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2015 (9) TMI 1110 - ITAT DELHI

2015 (9) TMI 1110 - ITAT DELHI - TMI - Disallowance of Expenditure in respect of approvals and permission and Expenditure on removal of squatters - CIT(A) allowed claim - Held that:- As decided in assesee's own case for AY 2007-08 for the relevant assessment year, it is noticed that the AO has changed his stand just because the assessee has transferred the complete rights in the project as a whole to M/s Purearth Infrastructure Ltd. When a particular method of computation of income of the assess .....

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any interference - Decided in favour of assessee.

Addition made u/s 41(1) - payment to Builders and liability for vacation of squatters allowed in assessment years 2004-05 on accrual basis - Held that:- On identical ground for A.Y. 2007-08 the finding of the Tribunal concluded In regard to the issue of disallowance of interest on the loans outstanding from M/s DCM Employees Welfare Trust, it is noticed that the issue is squarely covered by the decision of the Coordinate Bench of this .....

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nsated for the deficiency by the A.O in recording proper satisfaction. The ld. CIT(A) has restricted the disallowance to an extent of ₹ 9.79 lacs. The ld. CIT(A) fails to appreciate the reasonableness of expenditure that has been disallowed viz-a-viz the exempt income. In the light of the judgment of Maxopp Investments Ltd. vs. CIT (2011 (11) TMI 267 - Delhi High Court ). We, restrict the disallowance to 10.23 lacs as calculated by the assessee. In view of the aforesaid discussion and on t .....

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y the Revenue & Assessee against the order dated 06/07/2012 passed by the ld. CIT(A) s-XIII, New Delhi for A.Y. 2009-10. 2. Grounds of Revenue s appeal are as under: 1. That the CIT(A) erred in disallowing alternate claim made by the appellant on actual payment basis in respect of following items of expenses incurred in relation to real estate project without appreciating that claim had been made by the appellant for the reason that department has not accepted allowability of expenses on acc .....

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that since the department is disputing allow ability of these liabilities on accrual basis in assessment year 2004-05 amounts cannot be included in the taxable income in this year u/s 41(1) of the I.T. Act. 3. That the CIT(A) erred in disallowing an amount of ₹ 11.79 lacs on account of administrative expenses u/s 14A of the Income Tax Act as against disallowance made by the appellant company of ₹ 2.00 lacs in its return of income. 4. That the CIT(A) erred in upholding addition on acc .....

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ime herein after. Grounds of Assessee s appeal are as under: 1. Whether the ld. CIT(A) on the facts and circumstances of the case and in law is correct in deleting the deduction of ₹ 2,94,81,000/- on account of interest payable on accrual basis to MCD? 2. Whether the ld. CIT(A) on the facts and circumstances of the case and in law is correct in deleting the disallowance of ₹ 22,32,000/- made by the AO on account of interest on interest free loans? 3. Whether the ld. CIT(A) on the fac .....

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above at the time of the hearing. 3. We first deal with the appeal filed by the Revenue in: ITA No. 4467/Del/2012. Ground no. 1: Whether the CIT(A) erred in disallowing alternate claim made by the appellant on actual payment basis in respect of following items of expenses incurred in relation to real estate project without appreciating that claim had been made by the appellant for the reason that department has not accepted allowability of expenses on accrual basis and appeals in respect thereof .....

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ound for A.Y. 2007-08 in ITA No. 1895/Del/2012 which has been produced before us. The said order for A.Y. 2007-08 has adjudicated the matter relying upon the order for A.Y. 2006-07 as below: 2.1 It is the common case of both the parties that the grounds stand covered in favour of the assessee company by the order of the Tribunal in ITA No. 1983/Del/09 for A.Y. 2005-06 dated 17.11.2009, a copy of which has been placed in the paper book on page nos. C-3 to C-10. In this order, reliance has been pl .....

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the AO as also the issue of disallowance of flyover cost of ₹ 13.50 crores and the issue of interest payable to MCD in respect of outstanding flyover cost, it is noticed that for the assessment year 1993-94 to 1996-97 the revenue has included the income on the sale of property rights on the entering into agreement with the buyers and the expenses on account of land and development incurred by the assessee has been allowed in proportion to the area sold but applying the matching principle. .....

