2016 (3) TMI 679

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..... ent proceedings, the AO issued a detailed questionnaire to the assesse based on audited balance sheet, profit & loss account and tax audit report u/ 44AB. The books of accounts of the assesse are maintained on Oracle Software System which was found to be complex by the AO. It was also noted by the AO that there is a change in the method of accounting. During the year to conform with the guidance note issued by ICAI, the AO found the accounting complex and, therefore, issued a show-cause notice for getting their accounts audited u/s 142(2A) for this year. The AO sent the details of complexities found in the books of accounts along with the reply of the assesse. A proposal was sent for conducting special audit u/s 142(2A) of the Act. Further, it was noted that a survey was also conducted u/s 133A of the Act at the company's premises at P-39 (Basement), NDSE, Part II, New Delhi and certain documents were found. On 30.06.2008, CIT (A), Delhi IV granted approval of conducting the special audit of books of accounts of the assesse for this year. In accordance with that, a special auditor was appointed for conducting the special audit and submitted his report in Form No.6B of the Incom .....

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..... king for 8 projects 198 320 222,56,87,056 16. TOR - 15 & 20 Volume - VIII Reclassification of Income from House property Reconciliation of rental income with TDS Certificate Notional Income from House properties 321 326 330 326 329 346 8,15,68,758 4,49,85,573 3,27,52,542 17. TOR - 20 Volume - VIII Compensation paid to Shriram School Withdrawal of 30% deduction u/s 24 346 353 1,16,99,500 35,09,850 18. TOR - 30 Volume - IX Expenditure on account of Provision for gratuity u/s 43B 353 354 14,49,123 19. TOR - 29 Volume - IX Disallowance u/s 14A read with Rule 8D 354 360 16,47,55,000 20. Term of Reference No.31, Volume X Capitalization of Revenue Expenditure 360 362 2,13,94,580 21. TOR - 35 Volume - X Late Construction Charges 363 367 1,88,81,388 22. TOR - 33 Volume - X Prior Period Expenses 367 369 20,99,510 23. TOR - 36 Volume - X Recognition of Revenue on Various Components of Sale consideration A) Rebate on installments B) Contingency Deposit C) Interest free Security Deposit D) Registration Charges E) Indirect Taxes Recovered F) Closing Credit Balance in Allotment code No.10141A001 369 380 381 382 386 387 387 39 .....

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..... inst the additions confirmed by the CIT (A), the assesse is in appeal. Therefore, it resulted in cross appeals. 04. Assesse has raised following grounds of appeal "1. These facts were on record, calculation filed, remand asked for, the AO did not dispute the calculation. In such circumstances, the CIT (A) was wrong in asking the AO to again verify the working in respect of these disallowances. 2. That the learned CIT (A) has failed to appreciate that the CIT(A) has no power to set aside any fact of his order to the AO and, therefore, unless The CIT(A) found the calculations to be wrong, he had no option but to order relief. The facts of the order wherein CIT(A) has set aside for again verifying the figures is bad in law and be deleted and full relief to be allowed to the appellant company. 3. That the learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in setting aside the disallowance made by AD u/s 14A of the Income-tax Act, 1961. [Page 175-184 of CIT (A)'s Order] 3.1 That the learned CIT (A) had all the details and had such details verified from AO in remand to decide the issue and had set aside although the .....

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..... Assessing Officer in directing the assesse to get the accounts audited under section 142(2A) of the I.T. Act, 1961, by the Special Auditors and dismissing the appellant's appeal on this ground as infructuous. [Page 25 of CIT (A)'s Order] 5.1 The learned CIT(A) ought to have held that no genuine cause existed for ordering Special Audit u/s 142(2A) of the Income Tax Act as assesse's accounts were not complex and these accounts were being maintained for the last so many years. 6. That learned CIT (A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the addition of Rs. 3,67,27,062/- out of total addition of Rs. 3,92,27,313/- made by the Assessing Officer in respect of credit balance in Stale Cheques Account as on 31.03.2006 by holding the same as outstanding for a very long period and in the nature of trading receipts. [Page 25-31 of CIT (A)'s Order] 7. That learned CIT (A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the addition of Rs. 5,41,75,304/- made by the Assessing Officer on account of revenue recognition in respect of sale of land .....

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..... specific projects were utilized for such projects only and by drawing a formula that 1/3rd of advances have been given out of own funds and 2/3rd of advances have been given out of borrowed funds. [Page 90-109 of CIT (A)'s Order] 9.1 That the learned CIT(A) has grossly erred in law in directing for verification by the AD on part of the interest expenditure amounting to Rs. 27.45 Crores although the AD had already given his remand as duly noted in Para 17.35 of CIT(A)'s order. 9.2 That the learned CIT(A) completely failed to appreciate that no borrowed funds were utilized to finance its activities to buy land or for meeting construction expenses because receipts from customers were more than the expenditure incurred on these construction projects. 9.3 That the learned CIT (A) has drawn an artificial formula to confirm the part of the addition of Rs. 27.45 Crores out of interest payment. 9.4 That the learned CIT (A) failed to appreciate that there was no net interest expenditure as the amount of interest received amounting to Rs. 138.57 crores were in fact more than the amount of interest expenditure amounting to Rs. 136.00 crores. 9.5 That without prejudice, the le .....

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..... 1961. [Page 173-175 of CIT (A)'s Order] 14. That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the disallowance of Rs. 84,12,762/- out of total disallowance of Rs. 2,13,94,580/- in respect of the following items by treating the same as capital in nature and erred in not considering the fact that these expenses are on account of legal and professional charges, repair & maintenance expenses incurred in the normal day to day course of business and the same deserve not to be capitalized:- SR Particulars Amount (Rs.) 1 Expenditure for registration of Trade Mark and Brand Logo 10,08,774 2 Expenditure for Repair & Maintenance of Guest House, Mussoorie 55,18,338 3 Expenditure for consultancy expenses in connection with purchase of aircraft. 1,50,000 4 Expenditure for purchase of shares of Edward Keventer (Successors) Pvt. Ltd. out of total expenditure of 10,85,650 5 Proposed merger of DLF Power Limited and DLF Phase IV Commercial Developers Ltd. 6,50,000   Total : 84,12,762    15. That learned CIT (A) has grossly erred in law and on facts and in the circumstances of .....

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..... advanced by the parties and therefore they are dismissed. 06. Ground No.3 of the assessee's appeal is against the disallowance of Rs. 16,47,55, 000/- made by the AO u/s 14A of the Act applying the formula laid down under Rule 8D of the Income Tax Rules, 1962 and which has been set aside by CIT (A) to the file of AO for verification of complete facts and to compute the amount of expenditure which has been incurred in relation to the exempt income and then make disallowance. The assesse has raised following grounds :- "3. That the learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in setting aside the disallowance made by AD u/s 14A of the Income-tax Act, 1961. [Page 175-184 of CIT(A)'s Order] 3.1 That the learned CIT(A) had all the details and had such details verified from AO in remand to decide the issue and had set aside although the same could not legally be set aside. 3.2 That the learned CIT(A) has failed to appreciate that no interest, administrative or any other expenditure was incurred by the appellant in relation to investments during the assessment year 2006-07.That the learned CIT(A) ought to have .....

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..... worked out interest disallowance on proportionate basis. He worked out total interest expenditure other than direct interest expenditure incurred by the assesse at Rs. 13598.23 lakhs. He further took the average value of investments yielding exempt income of Rs. 393777.52 lakhs. He then worked out total average investment of the company by summing amount of investments in fixed assets, investments and current assets and loans and advances of Rs. 369116.03 lakhs resulting in to proportionate indirect interest expenditure of Rs. 1450.67 lakhs (39377.52*13598.23/369113.03 lakhs). He further added to this 0.5 % of the average of tax-free income yielding investment of Rs. 39377.52 lakhs amounting to Rs. 196.89 lakhs. Therefore, AO made total disallowance of interest of Rs. 1450.67 lakhs and expenditure of Rs. 196.89 lakhs totalling to Rs. 1647.55 lakhs u/s 14A of the Act. 08. Assesse carried the matter before the CIT (A) raising several contentions, however, CIT (A) holding that Rule 8D of the Income tax Rules does not apply for the impugned assessment year set aside the whole issue back to the file of the AO in view of the decision of Hon'ble Bombay High Court in the case of Godre .....

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..... the purposes of real estate business of the company. Further, it was submitted that investment of Rs. 505 crores as at 31.03.2006 has been made in several private limited companies for the purposes of holding land in those companies because of restrictions provided under Urban Land Ceiling Act at that moment. Therefore, the contention of the ld. AR for the assesse is that these investments are strategic investment for the purpose of real estate business of the assesse and, therefore, no disallowances can be made u/s 14A of the act on these investments. He submitted that assesse does not have any intention to earn any tax free dividend form those companies or to earn any exempt income from these partnership firms. For this relied on the decision of Honourable Delhi high court in case of i. CIT v. Holcim India P. Ltd. (ITA No. 486/2014) [Delhi] . ii. CIT .v. Oriental Engineers Pvt. Ltd (Delhi)(HC) ( 605/2012, Dt. 15.01.2013) where in it is held that expenditure on acquiring shares out of "commercial expediency" & to earn taxable income cannot be disallowed by invoking rule 8D of the IT rules 1962.  (iv) The Assessing Officer has made only general observation and not rec .....

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..... expenditure also. He further submitted that it is settled legal position that no disallowance u/s 14A can be made in the absence of receipt of any exempt income, for this he referred several high court and tribunal decisions some of them are as under :- a) CIT v. Holcim India P. Ltd. (ITA No. 486/2014) [ Delhi High Court], b) CIT vs. Lakhani Marketing (P&H High Court) [ITA NO. 970/2008] (Dtd. 02.04.14), c) CIT vs. Cortech Energy Pvt. Ltd (Gujarat High Court) 45 taxmann.com 116, d) CIT vs. Shivam Motors (P) Ltd (Allahabad High Court) [ITA no. 88/2014] (dtd. 05.05.14), e) CIT vs. M/s. Delite Enterprises (Bombay High Court) [ITA No/ 110/2009] (dtd. 26.02.2009), f) REI Agro Ltd. v. DCIT (ITAT Kolkata) [ITA No.1331 & 1423/Kol/2011]  (vii) He further relied on the decision of Hon'ble Delhi High Court in the case of Cheminvest Limited V CIT 378 ITR 33 ( del) where Hon'ble Delhi High Court, reversing the decision of Special Bench of ITAT, has held that if there is no income from investments no disallowance u/s 14A can be made. Based on this decision, he submitted that on strategic investment in shares of private limited companies, the assesse company earned no ex .....

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..... nds; therefore assesse is not aggrieved by this finding of CIT (A). He submitted that mere setting aside an issue to the file of the AO in view of the decision of Hon'ble Bombay High Court for working out the disallowance cannot be said that issue is decided against the assesse.  (iii) The next argument advanced by the ld. DR is that partner and partnership firms are separate entities for the purpose of taxation, therefore, it cannot be said that share from the partnership firm is doubly taxed income. He took us to the provisions of section 10(2A) of the Act showing that whatever is disallowed in the hands of the partnership firm is exempt in the hands of the partners and whatever is allowed in the hands of the partnership firm is taxed in the hands of the partners. Therefore, there is no double taxation on such income. He submitted that reliance placed by Ld. AR on the CBDT circular is misplaced.  (iv) He further submitted that strategic investments are required to be excluded is not a proposition enshrined in the provisions of section 14A of the Act. The strategic investments are also made for earning of profit and, therefore, their exclusion for working of disa .....

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..... Act . It is a matter of record that that assesse has worked out disallowance u/s 14A of Rs. 1,87,35,000/- and Ld. AO has rejected the disallowance made by assesse on the sole ground that disallowance computed by the assesse is not in accordance with Rule 8D of the Income tax Rules 1962. On perusal of the assessment order, we do not find that the AO has recorded any satisfaction regarding the correctness or otherwise of the expenditure disallowed by the assesse. Therefore, in our view, without this mandatory exercise not conducted by the AO, no disallowance can be imputed u/s A of the act by Assessing officer on its own. Our view is also supported by the decision of Honourable Delhi High Court in the case of Maxopp Investment Ltd. V. CIT [2011] 347 ITR 272 (Delhi) has held that- "29. Sub-section (2) of Section 14 A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having reg .....

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..... t reasons for the same." Further Honourable Delhi high court in case of CIT V Taikisha Engineering India Ltd[2015] 54 taxmann.com 109 (Delhi) has also held as under:- "17. More important and relevant for us are the observations in Godrej and Boyce Mfg. Co. Ltd. (supra) on requirement and stipulation of satisfaction being recorded by the Assessing Officer with reference to the accounts under Section 14(2) of the Act and Rule 8D(1) of the Rules. It was observed:- "Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-taxable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assesse, having regard to the accounts of the assesse. When a statute postulates the satisfaction of the Assessing Officer "Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated". (M. A. Rasheed v. State of Kerala [1974] .....

