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TMI Blog2024 (7) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) failed to appreciate that its case falls within the sub-clause (c) and (d) of Rule 46A of the Income Tax Rules, 1962 ("the Rules") to the Act. GROUND NO. II: VIOLATION OF PRINCIPLES OF NATURAL JUSTICE: 1. On the facts and in circumstances of the case and in law, the Ld. CIT (A) erred in violating the principles of natural justice, inter-alia, on the following grounds: i. The Ld. CIT(A) erred in passing the impugned order without appreciating and referring to the documents placed on record in the course of Assessment Proceedings and in the course of Appellate Proceedings - ii. The Ld. CIT(A) failed to provide an opportunity to the Appellant to rebut the contentions of the AO in the remand report. iii. The Ld. CIT (A) erred in passing the impugned order without providing an opportunity of personal hearing through video conferencing to the Appellant, despite the specific request of the Appellant. 2. The Appellant, therefore, prays that the impugned order passed in gross violation of the principles of natural justice be held as bad in law and the additions/disallowances made be deleted. GROUND NO. III; DISALLOWANCE OF CLAIM OF DEPRECIATION ON COMPUTER SOFTWARE AMOUNTI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to premium on issue of shares to Non-residents amounting to Rs. 32,500/- u/s. 56(2)(viib)of the Act. GROUND NO. VI: ERROR IN COMPUTATION OF TOTAL INCOME AND TOTAL TAX LIABILITY: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the AO in erroneously computing the total income and the total tax liability for the year under consideration. 2. The Ld. CIT(A) upheld the erroneous action of the AO in calculating the total tax payable by the Appellant taking into consideration the incorrect figure of loss assessed under the head Income from Business or Profession., 3. The Appellant prays that the Ld. CIT(A) be directed to compute the correct total income and total tax liability/refund in accordance with the provisions of the Act." 2. The brief facts of the case are that the assessee is a developer and developing the project in Mulund and assessee is as wholly owned subsidiary of 'Piramal Realty Pvt Ltd'(in short, 'PRPL'). The assessee managed a project in Mulund named, 'Revanta'. The assessee is recognizing the revenue in project completion method. During the impugned assessment year, the revenue has added back the excess c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following cases also the coordinate benches of the Tribunal had concluded that depreciation on software expenses is allowable @ 60%: "(i) Srinivasa Resorts Vs ACIT (41 taxmann.com 350)(Hyd-Trib) (ii) Ushodaya Enterprises Limited 938 ITRE (T) (Hyd-Trib) (iii) ACIT Vs. Zydus Infrastructure (P) Ltd (72 taxmann.com 199) (Ahd-Trib)" 16. We are persuaded to subscribe to the view taken by the aforesaid coordinate benches of the Tribunal and respectfully follow the same. Further, as observed hereinabove, the assesses claim of depreciation on software expense @ 60% which was allowed by the CIT(A) had also been accepted by the revenue and the same had also not been carried any further in appeal before the Tribunal. In terms of our aforesaid observations, we are of the considered view that the assessee had rightly claimed depreciation on computer software @, 60%. We thus set-aside the order of the CIT(A) in context of the issue under consideration and vacate the disallowance of Rs. 17,63,425/- made by the A.O on the said count. The Ground of appeal No. Ill is allowed." 5. The Ld.DR argued vehemently and mentioned that the 60% depreciation is only applicable to computer with software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40, 051 /- by the AO is upheld. 6.11 Accordingly, the Ground No. I is dismissed." 6. We heard the rival submission and considered the documents available in the record. The assessee purchased two software - (i) Office STD 2013 SNGLMVL; and (ii) Prjct 2013 SNGLMVL. In support of the order of co-ordinate bench specifically mentioned that the software is guiding the hardware and also an integral part of the hardware. Considering the order of the co-ordinate bench in assessee's own case (supra), in our considered view, the assessee has rightly claimed deprecation @60% and the addition of Rs. 84,40,051/- is deleted. In the result, ground No.III of the assessee is allowed. Ground IV : DISALLOWANCE OF SALES PROMOTION EXPENSES AMOUNTING TO Rs. 94,98,268/-: 7. The Ld.AR argued that assessee is in business of real estate development and has only one construction project at Mulund named 'Revanta'. In impugned assessment year, the assessee had incurred expenses on sale amounting to Rs. 94,98,268/- which is debited in the P&L Account in terms of "guidance note on accounting of real estate transaction for revised 2012" (in short, 'GN') issued by the "Institute of Chartered