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2023 (6) TMI 255 - AT - Income TaxTreatment to sale proceeds of land TDR - whether be apart of the project undertaken or be treated independently of the total project for the computation of the income? - HELD THAT:- As assessee has entered into an agreement to develop the slum rehabilitation scheme as per which assessee has acquired the land from M/s. Bombay Industrial Corporation and entered into multipartite agreement with SRA and different tenements. No doubt assessee has transferred the land to SRA and surrendered all the rights over the property.Assessee had a basic obligation to construct the building and receive TDR on the portion of land on which the construction is completed in the ratio of 1:1 on TDR and construction TDR in the ratio of 1:1.33. It is fact on record that the construction agreement received by the assessee is to construct the building as per the agreed terms only when assessee completes the constructions assessee gets the rights of TDR, that means assessee gets the TDR rights only when it completes the construction. We observed that assessee is following the project completion method which is recognized method of accounting. CIT(A) came to the conclusion that the sale proceeds of land TDR is part of the project undertaken and cannot be treated independently of the total project for the computation of the income by relying on the decision of the CIT v. Chembur Trading Corporation [2011 (9) TMI 1241 - BOMBAY HIGH COURT] - Accordingly, he gave a direction to the Assessing Officer to accept the method of accounting followed by the assessee. As observed in the case of CIT v. Chembur Trading Corporation (supra) has held that in this case method of accounting followed by the assessee is completion of project and has offered the income received on sale of TDR in the subsequent assessment year and the same has been duly assessed. In these circumstances sustaining the addition in the assessment year in question does not arise. We are inclined to accept the findings of the Ld.CIT(A) and accordingly, grounds raised by the revenue is dismissed. Proposed addition of notional interest - As assessee has utilized the total interest bearing funds only for the purpose of business purposes which is more than interest bearing funds borrowed by the assessee. When there is a mixed funds available to the assessee, there is legal presumption that the assessee has utilized the interest free funds for the purpose of financing non business activities as held in the case of CIT v. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT]. Therefore, we are inclined to accept the findings of the Ld.CIT(A) in deleting the proposed addition of notional interest. Accordingly, the ground raised by the revenue is dismissed.
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