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TMI Blog2023 (8) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... the members because that is the consideration paid to the members for transferring the rights in the flats. Therefore we are unable to agree with the contention that the cost of construction should be borne by the members. Revenue to the assessee is from sale of additional space to existing members and from the sale of the additional flats assessee received from the development project. Real test for allowing the cost of construction is whether the assessee has accounted for both these revenues in the profit and loss account - From the perusal of materials submitted before us and also from the findings given by the CIT(A) after verification of details, it is clear that the assessee has accounted the revenue from the redevelopment project on completion of contract method and has claimed the expenses accordingly. No infirmity in the findings given by the CIT(A) while allowing the claim of the assessee. Assessee has correctly claimed the cost of construction towards the redevelopment of the area of FSI acquired from the members and Marwah family. No reason to interfere with the decision of the CIT(A) - Decided against revenue. - I.T.A. No.4401/Mum/2019 - - - Dated:- 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was entitled to receive under the agreement for construction and allied obligation, has been received by the assessee from members of the society. Whether this consideration is received through the society or directly from twelve members specified under the agreement, it has no impact on taxability of assessee's income. All that is necessary is that consideration for work done by the assessee has to be taken into account - whether received through the society or directly. Once the consideration for construction work is found to have been taken account, it is only corollary thereto that expenses incurred to fulfill related obligation are to be allowed as deduction. In other words, as long as consideration received or receivable by the assessee is found to have been accounted /or, expenses incurred for the said purpose are to be allowed. With the consent of the parties, therefore, we remit the matter to the file of the Assessing Officer for limited purposes of verification of assessee's plea that consideration for carrying out construction work etc, has been duly received from members directly and, as such, properly accounted for. In case this plea is found to be corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment was going on, 4 flats have been purchased by the nominee of the Assessee Primo Realtors Private Limited and the area of the flats have been merged with the free sale area. Thus, the revised flat distribution was as follows: 8 flats were to be handover to 8 old/ existing members of the Nandadeep CHS. (statement of original members transferred flats to new member spage 721 to 724 of PB) 4 flats to Marwah s, and Balance 10 flats were available to the Respondent Assessee as free sale flats. 6. The reason for CIT(A) to enhance the disallowance in the first round of appellate proceeding is that the cost of construction ought to be born by the members of the society and that the assessee has not shown any receipts towards cost of construction. Therefore the CIT(A) was of the view that the expenses incurred by the assessee towards construction without showing the corresponding receipt cannot be allowed. The Hon ble Tribunal remanded the issue back to the AO for the limited purpose of verification of receipt of cost of construction from the members by the assessee so that the assessee can be allowed the cost of construction as a deduction. 7. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red flat to New Members is appearing as Mr. Rajkumar Sharma (31.05.2005) to Mrs. Jagruti Dhruv whose area appears to be 792, but in the last column maintained as Allotted Flats in Swaroski Building is shown as 1101 sq.ft. Neither any explanation was offered for this discrepancy nor was any supporting document attached to throw light on this; 8. The CIT(A) had, while deleting the disallowance sustained by the Assessing Officer in the remanded proceedings, factually gone through the various submissions / evidences given by the assessee as listed below:- o Statement of details of cost of construction recovered from flat owners and sale of 4 flats of Nandadeep by the Respondent Assessee. (page 716 of PB). o Statement of flats and area allotted in Swaroski building to existing members (page 93 and 140, 25-26, 599-601 of PB). o Ledgers, agreements, allotment letters (page 141-417, 108-139 of PB] o Detailed notes to accounts of sales reported in the profit and loss account (page 607-608, 741-756, 717-720 of PB). o Ledger of sale of residential units (504-606) and individual party-wise ledger of sales (page 609-621 of PB. o Statement of original members transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corresponding relevant page of the paper book Profit and loss account - Sale of Residential unit of Rs. 15,92,29,840/- - Other Income of Rs. 3,48,49,108/- 482 Grouping of sales of Residential unit of Rs. 15,92,29,840/- 718 Grouping of other income of Rs. 3,48,49,108/- 719 Sales Chart of Swaroski project 755-756 Ledger of accounting for Swaroski project sales along with individual ledgers of members 604-621 Particulars Corresponding relevant page of the paper book Profit and loss account - Total expenses of Rs. 18,40,97,633/- 482 Grouping of total expenses of Rs. 18,40,97,633/- 747 Detailed head-wise breakup of expenses relating to Swaroski project 748-750 12. The Ld. DR, relied on the order of the Assessing Officer to submit that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is not entitled to claim the cost of construction towards development of the property as a deduction. In this regard it is important to understand the way income and expenditure is earned / incurred in a redevelopment project. In assessee s case here the income to the assessee is arising out of two sources i.e. one consideration received from the additional space allotted to the existing members and second from the sale of 6 flats which the assessee got as part of the redevelopment. The expenditure towards the entire redevelopment should be borne by the assessee including for those flats to be allotted to the members because that is the consideration paid to the members for transferring the rights in the flats. Therefore we are unable to agree with the contention that the cost of construction should be borne by the members. As explained herein above, the revenue to the assessee is from sale of additional space to existing members and from the sale of the additional flats assessee received from the development project. So the real test for allowing the cost of construction is whether the assessee has accounted for both these revenues in the profit and loss account. From the per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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