TMI Blog2010 (12) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... ena, CIT(DR) and Peeyush Sankar, DR, for the Respondent ORDER A.K. Garodia: In this bunch of four appeals, there are cross appeals filed by the assessee and revenue which are directed against two separate orders of ld. CIT(A) - Ghaziabad both dated 29.3.10 for AY 2004-05 and 2006-07. Since some issue involved are common, all these appeals were heard together and are being disposed off by the common order for the sake of convenience. 2. The grounds raised by the revenue in both years are identical and hence we reproduce the grounds raised by the revenue in AY 04-05 i.e. ITA No.2739/D/10- 1. "Whether on the facts and circumstances of the case and as per law the ld. CIT(A) was legally correct in upholding the deduction u/s 80IB of the I.T. Act when it was clearly established that the construction of the projects started before 1.10.1998 infringing the provisions of section stated above. 2. The order of the ld. CIT(A) deserves to be set aside and the order of the AO be restored." 3. Ld. DR of the revenue supported the assessment orders, whereas it was submitted by ld. AR of the assessee that this issue is covered in favour of the assessee by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, contract for construction of all the four projects of Shipra Riviera was awarded only after 30.9.98. 26. The issue with regard to commencement of development and construction of housing project with reference to sec. 80IB(10) has been elaborately dealt with by the ITAT Pune Bench in the case of Nirmati Constructions vs. DCIT - 95 TTJ 1117 wherein it was held that activities like approval of plan, marketing for booking the residential units, availing of finance, receipts of advance booking money would not be construed to mean commencement of development and construction of housing project. It was also held that merely on the plea that assessee has incurred expenditure on cleaning of land and towards puja prior to 1.10.98 will not take away assessee's right to claim deduction u/s 80IB(10) which he is entitled in respect of housing that these expenses do not indicate that development and construction of housing project had been commenced before 1.10.98. Expenses were incurred on cleaning of land so that correct measurement of the land could be done. The issue with regard to expenditure on leveling of land, approval of plan, marketing of booking the residential units, receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead in connection with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous orders prejudicial to the interest of the revenue unless the view taken by the ITO is unsustainable in law. An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law passes some order, the same cannot be branded as erroneous by the Commissioner simply because he is of some other view or in the opinion of the Commissioner the order passed by the AO is week. This section does not visualize a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous causing prejudice to the interest of revenue. The power of suo moto revision under sub-s. (1) of s. 263 is in the nature of supervisory jurisdiction and the same can be exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects, therefore, there is no merit in this allegation of CIT. That the CIT was likewise not correct in holding the assessment order to be erroneous and prejudicial to the interest of the revenue so far as it related to the claim of expenses debited in the profit and loss account as cost of construction. The adverse observations made and findings recorded are wholly incorrect and without any basis. The CIT has failed to appreciate that the assessee maintained full and complete details in respect of expenses incurred on each project separately. Further, the cost of construction in respect of each project had been debited in accordance with the settled law. The CIT without pointing out any defect in the books of account or in the method of accounting regularly followed by the assessee and accepted by the department, was not correct in drawing a wrong inference. Accordingly, we set aside the order passed u/s 263 and allow assesse's appeal for the same. Assessee's appeal for AY 1999-00 is allowed with respect to exemption of income u/s 80IA(4F). After going through the accounting version of the assessee duly supported by audit report, the CIT(A) held that construction and development ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used for commercial purposes. It is submitted that the relevant pages of GDA broacher is available on pages 4 to 6 of the paper book. Our attention was drawn to page no. 6 of the paper book where it has been specified that maximum 5% of total project area can be used for shopping purposes. It is submitted that in spite of this contention of the assessee, there is no adverse finding recorded by ld. AR that these contentions of the assessee are not correct. Moreover, since the project was approved by GDA, it has to be accepted that the shopping area in the assessee's project was in conformity with Building Construction and Development Rules, 2000 as per GDA broacher available in paper book and hence, the same was below 5%. It was submitted that under this factual position, the issue involved is covered in favour of the assessee by the decision of Spl. Bench of the Tribunal rendered in the case of Brahma Associates vs. JCIT and 30 SOT 155 (Pune) (SB). Our attention was drawn to para no. 113 and 114 of the decision of the Spl. Bench of the Tribunal. Ld. DR of the revenue supported the orders of the authorities below. 10. We have considered the rival submissions, perused the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no enabling provisions so far as allocation of profits into profits relatable to residential units and commercial units are concerned. We have noted that section 80IB(10) categorically refers to the "profits derived in the previous year, relevant to any assessment year, from such housing project". What is deductible is 'profit of the housing project', and not the profit attributable to the residential units". Once, therefore, we hold that the project in question is a housing project, entire profits of the housing project are deductible u/s 80IB(10). The question of proportionate deduction is, therefore, not at all relevant in this context." 