized in the said project was subsequently transferred. Therefore, the assessee declared the income earned from this project as the business income. Accordingly, assessee is eligible to claim the above said interest expenditure as business expenditure. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A). Accordingly, Ground No. 2 raised by the revenue is dismissed. 29. With regard to Ground No. 3 we observe from the record that assessee had an outstanding creditors liability in its Books of Accounts. However, during the year assessee has transferred the development rights and projects to its sister concern and as per the assignment agreement they agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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