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2017 (1) TMI 933 - AT - Income TaxAddition on account of deemed income - accrual of profit in lieu of expenditure incurred for development of plot - AO held that assessee had become the owner of the plot of land after handing over the possession of the quarters and station to the Police department that he made an addition to the income of the assessee - FAA reversed the order of the AO - Held that:- The order of the FAA does not suffer from any legal or factual infirmity,that he had given a finding of fact that assessee was the owner of the plot of land from the very beginning, that it had executed a lease for 99 years at the rent of ₹ 1 per year in favour of the Police department,that if the assessee was not the owner of the plot of land there was no need for the government to enter in to a lease. Reserving or de-reserving of the plot of land cannot decide the issue of ownership of the plot of land. By constructing the plot of land the assessee had improved upon the right in land. If any taxable income was to accrue or arise it would not be at this stage but at the stage of sale of the constructed portion on the balance plot i.e.60% of the plot. The AO was not justified in applying ready reckoner rate on the stamp duty valuation and that also for the year under consideration.As the order of the FAA needs no interference from our side, so, confirming the same we decide the first ground of appeal against revenue Addition on incurred expenditure toward building number two of the police station building under various heads - Held that:- AO had not doubted the genuineness of the expenditure.His only objection was that at the time of spot visit by the inspector it was found that the assessee was not carrying out any construction activities.In our opinion,in the case of a contractor or a developer time gap in starting a new project after completing the first project is not an abnormal practice. But he has to maintain the office and the staff for starting the second project. Expenditure incurred for the intervening period cannot be disallowed. The assessee had started the construction of Police station and quarters after the plot of land was de-reserved. The FAA had scrutinized all the expenses incurred by the assessee and had held that certain expenses were not allowable. Expenses incurred under the heads salary of staff or electricity bills cannot be disallowed, especially when incurring of expenses is not in doubt. - Decided against revenue
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