11. In the same decision of the Spl. Bench of the Tribunal, it was also held that if the percentage of residential units in the housing project is less than 90% then such residential unit segment has to be treated on a stand alone basis for eligibility to deduction u/s 80IB(10) and the eligibility of such deduction can only be for the profit which are in respect of residential units segment of the overall project but in the present case, we have noted that it was the contention of the assessee before the AO as well as before ld. CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance should be deleted. 14. As against this ld. DR of the revenue supported the orders of the authorities below. 15. We have considered the rival submissions and perused the material on record and have gone through the orders of the authorities below. Regarding three disallowance under the head "charity and donation", prior period expenses and interest on TDS (UPTT) total amount Rs.85419/-, we find that this amount was added by the assessee in its computation of total income and hence to this extent, the disallowance made by the AO is justified and, therefore, upheld. Regarding the fourth disallowance of Rs.25,784/- on account of membership fees, we find that this disallowance has been made by the AO by making observation in para no. 15 of the assessment order that this amount is not expended wholly and exclusively for the purpose of business but no reason has been given by the AO for making this observation. The details of this expanse is available on pages 10 and 11 of the paper book as per which payment of Rs.20,000/- was made by way of cheque to NAREDCO on account of annual subscription for the year 03-04. It is submitted by the assessee in the synopsis filed before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10%) of Rs.1,47,492.00 on the ground of PROBABILITIES of personal use of Car. An assessment can not be framed on Probabilities and Suspicion. No show cause notice was issued before making addition. The addition is liable to be struck down. Moreover the same ahs also been considered in Individual Case of Sh. Mohit Singh for the AY 04-05. In the individual case of Sh. Mohit Singh he himself as disclosed an amount of Rs.26,400.00 in revised return of income filed of 16.2.05 as perquisite value of car provided to him by his employer company i.e. M/s Shipra Estate Ltd. A figure cannot be assessed twice first in the hands of the company and again in the hands of individual who is the Managing Director of the Company." 18. It is submitted by the AR of the assessee that this issue is covered in favour of the assessee by the judgment of Hon'ble Gujarat High Court rendered in the case of Saya Ji Iron and Engineering Company as 253 ITR 749. Ld. DR of the revenue supported the orders of the authorities below. 19. We have considered the rival submissions and perused the material available on record and have gone through the orders of the authorities below. We find that it has been noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of loss on sale of two cottages, it was submitted by ld. AR of the assessee that two cottages were sold in Kanchenjunga Apartments and full details were submitted before AO regarding sale proceeds of these two cottages along with their cost. It is also submitted that one cottage was sold for Rs.5.65 lakhs to Sh. Gaurav Jaiswal and Saurav Jaiswal being cottage no. C-17 and the second cottage was sold to Sh. Alok Sharma, cottage no. C-7 for Rs.24.75 lakhs total Rs.30.40 lakh. The cost of construction of these cottages are Rs.1101079/- for C- 17 and Rs.2289197/- for C-7 total Rs.3390276/-. For the sale of first cottage i.e. C-17, there was loss whereas for the second cottage i.e. C-7, there is a small profit and it is not the case that the AO had disallowed the entire loss on sale of C-17 which is Rs.536079/-. The AO had disallowed the net loss of Rs.350276/- after set off of profit of Rs.185803/- in respect of sale of the second cottage i.e. C-7. It is submitted that such a disallowance by the AO is not justified in the absence of any adverse material having been brought on record by him to suggest that the sale price declared by the assessee in respect of cottage no. C-17 is not cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remarks. The only objection of the AO is that sale of the cottages is below the cost of construction. We are not inclined to accept this reasoning of the AO in the absence of any adverse finding by him regarding reporting of lesser amount of sale proceeds compared to actual sale proceeds. The AO himself has noted that addresses of the buyers are furnished by the assessee and no effort was made by him to make enquiry from the buyer. No other adverse material has been brought on record by the AO and hence, we are of the considered opinion that such a disallowance on a general basis is not justified. We, therefore, delete the same. 27. Regarding the second grievance of the assessee i.e. regarding disallowance of Rs.162169/- being interest on car loan and depreciation on car, we find that the AO has made disallowance of Rs.19017/- on account of interest paid by the assessee on car loan taken from bank in respect of one Tavera Car. It is noted by the AO in para no. 3 of the assessment order that this one car was purchased for Rs.694254/- in the name of the Managing Director Sh. Mohit Singh. It is held by the AO that since the car is not in the name of the assessee company and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot made available. For one decision, even citation is not given and one more citation i.e. 38 BCAJ 579 is also not valid because this journal does not report full decision. The judgment cited being rendered in the case of Crompton Engg. Co. (supra) is not relevant because facts of that case are different. 29. The third issue is regarding disallowance made by the AO of Rs.1 lakh by invoking the provisions of sec. 40(a)(ia) on this basis that TDS was not deducted by the assessee from this payment of Rs.1 lakh made on account of payment of advertisement. It is submitted that such a payment is not covered by any section of I.T. Act regarding requirement of TDS in chapter XVII of the I.T. Act. As against this, it is submitted by ld. DR of the revenue that it is noted by the ld. CIT(A) in para no. 7 of his order that the assessee had spent a sum of Rs.1 lakh for the stall taken in a seminar organized by National real estate development council at Habitat Centre, New Delhi. It is submitted by ld. DR of the revenue that this payment is in the nature of payment of rent and hence, TDS was deductible u/s 194I. He supported the orders of the authorities below. 30. We have considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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