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TMI Blog2014 (9) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Assessee. Aggrieved by the order of CIT(A), Revenue as well as Assessee are now in appeal before us. 4. The grounds raised by the Revenue reads as under:- 1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 38,21,394/- by holding that construction can be continued even after date of completion certificate. 2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance of proportionate interest expenses Rs. 2,10,739/- by holding that the said expense was actually utilized for the business purpose. 5. The effective grounds raised by the Assessee reads as under:- 2.1 The Ld CIT(A) has grievously erred in law and on facts in confirming the long term capital gain on sale of land as worked out by AO at Rs. 2732211. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the long term capital gain of Rs. 27,32,211 as worked out by AO . 3.1 The Ld CIT(A) has grievously erred in law and on facts in confirming the sale price of land as worked out by AO at Rs. 77,76,487. 3.2 That in the facts and circumstances of the case as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that the appellant had received the completion certificate of the Building as early as 7.07.2006 from the competent authority and the appellant could not have expended so much after that. Further, the AO suspected that the appellant resorted to such devise with an intention to set off the Capital gain arised due to the sale of Factory land and building. On the other hand, as mentioned in the above paras, the appellant contended that: i. the appellant had carried out the said work through M/s. Pioneer Enterprise and it has issued bills with complete details as to the nature of work, quantity, rate etc. The purchases of raw material is supported by invoices. The appellant has produced herewith the xerox copy of many of such invoices to prove the purchases in question. The ledger a/c. showing factory building, construction expenses alongwith ledger a/c. of M/s. Pioneer Enterprise is also enclosed herewith. ii. the total construction carried out even as per certificate dated 7.7.2006 of Town Planner, DNH, Silvassa is 792.29 sq. mtr. consisting of ground floor-632.67 sq.mtr., loft-floor-159.62 sq.mtr. The total construction cost as per ledger a/c. enclosed herewith was of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had not doubted the source of payments. It was submitted by the ld. AR that the payments were made through banks and TDS have been made in relevant cases. There is a force in the argument of the appellant that the cost of construction per sq.ft. adopted by the AO was very low. The AO had not brought out on records cogent reasons why the was disallowed when the payments are through banks and TDS have been made. The AO failed to appreciate occupancy certificate issued by the Associate Town Planner. D&HN does not bar the appellant to carry out certain works which does not allow structural changes. It is common practice that certain works such as plastering, colour work, compound wall, interior works etc, are carried out even after occupancy certificate obtained by the assessee. I have also perused the Ledger a/c. of New factory Building. During the year total amount of work done on this building was Rs. 68,08,703/- and the Pioneer Enterprises have raised bills of Rs. 51,55,018/-. The ledger copy accounts details of works done and the payments made thereon. It is also a fact that the payments made to M/s. Pioneer Enterprises were in cheques as seen from the ledger a/c. For disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the same. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) deleted the addition by holding as under:- 9.1 The appellant begs to submit that the impugned action is wholly unjustified both on facts and in law. Firstly, when the AO himself has given a finding that the borrowed funds were utilized for the purpose of inflated expenses in construction of factory building, it cannot be said that the appellant had failed to prove the purpose for which borrowed funds were used. The AO has given contradictory findings and it appears that the matter has been dealt with in a casual manner. Secondly, the appellant has in the preceding paragraph has proved that there was no inflated cost of construction and hence the disallowance of interest on this ground by AO does not remain. Thirdly, it will be noticed from the ledger account of interest expenses (P) that interest has been paid to five parties aggregating to Rs. 3,56,000/- and all these depositors are old with earned forward balance. There is no finding in earlier year that these borrowings were utilized for non-business purposes. The copy of Asstt. order for A.Y.2006-07 Dt,....is enclosed. The only chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the basis of enquiries made found that annual appreciation of at least 20% has taken place every year in the case of land. He thereafter on the basis of area of land (8545.59 sq. mt) and the cost of acquisition (Rs. 45 lacs) worked out the cost of acquisition of Rs. 526.59/- per sq. mt and worked out the sale consideration received on sale of old factory land at Rs. 910 per sq. m. and re-worked the chargeable capital gain at Rs. 27,32,211/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee confirmed the addition made by A.O by holding as under:- 8.2 1 have carefully gone through the assessment order and the submissions made by the ld. AR. The dispute between the AO and the appellant is in the determination of price of the land sold with the factory building during the year. The appellant had not cleared the factual aspects in this regards. From the perusal of the Sale Deeds the following facts are emerged; the appellant had purchased the property i.e. land admeasuring 8545 Sq. Mt. together with construction of 1136.34 Sq. Mt. thereon from M/s. Patel Plast International Ltd. by sale deed dated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to assign more value to the structure than to the land to avoid the LTCG tax on the consideration of the land. It was also evident from the submission of the ld. AR that the property was not sold as on going concern. In that scenario, the new purchaser, in this case M/s. Jalaram Industrial Estate, a Firm, would be more interested in the land than the old factory shed. Thus, the land value should be much more than the old depreciated factory shed. 1 am also in complete disagreement of the valuation factory shed by the Registered valuer at Rs. 41.48,500/- because the total cost of land and building as on 8.05.2003 was only Rs. 45,00,000/-. How can the value of the depreciated shed be Rs. 41,48,500/-. The AO is fully justified that if the value of the Factory Shed can increase many fold then why not the land price? It will be a traversy, if the land value is accepted at Rs. 250/ Sq.Mts. and the Factory Shed at Rs. 650/Sq.Mts. Before me the ld. AR did not furnish the cost of the structure. The AO has maintained the consistency to the extent that no value of the structure was assigned both at the time of purchase and sale. The AO calculated the cost of the land @ Rs. 526.59/ Sq. Mts, ..... 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