TMI Blog2013 (11) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... e units are sold or not - In other words, profit is being estimated on unsold stock also - the method followed by the assessee company cannot be called as an unreasonable method and any change in the method would only be tax neutral - Thus there was no infirmity in the order of the CIT (A) as the same has been passed by the CIT (A) after analyzing and examining the issue elaborately. Disallowance of Reimbursed Expenditure u/s 40(a)(ia) of Income Tax Act, 1961 – Held that:- In case of reimbursement of common expenses incurred by the parent company for the benefit of group concerns, there is no need to deduct tax at source, and disallowance could not be made by invoking the provisions of S.40(a)(ia) – Following Linklaters LLP V/s. ITO [2010 (7) TMI 535 - ITAT, MUMBAI ] – from the details of the expenditure incurred, which were reimbursed by the assessee to M/s. Ambience Properties P. Ltd., it is seen that the expenses related to various items like office rent, electricity charges, salaries, staff welfare, conveyance, telephone charges, vehicle maintenance, printing and stationery, computer expenses etc. Therefore, the expenditure incurred cannot be treated as rent alone to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the sale of flats exceeded 30% the assessee recognized revenue on this project for the assessment year under dispute. As per the working sheet filed by the assessee, the stage of completion of project was at 41.83% considering the amount of cost incurred and projected cost as on 31.03.2006. The assessee has recognized revenue at Rs.7,07,92,872/- being 97.75% of the sales of which booking is done. 5. The Assessing Officer was of the view that since the assessee followed percentage completion method for recognizing revenue on fulfilling conditions of 30% of incurring cost of project and booking sales, the assessee was supposed to recognize the revenue at 41.83% of the projected sales of Rs.17,31,27,262/-. According to this percentage of revenue recognition at 41.83%, the revenue to be considered for the assessment year under consideration amounted to Rs.7,24,24,359/- as against the revenue considered by the assessee at Rs.7,07,92,872/-. Accordingly, the Assessing Officer was of the opinion that the assessee had understated the revenue to the extent of differential amount of Rs.16,31,487. On this basis, the Assessing Officer asked the assessee to explain why the differential amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting for recognition of revenue is regularly employed by the assessee and other group companies. In support of such contention, the assessee filed copy of the order passed by the CIT(A) in the case of another group concern, namely, M/s. Omega Shelters P. Ltd. The CIT(A), after analyzing the appeal order in the case of M/s. Omega Shelters P. Ltd., found that many reputed companies are recognizing revenue from real estate development, on the basis of percentage completion method and fixing a minimum thresh-hold limit of actual cost incurred. Hence, the method of accounting followed by the assessee is not unusual and in fact in line with the method of accounting followed by reputed real estate companies. Therefore, the CIT(A) held that the Assessing Officer cannot reject the accounting method followed by the assessee without a concrete finding that by adopting such method, the assessee has suppressed/ under- estimated its income. The CIT(A) further found that the order of the first appellate authority in the case of group concern, M/s. Omega Shelters P. Ltd. allowing the appeal of the assessee involving similar dispute, was confirmed by the Income-tax Appellate Tribunal Hyderabad v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 2011, held in the following manner- "8. We have heard the learned representatives of the parties and perused the record as well as gone through the orders of the authorities below. The assessing officer in his report to the CIT (A) clearly mentioned that the assessment was not based on the seized material but, it is based on only on wrong accounting standards followed by the assessee company in recognizing the revenue and hence, the only issue is to be adjudicated upon in this appeal is whether the assessing officer is right in rejecting the accounting method regularly employed by the assessee and substituting the same with accounting method as per AS-7 and computation of profit based on the same. The assessee contends that the method of accounting for recognition of revenue is regularly employed by the assessee and other group companies and to this effect the assessee had filed copies of the statement of accounts of some of the group companies where assessments were completed under section 143(3) of the Act by the assessing officers. The categorical finding of the CIT (A) is that the assessing officer simply by rejecting the method of accounting followed by the assessee is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceeding, the Assessing Officer noticed that the assessee has utilised the office accommodation and other infrastructure facility provided by its sister concern M/s. Ambience Properties Ltd. for which the assessee has paid an amount of Rs.15 lakhs. In the books of account, the assessee has shown it as reimbursement of expenses. The Assessing Officer, after examining the details of expenses held the payments to be in the nature of rents, requiring deduction of tax under s.194I of the Act. As the assessee has not deducted any tax, the Assessing Officer disallowed the amount of Rs.15 lakhs under S.40(a)(ia) of the Act. The assessee challenged the disallowance before the CIT(A). 12. It was contended before the CIT(A) that M/s. Ambience Properties Ltd. which is the flagship company incurs expenses on establishment etc., which it subsequently through debit advice, allocates to other group companies. It was contended that the amount of Rs.15 lakhs is not only on account of rent for the common premises but also includes other expenses like electricity, salaries, staff welfare, conveyance, vehicle maintenance, etc. In support of such contention, the assessee submitted a chart showing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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