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2014 (7) TMI 762 - AT - Income TaxExpenses incurred directly for phase 1 of project – Road Expenses - Whether there should be any allocation of road expenditure or not and whether the Commissioner (Appeals) is justified in allocating 19% of the road expenses on account of Phase–I and II – Held that:- The road expenditure cannot be allocated for Phase–II, for the reason that, firstly, for developing the plot and particularly the Phase–I, road was required to be constructed for getting access to the plot which was land locked - secondly, the road has been handed over to the municipal corporation of Mumbai for public use at large and not for assessee’s project alone that the assessee has received the TDRs - there cannot be any basis for allocation of road expenses to the Phase–II - The expenses has to be seen on a “matching principle” i.e., the cost incurred for the purpose of generating the revenue - If the “matching principle” is to be applied, then the entire road expenditure has to be allowed from the revenue receipts of the TDR disclosed in the year, because it has been shown against TDR receipts. A basis of allocation of expenses @ 19% as applied by the Commissioner (Appeals) seems to be quite reasonable and rational basis in the absence of other material or criteria for allocation for the purpose of making the allocation of the expenses between Phase–I and Phase–II - the disallowance of 19% on the road expenses should be restricted to net expenditure incurred by the assessee i.e., ₹ 1 crore and not ₹ 1,12,20,280, because the assessee got the reimbursement of ₹ 12,20,285 - the disallowance on account of road expenses should be restricted to ₹ 19 lakhs. Disallowance of loss on sale of TDR – Held that:- Disallowance of loss on account of TDR was not the subject matter of either the original assessment proceedings or the mandate of the Tribunal order - the reasons adopted by the CIT(A) that the sale of TDR to one Mr. Vijay M. Parkih is at lower cost is without any enquiry or any adverse material on record that the assessee has suppressed the sale made to this aprty - secondly, to hold that the payment of legal fee is not a necessary expenditure is again based on surmises that to be without any enquiry or based on some evidence - Even under the law, the Commissioner (Appeals) cannot disallow the loss in the round of proceedings, which is in pursuance of Tribunal’s order, issuing specific directions, which are only in relation to allocation of expenditure – CIT(A) could not have gone to disallow the entire loss in the TDR account, which was not the subject matter of earlier proceedings - already the road expenditure has been disallowed on the basis of proportionate allocation between Phase–I and Phase–II and such a road expense is a part of TDR - no separate disallowance under the head “TDR cost or expenditure” should be made - the disallowance of loss as made by the CIT(A) cannot be sustained and it is to be set aside – Decided partly in favour of Assessee.
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