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..... year and the interest paid is not directly attributable to any particular income or receipt then the formula prescribed would apply. Under clause (ii) to Rule 8D(2) of the Rules, the Assessing Officer is required to examine whether the assesse has incurred expenditure by way of interest in the previous year and secondly whether the interest paid was directly attributable to particular income or receipt. In case the interest paid was directly attributable to any particular income or receipt, then the interest on loan amount to this extent or in entirety as the case may be, has to be excluded for making computation as per the formula prescribed. Pertinently, the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii). Clause (i) relates to direct expenditure relating to income forming part of the total income and under clause (iii) an amount equal to 0.5% of the average amount of value of investment, appearing in the balance sheet on the first day and the last day of the assesse has to be disallowed. 20. However, in the present case we need not refer to sub Rule (2) to Rule .....

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..... erated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both by the CIT (Appeals) and ITAT." Though above decision was rendered in context to allowance of interest u/s 36(1) (iii) of the act , however honourable Bombay high court in case of HDFC bank limited [WP 1753 of 2016][dated 25.02.2016] has approved ratio of this decision while adjudicating on disallowance u/s 14A of the Act. Therefore the applicability of the above proposition rendered in context to Section 36(1) (iii) of the act equally applies to provisions of section 14A of the Act. According to that decision, if interest free funds available with assesse are more than non-interest bearing advances or investment, the nexus is required to be proved by the revenue for making any disallowance and in absence of such nexus the presumption is to be drawn that investments in tax free income yielding investments has been made out of interest free funds available with the assesse. Therefore, respectfully following that decision of Hon'ble Bombay High Court, no disallowance on account of interest exp .....

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..... n the group concern and not in the shares of any un-related party. Therefore, the primary object of investment is holding controlling stake in the group concern and not earning any income out of investment. Further the investment were made long back and not in the year under consideration. Therefore, in view of the fact that the investment are in the group concern we do not find any reason to believe that the assesse would have incurred any administrative expenses in holding these investments. The AO has not brought on record any material to show that the assesse has incurred any expenditure in relation to the income which does not form part of the total income." Assesse has also made investments in group concerns with a business object and also hold controlling interest but not in the shares of any unrelated party which shows that primary object of investment is for holding controlling stake in the group concern and furthering the business of the assesse. It is not the dominant object of the assesse to earn dividend from investments in private limited/ limited companies and to earn share of profit from partnership firms. According to the assesse dominant object of the assesse in .....

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..... sen out of investment in partnership firm and its share of the assesse from the firm which is exempt u/s 10(2A) of the Act. Admittedly, there is an exempt income, which is arising from the investment in partnership firm. We have already held that there cannot be disallowance on account of interest in view of interest free funds exceeding investment in securities earning tax free income. Therefore, the question arises before us is that whether disallowance of other expenditure is required to be made with respect to investments in partnership firm which has yielded tax free income u/s 10(2A) of the Act. This issue has been answered by Special Bench of ITAT in the case of Vishnu Anant Mahajan vs. ACIT 16 ITR (Trb) 621 (Ahd.)(SB) [137 ITD 189] that where exempt income is derived from partnership firm u/s 10 (2A) of the act, provisions of section 14A can be invoked for disallowance of expenditure. In that decision special bench of ITAT has considered all the arguments advanced before us and therefore in view of this decision these arguments are rejected. However, admittedly some expenditure is required to be disallowed as assesse himself has stated and made on its own some disallowance .....

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..... nded manner with our direction of computing disallowance u/s 14A of the Act. We are conscious of the decision of the coordinate Bench of ITAT in the case of Zuari Leasing and finance corporation Limited V ITO 112 ITD 205 (Del.)(TM) wherein in para no. 9 and 10 it has been held that "9. I have given careful thought to the rival submissions of the parties. As noted earlier, the learned Accountant Member has remanded the matter to the Assessing Officer, whereas the learned Judicial Member, in his proposed order, has directed that disallowance of bad debt be deleted. Therefore, the first question to be examined relates to the principles, which are to be followed by the appellate authorities while exercising discretion to remand the matter. For above proposition, I would like to quote and rely upon the following decisions :-  (1) In the case of M.G. Shahani & Co. (Delhi) Ltd. v. Collector of Central Excise 1994 (73) ELT 3 (SC) it is observed :- "The complaint of the appellant before us, for which we find sufficient justification, is that the Tribunal should have itself gone through the evidence and rendered a finding because all the relevant materials were before the Tribunal .....

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..... e case of Ghasi Ram Dayanand v. CST 92 STC 478 at the rate of 480, 481 (All.), it has been held that remand cannot be made for the purpose of de novo trial for permitting the parties to adduce fresh evidence to fill up lacuna or to decide a point when material is already on record.  (6)Powers of the Tribunal in the matter of setting aside an assessment are large and wide, but these powers cannot be exercised to allow the Assessing Officer an opportunity to patch up the week parts of his case and to fill up the omission by giving another innings- Asstt. CIT v. Anima Investment Ltd. [2000] 73 ITD 125 (Delhi) Asstt.CIT v. Arunodoi Apartments (P.)Ltd. [2002] 123 Taxman 48 (Gau.)(Mag.) Smt. Neena Syal v. Asstt.CIT [1999] 70 ITD 62 (Chd.).  (7)The Courts have held that appeals are not to be decided for giving 'one more innings' to the lower authorities in the appellate jurisdiction. Rajesh Babubhai Damania v. CIT [2001] 251 ITR 5411 (Guj.) CIT v. Harikishan Jethalal Patel [1987] 168 ITR 4722 (Guj.). Remand not for the benefit of the party seeking it to fill up gaps." 10. It is clear from above that primary power, rather obligation of the Tribunal, is to .....

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..... we reverse the order of CIT (A) and direct the AO to restrict the disallowance u/s 14A of the Act to Rs. 1,87,35,000/-, which disallowance has been made by assesse on its own.. In the result, ground no.3 of the appeal of the assesse is allowed with above direction. 14. Ground No 4 of the appeal is as under :- "4. That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the action of the Assessing Officer in rejecting the books of account of the appellant company and invoking the provisions of section 145(3) of the Income Tax Act, 1961, on wholly illegal and untenable grounds by treating the appellant's grounds as infructuous. [Page 24-25 of CIT(A)'s Order] " 15. This ground of appeal is not pressed by the assesse. Therefore, that ground of appeal is dismissed. 16. Ground no 5 of the appeal is against the special audit u/s 142(2A) of the act and assesse has raised following grounds of appeal "5. That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant's case in confirming the action of the Assessing Officer in directing the assesse to get the acc .....

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..... sequently, credited to the various bank accounts from which cheques are issued. Later on, at the close of the year, when these cheques are not cleared because of any reason because of non-presentation by the parties in their banks the entry is passed in the books of accounts by crediting stale cheque account and debiting the bank account. Therefore, in nutshell, on non-clearing of those cheques in the bank account of assesse for the control purpose, stale cheque account is credited by effecting the bank accounts. It does not have any outflow or inflow of the money but merely a control account. From those stale accounts as soon as any cheque is cleared, an entry is passed by debiting the stale cheque account and crediting the bank account. This event occurs when these cheques are presented by the parties in their bank accounts for clearance. During the FY 2005-06, Rs. 38,04,671/- amount of such cheques were transferred in stale cheques account and an amount of Rs. 1,64,53,036/- has cleared on account of presentation of those stale cheques by various vendors. During the assessment proceedings, AO was not satisfied that these accounting transactions treated this amount as revenue rece .....

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..... ubmitted that the addition is made u/s 41(1) of the Act. Assesse has not claimed any deduction of this sum and therefore provisions of section 41(1) cannot be applied. Therefore, there is no provision in the Income tax act by which this sum can be taxed as income. He further argued that according to the rule of consistency and on the basis of the burden of proof which is on revenue in this case, no addition should have been made. 23. Against this, the ld. DR submitted that though addition cannot be made in the case of the assesse by invoking the provisions of section 41(1) of the Act but these amounts are all advances and initial money receipts of the assesse. He relied very heavily on the order of the AO and various case laws relied upon. He vehemently submitted that the issue is squarely covered in favour of the revenue as per the decision of Hon'ble Delhi High Court in the case of CIT vs. State Trading Corporation of India Ltd. - 247 ITR 114. In the end, he painstakingly argued that the addition confirmed by the CIT (A) is correct as those cheques are outstanding for more than 3 years. It was also stated that case laws relied upon by the assesse do not apply to the facts of .....

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..... be identified and subsequent validation etc. or any other corrective measure can be initiated. It is not the case of the AO that the details of those stale cheques with respect to the party, amount, date of issue of cheque, bank from which it is issued, is not available and the parties have waived their right to receive these sums. Furthermore, we fail to understand that accounting entries, which are passed in the books of accounts for the purpose of better control of the account and which is a practice being followed by various large corporate when there are voluminous banking transactions, can generate an income which is chargeable to tax. It is also incomprehensible that cheques are issued to the vendors who could not for reasons best known to them did not present the cheques in those bank accounts can create an income chargeable to tax in the hands of the assesse company who has issued the cheques. We are mindful of the fact that these cheques are outstanding for more than three years but nonetheless the liability of the assesse company has not extinguished, the cheques issued in the name of various parties whose existence is not doubted and it is also admitted that they have .....

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..... stale cheque account is only Rs. 38,04,671/- and assesse has shown a clearing during the year of Rs. 1,64,53,036/- from that account. Honourable Delhi high court in case of Commissioner of Income-tax v. Shri Vardhman Overseas Ltd. [2012] 343 ITR 408 (Del) where in honourable High court was concerned with amounts paid for expenses remaining outstanding in the books for more than 4 years has held that:- "11. The question before us is limited to the applicability of Section 41(1) of the Act. The section in so far as it is relevant for our purpose is as below:- "Profits chargeable to tax. 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee ( hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be .....

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..... sation of the liability. The words in clause (a) viz., "some benefit in respect of such trading liability by way of remission or cessation thereof" should be read as a whole and not in the manner suggested by the learned standing counsel. 12. That takes us to the next question as to what constitutes remission or cessation of the liability. It cannot be disputed that the words "remission" and "cessation" are legal terms and have to be interpreted accordingly. In State of Madras v. Gannon Dunkerley& Co., AIR 1958, SC 560, Venkatarama AiyyarJ. explained the general rule of construction that words used in statutes must be taken in their legal sense and observed:- "The ratio of the rule of interpretation that words of legal import occurring in a statute should be construed in their legal sense is that those words have, in law, acquired a definite and precise sense and that, accordingly, the legislation must be taken to have intended that they should be understood in that sense. In interpreting an expression used in a legal sense, therefore, we have only to ascertain the precise connotation which it possesses in law". In our opinion, this rule should be applied to the interpretation an .....

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..... ,000/- and the balance of 2,56,529/- was brought to assessment under Section 41(1) of the Act. The assessee appealed unsuccessfully to the Appellate Assistant Commissioner and thereafter carried the matter in further appeal to the Tribunal. Its contention before the Tribunal was that the unilateral entry of transferring the amount from the suspense account to the capital reserve account would not bring the said amount within Section 41(1). The contention was accepted by the Tribunal whose decision was affirmed by the Calcutta High Court [reported as CIT v. Sugauli Sugar Works (P) Ltd. (1983) 140 ITR 286]. The revenue carried the matter in the appeal to the Supreme Court. The contention of the revenue (as noted at page 520 of 236 ITR) was that on the facts of the case, the liability came to an end as a period of more than 20 years had elapsed and the creditors had not taken any steps to recover the amount and consequently there was a cessation of the debt which would bring the matter within the scope of Section 41(1). It may be noted that the contention of the revenue in the case before us is precisely the same. To recapitulate, the learned standing counsel contended before us that .....

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..... a unilateral act of the assessee, who is a debtor to its employees. We fail to see how a debtor, by his own unilateral act, can bring about the cessation or remission of his liability. Remission has to be granted by the creditor. It is not in dispute, and it indeed cannot be disputed, that it is not a case of remission of liability. Similarly, a unilateral act on the part of the debtor cannot bring about a cessation of his liability. The cessation of the liability may occur either by reason of the operation of law, i.e., on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor, or a contract between the parties, or by discharge of the debt -the debtor making payment thereof to his creditor. Transfer of an entry is neither an agreement between the parties nor payment of the liability. We have already held in Kohinoor Mills' case [1963] 49 ITR 578 (Bom) that the mere fact of the expiry of the period of limitation to enforce it, does not by itself constitute cessation of the liability. In the instant case, the liability being one relating to wages, salari .....

