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The Additional C.I.T, Range 10, New Delhi Versus DLF Limited And Vice-Versa

2017 (11) TMI 381 - ITAT DELHI

Disallowance of claim of Internal development charges (IDC) in respect of project at Greater Kailash Part I & II - Held that:- These are business expenses for development of various projects under execution and same could not be related to particular area or apartment and as such the Assessing Officer is not justified in considering the admissibility of part of the expenses on proportionate basis. Further, this disallowance is revenue natural as the appellant has sold the properties in the subse .....

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4A read with Rule 8D - Held that:- The issue is fully covered as per order of the ITAT relating to A.Y. 2006-07. It is further noticed that even though the tribunal worked out disallowance in A.Y. 2006-07 to the extent of ₹ 22,50,000/- but sustained disallowance to the extent of ₹ 1,87,35,000/- on the ground that appellant itself has agreed for such disallowance during assessment proceedings. However, the appellant has clarified that no such admission was made and in clarification of .....

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33.25 lakhs. The Assessing Officer may give necessary effect so as to restrict the disallowance to ₹ 33.25 lakhs. - Disallowance and capitalization of amount expanded on repair and maintenance of Generator sets - Held that:- We are of the view that claim is in the nature of current repair as AO has not brought on record any evidence in support of allegation of purchase of new generator sets and also failed to make any comments in respect of details submitted by the appellant. There is .....

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r trial run and training of pilots is part of the business activities and as such there is merit in the contention of the appellant that air craft was used for the purpose of business. Further, principle laid down by Supreme Court in the case of Core Health Care Ltd.(2008 (2) TMI 8 - SUPREME COURT OF INDIA) also support the claim of the appellant as the Assessing Officer himself has not disputed the fact that the air craft was used for the purpose of business as he accepted the claim of interest .....

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ssable in its hands - Held that:- The appellant assigned DLF Services Ltd. right to recover lease rent for maintenance and upkeep services of Mall and as such there was a genuine business arrangement between the parties. If the lease income is considered as chargeable to tax in the case of appellant, the appellant may be eligible for claim of expenses on account of maintenance of Mall which was owned and run by the appellant and as such appellant has not derived any tax benefit on the basis of s .....

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was on the basis of liability crystallised during the year and same is on the basis of regular system of accounting followed by the appellant. In the light of order of ITAT and detailed finding recorded by CIT(A), no interference is called for in the order of the CIT(A) and this ground of the revenue is dismissed. - Addition on account of brokerage and commission - Held that:- Claim of brokerage and commission is permissible deduction as same is in the nature of sales expenses - Additio .....

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income or expenses and accordingly order of the CIT(A) is confirmed and this ground of revenue is dismissed. - Disallowance on account of non allocation of expenses incurred on behalf of M/s. Galaxy Mercantiles Ltd. - Held that:- CIT(A) was right in observing that the allowability of these expenses in the hands of the appellant cannot be disputed merely on the ground that the appellant has not been able to recover the same from the other party. Even if these expenses were incurred on behalf .....

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provided by M/s. M/s. Paul, Hastings, Janofsky & Walker LLP - Held that:- We find that payment of legal and professional charges to a firm is covered under Article 15 of Indo-US DTAA. There is also no dispute to the factual position that the service provider does not have any PE in India or any of its personnel stayed for more than 90 days in India during the relevant AY. In the light of these factual findings, we are of the opinion that payment made to M/s. Paul, Hastings, Janofsky & Walker LLP .....

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t to be considered as Fees for technical Services in terms of Article 12 of Indo-Singapore DTAA. Further, the CIT(A) has categorically held that mere issuance of report does not tantamount to making technology available in India. The ITAT Delhi bench decision in the case of Romer Labs Singapore Pte.Ltd. vs. ADIT [2013 (10) TMI 751 - ITAT DELHI] as referred to above is also relevant and support the claim of the appellant. The ld. CIT DR has not disputed the factual finding recorded by CIT(A), the .....

