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2012 (6) TMI 481 - AT - Income TaxDeferred revenue recognition - Administration/Contract Fees - AO stated that 75% of the receipts are spread over time share period to reduce its tax liability in the year of re operative receipt - Held that:- It cannot be denied that a major portion of services rendered by the assessee would be in the initial years of the time share period of 78 years, but AO’s view is not acceptable that all the services rendered to the members are completed in the first year itself and therefore the entire Administration / Contract Fee be recognised as 100% revenue in the first year of receipt - would result in a grave mismatch by the recognition of entire receipt as income in the first year and disregarding subsequent expenditure that the assessee would incur for services to be rendered to members the balance period of the time share - 50% of this Administration/Contract Fee is to be treated as income in the first two years of receipt and charged to tax @ 25% in each of the first two years and the balance 50% is to be treated as income and spread over in the remaining portion of the time share period Claim of Interest Expenditure - assessee contention that the CIT(A)erred in holding that the interest paid by the assessee to PHRC was expenditure not incurred wholly and exclusively for the purpose of business Held that:- The duties and liabilities of both the parties to the agreement viz. the assessee and PHRC are clearly laid out and there is nothing to mandate that the interest earned out of the fixed deposit representing Capital Bond Account was to be paid by the assessee to PHRC. The said deposits were to be maintained for the purpose of creation of mortgage over properties by PHRC - The assessee’s claim that the interest paid is out of interest earned on joint funds is unacceptable as the assessee had no liability or obligation to pay the same to PHRC and nor could the latter legally enforce payment of the same by the assessee. The interest on fixed deposits were received by the assessee only because of the failure of PHRC, as it did not mortgage the properties. If it had done so, the amount in the fixed deposits would have been returned - against assessee. Charge of interest u/s.234B and 234D - Held that:- The charging of interest u/s. 234B is mandatory and consequential in nature and there is no discretion in the matter and the charging of interest u/s. 234D considering the case of ITO Vs. Ekta Promoters P. Ltd [2008 (7) TMI 452 (Tri)]cancel the interest charged u/s. 234D as section 234D was brought on the statute w.e.f. 1.6.2003 cannot be applied to assessment year 2003-04 or earlier years having no retrospective effect.
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