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M/s. Parksons Press Pvt. Ltd. Versus DCIT RG 8 (2) , Mumbai

2017 (9) TMI 806 - ITAT MUMBAI

Deduction not granted in respect of the Collector's liability - Held that:- As found that the collector had determined the provisional liability to be paid by the assessee on the assessee getting the reversionary right from Mema Engineers by deed dated 17.2.2000, pending final determination by the Assistant Director, Department of Town Planning on behalf of the Collector. This letter shows that though the event which occasioned the payment of a portion of the unearned income accrued in the year .....

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The assessee had not stated as to how many flats or floors were developed and how many sold or to whom. - The liability would crystallize only when the Collector Mumbai Suburban District considers the matter and determines the amount to be paid by the assessee as Government‟s share of unearned income. This is supported by the fact that the assessee itself has not made any provision in its accounts for the liability. The Auditor has stated that the assessee has not made the provision in .....

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st of justice, we restore this matter back to the file of the A.O. with a direction to communicate directly to the Collector of Mumbai so as to find out if any liability is payable by the assessee towards this project and to decide the same afresh as per law. - Disallowance made u/s. 14A as per Rule 8D - Held that:- In view of the decision of Hon‟ble Bombay High Court in case of Godrej and Boyce [2010 (8) TMI 77 - BOMBAY HIGH COURT] Rule 8D is applicable w.e.f. A.Y. 2008-09. However, t .....

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(A.M): This is an appeal filed by the assessee against the order of CIT(A)-17, Mumbai dated 28/02/2011 for A.Y. 2007-08 in the matter of order passed u/s.143(3) of the IT Act. 2. The following grounds have been taken by the assessee:- 1. Re: Deduction not granted in respect of the Collector's liability ₹ 2,41,15,5991 - : 1.1. The Learned CIT(A) was not justified in confirming disallowance of the Collectors liability ₹ 2,41,15,599/-, being the liability arising pursuant to carryin .....

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ctors liability of ₹ 2,41,15,599/- is allowable u/s. 37(1) of the Act. 2. Re: Disallowance in respect of amount payable to Collector ₹ 2,41,15,599/- u/s. 43B of the LT. Act, 1961 2:1. Without prejudice to Ground No.1 above, and in the alternative, the Learned CIT(A) erred in making disallowance u/s 43B of the LT. Act, 1961 amounting to ₹ 2,41,15,599/- in respect of the Collectors liability. 2.2. The Learned CIT(A) failed to appreciate fact that the Collector's liability is .....

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ut prejudice to the contention that disallowance u/s 14A should be only ₹ 3,77,605, the learned CIT(A) has erred in directing the assessing officer to adopt the disallowance u/s 14A at ₹ 5,39,175 instead of ₹ 5,17,543 as under: Sr.No. Particular Amount (Rs.) Remarks 1 Direct Expenditure - PMS Charges Paid to Enam Securities Pvt. Ltd., 3,77,605 2 Interest Expenses Nil CIT(A) has opined at para 5.3 of her order that no disallowance was called for out of interest claimed. Despite .....

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n heard and record perused. Facts in brief are that the assessee is engaged in the business of manufacturing of packing materials and printing. During the course of scrutiny assessment, the A.O. observed from the Computation of Income that the assessee company has reduced its business income by ₹ 2,41,15,599/- being amount payable to Collector towards 50% of unearned income on land at 15, Shah Industrial Estate, Andheri (West), Mumbai It is further seen that the assessee has appended a not .....

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n in value being collectors land @ 20% B=A *20% 12,472,813 C=A-B 49,891,253 Less: Unearned income as per Collectors Order (stated above) D 1,660,055 Amount of unearned income E=C-D 48,231,198 Provision 50% of unearned income F=E / 2 24,115,599 4. It is further observed that the Auditor under Note No.6 of Notes to the Accounts has appended the following Note: 6. The Company had purchased right of reversion for land at 15 Shah Industrial Estate, Off Veera Desai Road, Andheri (W), Mumbai 400 058 fr .....

