TMI Blog2014 (10) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... us recoveries the assessee's explanation that they were from regular business has not been substantiated - interest earned being part of the business income is also not established – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided partly in favour of assessee. - ITA No. 553/Hyd/2013, ITA No. 554/Hyd/2013, ITA No. 555/Hyd/2013 - - - Dated:- 16-9-2014 - SHRI B. RAMAKOTAIAH AND SMT. ASHA VIJAYARAGHAVAN, JJ. For the Appellant : Sri S. Rama Rao For the Respondent : Sri P. Somasekhar Reddy ORDER Per: Asha Vijayaraghavan: The above appeals by the assessee are directed against the common order of the CIT(A)-I, Hyderabad dated 21.01.2013 for A.Ys. 2007-08 to 2009-10. Since issues involved in these appeals are common, they are clubbed and heard together and are disposed of by this common order. 2. Facts of the case are that a search and seizure operation was conducted at the business premises of the assessee-company on 17.9.2008. Subsequently, a notice u/s. 153A of Income-tax Act, 1961 dated 12.10.2009 was issued. In response, the assessee filed a letter dated 26.11.2009 stating that its return of income filed earlier on 26.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent method of accounting followed over the years, in the Assessment Year 2008-09, the appellant had not only capitalized the administrative expenses but had also claimed it as a deduction in the Profit and Loss A/c. The Assessing Officer reasoned that if the method by the appellant in the earlier years was to be followed, then the entire work in progress of ₹ 34,11,520 and administrative expenditure of ₹ 25,61,065, totalling ₹ 59,72,588, was required to be capitalized, leaving the other income of ₹ 25,39,368/- as fully taxable, without any deduction. Otherwise, he opined that the Assessing Officer ought to have offered the work in progress during the year under consideration as income, so as to be eligible for deduction on account of administrative expenditure. 9. Likewise, for the Assessment Year 2009-10, the appellant had not only capitalized the administrative expenses but had claimed those as deduction in the Profit and, Loss A/c. However, following the method being followed in earlier years, the entire work in progress of ₹ 1,53,12,728 and administrative expenditure of ₹ 53,42,233 totalling ₹ 2,06,54,961 was required to be capitaliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y builder will keep on constructing, irrespective of advances or sales, whereas the work in progress indeed contains potential profit element. Accordingly, working out a notional profit on work in progress only can give a consistent result as compared to notional profit on advances. Besides, it will yield profit every year unlike in any other year. 12. Since the assessee was adopting 10% rate on advances, the Assessing Officer adopted the same rate of 10% as reasonable profit of the work in progress (inclusive of administrative expenditure) and worked out the profit for the three years as under: A.Y. WIP Amount Advance offered Profit offered Required profit (10% of WIP) Difference in profit 2007-08 14470749 2004000 0 1447075 1447075 2008-09 5972585 0 0 597259 597259 2009-10 19390126 0 0 1939013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, Venkatagiri, Madhapur and Kavuri Hills, the total work in progress at the close of the year being ₹ 44,97,641/-, while the opening work in progress was ₹ 10,86,021/-. He averred that other expenses like administrative expenses etc could not have been considered for arriving at the work in progress. He contended that there was no progress in Venkatagiri project. On the other hand, the Madhapur and Kavuri Hills project were taken on development. However, the appellant could not execute any agreements and did not receive any advances for sale of flats. He submitted that the appellant has been adopting a consistent method of arriving at the profit on receipt of advances which was accepted for the Assessment Year 2005-06 and 2006-07 and even for the Assessment Year 2007-08 in respect of the two projects. Therefore deviation from the earlier method was not justified. 17. The CIT(A) held as under: I have gone through the facts of the case and the submissions of the appellant. The submission of the Id. Authorised Representative of the appellant itself shows that the appellant has not disputed the method of estimating @ 10% on work in progress. As regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only ₹ 9,90,586 for A.Y. 2007-08 as was admitted by the assessee itself. Hence this ground of appeal is dismissed. 22. With respect to assessment year 2008-09, the Assessing Officer made a separate addition of ₹ 25,39,366 under the head income from other sources . It was submitted before the CIT(A) that the assessee had admitted loss of ₹ 7,53,354 from business and assessee had considered certain items as income from other sources totalling to ₹ 25,39,366 including dividend on chits of ₹ 6,11,260, miscellaneous recoveries of ₹ 22,556 and income offered u/s. 132 of ₹ 15 lakhs. It was submitted that these three items form part of the income from business and, therefore, business income should have been arrived at ₹ 13,91,819. It was further submitted that the rent received of ₹ 3,10,000 should have been assessed separately as income from house property after allowing 30% standard deduction u/s. 24. It was also submitted that profit on sale of office premises of ₹ 36,913 should have been assessed separately as income from capital gains and not income from other sources. Further it was also submitted that the interest ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has pointed out with respect to income from rent that nothing has been submitted to establish that it is in the nature of income from house property so as to get deduction u/s. 24. Similarly with respect to miscellaneous recoveries the assessee's explanation that they were from regular business has not been substantiated. Further, interest earned being part of the business income is also not established. Hence we remit the issue to the file of the Assessing Officer to give one more opportunity to the assessee to present its case, and decide the issue thereupon. 25. However, with respect to dividend on chits, we confirm order of the CIT(A) in taking the same as income from other sources and with respect to the income of ₹ 15 lakhs we confirm order of the CIT(A) that the same being surrendered income has to be treated as income from other sources only. The Assessing Officer is directed to re-work the relief accordingly. 26. The ground raised by the assessee with respect to determination of short term capital gain in the A.Ys. 2007-08 and 2008-09 is being set aside to the file of the AO who shall re-work the same after considering the additions/disallowances sust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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