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sessee, just because the total rights in the project has been transferred, such method cannot be changed as by the change of the method, the expenses otherwise allowable to the assessee, is now being denied which is not a permissible act. In these circumstances, we are of the view that the action of the CIT(A) in directing the AO to allow the deduction of the said expenses is on right footing and do not call any interference. 6. The facts and circumstances of the issue being identical, we are al .....

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lities on accrual basis in assessment year 2004-05 amounts cannot be included in the taxable income in this year u/s 41(1) of the I.T. Act. 8. The Tribunal has dealt with this issue in the assessee s own case and the same stands covered in favour of the assessee by the orders of Tribunal in the earlier assessment years annexed to the paper book as under; A.Y. 2004-05 at page 69, A.Y. 2005-06 at page 74, A.Y. 2006-07 at page 82 A.Y. 2007-08 at pages 13, 14 & 17 9. The coordinate Bench has pas .....

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Bench of this Tribunal in the assessee s own case for the A.Y. 2003-04 referred to supra and consequently respectfully following the decision of the Coordinate Bench of this Tribunal in the assessee s own case for the A.Y. 2003-04, the findings of the ld. CIT(A) on this issue stand upheld. 10. The facts and circumstances of the issue being identical, we are also inclined to follow the orders Tribunal in the preceding assessment years in assessee s own case. 11. Accordingly ground no. 1 & 2 o .....

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see as well as Revenue is in appeal (being ground no.3 ) before us on this issue. Facts germane to deal with this issue are as under: 15. On perusal of assessment records it is observed that the assessee had made certain investments, and it had received dividend income of ₹ 60,088/- during the year under consideration which was claimed as exempt u/s 10(34) of the Act. The assessee in its computation of income had suo moto disallowed an amount of ₹ 10,23,000/- as per Rule 8D, calculat .....

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sets Disallowance + AX B/C 751.21 X 6583.5 34951.22 iii Aggregate of opening & closing value of investment (Average value of investment)1/2% of above as per Rule 8D 6583.5 X 0.5% 32.91 Total disallowance (Average of (i), (ii) & (iii) 176.41 Already added back in the computation of income by the assessee 10.23 ADDITION ON ACCOUNT OF SEC. 14A R/w Rule 8D 166.18 16. It is argued that out of 751.21 lacs, interest expenditure to an extent of 681.25 lacs is directly attributable to loans, whic .....

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investments, as no funds had been invested by the appellant for the allotment of above shares. 17. In respect of disallowance of administrative expenses the appellant submits that it had received dividend income during the year to an extent of ₹ 60,088/- only, and that there has been no transaction of purchase and sale of shares during the relevant year under consideration. Therefore, no disallowance on account of administrative expenses is warranted. In any case, it noticed that the appel .....

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red disallowance on account of interest amounting to ₹ 8.23 lacs and has further offered disallowance on account of administrative expenses to an extent of ₹ 2 lacs. Thus, the total disallowance u/s 14A as offered by the assessee amount to ₹ 10.23 lacs. 20. It is further observed that as per the scheme of restructuring and arrangement approved by the Hon ble Delhi High Court, the assets and liabilities(including loans) were transferred to a new company and shares were allotted .....

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s as to how the claim of expenditure in relation to tax free income has not been correctly made by the assessee as envisaged under section 14A(2). The ld AO has mechanically invoked Rule 8D. Sub-section (2) of section 14A of the Act provides the manner in which the AO is to determine the amount of expenditure incurred in relation to income, which does not form part of the total income. 22. We find that the AO has not established any nexus between the investments made and the expenditure incurred .....

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the exempt income received by the assessee therein. The Hon ble coordinate bench has recorded in para 5 therein that the assessee had incurred certain expenses which was attributable to the earning of exempt income. However in the facts of the present case before us, the assessee has suo mote disallowed expenses under section 14A of the Act. The Ld. D.R, contended that in the event there are any deficiency left by the A.O in recording proper satisfaction, the same can be made good by the Ld. CI .....

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