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..... the said amount from the creditors' account to its profit and loss account. The liability was shown in the balance sheet as on 31st March, 2002. The assessee being a limited company, this amounted to acknowledging the debts in favour of the creditors. Section 18 of the Limitation Act, 1963 provides for effect of acknowledgement in writing. It says where before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, a fresh period of limitation shall commence from the time when the acknowledgement was so signed. In an early case, in England, in Jones vs. Bellgrove Properties, (1949) 2KB 700, it was held that a statement in a balance sheet of a company presented to a creditor- share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt. In Mahabir Cold Storage v.CIT (1991) 188 ITR 91, the Supreme Court held: "The entries in the books of accounts of the appellant would amount to an acknowledgement of the liability to Messrs. Prayagchand Hanumanma .....

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..... for the purchase tax liability. The tax liability was in dispute with the sales tax department. In the previous year relevant to the assessment year 1985-86, on the basis of an order in the Kerala State's Special Leave Petition filed before the Supreme Court, the assessee wrote back a sum of 14,65,997/- out of the provision for the purchase tax liability. The assessing officer brought this amount to tax under Section 41(1). On appeal, the CIT(Appeals) held that only an amount of 1,25,46,534/- could be brought to tax under Section 41(1). On further appeal by the assessee, the Tribunal held that even this amount could not be brought to tax since the sales tax department was pursuing the matter even as late as in 1993 and cases were still pending decision before the sales tax authorities and that the matter had not been concluded by the decision of the Kerala High Court. The Tribunal thus held that there was no extinguishment of the statutory liability and, therefore, the write back could not be assessed under Section 41(1). The Kerala High Court affirmed the decision of the Tribunal [(2000) 243 ITR 362]. The revenue carried the matter in appeal to the Supreme Court. Applying its .....

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..... Court of Appeal in England in the case of Morley v Tattersall (1939) 7 ITR 316, and the test propounded by Lord Greene in that case that the taxability of the receipt was fixed with reference to its character at the moment it was received and not at any subsequent point of time and not because the recipient treated it subsequently in his income account as his own, and also to some decisions of courts in India in which the principle was applied and ultimately held as under: "In other words, the principle appears to be that if an amount is received in the course of trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessee's own money because of limitation or by any other statutory or contractual right. When such a thing happens, commonsense demands that the amount should be treated as income of the assessee. In the present case, the money was received by the assessee in the course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, by efflux of time the money has become the assessee's .....

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..... show that the liability has ceased or has been remitted, the same can be brought to tax as provided in Section 41(1). In this manner the statute prescribes that a deduction for a trading liability allowed earlier can be brought to tax on the ground that the liability to pay the same has been remitted or ceased. 21. Another distinguishing feature in the present case is that the sundry creditors continue to be shown in the assessee's balance sheet as on 31.3.2002. In the case before the Supreme Court in CIT Vs. T.V.Sundaram Iyengar (supra), the assessee took a positive step of transferring the unclaimed balances in the deposit accounts to its profit and loss account, an act, which was considered to be of considerable significance in demonstrating the intention of the assessee to appropriate the money belonging to the depositors as its own monies. That case was dealing with items of receipt received in the course of the business of the assessee, though of capital nature at the time when they were received. The present case is one of a trading liability being earlier allowed as a deduction and which is sought to be recalled under Section 41(1) of the Act. At the cost of repetiti .....

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..... fically incorporated in the Act to cover a particular fact situation. The section applies where a trading liability was allowed as a deduction in an earlier year in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in a later year by way of remission or cessation of the liability. In such a case the section says that whatever benefit has arisen to the assessee in the later year by way of remission or cessation of the liability will be brought to tax in that year. The principle behind the section is simple. It is a provision intended to ensure that the assessee does not get away with a double benefit once by way of deduction in an earlier assessment year and again by not being taxed on the benefit received by him in a later year with reference to the liability earlier allowed as a deduction. In CIT, Mysore v. Lakshmamma, (1964) 52 ITR 789 Hegde, J., (as he then was) speaking for the Mysore High Court observed that Section 10(2A) of the Indian Income Tax Act, 1922, which is the fore-runner of Section 41(1) of the present Act, was introduced w.e.f. 01.4.1955 to get over the judgment of the Bombay High Court in Mo .....

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..... fect to by the Supreme Court, nor did it consider fit to apply Section 28(iv). It is a well settled rule of interpretation of statutes that a construction that reduces one of the two provisions in a statute to a useless lumber or a dead letter would not amount to a harmonious construction and that a familiar approach in such cases is to find out which one of the two provisions is a special provision made to govern a certain situation and to exclude that situation from the applicability of the general provision. If we apply this rule of interpretation to the case before us, we must necessarily hold that while Section 28(iv) would apply generally to all benefits or perquisites which arise to the assessee from the business carried on by him, the benefit which he obtains by way of remission or cessation of a trading liability in a later year, in respect of which he has obtained a deduction in an earlier year in computing the business income, should be governed by Section 41(1) which is the specific provision governing the factual situation and not by Section 28(iv). This way there would be no conflict between the two provisions and both will be given effect to." 26. In view of the abo .....

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..... for constructed properties from completed contract method to percentage completion method in terms of Accounting Standard - 9 issued by ICAI and notified by Ministry of Corporate Affairs. The company has adopted the accounting policy that unless threshold of 30% of the project is not reached, the revenue from that project is not to be recognised. For this, in the annual account of the company, in Note No.5 (a) of Schedule 25 it was mentioned that pursuant to the Guidance Note on recognition of revenue of real estate developers issued by ICAI, the company has changed the accounting policy for recognising revenue in respect of constructed properties including those covered under agreement to sell, commercial space, etc. entered into and subsidiary, coordinating companies from the year of registration of the sale deeds of the property to percentage completion method. Further, Schedule 24 of the financial statement also showed that in Note No.6 that revenue from sale of land and plot is recognised in the financial year in which transfer is made by registration of sale deeds or otherwise in favour of the buyers. Therefore, it is apparent from the conjoint reading of these two notes tha .....

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..... nd, therefore, he confirmed the addition. 30. Before us, ld. AR submitted as under :- a) The assesse is following the practice of showing income arising on sale of plot and land as and when the conveyance deed is executed in favour of the buyer. This is an accepted method of accounting in case of sale of open plot of land. This practice is being followed by the assesse year to year for past several years and same has been accepted by the revenue in past. b) He submitted that the change in policy is with respect to construction of real estate properties and not with respect to sale of plot of land. c) He submitted that Accounting Standing - 7 issued by the ICAI applies to only construction contracts and not to the sale of open plots of land. d) He further submitted that Guidance Note for recognition of the revenue is required to be recognised when conditions stated in para 4 mentioned in that Guidance Note are fulfilled. According to that revenue is required to be recognised only if all significant risk and rewards of ownership are effectively transferred to the seller. Coupled with this, there has to be handing over of the possession of the real estate unit tote buyer. He .....

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..... f accounting change for sale of plot from AY 2007-08 is not acceptable to the revenue. i) He further argued that it is always the prerogative of the assesse to change the method of accounting provided it is bona fide. Revenue in no case can thrust upon assesse to change its method of accounting in the year prior to the change made by the assesse. He further stated that the change of method of accounting is bonafide and neither AO nor CIT (A) has stated that change in the method is with malafide intention. It was further his argument that here, the assesse has not changed the method of accounting but revenue is thrusting upon the assesse change in method of accounting which is not permitted by law. 31. Against this, ld. DR submitted that assesse is required to offer its profit for taxation on consistent method of accounting and not at the whims and fancies of the assesse. For this argument, he relied on the decision of Hon'ble Supreme Court in the case of CIT vs. British Paints Limited - 188 ITR 44 (SC). He further submitted that it is not the simple plots of land which are sold by the assesse but are developed plots of land and, therefore, provisions of Accounting Standard - .....

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..... ccounting in this year from project completion method to percentage completion method. However, there is no change in the method of accounting of sale of plot of land which hitherto followed by the assesse from year to year as and when sale deeds are executed. There is no dispute that this income has been offered for taxation by assesse inAY2007-08 and AO has also not reduced this income from the assessed income of the assesse for AY 2007-08. Therefore, the limited dispute remains in this ground is that whether the income of sale of plot shall be taxed in this year or has been rightly offered by assesse in AY 2007-08. According to the method of accounting changed during the year which has been shown in the audited balance sheet at Schedule No.25, Note No.5(a) relates to constructed properties only and not for plot of land. According to Note No.6 in the Schedule No.24 policy of revenue recognition on sale of plots and land is recognized in the financial year in which transfer is made by registration of sale deeds in favour of the buyers. Therefore, it is apparent that there is no change in the policy of revenue recognition arising on sale of lands and plots. This method of revenue r .....

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..... ived from the real estate sales;and  (d) It is not unreasonable to expect ultimate collection of revenue from buyers. 4.3 Where transfer of legal title is a condition precedent to the buyer taking on the significant risks and rewards of ownership and accepting significant completion of the seller's obligation, revenue should not be recognised till such time legal title is validly transferred to the buyer." Therefore regarding these two plots of land in question if the conditions mentioned in para4.2 is fulfilled the revenue should be recognised. We are conscious that though this guidance of revenue recognition is issued by ICAI in February 2012 and the issue here is required to be decided in AY 2006-07 even then we are convinced that the principle of accounting and revenue recognition which are based on 'transfer of risk and reward' of the property coupled with the conditions agreed between the buyer and the seller has not undergone any material change. Therefore, we are of the opinion that Guidance Note revised by the ICAI in 2012 has persuasive value for deciding revenue recognition concept in case of the assesse in this ground of appeal. Ld. DR, during the .....

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..... ding of whole of the agreement, it is apparent that there are several conditions attached to the sale of plot of land and on completion of them only the buyer gets right to get that property registered in his name. The agreement to sell also does not prescribe that prior to the execution of sale deed and on execution of agreement to sell, the possession of the property is transferred. Therefore it is apparent that full 'risk and reward' of the plot is transferred to the buyer only at the time of execution of sale deed by the seller in favour of buyer and after that nothing is required to be done for this property from either side. At present there are many obligations on the seller as well as the buyer. In view of this, we are of the opinion that seller has not handed over possession of the real estate unit to the buyer during this year and further transfer of legal title is a condition precedent for taking over the significant risk and reward of the ownership by the buyer till the execution of sale deed, revenue cannot be recognized by the assesse. These events of execution of sale deed etc. has not happened during this year but admittedly in subsequent years, where assess .....

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..... aspects of transfer of risk and reward. Secondly, the method of accounting is consistently followed by the assesse and accepted by the revenue in past years. Thirdly, the revenue itself has taxed this income in AY 2007-08 U/S 143(3) and not reducing this income from that year gives a presumption that it had also accepted taxability of this sum for AY 2007-08. Fourthly, AO has not demonstrated that how the method of accounting employed by the assesse is incorrect but merely has gone on presumption that as there is a change by assesse in method of accounting followed for constructed properties from projection completion basis to percentage completion basis, the same should also be applied in case of sale of plot of land which are unconstructed. We could not find any provision in the Act which prohibits assesse from adopting different revenue recognition method for sale of products of different characteristics and marketability. Admittedly, assesse is permitted to have different revenue recognition policy for sale of plot of land compared to sale of constructed properties. Only condition is that correct profit is required to be deduced from that method. Apparently revenue has not all .....

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..... ation of the same income. [Page 36-53 of CIT(A)'s Order] 8.2 That the learned CIT(A) has erred in directing the AO to verify the details filed with AO and in confirming the addition as the CIT(A) has no such power to set a-side the part of addition made by AO. [Page 53 of CIT(A)'s Order] 8.3 That without prejudice, the learned CIT(A) ought to have directed to exclude the amount of Rs. 78,77,80,921/- from taxable income of A.Y. 2007 -08 or subsequent years if it was to be held that amount is taxable in the assessment year under appeal." 36. These grounds of appeal are against confirmation of the addition of Rs. 78,77,80,921/- out of the total addition of Rs. 1,02,84,93,509/- made by the AO on account of revenue recognition on projects completed less than 30% based on percentage completion method, namely, Project Summit and Project Mangolia rejecting the submission of the assesse that percentage completion method cannot be applied to these projects because the construction work has not started before 31.03.2006. 37. The CIT (A) has rejected the contention of the assesse that income generated from this project has already been offered for taxation in subsequent years and .....

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..... ject and, therefore, upholding the addition on the principle restricting the addition to the extent of Rs. 62,68,85,221/- on account of Mangolia Project and Rs. 16,08,95,700/- from Summit Project. Aggrieved by this, the assesse is in appeal before us. 39. Before us, ld. AR submitted that assesse has correctly laid down a threshold limit of 30% which is in accordance with the principles laid down in the Guidance Note issued by the ICAI. He submitted that though the Guidance Note prescribes the percentage of threshold as 25%, however, the assesse based on the prevalent practices in the trade has adopted it @ 30% as threshold. For this, he submitted that assesse has given sufficiently large number of comparable developers' case where identical practice is being followed and accepted by the revenue. His next argument was that there is no doubt about the correctness of the profit of these two projects. Merely revenue wants to prepone taxability of these projects from subsequent years to earlier year and this is a revenue neutral exercise. For this, he relied on the decisions of Hon'ble Supreme Court in the case of CIT vs. Billahari Investment Private Limited (supra). The next s .....