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t. The entries recorded by appellant were merely pass through entries and as such there is no case of any adverse revenue implication. The order of CIT(A) is confirmed. - Addition u/s 40(a)(ia) on account of non deduction of TDS on payments made to two trusts - Held that:- here is no default on the part of the assessee in not deducting TDS on such payment. The order of the CIT(A) is based on proper appreciation of facts and there is thus no justification for any interference and this ground .....

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TDS on rent received from Shri Ram School - Held that:- Assessing Officer has not allowed the benefit of claim of TDS which is in respect of rental income from Shri Ram School. The Assessing Officer observed that as the rent has not been offered as income by the appellant, it is not entitle to claim of TDS. The CIT(A) has allowed relief on the ground that rent has been transferred to DLF Qutub Enclave Complex Educational Charitable Trust, but as TDS is in the name of appellant, benefit of same i .....

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accepted. - Mismatch in TDS certificates - Held that:- No addition can be considered merely on the basis of TDS certificates especially in the case of income from house property. It was also argued that the addition is revenue neutral in nature as the excess has been offered for taxation in subsequent year. - Capital gain computation - substitution of sale price of shares by NAV of the shares of Diwakar Estates Ltd. and Monishka Builders & Developers Pvt. Ltd. - Held that:- For the purpo .....

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n the case of CIT v. Gulshan Kumar [2002 (5) TMI 35 - DELHI High Court]. In view of the settled legal position and in the absence of any evidence regarding non-disclosure of full value of consideration, there is no infirmity in the order of CIT(A) and same is confirmed. - Disallowance of claim of depreciation on DLF Centre Building - Held that:- CIT(A) has observed that this very issue arose in the preceding year and relief allowed at the first appellate stage was accepted by the revenue as .....

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Assessee : Shri R.S. Singhvi, CA For The Revenue : Ms. Renu Amitabh, CIT-DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER: The above two cross appeals have been filed by the Assessee company [assessee] and assessing officer [ AO ] against order u/s 250 of the Income tax Act, 1961 [hereinafter referred to as Act ] dated 29.05.2012 passed by CIT(A)-XIII, New Delhi for assessment year 2007-08. 2. Facts of the case, in brief, are that the assessee is a limited company engaged in the business of real estate .....

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the Income tax Act, 1961. The appellant challenged the order u/s 142(2A ) before Hon ble Delhi High Court. The Hon ble High Court issued directions to the AO to pass a reasoned and speaking order for ordering special audit u/s 142(2A) which was rightfully obeyed by the AO and a fresh order dated 08.12.2009 was passed directing the appellant to furnish special audit report within 60 days from the receipt of the said order. Finally, special audit report was furnished by the appellant on 27.05.201 .....

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om To (Rs.) 1 Form 6B Cash Payments 27 34 19,100.00 2 Form 6B Prior Period Expenses 34 44 2,20,25,324.00 3 TOR-1 Interest on earnest money advanced to group concerns 44 55 4,19,00,000.00 4 TOR-1 Interest on debentures not charged from group concerns 55 64 7,53,00,000.00 5 TOR-1 Interest pertaining to loan for Edward Keventer Project 64 73 7,05,00,000.00 6 TOR-6 Interest capitalization in respect of project Star TowerSilokhara 104 106 45,92,000.00 7 TOR-6 Interest capitalization in respect of pro .....

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eads 255 288 20,70,28,248.00 17 TOR-19 Allocation of Expenses Galaxy Mercantile 288 293 3,66,66,458.00 18 TOR-19 Allocation of expenses not allocated at all 293 310 61,90,518.00 19 TOR-21 Disallowance u/s. 14A read with Rule 8D 310 333 27,22,75,000.00 20 TOR-22 Non deposit of Punjab VAT 333 337 1,60,000.00 21 TOR-23 Pre Operative expenses 337 342 1,81,95,513.00 22 TOR-23 Expenses on projects not commenced 342 352 1,79,83,814.00 23 TOR-23 Cost of DG Sets claimed as revenue to be capitalized 352 3 .....