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ary to the Government of Maharashtra, Revenue and Forest Department. The said reversion was made effective by the District Collector Bombay, Bombay Suburban District; vide his order dated 30th August, 2003 with an obligation to make payment of the 50% of unearned income based on market value from future transfer after development of the property, at respective time. The Government of Maharashtra, Revenue and Forest department has issued a notification dated 21.05.2006 to enforce use of Ready Rec .....

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ment land fair market value of the land will be 80% of the ready recknor value. Liability of for such earned income is worked out as under: Valuation of Land admeasuring 3692.40 sq.Yards (3087.33 Sq.mtrs.) @ 20200 per Sq. Mtr. (as per Ready Racknor) A 62,364,066 Less: reduction in value bein collectors land @ 20% B=A *20% 12,472,813 C= A-B 49,891,253 Less: Unearned income as per Collectors Order (stated above) D 1,660,055 Amount of unearned income E=C-D 48,231,198 Amount payable to the Collector .....

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8377; 6,00,945/-. 7. By the impugned order, the ld. CIT(A) confirmed both the additions against which the assessee is in further appeal before us. 8. It was argued by the ld. AR that the assessee had purchased right of reversion in respect of a leasehold land at 15 Shah Industrial Estate Off Veera Desai Road, Andheri West, Mumbai - 400 058 vide deed of reversion dated February 17, 2000 from M/s. Mema Engineers and Contractors Pvt. Ltd. The said Mema Engineers had acquired the leasehold land unde .....

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y 21, 2006 stated to enforce use of Ready Recknor value for land valuation for use of Government Land on lease or rent and to include the improved methods of valuation of Government Land in respective cases. During the relevant Previous Year, the assessee had completed the development of the commercial building and has offered the profits on sale of commercial units at Shah Industrial Estate. Further, the assessee had claimed deduction of liability to Collector towards 50% of the unearned increa .....

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e assessee has understated the income the extent of ₹ 2,41,15,559/- as the amount payable to the Collector has not been debited in the books of accounts. 10. As per ld. AR Collector's liability is not any sum payable by way of tax, duty, cess or fee under any law. It is a contractual liability arising pursuant to the conditions in-built in the agreement for purchase of the rights in the land by the Assessee and is therefore not covered by the provisions of 43B of the Act. 11. The ld. A .....

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ssee has not booked the liability in the books of accounts, the liability has not crystallised during the year, ld. AR submitted that the question as to whether the assessee is entitled to a particular deduction or not depends on the provisions of law and the entries in the books of accounts cannot be considered as decisive or conclusive factor. For this purpose, reliance was placed on the decision of the Hon‟ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT (82 ITR 363) .....

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view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. 13. The ld. AR also placed reliance on CBDT‟s Notification No. 9949 dated January 25, 1996 issued u/s. 145(2) of the Act, which states that as per the Principle of Prudence, provisions should be made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in t .....

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ion made by the assessee while computing its taxable income with respect to the account which did not accrue nor paid by the assessee. With regard to Rule 14A disallowance, the contention of the ld. DR was that the A.O. had computed disallowance as per Rule 8D, according to which even in the years falling to A.Y. 2008-09 reasonable disallowance is required to be made in respect of expenditure incurred for earning exempt income. 14. We have considered rival contentions and carefully gone through .....

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e occupants of land included in a Development Scheme or in other special cases. According to this form which was given by M. Electrical and Mechanical Appliances (P) Ltd. (the earlier name of the vendor, Mema Engineers & Contractors (P) Ltd.) to the Additional Collector of Bombay, Bombay suburban District on 31.7.1964, mema had agreed to pay land revenue from time to time based on assessments to be made by Government, all taxes, rates and cess leviable in respect of the said land. The grant .....

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own Planning on behalf of the Collector. This letter shows that though the event which occasioned the payment of a portion of the unearned income accrued in the year 2000 it was only in the year 2003 that the Collector was aware of the event and the occasion was assessee‟s request to the Collector to allow it use to property commercially. (This is clear from the opening sentence of the letter which refers to the assessee‟s request for commercial use). The assessee has not stated furt .....

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