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..... have not exceeded the threshold of 30% for the purpose of revenue recognition and, therefore, he stated that the revenue cannot be recognized. However, he also fairly agreed that though data available at page 69 to 71 of the assessment order, according to which both the projects are at the very primitive stage i.e. Mangolia Project at approximately 10 - 12% and Summit Project is also less than 20%. However, he agreed that there is no objection from the assesse side to determine the threshold limit of 30% of the total project cost for the purpose of revenue recognition. 42. We have carefully considered the rival contentions and also given a careful thought to the offer of ld. DR for setting aside this ground of appeal to the file of the AO for determination of threshold limit of 30% of the total project cost incurred up to this year or not. Before that we would like to address the issue of threshold percentages determined by the assesse of 30 % instead of 25 % provided in the guidance note on accounting for real estate transactions issued by ICAI in 2012. Firstly assesse has submitted the instances where in the identical facts and circumstances there is trade practice of adopting .....

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..... threshold of 30 % of the total project cost, no fault can be found with the estimate made by the assesse. It is also undisputed that in subsequent years the special auditor appointed by revenue has accepted the threshold of 30 % adopted by assesse and AO has accepted the same. In view of above we are of the opinion that assesse has rightly accepted the threshold of 30 % of achievement of total project cost for commencement of revenue recognition. Further the working of the total project should also include all types of development charges required to be included in the same. Ld. AR has stated that the details of percentage of completion of project are available in the assessment order itself. However after careful consideration and agreed by both the parties, we set aside this issue to the file of the AO to determine with respect to Magnolia Project and Summit Project following :-  (i) To determine the total project cost of both these projects including the cost of internal and external development charges of the project  (ii) To determine whether the actual cost of expenditure incurred up to 31.03.2006 is less than 30% of the total project cost estimated by the asse .....

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..... .5 That without prejudice, the learned CIT(A) failed to give directions to allow the interest on the basis of POCM method against the respective projects either during the year and in the subsequent years where revenues are recognized." 44. This ground is against the confirmation by CIT (A) of disallowance of interest expenditure of Rs. 27,45,00,000/- out of total disallowance of expenditure of Rs. 1,19,15,13,955/- on account of capitalization of interest expenses by holding that there is no direct nexus which can be established to hold that the loans are utilized for specific projects only and adopting a formula that 1/3rd of the advance has been given out of own funds and 2/3rd of the advances have been given out of the borrowed funds. Assesse was further aggrieved that despite of information available in assessment order and in the remand report of the assesse, still CIT (A) has set aside the ground to the file of the AO for verification The assesse was also aggrieved by the non-appreciation of facts by CIT (A) that borrowed funds have not been utilized for buying of land or meeting of construction expenses because receipts from the customers being advanced against sale are mor .....

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..... ven are part of the inventory i.e. closing stock of the assesse. Aggrieved by this, assesse carried this matter in appeal before the CIT (A) who in turn deleted the addition of Rs. 91,70,13,955/- but confirmed the disallowance of Rs. 27.45 crores. The main reason for the confirmation of the disallowance advanced by CIT (A) is that part of the interest on borrowed funds is for the construction of the project and the amount borrowed is mixed up with own funds and interest free funds. Thus, there is no direct nexus which can be established to hold that loans for which the money was borrowed were utilized for such projects or not. Therefore, he devised a formula that one portion out of three shall be considered being interest free funds available and two portions shall be considered as interest bearing funds. By applying this formula, he held that out of Rs. 1,19,15,13,155/-, Rs. 70.10 crores of the interest is pertaining to interest earned on loans and advances to group entities and, therefore, net interest expenditure of Rs. 49.46 crores shall be capitalized. The findings of CIT (A) based on the special auditors' report in para no 17.39 were as under :-  (a) There is no di .....

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..... Builders, wherein Hon'ble Supreme Court has held that there is no diversion of money for non-business purposes and loans to subsidiaries are at higher rates then rates of borrowings paid by the assesse. He further submitted that Accounting Standard 16 issued by ICAI does not have any application on the facts of the case. The next argument was that the case of the assesse is covered by the decision of Hon'ble Delhi High Court in the case of CIT vs. Tulip Star Hotels Limited wherein if the interest expenditure is incurred for the purpose of business the deduction should be allowed u/s 36(1)(iii) of the Act. He further relied on the decision of Hon'ble Supreme Court in the case of DCIT vs. Core Health Care Limited - 298 ITR 194 (SC) wherein Hon'ble Supreme Court has stated that provisions of section 36(1)(iii) has to be read on its own term and it is a code by itself. The Hon'ble Supreme Court further held that it does not make any difference whether the capital is borrowed for revenue purposes or for acquisition of capital assets, requirement of section is that the assesse must borrow capital for the purposes of its business. Therefore, he submitted that as in th .....

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..... gument that the disallowances have been based on well accepted principles of capitalization of borrowing cost in accordance with Accounting Standard issued by the ICAI in Accounting Standard 16. He, therefore, submitted that the disallowance confirmed by the CIT (A) is correct. 48. In rejoinder, ld. AR submitted that now the issue is squarely covered in favour of the assesse in view of the decision of Hon'ble Supreme Court in the case of Hero Cycles Limited vs. CIT reported in 63 taxman.com 308 (SC). He also relied on the decision of Hon'ble Supreme Court in the case of DCIT vs. Core Healthcare Limited (supra). 49. We have carefully considered the rival contentions. It appears that the AO has made this addition mainly because of note mentioned by assesse in its accounting policies with respect to borrowing costs according to Accounting Standard 16 issues by ICAI. We have perused notes attached to financial statements and we are of opinion that these notes have arisen in the financial statement of the assesse because of the issue of applicability of Accounting Standard 16 issued by the ICAI. According to Accounting Standard 1 i.e. disclosure of accounting policies, each an .....

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..... for the purpose of inventory as provided under Accounting Standard 16. Apparently, in this case, there is no allegation that interest is not paid on capital borrowed for the purpose of the business. Hon'ble Mumbai High Court in the case of CIT vs. Lokhandwala Constructions Industries Ltd. [ 131 taxman 810] has held as under :- "4. From the facts found by the Tribunal on record, it is clear that assessee undertook two-fold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from both the activities were assessed under section 28 of the Income-tax Act. In this case, we are concerned with the second activity (hereinafter referred to, for the sake of brevity, as "Kandivali Project"). According to the Commissioner, loan was raised for securing land/development rights from the Mandal. That, the loan was utilised for purchasing the development rights, which, according to the Commissioner, constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest incurred thereon constituted part of capital expenditure. This finding of the Commission .....

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..... . K. Raheja Pvt. Ltd. - 2006-TIOL-220-ITAT-MUM;  (iv) K. Raheja Development Corporation vs. DCIT in ITA No.240/Bang./97 dated 22.09.1997 - In this case, reference application filed by the Department has also been rejected by the Hon'ble Karnataka High Court vide its order dated 08.11.2000 in Civil Petition No.832/2000 (IT). Before us, ld. DR could not cite any decision against the claim of the assesse, therefore, respectfully following the decision of Hon'ble Bombay High Court and as well as various coordinate Benches, cited above, we do not concur with the view of CIT (A) on disallowance of interest of Rs. 24.75 crores u/s 36(1) (iii) of the Act. The alternative argument of the assesse regarding adoption of any artificial formula for the purpose of computing interest disallowance. Ld. CIT (A) has presumed proportion of utilisation of funds in absence of the nexus holding that assesse has used mixed funds. Honourable Bombay High court in case of CIT V Reliance Utilities & Power limited 313 ITR 340 has held that "The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise tha .....

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..... aid for renting of the premises, income of which is chargeable to tax under the head property. There is no dispute about the genuineness of the claim of the expenses and as brokerage charges create an override charge on receipt of the rent. The rental income is required to be considered after adjustment of the brokerage. He further argued that provisions of section 23 as per which the annual value has been defined as standard rent or actual rent received or receivable, whichever is higher. Therefore, he submitted that actual rent in the case of the assesse should be after deduction of brokerage charges on receipt of the rent. He further canvassed that real income is required to be taxed and as the brokerage is directly related to the income of rent receivable, deduction should be granted either u/s 23 or under the head of the business income. 55. Ld. DR relied on the order of the AO and CIT (A) and submitted that there is no such deduction provided u/s 23 or section 24 of the Act. He further relied on the decision of Hon'ble Punjab & Haryana High Court in the case of Piccadilly Hotels Limited. 56. We have carefully considered the rival contentions. The case of the assesse is .....

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..... e 152 of CIT(A)'s Order] 11.2 That without prejudice, the learned CIT(A) failed to give appropriate directions to allow the claim in the subsequent years in which the appellant had itself accounted for the revenue in respect of the ICON project." 59. These grounds are against the confirmation of the addition of Rs. 42,86,05,986/- out of the total addition of Rs. 2,22,56,87,056/- on account of revenue recognition on the basis of percentage of completion method in respect of ICON Project after including the internal development cost. 60. During the year, the assesse has not recognised any revenue on this "ICON" Project. On query by the AO, it was submitted by the assesse that the percentage of completion in case of this project has not been reached to the extent of 30% of the total project cost and, therefore, according to the Guidance Note issued by the ICAI, no revenue is recognised. The arguments advanced by the assesse were same as they have advanced arguments in the case of non-recognition of revenue in case of Mangolia Project as well as Summit Project. It was further submitted that the profit in respect of Icon Project has already been offered to tax in subsequent year .....

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..... circumstances of the appellant's case in confirming the disallowance of Rs. 84,12,762/- out of total disallowance of Rs. 2,13,94,580/- in respect of the following items by treating the same as capital in nature and erred in not considering the fact that these expenses are on account of legal and professional charges, repair & maintenance expenses incurred in the normal day to day course of business and the same deserve not to be capitalized:- SR No. Particulars Amount (Rs.) 1 Expenditure for registration of Trade Mark and Brand Logo 10,08,774 2 Expenditure for Repair & Maintenance of Guest House, Mussoorie 55,18,338 3 Expenditure for consultancy expenses in connection with purchase of aircraft. 1,50,000 4 Expenditure for purchase of shares of Edward Keventer (Successors)Pvt. Ltd. out of total expenditure of 10,85,650 5 Proposed merger of DLF Power Limited and DLF Phase IV Commercial Developers Ltd. 6,50,000   Total : 84,12,762   68. This ground is against disallowance of expenses of Rs. 84,12,762/- confirmed by the CIT (A) out of the total disallowance of Rs. 2,13,94,580/- with respect to various expenditure. 69. The first issue of disallowance .....

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..... n favour of the assesse by the decision of Hon'ble Gujarat High Court in the case of CIT vs. Maharana Mills Ltd (1994) 208 ITR 972 (Guj) wherein it has been held that expenditure on repairs of guest house is allowable u/s 30 of the Act. It was further submitted that that the amount of expenditure is not in doubt. He further relied on the decision of Hon'ble Bombay High Court in the case of M/s Greaves Cotton and Company Ltd. vs. CIT and also Hon'ble Allahabad High Court in the case of Kanpur Dyeing and Painting vs. CIT - 75 ITR 686. 75. Against this, ld. DR relied on page no.363 of the order of the AO. He also supported the order of the CIT (A). 76. We have carefully considered the rival contention. In this case the construction expenditure of compound wall has been held to be of capital in nature only on the ground that the expenditure resulted in enduring benefit. We are of the view that this is not the only test for holding that expenditure is capital in nature. Hon. Karnataka High court in Commissioner Of Income-Tax vs. B.V. Ramachandrappa And Sons [191 ITR 34] [Karn] while deciding the issue of compound wall has held as under :- "5. The distinction between repa .....

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..... enance of guest house. 77. Next item of expenditure was Rs. 1,50,000/- towards expenditure for consultancy expenses in connection with purchase of aircraft. Ld. AO has disallowed it holding to capital expenditure. CIT (A) confirmed the disallowance holding that incurred by the assesse for the purpose of purchasing of suitable Air-craft, therefore this expenditure has been incurred directly or indirectly for the acquisition of Aircraft which is a fixed asset and therefore, it is part of cost of fixed assets as per Section 43 (1) of the Act, which is eligible for depreciation as and when the asset is put to use. 78. Ld. AR submitted that as the expenses are part of the regular business activities, same is to be considered as permissible deduction. Ld. DR Relied up on the order of CIT (A). 79. We have carefully considered the rival contention and we do not find any infirmity in the order of CIT (A) holding that the amount paid for consultancy fees for purchase of aircraft which is a fixed asset cannot be allowed as revenue expenditure. Therefore we confirm the order of CIT (A) on this count. 80. The next disallowance is pertaining to expenses incurred for purchase of shares of Edw .....