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TOR-24 Withdrawal of TDS credit ₹ 11,07,190 411 418 *** 31 TOR-28 Reclassification of income from House property 418 430 7,87,31,326.00 32 TOR-28 Notional rental income 431 452 3,28,52,595.00 33 TOR-28 Reconciliation of TDS with rental income. 452 456 5,41,734.00 34 Withdrawal of TDS on rental income ₹ 41,764/- 35 TOR-28 Withdrawal of TDS credit ₹ 41,764 456 457 *** 36 TOR-28 Notional Rent where security deposit received 457 464 12,60,000.00 37 TOR-32 Sale price of shares 464 .....

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its order dated 29.05.2012 in which the appeal was partly allowed. Against the order of CIT(A), both assessee and AO are in appeal before us. 5. The assessee has raised following grounds of appeal : 1. 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 ₹ 1,01,07,405/- made by the Assessing Officer in respect of Internal Development Charges (IDC) - Greater Kailash-II by holding that the same is not re .....

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s incurred by the appellant in relation to investments during the assessment year 2007-08. That the learned CIT(A) ought to have held that no amount of interest, administrative or other expenditure was disallowable u/s. 14A of the Income tax Act, 1961. 2.3 That the learned CIT(A) has grossly erred in applying section 14A of the Act without appreciating that this section has no application to the present case. 2.4 That the learned CIT(A) failed to appreciate the submissions of the appellant that .....

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been incurred in relation to income which does not form part of the total income under the Act, for such previous year, as mandated by section 14A of the Act. 2.6 That the learned CIT(A) has not appreciated that no such finding on satisfaction, as amended by law has been recorded by the Assessing Officer and as such provisions of section 14A of the Act cannot be invoked. 3. That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant s case in confirmi .....

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cumstances of the appellant s case in confirming the net disallowance of ₹ 51,51,360/- (i.e. after allowing depreciation @ 40% on gross disallowance of ₹ 85,85,599/- which works out to ₹ 34,34,239/-) made by the Assessing Officer on account of interest expenses on Aircraft to be capitalized. [Page 246-250 of CIT(A) s order. 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 net addition of ₹ .....

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circumstances of the appellant s case in appreciating the fact that the taxable income means real income and not a fictional income. 6. That the order passed by the learned CIT(A) is bad in law as well as wrong on facts and erroneous in points of law and right is reserved to assail the same on such other ground or grounds as may be advanced at the time of hearing for which the appellant raves leave to amend, vary or add to the grounds hereinbefore appearing. 6. The revenue has raised following .....

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and in law was justified in deleting the addition of ₹ 41900000/- made by the AO on a/c of disallowance of proportionate interest. 4. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 75300000/- made by the AO on a/c of addition of notional income on account of interest on debentures not charged from group companies. 5. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in del .....

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y the AO on a/c of disallowance on account of Capitalization of interest. 8. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 171233363/- made by the AO on a/c of disallowance of brokerage & commission. 9. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 339987217/- made by the AO on a/c of disallowance of revenue recognition as per POCM. 1 .....

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ircumstances of the case and in law was justified in deleting the addition of ₹ 24064/- made by the AO on a/c of disallowance of net interest free security deposit. 13. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 20300000/- made by the AO on a/c of disallowance of net registration charges. 14. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of .....

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f Non Allocation of expenses to Galaxy Mercantiles. 17. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 6190518/- made by the AO on a/c of disallowance of expenses on a/c of Allocation of expenses not allocated at all. 18. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 272275000/- made by the AO on a/c of disallowance of expenditure u/s 14A .....

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der the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 17983814/- made by the AO on a/c of disallowance of expenses on project not commenced. 22. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 10432923/- made by the AO on a/c of disallowance of expenses for increase in authorized capital capitalized. 23. Whether the CIT(A) under the facts and circumstances of the case .....

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F Qutub Enclave Complex Edu. Charitable Trust. 25 Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 2708664/- made by the AO on a/c of disallowance of expenditure u/s 40(a)(ia) of the Act, 1961 for non deduction of TDS on payments to M/s. DLF Qutub Enclave Complex Medical Charitable Trust. 26. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 420 .....

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es of the case and in law was justified in deleting the addition of ₹ 78731326/- made by the AO on a/c of disallowance of reclassification of income from Income from house property to Income from business & profession . 29. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 32852595/- made by the AO on a/c of disallowance of notional rent/Additional annual letting value (ALV) i.r.o. vacant property. 30. Whether .....

