9911796707
TMI Blog2015 (12) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... orney was also executed in respect of the said land, that the plot of land was reserved for construction of school and play ground, that approval in respect of the said property was received on 10. 1. 2007 in the name of the original owner, that the assessee negotiated with Babubhai Kanakia Foundation(BKF)for giving school building on rental basis, that the Government (Govt. ) of Maharashtra issued an NOC for starting IB school at Chembur, hat it requested for amendment in the approved plan and the same was approved on 8. 3. 2007, that it started construction of the building in AY 2007-08, that on 07. 06. 07 it entered into formal lease agreement with BKFfor giving school building on rental basis, that in July 2007 part possession of the school building i. e. upto second floor was given to the said trust, that at that time it was decided to charge rent of Rs. 2. 00 lacs per month for 9 months, that the assessee had shown rental income, amounting to Rs. 18. 00 lacs under the head income from house property u/s. 22 of the Act, that the assessee had taken secured loans as well as unsecured loans for construction of school building, that during the AY. 08-09, it had paid interest of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from appropriate authority to operate the school, that no major expenses were capitalized with the building, that labour charges were incurred before 31. 7. 2008, that same were found to be spread over throughout the year. Finally, he held that the income arising to the assessee was to be taxed under the head income from other sources. He also held that the interest amounting to Rs. 3. 26 crores was not allowed. 2. 1. Aggrieved by the assessment order the assessee filed an appeal before the First Appellate Authority (FAA). Before him extensive submissions were made with regard to head of the income under which the income had to be assessed and the interest payment. After considering the assessment order and submission of the assessee, the FAA held that the appellant started construction of the school building for AY 2007-08, that the expenses were entered into books of account and were shown as WIP, that the total expenses incurred including for the plot of land till 31. 3. 2007 was Rs. 10. 53 crores, that the P&L A/c. as on 31. 3. 2008 showed further expenses incurred till 31. 3. 2008, that the file number of approvals such as IOD, CC remained the same throughout, that the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, that the assessee had given details of the constructed area and the availability of certain areas free of FSI, that the certificate of the architect indicates that 3rd to7th floors were constructed later on, that the statement of the architect were not provided to the assessee though the same were relied upon by the AO, that as on 12. 4. 2008 two floors of the school building were complete. It is also found that in the case of BKF the AO has mentioned that the trust was conducting schools at Mira Road and Chembur, that there is no doubt that BKF was deducting tax at source on payment of rent to the Assessee. The AO has mentioned that instead of occupying the building the assessee might have utilised some other premises for running the school. We do not find any reason fir arriving at the said inference. The evidences produced before the FAA about admission of students and their report cards for 3 academic years clearly prove that the school had commenced its activities in the year under consideration. We do not find any legal infirmity with the order of the FAA who had held that income could not be taxed as income from other sources and that interest paid, amounting to Rs. 3, 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the AO and the AR supported the order of the FAA. We have heard the rival submissions and perused the material before us. We find that the assessee had installed various items as per the mutual agreement entered into with the lessee, that the amount was capitalised. We have, in the earlier part of the order, held that rental income was to be assessed u/s. 22 of the Act. Therefore, we agree with the observation of the FAA that capitalisation will not make any difference. Upholding the above, we decide ground No. 3 against the AO. 4. Next Ground of appeal deals with allowing expenses of Rs. 2. 80 crores on account of bogus purchases and proportionate interest expenditure of Rs. 28. 77 lacs. During the assessment proceeding, the AO found that an action u/s. 132(1) of the Act was carried out in the Kanakia Group of cases on 29. 3. 2011, that enquiries conducted after the search operation revealed that it had taken accommodation bills, that Kanakia group had declared an amount Rs. 42 crores towards bogus purchases for the AYs 2006-07, 2011-12 u/s. 132(4) of the Act, that the said disclosure was made in the hands of four group companies. The AO during the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced regarding purchase of goods and same were not rebutted by the AO. In our opinion, the addition had to be restricted to the four entities who had taken the accommodation entries. As the AO has not brought on record that purchases made by the assessee were part of bogus bill transactions, so we are of the opinion that FAA was justified in deleting the addition with regard to addition made under the head bogus purchases as well as the proportionate interest disallowance. Upholding his order, Ground No. 4 is decided against the AO. 5. Next ground is about deleting the addition made on account of accommodation entries amounting to Rs. 11. 51 lacs. The AO found that during the year the assessee had booked an amount of Rs. 11, 51, 771/- as part of WIP. He held that it was part of the bogus purchase and it had to be taxed as unexplained expenditure u/s. 69B of the Act for the year under consideration. The FAA referring to his order, with regard to accommodation entries/bogus bills, held that following the same the purchase made by the assessee had to be considered as genuine ones. 5. 1. The DR left the issue to the discretion of the bench and the AR supported the order of the FA ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