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..... ances received by the appellant from its customers and they are more than 10 years old. [Page 204-218 of CIT(A)'s Order] 15.1 That without prejudice, the learned CIT(A) ought to have issued directions to exclude the amount, if the appellant itself recognized the same as its income in subsequent years." 88. This ground of appeal is against the addition of Rs. 31241768/-being old balance received by assesse from its customers which are more than 10 years old. Originally the Assessing Officer made addition to the extent of Rs. 35,08,31,012/- out of which the CIT(A) allowed relief to the extent of Rs. 31,95,89,244/- and balance amount to the extent of Rs. 3,12,41,768/- was confirmed. 89. Ld. AR submitted that at the outset, that these are old carry forward balances and part of running account and as such basis of addition in the year under reference is factually and legally incorrect and misconceived. He submitted that AO and CIT(A) have not made reference to any section of the Act under which addition was made and as the liability is recognised in the books and no deduction was claimed in the earlier years, same cannot be added to the income of the assessee in this year. He fu .....

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..... ments and has never been engaged in the modernization of Airport which is a new and specialized line of business and this tender fees paid for the same is not connected with the existing line of business of the appellant. [Page 243-254 of CIT(A)'s Order] 16.1 That the learned CIT(A) has failed to appreciate that bidding for such projects was in line with the business of the company and there was a unity of funds, management & control with the existing business of the company as the business was same, no disallowance was called for. 16.2 That learned CIT(A) ought to have appreciated that the business of the appellant remains construction/ whether it constructs houses, commercial places like malls, airports etc." 93. This ground of appeal against the confirmation of disallowance of Rs. Rs. 1,47,70,222/- on account of expenditure for bidding of modernisation of airports. ld. AO disallowed the same in absence of proper information whereas CIT (A) confirmed the disallowance as expenses are incurred by the appellant on account of tender fees for bidding for contract for modernization of Airports, and in his opinion appellant company is in the business of real estate development .....

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..... 00/-and not allowable u/s 40A(3) the Income-tax Act, 1961. [Page 254-256 of CIT(A)'s Order]" 98. Brief facts of the case are that that there is no discussion in the assessment order for the disallowance. The Assessing Officer disallowed the aforesaid amount in the computation vide Sl.No.26 (2nd item) of page 458 of the assessment order. However, the Special auditors at page 22 of their report in form 6 (B) had made observations in respect of this item in the table enclosed with the Special auditor's report at Vol. I Part I, Page 22. They have observed that the appellant incurred expenditure totalling to Rs. 5,13,934/, where payment in excess of Rs. 20,000/- was made otherwise than by a cross cheque or the bank draft and hence 20% of the expenditure was disallowed under Section 40A (3). CIT (A) confirmed this disallowance holding that the cash payment to employee is not covered by the exception in Rule 6DD of the Income Tax Rules. Therefore, the disallowance of Rs. 1,02,786/-, being mandatory and not covered by Rule 6DD. 99. Ld. AR submitted that appellant itself has already added Rs. 42,803/- out of total disallowance of Rs. 1,02,786/- and as such there is no case for any .....

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..... n method (POCM) in Summit and Magnolia project, without giving any reasoning. Further that on the facts & Circumstances the ld. CIT(A) erred by directing the AO to verify the IDC allocation to above mentioned two projects and upholding the additions up to Rs. 78,77,80,921/- subject to such verification of the AO whereas such direction of the ld. CIT(A) has the effect of setting aside the order which was not permissible as per I T Act. 3. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the disallowances of Rs. 39,29,42,662/- considering this as an accounting mistake although these expenses were on a/c of provision for construction account- Regency Park account, whereas these were prima facia prior period expenses as per detailed working made by the auditors about which the assessee had failed to rebut the findings given by the auditors. 4. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the disallowances of Rs. 14,55,37,400/- on a/c of Non allocation of proportionate overhead expenses. 5 That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 37,81,33,639/- made on a/c of .....

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..... 34,915/- on a/c of Savitri Cinema even after accepting the fact that no business activities were carried out during the year. 12. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 16,95,67,085/- on a/c of Grand Mall project u/s 40A(2)(b) in spite of the fact that it was clear from the findings of special auditor as well as AO that the payments were made in excessive to fair market value to the company which falls within the purview of section 40A(2). 13. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 91,70,13,955/- on a/c of capitalization of Interest expenses as per AS-16 in spite of the fact that it was clear from the findings of special auditor as well as AO that the interest bearing funds were utilized for acquisition of land or for financing development cost of projects. 14. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the disallowances of Rs. 20,87,70,567/- on a/c of brokerage charges in spite of the fact that no revenue was recognized on the ground that the project was under completion but even then the assessee company had claimed th .....

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..... allow the credit for TDS amounting to Rs. 26,25,369/- (subject to verification) in spite of the fact that the payme1lt received by the Assessee company was not legally right. 22. That on the facts & Circumstances of the case the ld. CIT(A) erred in directing the AO to verify the complete facts and figures with regard to disallowance u/s 14A read with Rule 8D and compute the amount of expenditure which has been incurred in relation to the exempt income and disallow the same. Further the ld. CIT(A) has contradicted himself by directing the AO to verify the working submitted by the assessee and simultaneously deleting the additions. 23. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 1,04,56,937/- being project expenses which should have been capitalized by the assessee company because these a related to the acquisition of new projects. 24. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 22,31,806/- without going through the details of the same and accepting the same at the face value of assessee company. 25. That on the facts & Circumstances of the case the ld. CIT(A) erred i .....

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..... g the provisions of section 2(22)(e) of the Act." 33. That on the facts & circumstances of the case the Id CIT(A) erred in deleting the addition of Rs. 34,84,265/- on a/c of deemed dividend in spite of fact that said amount was advanced by MIs DLF Financial Services ltd (DFCL) to the assessee company, and the assessee company was a holding company of DFCL, and thus attracting the provisions of section 2(22)(e) of the Act. 34. That on the facts & circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 12,60,00,000/- on a/c of deemed dividend in spite of fact that said amount was advanced by M/s Bhoruka Financial Services Ltd to the assessee Company, and the assessee company was a holding company of M/s DLF Commercial Development Ltd, which was holding 98.73% shares of Bhoruka Financial Services Ltd and in this manner being subsidiary of the subsidiary, it was fiduciary in nature. Therefore the ratio laid down by the Apex Court in the case of Kishanchand (supra) was squarely applicable in this case. 35. That on the facts & circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 225,85,28,452/- on a/c of deemed dividend (on protectiv .....

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..... ve deleted addition of Rs. 3,92,27,313/- as per reasoning given therein. Further CIT (A) has deleted the addition of Rs. 25,00,251/- on the ground that these cheques have been subsequently cleared in favour of the parties to whom they have been issued. Following the same reasoning, we confirm the order of the CIT (A) in deleting the addition of Rs. 25,00,251/- under the head stale cheque account. Therefore, ground no.1 of the revenue's appeal is dismissed. 109. Ground no 2 of the appeal of revenue is as under :- "2. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 24,07,12,588/- based on percentage or completion method (POCM) in Summit and Magnolia project, without giving any reasoning. Further that on the facts & Circumstances the ld.CIT(A) erred by directing the AO to verify the IDC allocation to above mentioned two projects and upholding the additions up to Rs. 78,77,80,921/- subject to such verification of the AO whereas such direction of the ld. CIT(A) has the effect of setting aside the order which was not permissible as per I T Act." 110. Ground No.2 is against the deletion of addition of Rs. 24,07,12,588/- based on p .....

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..... CIT vs. Calcutta Discount Company Ltd. - 19 ITR 181 (SC); Laxmi Rattan Cotton Mills - 73 ITR 634 (SC); Rajiv Tandan vs. DCIT - 164 taxman 271 (Del.); and Schinder Electrical Industries - 171 taxman 177. His main submission was that without the evidence, the expenditure cannot be allowed. 115. Against this, ld. AR submitted that these are the expenditure which have been incurred in the past year, the details of each project is given at page 97 of the assessment order passed on which the addition of Rs. 30,16,44,316/- has been made and all these projects are pertaining to the previous years. Full details of construction expenses are already available on the file. No expenditure has been incurred during the year but these are debit expenditure account of the old completed projects. As the credit entries of these accounts have been taxed in this year due to the change of the method of accounting the debit balance also is required to be adjusted. Therefore, there is no under-statement of income of the assessee. 116. We have carefully considered the rival contentions as well as the orders of the lower authorities. Because of the change of the method of accounting and as per the matchi .....

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..... any vouchers and bills for this year as expenses have not been incurred during this year. In view of this, the decisions cited by the ld. DR that no bills etc. have been submitted is not acceptable. Therefore, we confirm the deletion of addition of Rs. 30,16,44,316/-.Another addition of Rs. 9,12,98,346/- is also pertaining to the provision of construction account of Regency Project. This amount is forming part of the opening stock of that project for which the expenses etc. have been incurred in the past year. These amounts have not been debited by the assessee and no claim has been made for deduction. It was submitted that opening balance of the construction of the project was Rs. 1,21,40,02,826/- which included the amount of Rs. 9,12,98,346/-. These facts have not been controverted by the AO in its remand report. The income of this project has already been taxed. Therefore, the debit balance of this account is also required to be granted. Before us, the ld. DR did not submit any other argument other than that the bills and vouchers for these projects have not been submitted. As it is evident that it is part of opening balance of Project Regency there cannot be any bills for the .....

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..... to the fact that the parent company cannot hold all the land purchased in their own name due to applicability of Land Ceiling Act in various states. Further All the subsidiaries are created to hold land and will statutorily require a share holders and working Directors in absence of which formulation of a company cannot be done. But to say that these companies are independently working and there is no contribution or control in day to day affairs of these companies by the assessee will be an incorrect proposition. it is held that assessee has claimed excess expenditure to the tune of Rs. 14,55,37,400/- which should have been rightfully apportioned to various subsidiary companies. Hence, the amount of Rs. 14,55.37,400/- is being disallowed as expenditure not relatable to the business of the assesse and therefore is added to the income of the assesse. On appeal before CIT (A) the disallowance is deleted and therefore revenue is in appeal. 119. Before us, ld. DR submitted two arguments that the expenses are not related to the business of the assessee and it should be apportioned to the respective projects. 120. Against this, the ld. AR submitted that the CIT (A) has considered the c .....

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..... that expenditure in the hands of the assesse. The CIT (A) relying upon the decision of ITAT, Delhi Bench in the case of Nestle India Ltd. vs. DICT - 27 SOT 9 has deleted the addition. We do not find any infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with instances that these are not incurred by the assesse wholly and exclusively for the purposes of the business of the assessee. Hence, we confirm the order of the CIT (A) deleting the addition of Rs. 14,55,37,400/-. Ground No.4 of the revenue's appeal is dismissed. 122. Ground no 5 of the appeal is as under :- "5 That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 37,81,33,639/- made on a/c of opening balances in construction account - External Development Charges. Further the ld.CIT(A) has contradicted himself by directing the AO to verify the working submitted by the assessee and simultaneously deleting the additions." 123. Ground No.5 is against deleting the additions of Rs. 37,81,33,639/- made on a/c of opening balances in construction account - External Development Charges. Further the ld. CIT(A) has contradicted himself b .....

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..... aspect about the verification of the amount to the AO is beyond his powers. We disagree with the argument of the ld. DR and without commenting on that much, we are of the view that CIT (A) has given one more opportunity over and above the opportunity of assessment and remand proceedings for verification of these details, cannot be said that it is against the revenue. In fact, according to us, it is in favour of the revenue. Further, in the appeal effect order passed by the AO on 20.11.20121, after verification of these facts, the AO has deleted the addition pursuant to the order of the CIT (A) after verification. In view of these facts, we are of the view that the addition on account of Rs. 37,81,33,639/- is unsustainable and hence we confirm the order of CIT (A) on this ground. Therefore, ground no.5 of the revenue's appeal is dismissed. 127. Ground no 6 of the appeal is as under :- 6 That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 30,16,44,316/- on a/c of provision for construction account- Regency Park account no A33P038-000-03. Further the ld.CIT(A) has contradicted himself by directing the AO to verify the working subm .....

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..... dition. Therefore, we confirm the order of the CIT (A) in deleting the addition of Rs. 30,16,44,136/- on both the counts i.e. one that it is part of the work in progress and already considered by the income computation of the assessee; and secondly, it is a double addition made by the AO. Thirdly AO himself has deleted the addition after satisfying himself on verification of details as directed by CIT (A). Therefore this addition cannot be sustained. Hence, Ground No.6 of the revenue's appeal is dismissed. 132. Ground No 7 of the appeal of the revenue is as under :- "7 That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 21,39,996/- on a/c of not disclosing the credit balance in some sub-ledger accounts (in IDC sub-ledger account). Further the ld.CIT(A) has contradicted himself by directing the AO to verify the working submitted by the assessee and simultaneously deleting the additions." 133. Ground No.7 is against deleting the additions of Rs. 21,39,996/- on a/c of not disclosing the credit balance in some sub-ledger accounts (in IDC sub-ledger account). Further the Id CIT(A) has contradicted himself by directing the AO to ver .....