Accountants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same method should have also been accepted for AY 2008-09, there being no change in facts and circumstances vis-a-vis the past years. We are placing reliance on the Judgment of Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992) 60 Taxman 248/193 ITR 321 (S.C) wherein it is held that in the absence of any material change in facts, a different view than taken in earlier years could not be taken: "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee we do not think the question should have been reopened and contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai Bench in the case of Layer Exports P Ltd (supra). So the question of capitalizing the project cost of sale promotion is unjustified. We set aside the appeal order on this issue and the addition of Rs. 94,98,268/- is deleted. In the result, ground No.IV of the assessee is allowed. Ground V: ADDITION OF SHARE PREMIUM UNDER SECTION 56(2)(viib) OF THE ACT: 10. The assessee is engaged in the business of real estate and during the impugned assessment year, the assessee allotted equity shares to following companies at issue price of Rs. 75/- per share comprising face value of Rs. 10 per share and premium of Rs. 65/- per share: 1. Foglight Investment Limited - 1000 2. Board Street Investments (Singapore) Pte Ltd - 450 3. MBD BridgeStreet 2015 Investments (Singapore) Pte Ltd - 50 11. In relation to allotment of share, the Ld.AR submitted that the assessee obtained valuation report from M/s D.B Ketkar & Co which was submitted before the ld. Assessing Officer during the course of assessment proceedings and as well as before the Ld.CIT(A). Copy of the report is duly enclosed in APB 55-57. The Ld.AR further argued that the ld. AO had not accepted the valuation report and asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d I the CIT(A)." The ld. AO cannot take away the option granted by the Statute to the assessee for adopting a method of valuation. The ld. AR relied on the following orders: - In the case of Vodafone M-Pesa v. PCIT [2018] 256 taxman 240 (Bom. HC), it is noted that, "The Commissioner in the impugned order does not deal with the primary grievance of the assessee. This, even after he concedes with the method of valuation namely, NAV Method or the DCF Method to determine the fair market value of shares has to be done/adopted at the assessee's option. Nevertheless, he does not deal with the change in the method of valuation by the Assessing Officer which has resulted in the demand. There is certainly no immunity from scrutiny of the valuation report submitted by the assessee. Therefore, the Assessing Officer is undoubtedly entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the assessee." In the case of JCIT v. Om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or vice versa militates against the solemn object of Section 56(2) (viib) of the Act." 12. The Hon'ble Bench had during the course of aforesaid hearing, directed the Appellant to furnish the basis and working papers for arriving at a valuation of Rs. 65/- per share, a comparison of projected v/s actual cashflows, and shareholding structure of the Appellant and its subsidiaries in relation to the said ground of appeal. Accordingly, the matter was kept part heard and the was subsequently listed for hearing on June 27. 2024. 13. Now, during the course of hearing on June 27. 2024. the ld. AR at the request of the Hon'ble Bench, submitted the basis of projections when valuation report was obtained in 2015 & also submitted the comparative analysis of projections v/s actuals figures alongwith reasons for variances therein, during the course of hearing. 14. The ld. AR submitted that variance in projection v/s actual was on account of delay in project due to changes in Development Control & Promotion Regulation 2034 Rules ("DCPR Rules"), delay in receiving various approvals from the regulatory authorities, increase in cost of raw materials such as cement and steel, unexpected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on actual numbers as per latest audited financials of the assessee company. Whereas in the DCF method, the value is based on estimated future projection. These projections are based on various factors and projections made by the management and the Valuer, like growth of the company, economic/market conditions, business conditions, expected demand and supply, cost of capital and host of other factors. These factors are considered based on some reasonable approach and they cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after certain period of lime. Precisely, these factors have been judicially appreciated in various judgements some of which have been relied upon by the Id. Counsel, for instance: i) Securities &Exchange Board of India & Ors [2015 ABR 291 (Bombay HC)] "48.6 Thirdly, it is a w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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