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the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 13681610/- made by the AO on a/c of disallowance of Sale prices of shares based on (NAV) of shares of Diwakar Estate Ltd. & Monishka Builders & Dev Pvt.Ltd. 33. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 6508264/- made by the AO on a/c of disallowance of expenditure where bills were not in .....

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Tribunal vide its order dated 11.03.2016 for immediately preceding AY 2006-07 in ITA NO. 2677/Del/2011 and 3061/Del/2011 has decided the cross appeals filed by both the parties and most of the issues involved in appeal of the revenue have already been dealt with and adjudicated upon in the said order. Sh. R.S. Singhvi, counsel appearing on behalf of the assessee pointed out that substantial issues arising out of revenue s appeal are covered in favour of assessee and to buttress his contention h .....

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e CIT(A). 8.2 The relevant observations and finding of AO from Pages 212 to 215 are as under: On this issue the special auditor has specifically observed the assessee is holding some land in Greater Kailash which are clearly identifiable separately and total area of land held is 18.10 acres. The details of land held has been given in the special audit report. The assessee has shown total amount of IDC expenditure aggregating ₹ 7,95,35,569/- out of this ₹ 2,84,68,129/- pertains to sec .....

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opies of relevant documents evidencing the fact that shelter fees paid pertains to other lands were enclosed as a part of the Special Audit report. The assessee company has incorrectly presumed the entire amount of ₹ 7,95,35,569/- as having been incurred for all lands measuring in total at 18.10 acres. Based on this presumption, an amount of ₹ 3,51,20,018/- has been claimed as expenditure on a pro-rata basis in respect of land (N Block GK) which was sold during the assessment year 20 .....

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f the lands for which shelter fees was paid. The letter of shelter fees clearly gives description of the land against which shelter fees was paid. During A.Y. 2007-08 the assessee company has sold/transferred three land at N-Block, G.K. - I measuring 2.045 acres, 5 acres and 2.50 acres measuring in all at 9.545 acres. The assessee company has claimed pro rata deduction of ₹ 3,51,20,018/- against the sale of land. However out of this deduction claimed the pro rata deduction is allowable onl .....

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land sold. The argument of the assessee is not acceptable since the lands located at Greater Kailash - I are clearly and separately identifiable and accordingly the expenses which are pertaining to specific lands are not allowable against other lands. The assessee has not disputed the fact that shelter fees claimed on pro rata basis was pertaining to E and W block lands and not N block land which was sold. Accordingly, the cumulated security expenses aggregating ₹ 2,84,68,129/- are allowa .....

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see company and the balance amount of ₹ 2,01,07,405/- is being disallowed since these expenses are not pertaining to the land sold during the relevant financial year. 8.3 Relevant finding and conclusion of ld CIT(A) order s at para 12.10 on Page 144-146 reads as under: 12.10 I have considered the observation of the ASSESSING OFFICER and submission of the appellant and material available on record it is seen that the Assessing Officer has held that the land located at Greater Kailash-I and .....

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uot; Block, GK-II. 1.15 19,080.00 Total 5,10,67,440.00 It is seen that during the year appellant has sold land other than the land situated at E & W Block of GK-II. It is also seen that appellant has not incurred any expenditure relating to the plot of land sold during the year. As discussed above, the amount of ₹ 5,10,67,440/- has been incurred on land situated at E & W Block of GK-II and no amount has been spent on other land situated at GK-I and GK-II. Therefore, no expenditure .....

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. The expenditure of ₹ 5,10,67,440/- shall be allowable in the year in which E & W Block lands are sold /transferred by the appellant company. Therefore, the proportionate expenses towards IDC claimed to the extent of ₹ 2,01,07,405/- disallowed by the ASSESSING OFFICER, is not related to lands sold during the year. Hence, the same is confirmed. It is also claimed by the AR of the appellant this issue is covered in favour of the appellant by CIT(A) order for A.Y. 2006-07. It is se .....

