Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2011 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (10) TMI 573 - AT - Income TaxAddition under S.69A - unexplained investment made in the construction - Held that:- We are of the view that it would be judicious and reasonable to allow a deduction of 15% from the estimated cost of construction as determined by the DVO and then to allow a further deduction of 10% towards selfsupervision. In the valuation report, the DVO has allowed rebate for self-supervision at 6%. However, as per the decisions of the Tribunal in similar cases, the rebate towards self supervision at 10% would be reasonable. Hence, further deduction on account of self-supervision has to be allowed. If these deductions are allowed, the estimated cost of construction would work out to a figure which is less than what the assessee has shown in its books of account as cost of investment in construction of building. Thus, it is seen that the amount as shown by the assessee as cost of construction in the books, is at a higher amount than the cost of construction estimated by the DVO as modified in accordance with the ratio of the rulings of the jurisdictional Tribunal in similar cases noted above. Under these circumstances, respectfully following the decisions of the coordinate Benches of the Tribunal in similar maters, we hold that no addition is called for towards unexplained investment in the construction of the building for the assessment years 2000-01, 2002-03, 2003-04, 2004-05 and 2005- 06. Disallowance of interest - Held that:- Perusing the factual matrix of the matter, we are of the pinion that the CIT(A) has rightly allowed as Revenue expenditure, the amount of interest, which related to the period after commencement of business from the Mall during the previous year. Hence, grounds of the Revenue on this issue are rejected. Entitled to relief under S.80IB - Held that:- Income from PAS system can be said to have been derived from the hotel business of the assessee for the purpose of allowing deduction under S.80IB. Hence, order of the CIT(A) is confirmed on this aspect - scrap sales relating to sale of empty liquor bottles, empty cartons, we appreciate that large value of such scrap has to be disposed of, periodically by the hotel and hence these receipts are also directly linked with the business of the assessee and hence, the same are also eligible for deduction under S.80IB - Miscellaneous receipt is from telephone and fax sale are installed in the rooms and are amenities which are required to be provided in a hotel to the guests. These receipts also form part of the assets of the undertaking and income therefrom have a direct nexus with the business/profits of the assessee’s business, eligible for deduction under S.80IB - miscellaneous receipt from laundry it is taken for granted that in any hotel, laundry facility would be provided Without this facility, hotel business cannot be successfully conducted. Similarly with respect to miscellaneous from sale of various items like shaving kits, toilet kits, provision of secretarial assistance, these are all amenities having a direct nexus with the running of the hotel intertwined with the business of hospitality and making the guests comfortable and taken care of and therefore, have direct nexus with the which is derived from such undertaking and as such, such miscellaneous income is eligible for relief under S.80IB. Hence, order of the CIT(A) is confirmed on this aspect. Income by way of lease rentals, has been derived by the assessee from letting out a portion of the building. We do not find any link between the hotel business of the assessee and the letting out of the building. Addition on account of profits attributable to the advances received - Held that:- No infirmity in the order sf the CIT(A) in holding that the addition of ₹ 66,56,500 made by the assessing officer towards accrued profit on advances, after rejecting the method consistently followed by the assessee is not sustainable in law. We also find that the amounts received by the assessee as advances cannot be cancelled and the advances will then have to be returned. There is no debt created in favour of the assessee to receive these amounts as income till the buyer pays the full amount or the property is registered in the name of the buyer.Therefore even under the mercantile system these advances cannot be considered as income. Addition on account of lodge rent receipts - Held that:- As find that under S.145(1) from assessment year 1997-98 onwards, income chargeable under the head ‘profits and gains of business or profession’ has to be considered either in accordance with cash or mercantile system of accounting regularly employed by the assessee, and therefore, it is not open to the assessee to adopt hybrid method of accounting, i.e. to account for receipts from lodge alone on cash basis. We accordingly uphold the order of the CIT(A) and reject the grounds of the assessee on this aspect. Interest attributable to advances made to sister concerns without interest - Held that:- We set aside this issue to the file of the assessing officer insofar as it related to investment in share application money of ₹ 4 crores, we delete the disallowance relatable to balance amount of interest free advances of ₹ 4.37 crores.
|