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2015 (2) TMI 320 - AT - Income TaxDisallowance made u/s 14A - CIT(A) deleted the disallowance - Held that:- CIT(A) just gave a finding that the Assessee had surplus funds available which was invested with no material to support this finding, especially when the AO has given a specific finding that out of the loan taken from Saraswat Bank amounting to ₹ 105.30 lacs, sum of ₹ 79.3 lacs has exclusively been used for the purchase of shares from Counto Automobiles. We do not find any material being brought on record by the Assessee and referred to by the CIT(A) while giving this finding. We find that the finding given by the CIT(A) is perverse and the onus is on the Assessee to prove that it has invested the surplus funds in purchase of the shares. Under these circumstances, we are of the view that the AO has correctly disagreed with the claim of the Assessee. We do not find any infirmity or illegality in applying Rule 8D or in the computation of the disallowance made by the AO in accordance with Rule 8D. - Decided in favour of revenue. Disallowance under the head “Professional/Consultancy/ Survey fees” - AO noted that these expenses relate to the projects in progress and therefore should have been debited to the work in progress and thus disallowed the sum - CIT(A) deleted the disallowance - Held that:- Each assessment year is independent and income for each assessment year has to be computed independently. We, therefore, set aside the order of CIT(A) on this issue and restore this issue to the file of CIT(A) with the direction that the CIT(A) shall re-decide this issue after getting the evidences from the Assessee as to what extent these expenses relate to the current year and to what extent these expenses relate to the work in progress. Further, the CIT(A) should also obtain evidences that these expenses have been incurred by the Assessee genuinely for the purpose of the business. To the extent these expenses relate to the work in progress, it should be disallowed. Only the expenses which the Assessee proves to have been genuinely incurred for the purpose of the business and does not relate to work in progress be allowed - Decided in favour of revenue for statistical purposes. Addition to income - AO re-computed the profit relating to the projects completed crediting the sale proceeds to the profit and loss account - CIT(A) took the view as if the AO has changed the method from project completion method to percentage completion method and accordingly he deleted the addition - Held that:- The method as has been followed by the Assessee, in our opinion, is neither project completion method nor percentage of completion method. Percentage of completion method is not linked with the consideration received by the Assessee from the intended buyer. We noted that the Assessee has recognized the revenue only when the registration of the sale deed has been done by the Assessee in favour of the buyer. Under AS-7 this is not a recognized method of recognizing the revenue. This method is neither project completion method nor percentage of completion method. The method adopted by the Assessee, therefore, cannot be regarded to comply with the ingredients as laid down u/s 145 of the Income Tax Act. Sec. 145 of the Income Tax Act makes it mandatory on the part of the Assessee to follow either cash or mercantile system of accounting regularly. Recognizing the revenue when the sale deed has been registered by the Assessee in favour of the buyer cannot be regarded to be either cash or mercantile system of accounting. We, therefore, set aside the order of CIT(A) and restore the order of the AO. - Decided in favour of revenue.
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