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incurred in respect of Greater Kailash project as on 31.03.2007 is ₹ 7,95,35,569/-. b. There is no dispute about genuineness and admissibility of claim of Internal Development Cost (IDC). However, the AO has disallowed proportionate claim of IDC relating to Greater Kailash project with reference to actual sale effected during the year. c. It was explained that the revenue from sale of these lands is recognized as per matching concept in which the cost of land sold is determined by computi .....

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one of the various projects and accordingly the claim of the assessee is based on sound accounting policy being consistently followed for several years. f. The limited issue for consideration is whether IDC cost incurred on the entire project of Greater Kailash is to be allowed on proportionate basis or in respect of specified land or area. g. It was argued that AO has not properly appreciated the facts of the case, nature of the claim, past history and accounting principles. h. it was further .....

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uch claim is revenue neutral and covered by the decision of Hon ble Apex court in the case of CIT v. Excel Industries Ltd. [2013] 358 ITR 295(SC). It was further contended that issue of timing difference and revenue neutrality has already been considered by Hon ble tribunal in AY 2006-07. 8.5 The ld. CIT DR relied upon the order of AO and CIT(A) and opposed the method adopted by the assessee. 9. We have heard the Ld. AR Sh. R.S. Singhvi and CIT-DR Ms. Renu Amitabh and also gone through the order .....

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these are the developmental expenses in respect of various blocks in Greater Kailash, Part-II which were under development by the appellant. It was submitted that these expenses are for the development of whole area and not specific to property sold. There is no dispute that these expenses are of revenue nature and permissible deduction under the law as Assessing Officer himself has allowed part of the expenses which are attributable to property sold during the year. 11. The CIT DR supported th .....

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g the admissibility of part of the expenses on proportionate basis. Further, this disallowance is revenue natural as the appellant has sold the properties in the subsequent years and taking into consideration the principle laid down by Supreme Court in the case of CIT Vs. Excel Industries Ltd. 358 ITR 295, there is no ground or justification for disallowance of part of expenses relating to IDC and accordingly this ground is allowed. However, if any part of these expenses have been claimed or all .....

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the Assessment Order]: The submission of the assessee has been considered. However, it is noticed that the assessee has invested an amount of ₹ 83.75 crores in the partnership firms as its share capital and ₹ 589 crores in various Pvt. Ltd. companies. The details of investments are enclosed with the Special Auditors Report. These investments have been made out of interest bearing funds of the assessee and therefore, there is direct nexus between the funds borrowed and investments. T .....

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tner, however, no proportionate disallowance on the expenditure has been made for earning such exempt income. Upon examination of assessee s reply, it is seen that assessee s contention is that no interest bearing funds were utilized for making investment for earning exempt income. Since no deduction on account of interest was claimed, therefore, no disallowance can be made under section 14A of the Income Tax Act. In this regard assessee has tabulated certain data on page 22 and 33 of reply date .....

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e assessee it is evident that no such working has been carried out. But such a situation cannot exist. In other words there is bound to be some expenditure pertaining to earning of exempt income. Since the assessee has failed to carry out the computation exercise, provisions of section 14A are attracted. The said section provides that the where the assessing officer is not satisfied with the correctness of the claim of the assessee, he may work out the same on his own. For carrying out such work .....

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le 8D the entire interest expenditure forming part of the P&L Account will have to be taken for the purpose of computing the disallowance. Hence, the table furnished in para21.8, page 8 of the Special Audit Report , Volume X is being applied for computing the proportionate disallowance. It may also be pointed out that apart from the disallowance of interest expenditure aggregating ₹ 2401.31 lacs, there is also disallowance of administrative expenditure aggregating ₹ 321.44 lacs c .....

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t, fixed or variable and managerial or financial in accordance with law. Attention may be drawn to the decision of Delhi ITAT Special Bench in the case of Chem Invest Ltd. 121 ITD 318, where it has been held that a disallowance under section 14A is warranted even in a year in which no exempt income has been earned or received by the assessee. With these remarks, the addition of ₹ 27,22,75,000/- is made U/s.14A read with rule 8D (ii). The working of disallowance u/s 14A read with Rule 8D is .....

