TMI Blog2017 (10) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee from the interest free fund received by it from Bhuminath Construction. Moreover, it appears that in case of Bhuminath Construction, the Assessing Officer has accepted the compensation paid of ₹ 6,75,150 to the assessee while completing the assessment. Therefore, if actually higher compensation has not been paid to the assessee, no addition can be made notionally and on mere presumption and surmises that the assessee might have received excess compensation or the compensation received is meager. Commissioner (Appeals) has categorically stated that the Assessing Officer had never doubted the genuineness of the purchases and total cost incurred towards the construction, however, he has sustained the addition primari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in the business of purchase, construction, acquiring, running, etc., of all types of resorts, hotels, motels, holiday home, guest house, restaurants, Caf , etc. For the assessment year under dispute, the assessee filed its return of income on 27th October 2007, declaring total income of ₹ 28,820. During the assessment proceedings, the Assessing Officer found that the assessee has entered into a MoU with Bhuminath Construction on 8th June 2006, for development of a Class Hotel at Sanpada, Navi Mumbai. As per the terms of the agreement, Bhuminath Construction was supposed to advance an amount of ₹ 5 crore to the assessee for development work and subsequent expenses were to be incurred by the assessee. He also found tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost incurred by the assessee on the project which worked out to ₹ 36 lakh. Accordingly, the Assessing Officer added back the amount to the income of the assessee. Being aggrieved of the addition made by the Assessing Officer, assessee preferred appeal before the first appellate authority. 4. Before the learned Commissioner (Appeals) the assessee objecting to the addition made by the Assessing Officer submitted that proper opportunity was not given to the assessee by the Assessing Officer. It was submitted, under the MoU, the contractor has a right to cancel the MoU if the developer is not able to complete 50% of the work within 9 months from the date of commencement. It was submitted, since the development work was not complete to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the project was partly made out by the assessee from borrowed funds of ₹ 94,94,882. He also observed, the assessee has paid interest of ₹ 9,60,000, which is more than the compensation received. Thus, on the aforesaid analysis of facts, the learned Commissioner (Appeals) upheld the addition made by the Assessing Officer. 5. Learned Authorised Representative submitted before us that cost of construction was also founded by Bhuminath Construction free of interest. He submitted, if the interest component on the amount advanced by Bhuminath Construction is considered, the compensation paid is good enough. Learned Authorised Representative submitted, as per mandate of section 44AB of the Act, its books of account are audited. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U providing the mode and manner of payment of compensation. Therefore, the basis for payment of compensation being not transparent, the claims of the assessee cannot be accepted. 7. We have heard rival contentions and perused the material available on record. It is evident, there is no dispute about the fact that the assessee and Bhuminath Construction have entered into MoU for development of a Hotel. It is also a fact that as per the terms of MoU, Bhuminath Construction will advance a sum of ₹ 5 crore in installments to the assessee for development of the project. It is also made clear in the MoU that the said amount of ₹ 5 crore shall be interest free. Neither of the Departmental Authorities have taken into consideration th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve no hesitation in deleting the addition made on estimate basis. However, the Assessing Officer is directed to bring to tax the compensation received by the assessee from Bhuminath Construction. Grounds no.1 and 2 are disposed off accordingly. 9. Ground no.3, relates to levy of interest under section 234B and 234C of the Act. 10. Both the parties admitted before us that this ground is consequential in nature. Accordingly, we direct the Assessing Officer to give consequential effect while re computing the income of the assessee keeping in view our findings given above and in accordance with the provisions of law. 11. In the result, assessee s appeal is partly allowed. Order pronounced in the open Court on 08.09.2017 - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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