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2015 (9) TMI 1301 - ITAT DELHI

2015 (9) TMI 1301 - ITAT DELHI - TMI - Disallowance of legal & Professional Expenses - CIT(A) deleted the addition - Held that:- We respectfully note the ratio of the judgement of Hon’ble Supreme Court in the case of Ashish Plastic Industries vs ACIT (2015 (4) TMI 16 - SUPREME COURT) wherein it was held that if the appellant assessee is able to prove that the tax on the penalty from sale of material has been paid by the payee, then the benefit thereof should be extended to the appellant assessee .....

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ew taken by the first appellate authority finds support from the ratio of the judgment of the Hon’ble Apex Court in the case of Ashish Plastic (supra) hence the legal preposition adopted and followed by the CIT(A) is correct and uphold the same. However, we find it appropriate that this issue requires examination and verification at the end of the AO as to whether the payee recipient Co. M/S DLF Home Developers Ltd. had paid tax on the receipts. The issue is restored to the file of the AO for li .....

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ion method, the element of cost cannot change and once IDC is accepted to be an element of cost, then whichever method one applies, it has to be allowed as a cost of the project for working out the true profit and loss account in respect thereof. Under above noted facts and circumstances, we are inclined to hold that the AO was not justified in disallowing the IDC cost incurred during the year for carrying out facilities like roads, sewage, lighting, park, water supply line etc. The Budgeted IDC .....

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he facts and circumstances and in law position for taking a deviated or different view - Decided against revenue.

Disallowance u/s 40(a)(ia) - CIT(A) deleted the addition - Held that:- We are in agreement with the view taken by the CIT(A) that when it is established that the brokerage expenses of ₹ 1,15,90,431 have actually been claimed by the assessee in the profit and loss account and the same amount was disallowed in the computation of income on the ground that the TDS was no .....

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4.12.2012 in Appeal No. 68/12-13 for AY 2008-09. 2. Ground no. 4 of the revenue being general requires no adjudication. Remaining grounds of the revenue read as under:- 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified In deleting the disallowance to ₹ 43,26,000/- on a/c of disallowance of legal & Professional Expenses made by the Assessing Officer? 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in .....

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d. Ld. DR has also drawn our attention towards assessment order para 4.5 at page 3 and submitted that it was observed by the AO that the assessee has debited an amount of ₹ 43,26,000 towards professional expenses in the name of M/s DLF Home Developers Ltd. under the head of architectural and consultancy fee who is also the holding company of the assessee company having 51% share of the assessee company. Ld. DR further submitted that the amount of professional charges claimed in respect of .....

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drawn our attention towards assessee s paper book page no. 28 and 29 and submitted that the assessee submitted copies of the bills raised by payee M/s DLF Home Developers Ltd. along with details of architectural and consultancy services received by the and fees paid in this regard. 4. On careful consideration of above submissions, at the very outset, we respectfully note the ratio of the judgement of Hon ble Supreme Court in the case of Ashish Plastic Industries vs ACIT (supra) wherein it was h .....

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was no case of evasion of tax or diversion of income by the payer assessee company. On careful consideration of aforesaid observations and conclusion of the CIT(A), we are of the opinion that the view taken by the first appellate authority finds support from the ratio of the judgment of the Hon ble Apex Court in the case of Ashish Plastic (supra) hence the legal preposition adopted and followed by the CIT(A) is correct and uphold the same. However, we find it appropriate that this issue require .....

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in para 5.1 to 5.7 at pages 4 & 5 and submitted that the AO was correct in making disallowance of internal development cost (IDC) expenses by holding that in absence of any supporting evidence, it could not be observed whether the expenses claimed by the assessee under the head of external development cost and internal development cost in the POCM chart were actually incurred or not. Ld. DR further contended that the assessee in its P&L account has debited only the amount of ₹ 80,5 .....

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rted the impugned order and submitted that the disallowance made by the AO without any basis was rightly deleted by the CIT(A) as the IDC has to be charged from the customers. Ld. AR has also drawn our attention towards order of ITAT B Bench Delhi in assessee s group company s case in ITA No. 3561/D/2013 for AY 2005-06 in the case of DCIT vs DLF Limited and submitted that when the assessee is claiming deduction in respect of internal development cost/expenditure of the amount in proportion to th .....

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a no. 8 and 9 of the order of the Tribunal (supra) in assessee s group company s case and submitted that in the subsequent assessment year, the claim of IDC has been allowed to the assessee by the AO. Ld. DR placed a rejoinder and submitted that expenses on infrastructure development whether internal or external cannot be allowed as revenue expenditure. However, ld. DR fairly accepted that in the case of DCIT vs DLF Limited (supra), the Tribunal allowed internal development cost in proportion to .....

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,04,80,000 and the assessee has debited only the amount of ₹ 80,53,742 towards internal development cost (IDC). 6. On careful consideration of above submissions of both the parties, firstly we note that in the similar set of facts and circumstances in the case of assessee s group company i.e. DCIT vs DLF Ltd. (supra), the Tribunal held as under:- 3. The relevant facts are that the assessee, is engaged in the business of real estate and development. During the year the Assessing Officer mad .....

