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2019 (1) TMI 17 - AT - Income TaxDisallowance of expenses incurred for the project after 15.04.2008 - assessee has booked total expenditure incurred for the project @76.46% for the current financial year and the balance expenses representing 23.54% has been allocated to Work-in-progress - Held that:- Once, the project has been complete in all respect and the authorities have issued Occupancy Certificate on being satisfied with the completion of the work, then the assessee cannot claim that it has incurred such a huge expenditure for carrying out further work in the project. Although, the assessee claimed to have incurred various expenditure like POP work, installation of grills & fabrication, internal paintings, alterations in locations of wash basis, alteration in windows etc., it fails to substantiate such claim with necessary evidence in the backdrop of obtaining completion certificate for the project.Therefore, we are of the considered view that the AO was right in disallowing expenses incurred after 15.04.2008 @76.46% and balance amount of 23.54% to be reduced from Work-in-progress. Coming to the alternative claim of the assessee that although it has obtained completion certificate from the Architect on 15.04.2008, the fact remains that it has obtained Part Occupancy Certificate from the competent authorities i.e. from CIDCO on 10.06.2008, hence, at least expenditure incurred for the period from 16.04.2008 to 10.06.2008 should be allowed. We find that the assessee claims to have incurred a sum of ₹ 13,37,447/- between 16.04.2008 and 10.06.2008 i.e. the date of partial Occupancy Certificate obtained from the competent authority. The assessee claims that it has filed necessary evidence before the Assessing Officer to justify those expenses. We find that although the assessee has obtained completion certificate from its Architect on 15.04.2008, what is relevant is the completion certificate obtained from the competent authority i.e. CIDCO on 10.06.2008. Therefore whatever expenditure has been incurred between 16.04.2008 and 10.06.2008 needs to be allowed, if the assessee substantiated incurring various expenses for the work stated to be carried out in the project. Hence, we direct the AO to call for necessary enquiries in the light of the claim along with necessary evidence and if the Assessing Officer find that the assessee has substantiated expenses incurred with necessary evidences, then the Assessing Officer is directed to allow the expenses incurred between 16.04.2008 and 10.06.2008 of ₹ 13,37,447/. Disallowance of interest - Held that:- Once the Assessing Officer has accepted the fact that interest has been paid after deducting applicable TDS, then there is no reason for the Assessing Officer to disallow interest paid for the current financial year. CIT(A) after considering the relevant facts has directed the Assessing Officer to verify whether interest for the year has been really paid or only provision has been made in the books of account. We do not concur with the findings of the CIT(A) in so far as A.Y. 2009-10 is concerned for the reason that the treatment of interest in the books of account is irrelevant whether the same has been paid or provided in the books of account. What is relevant is the assessee has paid interest after deducting necessary TDS applicable as per law. In this case, the lower authorities have not disputed the fact that the assessee has paid interest after deducting applicable TDS. We are of the considered view that the Assessing Officer has erred in disallowing interest for A.Y. 2009-10 and, hence, we direct him to allow interest paid for A.Y. 2009-10. Disallowance of expenses incurred by the Director on behalf of the company - Held that:- AO has disallowed expenses incurred by the Director on behalf of the company without assigning any reasons and concluded that the assessee has not filed any details in respect thereof. But, it is the claim of the assessee that it has filed necessary details in respect of expenditure incurred by the Director and reimbursed by the company. The facts are contradicting each other. Therefore, we are of the considered view that the issue needs to be re-examined by the Assessing Officer in the light of claim of the assessee. Hence, we set aside the issue to the file of the Assessing Officer and direct him to call necessary inquiries and take decision in accordance with law. Reduction of certain expenses from Work-in-progress while completing the income tax assessment for A.Y. 2010-11 - AO has disallowed certain expenses on the basis of project completion ratio as per which it has disallowed 76.46% of expense for the current financial year and remaining 24.54% has been reduced from Work-in-progress - Held that:- AO has disallowed expenses pertaining to the project completed during the current year and balance amount has been directed to be reduced from the Work-in-progress. No doubt the AO has disallowed certain expenses for current financial year for the reasons stated in the assessment order, but giving directions to reduce the remaining part of expenses while completing the assessment for A.Y. 2010-11 is beyond the scope of the Assessing Officer. Whether a particular expense is allowable or not and it needs to be excluded from the value of Work-in-progress, has to be decided while completing assessment for A.Y. 2010-11. Therefore, we are of the considered view that the Assessing Officer erred in giving directions to reduce remaining part of the expenses from Work-in-progress while completing assessment for A.Y. 2010-11. Hence, we set aside the direction given by the Assessing Officer for A.Y. 2010-11. - Appeal filed by the assessee is partly allowed for statistical purpose.
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