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..... e credit side of sum ledger. 138. Ld. DR advanced same arguments as advanced in grounds no.6 & 7 of the revenue's appeal. The arguments of the ld. AR were also same. Ld. AR also submitted that this is a double addition as the same addition has been considered by the AO at pages 47 to 67 of the assessment order. 139. We have considered the rival contentions. We have already held that the method of accounting for the sale of plot is unchanged and assessee has correctly deduced the profit at the time of the registration of the sale deed. This amount relates to realisation from the customers against the sale of plot for the period up to 31.03.2005. The detailed back up of the closing balances is that up to 31.03.2006 assessee has received Rs. 1,79,90,567/- from customers towards the sale of the plot. Out of this amount conveyance deed has been executed in FY 2005-06 and revenue has been recognised of that sale consideration of Rs. 56,08,588/-. This leaves the balance of Rs. 1,23,81,979/- being advance received from the customers towards the sale of plot for which conveyance deed has not been executed. It is not disputed that revenue on these plots has already been recognised by t .....

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..... ined liabilities. 144. We have carefully considered the rival contentions. The AO has picked up certain general voucher accounting entries passed by the books of accounts. These accounting entries are tabulated at page nos.142 to 143 of the assessment order as under :- S. No. V.No. Date Description Amount (Rs.) 1 JV542 31.03.2003 Estimated Development Cost. 17,29,99.721/- 2 1V373 31.03.2006 Provision of IDC PH - V booked against the shortfall in W/off on conveyancing FY 2005-06. 1,22,41,224/- 3 JV456 31.03.2006 Provision of IDCPh - V booked against the shortfall in W/off on sale FY 2005-06. 5,00,18,803/- 4 JV 467 31.03.2006 Provision for FY 2005-06. 25,60,429/- 5 Vol.-X TOR 35 31.03.2006(*) Bill of Devyani International Oct- March-2004. 15,59,858/-   The AO was of the view that these are without any basis and merely provided as liability. Therefore, he has made the addition. The amount of Rs. 22,83,72,235/- is consisting of provision of estimated development cost of Rs. 17,29,99,721/- which has been already spent up to 31.12.2008, therefore, these amount cannot be treated as unascertained liability as it has already been crystallised. Regarding .....

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..... gh there was no basis for deriving IDC on a per sq. ft. basis in this matter. 147. Ld. DR relied on the order of the AO and stated that the provision of IDC of Rs. 6,22,60,027/- has been made and out of which the actual expenses incurred is only Rs. 1,40,15,503/- and, therefore, the expenditure provision of Rs. 4.82 crores has been added by the AO. 148. Against this, ld. AR submitted that IDC is an integral cost and is payable according to the licences issued by Director of Town and Country Planning and as the projects are executed in Haryana, it is part of the budgeted cost as per the Haryana Development and Regulation of Urban Area Rules, 1976 (HDRUAR) and these expenditure are in the nature of fees etc. levied by the revenue. Further, he submitted that this amount has already been included in JV No.456 and JV No.373. He submitted that these amounts have already been included in the disallowance made by the AO of Rs. 22,83,72,935/-, therefore, it is a duplicate addition. 149. We have carefully considered the rival contentions. We have perused the relevant orders of AO as well as the CIT (A). This amount is already included in the addition made by the AO in ground no.9 of the r .....

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..... deletion of disallowance of Rs. 10,34,915/- by the CIT (A) as the expenditure was incurred by the assessee on assets which could not be utilised due to litigation and now as stated is in operation. Therefore, ground no.11 of the appeal of the revenue is dismissed. 155. Ground no 12 of the appeal is as under :- 12. That on the facts & Circumstances of the case the ld.CIT(A) erred in deleting the additions of Rs. 16,95,67,085/- on a/c of Grand Mall project u/s 40A(2)(b) in spite of the fact that it was clear from the findings of special auditor as well as AO that the payments were made in excessive to fair market value to the company which falls within the purview of section 40A(2). 156. Ground No.12 is against deleting the additions of Rs. 16,95,67,085/= on account of Grand Mall project u/s 40A(2)(b) in spite of the fact that it was clear from the findings of special auditor as well as AO that the payments were made in excessive to fair market value to the company which falls within the purview of section 40A(2). 157. Ld. DR submitted that the assessee has passed the taxable profit from this net profit and loss account to its associate concern and, therefore, the provisions of .....

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..... of section 40A(2)(b) triggers and the disallowance has been rightly made. The AO solely disallowed this amount u/s section 40A(2)(b) for two reasons i.e. (a) on DLF Grand Mall the profit should have been higher by Rs. 52,12,758/-; and (b) a profit of Rs. 16,43,54,327/- meant to be DLF Home Developers Limited, which is subsidiary of the assessee company. We have perused the provisions of section 40A(2)(b). According to which, an expenditure incurred by the assessee for which payment has been made to the related party, AO is required to prove that such payment is excessive and for turning this conclusion, the AO has to obtain the fair market value of the product transacted for which the payment is made is required to be proved. From the assessment order, we could not find an observation or a finding of AO about what was the fair market value of the product for which the transaction has been entered into and payment has been made to a related party. Unless, the AO derives the fair market value he cannot determine that the payment is excessive or unreasonable. The AO has not done this exercise in both those additions. Further, Hon'ble Karnataka High Court in the case of CIT vs. Ra .....

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..... it is confirmed. Against this amount which is confirmed, the assessee is in appeal as per ground no9 of the assessee's appeal and against deletion of Rs. 91,70,13,955/- revenue is in appeal on this ground. We have already given our finding regarding allowability of this interest expenditure while deciding ground no.9 of the assessee's appeal wherein we have directed to delete the disallowance of interest expenditure based on the decision of honourable Bombay high court. Therefore, we confirm the order of the CIT (A) in deleting the addition of Rs. 91,70,13,955/- on account of interest expenditure. In the result, ground no.13 of the revenue's appeal is dismissed. 165. Ground no 14 of the appeal of revenue is as under :- 14. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the disallowances of Rs. 20,87,70,567/- on a/c of brokerage charges in spite of the fact that no revenue was recognized on the ground that the project was under completion but even then the assessee company had claimed the expenditure 166. Ground No.14 is against deleting the disallowances of Rs. 20,87,70,567/- on a/c of brokerage charges in spite of the fact that no r .....

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..... sion of coordinate Bench as facts are not distinguished by revenue, we confirm the order of CIT (A) in deleting the addition of Rs. 20,87,70,567/- on account of brokerage expenses for sale of various properties. Therefore, ground no.14 is dismissed. 170. Ground no 15 of the appeal is a s under :- 16. That on the facts & Circumstances of the case the ld.CIT(A) erred in deleting the additions of Rs. 179,70,81,070/- out of addition made by the AO to the tune of Rs. 222,56,87,056/- by recognizing the revenue on POCM method based on the detailed working of the Special Auditor who had mentioned that the assessee had wrongly implemented the new accounting standards in its various projects. 171. Ground No.15 is against deleting the additions of Rs. 13,24,00,000/- on a/c of Revenue recognition of Saket Court Yard in spite of the fact that it was clearly established by the AO as well as auditors that by manipulating books of account the assessee company had postponed its income. 172. Ld. DR submitted that Saket Courtyard project is not the fixed asset of the assessee company but stock-in-trade of the assessee company and, therefore, the assessee has capped this asset as fixed asset is i .....

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..... new accounting standards in its various projects. 176. Ground No.16 is against That on the facts & circumstances of the case the ld.CIT(A) erred in deleting the additions of Rs. 179,70,100/- out of addition made by the AO to the tune of Rs. 222,56,87,056/- by recognizing the revenue on POCM method based on the detailed working of the Special Auditor who had mentioned that the assessee had wrongly implemented the new accounting standards in its various projects. 177. Ld. DR and ld. AR submitted before us that this issue is also interlinked with the ground no.8 of the assessee's appeal. 178. We have carefully considered the rival contentions. In ground no.8 of the assessee's appeal, the ground is set aside to the file of the AO as per directions contained therein. We also set aside this ground of appeal of the revenue to the file of the AO with the same direction. In the result, the ground no.16 is allowed accordingly. 179. Ground no 17 of the appeal is as under :- 17. That on the facts & circumstances of the case the ld.CIT( ) erred in deleting the additions of Rs. 8,15,68,758/- on a/c of reclassification of Income from House Property without appreciating the legal as .....

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..... 86,148/- on account of reclassification of income from house property and income from other sources. The addition has arisen due to disallowance of standard deduction of 30% claimed by the assessee u/s 24(a) of the I.T. Act, as a result of reclassification of the income from house property to income from other sources. 11. The Ld. AR pointed out that the issue raised is also covered by the decision of the Tribunal in the case of assessee itself for the assessment year 2001-02 in ITA No.3377/Del/2000 and for the assessment year 1996-97 in ITA No.3522/Del/2000. He pointed out further that the first appellate authority has also decided the issue in favour of the assessee in the case assessee itself of the assessment years 2006-07, 2007-08 & 2008-09. He submitted further that there is no change in the facts and circumstances of the case in this regard during the year under appeal. 12. The Ld. Departmental Representative on the other hand tried to justify the assessment order on the issue. 13. We find that the Ld. CIT (A) has discussed the issue in detail and has given its finding in this regard in para no.6.14 of the first appellate order, reproduced hereunder: "6.14 I have con .....

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..... anywhere that property should be held as investments as the basis of assessing the income from other sources. Considering these facts, related to provisions of law and decision of the Tribunal of the issue in the case of the assessee itself in other assessment years. We are of the view that the Ld. CIT (A) has rightly decided the issue in favour of the assessee with direction to treat the income from such properties as income from house property and to allow deduction u/s 24(a) of the Act. The first appellate order in this regard is thus upheld. Ground No.2 is accordingly rejected." 184. Further, Ld. DR has relied upon the decision of Hon'ble Supreme Court in the case of Chennai Properties and Investment Ltd. vs. CIT in Civil Appeal No.4494/2004  wherein Hon'ble Supreme Court has held that letting out of the properties is in fact the business of the assessee. We have gone through the decision of Hon'ble Supreme Court and we are of the view that this decision favours the argument of the assessee. At page 4 of the decision, the Hon'ble Supreme Court has considered the judgement of that court in East India Housing and Land Trust Ltd. The court has considered tha .....

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..... wherein CIT(A) has directed the AO to verify the reconciliation statement and subject to such verification, he has deleted the addition. 189. We have carefully considered the rival contentions. The fact of the case is that amount of income shown in the TDS certificate did not match with the income from house property shown by the assessee. According to the AO, as per the TDS certificate, the rental income is Rs. 19,87,55,011/- whereas income shown by the assessee is Rs. 13,44,89,907/- thereby there is a difference of Rs. 6,42,65,105/-. After deducting there from 30% as standard statutory deduction for computing income from house property amounting to Rs. 1,92,79,531/- , and addition of Rs. 4,49,85,573/- is made. The CIT(A) has dealt with this issue in para 21.23 at page no.163 of his order as under:- "21.23 I have carefully considered the assessment order, remand report of the AO and the submissions made by the ld. AR. As per reconciliation submitted by the assessee, the difference in income as per books of account and TDS certificates is on account of advance rent received during the year which has been accounted for by the appellant in the next year to which the advance rent .....

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..... value amounting to Rs. 3,22,84,192/- and by making addition of notional rent of properties that remained vacant for a part of the previous year amounting to Rs. 4,68,350/- ignoring the facts of the case and wrongly relying upon the decision of Hon'ble ITAT in spite of the fact that the jurisdictional High Court has favoured the revenue on similar issue ." 192. Ground No.19 is against deleting the additions of Rs. 3,27,52,542/- on a/c of enhancement in annual value amounting to Rs. 3,22,84,192/- and by making addition of notional rent of properties that remained vacant for a part of the previous year amounting to Rs. 4,68,350/- ignoring the fact of the case and wrongly relying upon the decision of Hon'ble ITAT in spite of the fact that the jurisdictional High Court has favoured the revenue on similar issue . 193. Ld. CIT (A) has dealt with this issue as under :- "21.32 I have carefully considered the assessment order and the submissions made by the ld. AR. From the details and other material on record, it is noted that the addition of Rs. 3,27,52,542/- comprises addition of Rs. 3,22,84,192/- by enhancement in the annual value by applying highest rent on all properties an .....

