TMI Blog2015 (12) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of assessee in part. Disallowance of the indexed cost of expenses - CIT(A) has confirmed the action of the AO by holding that the assessee has failed to establish that the expenditure was incurred on land and that it has resulted in any improvement of the property - Held that:- The entire expenditure is claimed to have been incurred in cash. However, the assessee has not produced any bills or details of work as well as parties to whom the payment was made. What was produced by the assessee were the self made vouchers without any confirmation from the other party. It is pertinent to note that the assessee companies are in the business of development of the properties and the joint development agreement were entered into between the parties in connection with their business activities. The assessee were to get 13% of the developed property and the income from the sale the developed property would be the business income of the assessee. Therefore, any activity under the Joint Development Agreement was in the nature of business activity of the assessee. The expenditure incurred in pursuant to or as an obligation under the Joint Development Agreement can be claimed as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment vide order dated 31/2/2010, the AO made addition on account of full value consideration u/s 50C of the Income-tax Act apart from the addition on account of cost of acquisition and cost of improvement of asset while computing the long term capital gain. The assessee challenged the action of the AO before the CIT(A) who has granted part relief to the assessee by deleting the addition made on account of invoking sec. 50C of the Income-tax Act. However, the CIT(A) has confirmed the addition made by the AO in respect of the cost of acquisition and cost of improvement of the property. The Revenue has not challenged the order of the CIT(A) so far as the relief was granted by deleting the addition made on account of full value consideration u/s 50C. Thus, the assessee has raised the following grounds before us. 1) The order of the learned CIT(A), is so far as it is prejudicial to the interests of the appellant, is against law, weight evidence and probabilities of the case. 2) The learned CIT(A) erred in confirming the disallowance of partial cost of acquisition being delayed payments made to ND Patel of a sum of ₹ 3,45,000/-, as she failed to appreciate that the said sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant prays that the appeal be allowed. 4. Ground No.1 is general in nature and does not require any specific adjudication. 5. Ground No.2 is regarding disallowance of cost of improvement of ₹ 1,25,78,425/-. The assessee has claimed the cost of acquisition as well as cost of improvement of the property at ₹ 1,32,78,425/-. It was aggregated cost incurred under different heads. However the period starting from financial year 1995-96 till 2007-08, the assessee shown these cost under the project investment and are being carry forward every year. During the course of asst. proceedings, the AO asked the assessee to submit complete details of this cost. In reply, the assessee filed a chart showing project investment which adds up to ₹ 1,32,78,425/- till the financial year 2007-08. The AO found that except the amount of ₹ 1 lakh incurred had shown settlement, the other expenses are shown administrative expenses such as audit fee, professional charges, office rent, telecommunication and other misc. expenses. Thus, the AO was of the view that all these general administrative expenses has nothing to do with the improvement of the land in question. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sake of ready reference we reproduce the details comprising the item of the expenditure and grand total of each expenditure for all the years as under: Item of Expenditure Grand Total Particulars 23,834.00 Audit Fees 7,274.00 Bank charges 52,993.00 Bank Interest on OD 500.00 Cap in Clsd Part Firm W/off (TNV Hsg) 250,110.00 Construction of Road 58,350.90 Conveyances 1,052,055.00 Depreciation (Fun Fix) 258,430.00 Director Remuneration 27,984.40 Entertainment Charges 30,410.00 Filing Fees 9,640.00 Finance Charges 13,200.00 Furniture Shifting Charges 86,567.00 Hire Charges 5,421.55 Insurance Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, so far as the claim of the assessee pertaining to the expenditure for removing the encumbrance or preserving the asset, the same has already been allowed by the AO. The decision relied upon by the assessee are relevant only to the issue of allowability of the expenditure incurred for removing hurdles of transfer of the property and the interest paid by the assessee on amount borrowed for the purchase of the property. One of the expenditure has already been allowed by the AO, therefore, we are of the view that the other than the interest expenditure no other expenditure can be allowed either as cost of the acquisition or cost of improvement of the land as per the provision of sec. 48 of the Act. As regards interest expenditure, the same is allowable as cost of acquisition if paid on the amount used for acquisition of the land in question. Further the interest paid for the period prior to the joint development agreement would be allowable as cost of the acquisition. Accordingly, the AO is directed to verify and determine the interest paid on the borrowed funds used for acquisition of the land in question up to the date of Development agreement and allowed the same as cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the action of the AO before the CIT(A) but could not succeed. The CIT(A) has confirmed the action of the AO by holding that the assessee has failed to establish that the expenditure was incurred on land and that it has resulted in any improvement of the property. 14. Before us, the learned AR of the assessee submitted that the vouchers were produced on 24/6/2008 which is after the survey conducted and much before the assessment proceedings. Therefore genuineness of the expenses cannot be doubted. He has submitted that the entire expenditure was recorded in the books of account and capitalized being part of the work-in progress of the project. The assessee did not claim the said amount of expenditure until the land was sold the other parties to the joint development agreement have corroborated the expenditure incurred by the assessee. The assessee was the owner of the land and all risk and reward belong to assessee. Thus, the learned AR has submitted that the expenditure is an allowable claim. He has referred clause 17 and 18 of Joint Development Agreement at page 187 of the paper book and submitted that the assessee was at receiving end and under the obligation to incur the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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