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nversion Charges, Road Work etc. The Ld. CIT (A) has deleted theses disallowance which has been questioned by the Revenue in this ground. 4. At the out set, the Ld. AR submitted that the issue raised is fully covered by the decision of the Tribunal in the case of assessee itself for the assessment years 1994-95, 2000-01, 2002- 03 & 2004-05 under the similar set of facts and circumstances. 5. The Ld. Departmental Representative on the other hand basically placed reliance on the assessment ord .....

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e Assessing Officer had disallowed the claimed expenditure with this observation that out of the total development expenditure incurred on internal development, expenditure on the maintenance, billing services could not be treated as expenses for construction and development. We find that in the above cited assessment years an identical issue was raised, wherein Assessing Officer was directed to delete such disallowance with further direction to consider the same as part of work-in-progress. 8. .....

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llant s own case for earlier years. It is seen that this issue is covered in favour of the appellant by the orders of Hon ble ITAT in appellant s own case for AY 1994-95, 2000-2001 to 2002-03 and 2004-05. It is observed that the Assessing Officer noted that the appellant is claiming deduction in respect of internal development expenditure of the amount in proportion to the area conveyanced in respect of properties during the year. The appellant was asked to give details of such expenditure incur .....

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Officer had been directed to delete such disallowance and the Assessing Officer was directed to consider the same as part of work in progress. The Hon ble ITAT B Bench vide its recent order dated 09.04.2009 in ITA No.93/Del/2008 for A. Y 2004-05 in appellant s own case decided this issue in favour of the appellant. Relevant extracts from the said order is reproduced as under: 5. After considering rival submissions, we find that the issue has been decided in favour of the assessee by the Tribuna .....

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e control of Director, Town & Country Planning, Haryana. The assessee debits on yearly basis all direct expenses for development of this colony, into the work-in progress account. On sale of the land or units, it credits work-inprogress: account by 30% of sale value and debits the same to profit & loss account as internal development charges. This, it has done consistently, right from 1981 till date. The CIT (A) has discussed this issue in para 24 of page 23 onwards. His finding given at .....

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he sale booked in the year. Therefore, method of accounting followed by the assessee was fair and correct and in accordance with HDR UA Act. It is only when the project comes to a close, that the closing entries would need to be put to the balance, if any, in the work-in progress account. 13.1 We also find that the finding of CIT(A) that this is not the annual expenditure, is actually incorrect. It is only expenditure which is written off, but what percentage thereof is the question, - all of it .....

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it agitated upon in the execution proceedings or in appeals in subsequent years. This has not resulted in any profit to the Revenue, but has only increased the administrative work, both for the Revenue, as well as, for the assessee. This is evident from the fact that, in remand proceedings, the actual income from business (loss) has been increased to ₹ 79,82,5161-. The relevant para is last sub para of para 3 at page no.7 of the AO s order dated 24.03.2000 which is reproduced hereunder: Th .....

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ion basis as also the revised working of the Trading Account as per the findings of the learned CIT(A)-23 for Asstt. Year 1994-95. According to the revised working, the G.P. will go down by a figure of ₹ 79,82,516/- and the same is reduced from the, total income of the assessee company. A copy of the revised trading account duly signed by the assessee is enclosed herewith. " Therefore, this tinkering of the method of accounting of the assessee has not resulted in any gain to the Reven .....

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145 of the Act is uncalled for, the book results are to be accepted since there is no dispute to the income offered and expenses claimed, these directions given by CIT(A), in his order, are incorrect and the order of the AD and the CIT, Delhi (Central), New Delhi, on this ground for applying section 145 of the Act needs to be over-ruled and the return of the assessee on this point needs to be restored The income of the assessee, as returned, be accepted as such." 6. In view of the above, l .....

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the first appellate order on the issue is compressive and reasoned one, hence, we are not inclined to interfere therewith especially when there is no change in the facts in the assessee's case in comparison to above cited assessment years. The ground no.1 is accordingly rejected. 7. In view of above observations of the Tribunal, we note that the facts and circumstances of the present case are similar and the CIT(A) was right in holding that the assessee has incurred impugned amount on IDC a .....

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tances, we are inclined to hold that the AO was not justified in disallowing the IDC cost incurred during the year for carrying out facilities like roads, sewage, lighting, park, water supply line etc. The Budgeted IDC was a part of cost and the same has to be accepted for recognizing revenue as per POCM method which was consistently accepted by the department in the assessee s case. We cannot ignore that similar claim of the assessee group company in similar facts and circumstances was accepted .....

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nd no. 2 of the revenue being devoid of merits is dismissed. Ground No.3 8. We have heard arguments of both the parties inter alia the impugned order of the CIT(A) and relevant part of assessment order on this issue. 9. Ld. DR supported the order of the AO and submitted that the CIT(A) was not justified in granting relief to the assessee and deleting the addition made by the AO u/s 40(a)(ia) of the Act. Ld. AR supporting the conclusion of the CIT(A) submitted that in para 8.3 at page 14 of the i .....

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at the CIT(A) granted relief for the assessee with following conclusion and observations:- 8.2 I have considered the submission of the appellant and observation of the Assessing Officer. It is seen that Assessing Officer has disallowed brokerage amount of ₹ 10,00,000/- on the ground that appellant has not disallowed the brokerage amount of Rs.l,15,90,431/-and has disallowed only ₹ 1,05,90,431/-of the brokerage claimed in the computation of income. This disallowance has been made by t .....

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