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..... the case. 196. We have carefully considered the rival contentions. We have also perused the order of the coordinate Bench of the ITAT in ITA No.3561/Del/2013 wherein ground no.3 have considered the identical issue where in para no 16 to 23 addition is deleted by ITAT as under :-- "16. The Assessing Officer made an addition of Rs. 3,02,61,251/- on account of notional rent/ additional annual letting value (ALB) u/s 23(1) (a) of the Income tax Act,1961, in respect of vacant properties. The details of the addition as per the assessment order is as under: - DLF City Centre Rs.2,36,01,310/- - DLF Commercial Shopping Complex Rs. 27,21,360/- DLF Corporate Park Rs.1,69,07,688/-   Rs.4,32,30,358/- Less: Standard Deduction u/s 24(1) Rs.1,29,69,107/-   Rs.3,02,61,250/-   17. The Ld. CIT (A) has deleted the addition after discussing the case of the assessee in detail and following the decision cited before him in this regard including decision of 'D' Bench of the Tribunal on an identical issue in the assessee's group concern M/s DLF Office Developers vs. ACIT reported in 23 SOT 19 (Del) and first appellate orders in the assessee's own case f .....

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..... at" where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value will have to be worked out under section 23(l)(c) of the IT Act and according to this clause, if the actual rent received / receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property. " In the case of appellant, the appellant had intention to let such properties but could not get suitable tenant. In such a situation, the AL V will be Nil as per provision of section 23(1)(c) of the IT Act. Section 23(1)(a) r.w.s 23(1)(c) clearly provides that if the property remain vacant wholly or partly during the year, then actual rent received or receivable will be taken as the ALV of such properties. In the case of appellant the property is remained vacant, therefore, the ALV of such properties will be Nil. Hence, no notional rent can be estimated in the case of vacant properties. The decision of the Assessing Officer was not justified. As regards, the Assessing Officer's decision of computing the notional rent based on highest rent in respect of eac .....

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..... 9 is dismissed. 198. Ground no 20 of the appeal is as under :- "20. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the additions of Rs. 1,16,99,500/- on a/c of deduction allowable u/s 57(iii) of the Act ignoring the facts of the case that the 0 disallowed the same in light of the prohibition created by the arbitration award." 199. Ground No.20 is against deleting the additions of Rs. 1,16,99,500/- on a/c of deduction allowable u/s 57(iii) of the Act ignoring the fact of the case that the AO disallowed the same in light of the prohibition created by the arbitration award. 200. Ld. DR submitted that income is charged to tax for earning income from property named as Shriram School Building and there is no provision for granting this deduction u/s 57(3) of the Act as it is not incurred for earning of the income under the head other sources. 201. Against this, ld. AR submitted that this amount is paid to the owner of the property for earning of the income. He stated that it is a pass through transaction and the identical amount of the sum has been transferred to DLF Qutab Enclave Educational Charitable Trust. 202. We have carefully considered the r .....

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..... the rival contentions. As the income itself has been treated as taxable in the hands of the assessee u/s 56 of the Act, therefore, the assessee is eligible for credit of tax deduction at source. The ld. CIT (A) has dealt with this issue in para 22.15 as under :- "22.15 So far as the AO's denial of the credit of TDS of Rs. 26,25,369/- on the income received from Shriram School is concerned, I find that as the rental income has been assessed under the head "income from other sources" and since the TDS relates to the very same income, the credit for the said TDS cannot be logically denied. Therefore, the AO is directed to allow credit of TDS of Rs. 26,25,369/-, after due verification." 208. Further, the ld. CIT (A) has asked the AO to make necessary verification; therefore, we confirm the order of the CIT (A) and dismiss ground no.21 of the revenue's appeal. 209. Ground no 22 of the appeal is as under :- 22. That on the facts & Circumstances of the case the ld. CIT(A) erred in directing the AO to verify the complete facts and figures with regard to disallowance u/s 14A read with Rule 8D and compute the amount of expenditure which has been incurred in relation to the exe .....

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..... lity study was in connection with existing business of the appellant and therefore it is held that the claim is allowable as a revenue expenditure. Consequently, the impugned addition of Rs. 1,04,56,937/- on this count was deleted. Therefore revenue is in appeal . 214. Ld. DR submitted that these expenditure are capital in nature, therefore, vehemently supported the order of the AO and submitted that the addition may be confirmed. 215. Ld. AR relied on the order of the CIT (A) deleting the addition. 216. We have carefully considered the rival contentions. The assessee has incurred this expenditure on proportionate and feasibility of various construction projects in which business the assessee is engaged into. Before embarking on to any of the projects, it is a common practice to obtain a feasibility and economic viability of construction projects at different geographical location. These expenses are for facilitating the existing business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or unrelated to the business of the assessee. Therefore, in our view, this expenditure are wholly and exclusively incurred for the purposes of t .....

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..... submitted before AO it was held by the Honourable P & H High Court held that bilateral agreement between the assessee and the government does not provide for charging of extension fee from the buyers of the plots on the ground of nonconstruction of building and in absence of any legal sanction for doing so assessee cannot indirectly impose penalty on the plot holder. The order of the Director Town and Country Planning upheld and was declared to be not ultra vires of the act. Further it was submitted by the assessee regarding late construction charges are received from customers / plot holders are under litigation in the Supreme Court. The decision is pending before the Supreme Court, as such, it cannot be accrued as income of the assessee company. In earlier years, late construction charges have been shown as income in the year of receipts and alter the order of Hon'ble High Court was received; the said late construction charges have been shown as an liability. As if the Supreme Court decides that the assessee company cannot collect the said charges, then all these charges will be returned to the concerned customers in the future year. In this regard, it may be noted that as p .....

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..... t becomes a liability on the assessee towards the customers. The CIT (A) has further considered this issue in entirety as under :- "26.10 It is observed that up to September 2002, the appellant has treated collection of late construction charges as its income and from October 2002 onward, the appellant has not been treated the receipts of late construction charges as its income, in view of the matter being under litigation. The assessee himself has stated that if the Hon'ble Supreme Court decides that the assessee cannot collect late construction charges then only charges will be returned to concerned customers. It is noted that as per the High Court order, the assessee company had no right to collect late construction charges from its customers. However, the Supreme Court by its order dated 19.11.2010 has set aside the order of the High Court and therefore, it cannot be said that receipts in question are not accrued income. As the order of the Hon'ble Supreme Court is dated 19.11.2010 the amount collected is the income for financial year 2010-11. 26.11 An amount cannot be said to accrue unless enforceable debt is created in favour of assessee. Reference can be made to .....

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..... 2 only" Accounting standard 9 issued by ICAI on revenue Recognition also satisfies the accounting policy of the company that when the revenue is saddled with uncertainties same should not be recognised till the uncertainties are resolved. Therefore following the decision of coordinate bench as well as the accounting standard 9 of ICAI we are of the view that assesse has correctly recognised revenue in the year the issue attained certainty. Therefore on perusal of the decision of CIT (A) we are of the view that there is no infirmity in the order . Hence we confirm the order of CIT (A) and dismiss ground no 25 of the appeal. 227. Ground No 26 of the appeal is as under :- 26. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the disallowance of Rs. 20,99,510/- being prior period expenses. 228. Ld. AO has disallowed the sum of the employee reimbursement holding these expenses are of the nature of prior period expenses and because the bills were not submitted by the employees and hence it did not accrue during the year. No factual details of these bills were given. In light of this the claim of the assessee is rejected and amount of Rs. 20,99,510/- is a .....

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..... its employees during this period and after following the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Shriram Piston - 174 taxman 147, the disallowance is deleted. The reliance of the ld. AR on the decision of Hon'ble Delhi High Court in CIT vs. Modipan Ltd. - 334 ITR 102 is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowabaility of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition of Rs. 22,98,510/- on account of prior period expenditure. In the result, ground no.26 of the revenue's appeal is dismissed. 232. Ground No 27 of the appeal is as under :- 27. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the addition of Rs. 4,94,00,550/- received from customers in terms of contractual obligation. 233. Brief facts are that before AO assessee submitted that these are refundable deposits and are shown as liabilities in the balance sheet and hence it cannot be trea .....

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..... is is a practice continuously followed by the assessee and accepted by the revenue in past. He further stated that a large amount has actually been utilised from time to time in performance of the contractual obligation. His argument was that each and every receipt cannot be charged to tax unless it partakes the character of revenue receipt without any obligation for payment. 236. We have carefully considered the rival contentions. This amount has been collected by the assessee at predetermined rate from the buyers which has obligation to incur expenditure on account of contingent nature for the projects. It is not a fact that this amount has not been utilised as it is evident that in March 2006, assessee has incurred the cost of Rs. 9.87 crores. Furthermore, in the preceding two years as well as succeeding two years, the assessee has incurred expenditure out of this sum. We agree with the contention of the ld. AR that each and every receipt cannot be charged to tax unless it partakes the character of revenue. Further, we also agree with the observation of the ld. DR that receipts if revenue in nature and camouflaged as deposits cannot escape the taxation. In between these two use .....

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..... nance expenditure of the society and to keep these deposits for insurance premium and maintenance. They are refundable to resident welfare associations. CIT (A) relying on the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Goel Gases Pvt. Ltd. - 188 ITR 216 (Del.) held that security deposit cannot be charged to tax as an income. In view of this, we do not find any infirmity in the order of the CIT (A) when deposits are with a purpose, the depositors are identified, there is a regular method of accounting adopted in past for treatment of this income which is accepted by the revenue and there is an obligation cast upon the assessee. Hence, ground no.28 of the revenue's appeal is dismissed. 241. Ground No 29 of the appeal is as under :- 29. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the addition made by the AO of Rs. 18,66,82,603/- being the amount received by the assessee company from the customers for execution of conveyance deed in favour of customers which was in the nature of liability ceased to exist and thus should have been forfeited by the assessee company. 242. Ground No.29 is against deleting the addition .....

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..... e assessee from the buyer towards registration charges with the office of the Registrar for conveyance deed registration. At the time of registration, assessee incurs this expenditure by debiting to this account of that particular customer. The total receipt of registration charges is identified with respect to each of the buyer and there are movement in respective accounts. In fact, it is a past through cost collected by the assessee from the buyer to be incurred by assessee on behalf of the buyer. In view of these facts, these receipts cannot partake character of the revenue in the hands of the assessee. It is also not the case of the AO that the depositors are not identified and despite the conveyance deed executed by the assessee, the amount has not been incurred. In absence of this finding, it is not possible to confirm the disallowance. Therefore, we confirm the order of the CIT (A) in deleting the addition of Rs. 18,66,82,603/- being credit balance of registration charges received from the customers. Ground No.29 of the revenue's appeal is dismissed. 245. Ground No 30 of the appeal is as under :- 30. That on the facts & Circumstances of the case the ld. CIT(A) erred i .....

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..... ee company as income. 251. Ground No.31is against restricting the addition to the tune of Rs. 3,12,41,768/- only out of addition Rs. 35,08,31,012/-, shown as Closing Credit Balances in Allotment Account which, though proved to be non-refundable, was not offered by the assessee company as income. 252. This issue is regarding revenue recognition in case of sale of land and plots has been decided in ground no.15 of the assessee's appeal, therefore, ld. DR as well as ld. AR agreed that decision taken in ground no.15 of the assessee's appeal shall dealt with this addition. Ld. AR further submitted that if it is decided against the assessee, it would amount to double addition in the hands of the assessee. 253. We have carefully considered the rival contentions and we are also of the view that it is covered by ground no.15 of the assessee's appeal which is against revenue recognition in case of sale of plot and land. We have already held in the case of revenue recognition in case of sale of land and plots that it should be chargeable to tax only in the year in which the sale deed is executed after giving our reasons. In view of this, this amount is only an advance received .....

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..... idend (on protective basis) without appreciating the facts and various case laws discussed by the AO in the assessment order which were squarely applicable in this case 255. All these grounds relate to common issue of taxation of deemed dividend and therefore these are argued by the parties on similar lines. 256. Brief facts of the ground no 32 is that there are some loan transaction between DLF Commercial Developers Ltd. (DCDL) has given some loans to the assessee company. Assessee is the holding company of the lender DCDL. DCDL had on the date of giving these loans to the parent assessee company who is holding 100% share in this company there was reserve and surplus of Rs. 216,05,69,000/- and on various dates mentioned Rs. 2,57,970/- were advance by the company DCDL to the shareholders DLF Ltd. Hence this amount created a debit balance on the date and is therefore according to AO it is liable for taxation under 2(22) (e) of the act. On appeal before CIT (A) who deleted the addition holding that the amount is for the business purposes of the assessee as the nature of these transaction is receipt of amount from customers of DLF commercials developers limited in respect to sale o .....

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..... abulated as under for clear picture of the transactions and rival arguments. Sl. No. Loan/ Advances Paid by Loan/ Advances Paid by Amount Shareholding In the payee Company At Column No.3 Assessee's arguments 1. DLF Retail Developers Ltd. Anjuli Builders Pvt. Ltd. 1,00,00,000 100% of DLF Home Dev. Ltd. The observation of the Ld AO in column 3 of table 2 of that "DLF Universal is holding Company of Anjuli Builders Pvt Ltd Via DLF Home Developers Ltd" is factually incorrect as explained below. The borrower namely Anjuli Builders Pvt Ltd is not a shareholder of lending company i.e. DLF Retail Developer Ltd. A copy of the annual return filed by the lending company with the registrar of the companies shows no shareholding by the borrowing company. Therefore this transaction is not covered by the section 2(22) (e). Secondly it will be noted that from Schedule 7 of the Balance Sheet of the appellant company that it does not hold any share in the borrowing company namely Anjuli Builders Pvt Ltd. Therefore it can also not be said that the payment has been made to a concern in which shareholder is a member and in which he has a substantial interest. Thirdly the money borrowed .....

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..... DLF Info City Developers (Chd) Pvt Ltd and other companies are not a shareholder of lending company i.e. DLF Commercial Developer Ltd. A copy of the annual return filed by the lending company with the registrar of the companies (Page 27- 38) shows no shareholding by the borrowing company. Therefore this transaction is not covered by the section 2(22) (e). Secondly it will be noted that from Schedule 7 of the Balance Sheet of the appellant company that it does not hold any share in the borrowing company namely DLF Info City Developers (Chd) Pvt Ltd. and other companies Therefore it can also not be said that the payment has been made to a concern in which shareholder is a member and in which he has a substantial interest. Thirdly the money borrowed by the DLF Info City Developers Pvt(Chd) Ltd and other companies has been used by the borrowing company for its business and therefore though the appellant being the holding company of the lending company it can not be said that the payment by the lending company to DLF Info City Developers(Chd) Pvt Ltd and other companies is on the behalf of or for the benefit of the appellant as there is no payment by the borrower to the appellant. Th .....

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..... ower company enclosed at page 219- 288 In fact the money had been paid by the lending company to the borrower out of loan given by the appellant company. Same has been evident from the financial statement of lending company enclosed at page 335-350. 4. DLF Gold Resorts Pvt. Ltd. DLF Commercial Developers Ltd. 66,13,530 100% DLF Ltd. Copies of account of DLF Commercial Developers Ltd in the books of DLF Golf resort Ltd (vol 33 page 12132-12140). DLF Commercial Developers Ltd had entered into an agreement(Vol 33 Page 12024-12027) with DLF Golf Resort Ltd under which the DLF Golf Resort runs the Golf club on behalf of the DLF Commercial Developers Ltd, subject to a charge of 2% of the total expenditure. Details along with copy of the agreement were enclosed of our letter dated 20.04.2009 (Vol 33 Page 12073). The amount of Rs. 69,71,34,285 is the closing balance of security deposit received by the DLF Commercial Developers Ltd as per agreement dated 1.5.1999. Therefore it is not a loan transaction but a business transaction. The borrower namely DLF Commercial Developers Ltd is not a shareholder of lending company i.e. DLF Golf Resort P Ltd the financial statement of lending compa .....

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..... Taxman 407 (Delhi), it is clear that if advance is taken by an assessee, who is otherwise covered by Section 2(22)(e) for treating such advances as deemed dividend, and the assessee is able to establish that such advances were not taken as loan and these were business receipts in the ordinary course of business then those amounts would not fall within the scope of deemed dividend. The contentions of the appellant have not been disputed by the AO. The AO has himself noted at page No. 415 of the assessment order that there were no disputes on the facts of the case as submitted by the assessee and what was remaining to be seen was whether the provisions of Section 2(22)(e) were applicable to these transactions or not. The AO has observed that the contention of the assessee that these were business advances and hence not covered by the scope of deemed dividend could be considered only when advancing company is in the business of money lending. Since the appellant is in the business of real estate and the money from the companies in the table - 1 hereinabove were in respect of normal business, it would show that the money was received by the appellant in the normal course of business. .....

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..... puted facts as per charts reproduced in this order show that in serial No.2 DLF Retail Developers Ltd., had given an advance to Anjali Builders. Here, Anjali Builders did not hold any shares in DLF Retail Developers Ltd., at all. There is no relationship of the payee of being a shareholder of the payer. After all, on first principle, dividend or deemed dividend can only be brought to tax when a payment is made by a company to its shareholder in the garb of a loan. This fact is wholly absent in the instant case. The appellant is neither the payee, nor a common shareholder of the payer and payee company having requisite number of shares to be eligible to caught in the mischief of section 2(22) (e) of the Act. Therefore, in my opinion, the question of protective addition in the hands of the appellant does not arise. 29.47 Now we come to serial No.2, i.e. loans have been advanced by DLF Commercial Developers Ltd., (DCDL) to various companies. All these companies did not have any share whatsoever in DCDL. But DCDL held substantial shares in the payee companies. Here is the case where the shareholder has given money by way of loans or advance to the companies. The question of dividend .....

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..... usiness transactions in respect of booking of property for which the payment was made by DLF Financial Services Ltd. to the Assessee. Being business transactions, it is submitted that these are not Deemed Dividend. Reliance is placed on the judgment in the case of CIT Vs. Ambassador Travels Pvt. Ltd. (2008) 173 Taxman 407 (Delhi). It is further submitted that transaction of Rs. 5,09,265/- was merely a book entry and there was no flow of money as the book entry of Rs. 7,59,265/- was netted of by Rs. 2,50,000/- paid by DLF Limited to DLF Financial Services Ltd. as advance against purchase of property. Reliance is placed on Sunil Sethi vs. DCIT, Company, Circle 1(1), New Delhi, (2008) 26 SOT 95 (Del) wherein it is held that amount given for business purpose of the company i.e. to purchase a suitable business premises, the amount in question could not be considered as deemed dividend. Regarding the Second transaction of Rs. 29,75,000/- was received by the appellant against sale of property to payer company, i.e. DLF Financial Services Limited. It is submitted that the money received in the ordinary course of business is not a loan or advance and would not come within the purview of dee .....

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..... ;ble Delhi High Court in the case of CIT V Ankitech Pvt. Ltd.[2011] 11 taxmann.com 100 (Delhi). He further relied on the decision of AR CIT V A R Mangnetics Private Limited - 220 taxman 209.[Delhi] 264. We have carefully considered the rival contentions. We discuss the each of the issue as under :-  (i) Regarding Rs. 257950/- received from the customers of DCDL assessee is the holding company of the lender DCDL. DCDL had on the date of giving these loans to the parent assessee company who is holding 100% share in this company there was reserve and surplus of Rs. 216,05,69,000/- and on various dates mentioned Rs. 2,57,970/- were advance by the company DCDL to the shareholders DLF Ltd. It is an accepted fact that this amount is for the business purposes as receipt of amount from customers of DLF commercials developers limited in respect to sale of property by DLF Commercial developers limited. Ld. AR has further stated that in fact appellant has given loan to this party and balance receivable prior to the amount received on behalf of the customer of that company was Rs. 2046054553/-. Therefore in fact there is debit balance of that party in the books of the assessee and it is .....

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..... We find no reason whether in law or in fact to interfere with these findings of facts, which are neither perverse nor arbitrary. The question of law is, therefore, answered against the revenue and the appeal is dismissed.""6. A perusal of the facts and the above extract reveals that the revenue failed to adduce any evidence to prove that the transaction between the assessee and the company was a mere smoke screen to cover a surreptitious payment of money to a share holder. M/s Nexo Products (India) received certain export orders but was not in a position to execute the orders as its manufacturing facility was situated in a remote area and was beset with labour problems and erratic supply of electricity. The Company, therefore, entered into an agreement, dated 1.8.2007 with the assessee to install plant and machinery at his premises to enable the assessee to do job work for the company, at 10% below the prevailing market rate. The Assessing Officer did not doubt this agreement or these facts. The assessee having proved a tangible business expediency between the assessee and the company, the question of invoking Section 2(22) (e) of the Act does not arise. The Income Tax Appellate Tr .....

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..... d that one Sanjay Bhaskar held more than 50.49 per cent of the shares in Arcon (India) Pvt. Ltd. and also held 99.98 per cent of Shares in the respondent-assessee. The aforesaid addition made under section 2(22)(e) was upheld by the Commissioner of Income-tax (Appeals). 3. The Tribunal has, however, deleted the said addition following decision of the jurisdictional High Court in CIT v. Ankitech (P.) Ltd. [2011] 199 Taxman 341/11 taxmann.com 100/[2012] 340 ITR 14 (Delhi). The said decision has been held that deemed dividend provisions cannot be invoked in such cases because the shareholdersare common." Therefore for the reason that the business advances have not been disputed by the AO and further merely common shareholding cannot be the cause for invoking section 2 (22) ( e) of the Act. Therefore this amount also cannot be taxed u/s 2(22) ( e) of the act as these are business advances.  (iv) Regarding the addition on protective basis it is accepted fact that assessee is not a registered shareholder of these companies who advanced loan to other companies. It is also not established that assessee is the beneficiary of these loans. Honourable Delhi high court has held in ca .....

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..... w sought to be argued by the Revenue, too, Ankitech (P.) Ltd. (supra) was decisive: "The expression 'shareholder being a person who is the beneficial owner of shares' referred to in the first limb of section 2 (22) (e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial shareholder then the provision of section 2 (22) (e) will not apply. Similarly, if a person is a beneficial shareholder but not a registered shareholder then also the first limb of the provisions of section 2 (22) (e) will not apply." 13. It is, therefore, clear that in the absence of any finding that Harjit Kaur owned the shares in terms of Section 201A or was beneficial owner in terms of such provision - on both counts - the findings being adverse to the Revenue, no question of law arises."  (v) Further the decision relied up on by the Ld. DR on Star Chemicals Limited V CIT 203 ITR 11 (Bom) was not on the issue of business advances. Further decision of Sadhana Textile Mills P Limited V CIT 188 ITR 318 (Bom) was whether the provision of section 2 (22) (e) applies to a corporate entity or not. This is not the case where .....

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..... AR relied on the order of CIT (A). 269. We have carefully considered the detail of expenditure stated at page no 439 to 442 of the assessment order. Expenses incurred are in the nature of broadband charges, travelling expenses of directors, entertainment expenses of the guests of the companies. It also includes foreign travel expenses of directors where foreign tour report is also submitted by the assessee before AO. No infirmity in the order of ld. CIT (A) was pointed out and therefore we confirm the findings of CIT (A) in deleting this disallowance. In the Result ground no 36 of the appeal is dismissed. 270. Ground No 37 of the appeal is as under :- 37. That on the facts & circumstances of the case the ld. CIT(A) erred in deleting the disallowance of Rs. 1,93,38,906/- on a/c of brokerage, maintenance and professional charges paid to group companies which were either not legal or capital in nature as it was given for providing necessary information about land across India. 271. Ground No.37 is against deleting the disallowance of Rs. 1,93,38,906/-/- on a/c of brokerage, maintenance and professional charges paid to group companies which were either not legal or capital in nat .....

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..... survey about the land. The details of these expenses are noted at page no 442-443 of the assessment order where the explanation given by the assessee before AO is also reproduced. In view of this we do not find any infirmity in the order of CIT (A) in deleting this disallowance. In the result ground no 37 of the appeal is dismissed. 273. Ground No 38 of the appeal is as under :- 38. That on the facts & circumstance of the case the ld. CIT(A) erred in deleting the disallowance of Rs. 13,48,804/- made by the AO because the vouchers/bills against such expenditure were not in the name of assessee company and thus it was not established that such expenses were laid out wholly and exclusively for the purpose of the business of the assessee company. 274. Ground No.38 is against deleting the disallowance of Rs. 13,48,804/- made b the AO because the vouchers/bills against such expenditure were not in the name of assessee company and thus it was not established that such expenses were laid out wholly and exclusively for the purpose of the business of the assessee company. The details of these expenses are at page no 445 of the assessment order where in the bills are in nature of electric .....

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..... The AO has not disputed the factual position contained in the submissions of the appellant in his comment on the grounds of appeal and the submissions of the appellant. Considering the above, the addition of Rs. 1,77,32,060/- is deleted." 281. Ld. DR could not point out any infirmity in the order of CIT (A). Therefore we confirm the order of CIT (A) where in disallowance of Rs. 1,77,32,060/- is deleted. In the result ground no 39 of the appeal is deleted. 282. Ground No 40 of the appeal is as under :- 40. That on the facts & Circumstances of the case the ld. CIT(A) erred in deleting the disallowance of Rs. 6,50,000/- made by the AO on the ground that neither any details nor any bill / vouchers were produced before him. 283. Ground No.40 is against deleting the disallowance of Rs. 6,50,000/- made by the AO on the ground that neither any detail nor any bill/ vouchers were produced before him. 284. Ld DR relied on the order of AO and Ld. AR relied on the order of CIT (A) . 285. On looking at the expenses of Rs. 6,50,000/- it is on account of the amalgamation of assessee with DLF power limited. We have carefully considered the rival contentions. Hon Supreme court has held in Com .....

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