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d in point No. 1. 30,299.24 (directly related to exempted income) B Average of value of investment, income from which does not form part of total income. 64,287.62 C The average of total assets as appearing in the balance sheet 8,11,166.72 Total Assets: As on 31.03.2007 As on 31.03.2006 Fixed Assts 99,360.24 53,639.65 Investments 76,917.35 139,728.29 Current Assets, Loans & Advances 9,43,844.94 308,842.97 Total Assets 11,20,122.53 5,02,210.91 Average (Total Assets as on 31.03.2007 + Total As .....

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alue of Investment income of which does not form part of total income 67,202.12 61,373.12 Average Investment (67,202.12 + 61,373.12)/2 64,287.62 As per this working the total disallowance as per Sec 14A r.w. Rule 8D would be ₹ 27,22,75,000/. 15. Finding and conclusion of CIT(A) s order [ para 21.6 on page 217-220 of CIT(A) s Order] reads as under: 21.6 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various judicial pronouncements available on th .....

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d that appellant has shown interest incurred on fixed period loan of ₹ 463.86 crore. Out of this an amount of ₹ 196.02 crore has been capitalized over the project. The appellant has also paid interest on over draft etc. to the tune of ₹ 35.15 crore. As such the total interest payment during the year comes to ₹ 302.99 crore. As against this, the appellant has shown interest receipts of ₹ 284.51 crore in the P&L account. If the interest paid on bank overdraft faci .....

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in the shares of M/s Edward Keventor (Successors) Pvt. Ltd. for acquiring shares of said company. The appellant had paid ₹ 26.76 crore as interest on the loan taken from ICICI Bank which has been specifically taken for making investment in shares of M/s Edward Keventor (Successors) Pvt. Ltd. The other loans taken by the appellant company on which interest is paid were related to the construction projects being undertaken by the appellant company and advanced to other group entities. Theref .....

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ance u/s 14A ( 1 + 2 ) 1.45 A Amount of expenditure by way of interest other than the amount of interest included in point No.1. (directly related to exempted 26.76 income) B Average of value of investment, income from which does not form part of total income. 438.92 C The average of total assets as appearing in the balance sheet 8,111.66 It is observed that earning of exempt income is not a passive activity. In the present age of making of investment, maintaining or continuing with investment a .....

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ement of investment is embedded in the expenditure debited to the profit and loss account. The indirect expenditure incurred on the administration and management of investment is also substantial, considering the total expenditure debited by the appellant in profit and loss account. Therefore, some expenses has to be apportioned on the investment made on which exempt income is earned by the appellant. The appellant has invested ₹ 642.87 crore for earning exempt income, therefore, 0.5% of s .....

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8377; 4.66 crore. In the assessment order ASSESSING OFFICER has disallowed ₹ 27,22,75,000/- u/s 14A of the IT Act on account of earning exempt income. This disallowance has been worked out by the ASSESSING OFFICER on the basis of section 14A read with Rule 8D of the IT Act. The Hon ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. vs. DCIT (2010) 194 Taxman 203 (BOM) has held that provisions of Rule 8D are applicable prospectively w.e.f A.Y. 2008-09 and not retrospe .....

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4A is restricted to ₹ 4.66 crore. As a result, the appellant gets a relief of ₹ 22,56,75,000/- 16. Ld. counsel for the assessee submitted at the very outset that this very ground is covered in favour of assessee by the order of Tribunal for AY 2006-07. It was further argued that in absence of any change in facts, the observations and finding of Tribunal in order for AY 2006-07 are fully relevant and applicable to the present case. In support of his contention, the ld. counsel also pl .....

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ground is in respect of disallowance u/s. 14A. The Assessing Officer has made disallowance u/s. 14A to the extent of ₹ 27,22,75,000/-, which has been restricted to ₹ 4,66,00,000/- by CIT(A). Both the parties are aggrieved and in appeal against order of the CIT(A) as per respective ground raised by the parties. The Ld. AR contended that the issue is fully covered as per order of the ITAT in the immediately preceding year i.e. A.Y. 2006-07 and on the basis of order of ITAT, the disall .....

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which is in accordance with Rule 8D should be sustained. However, both the parties have agreed that all the issues arising out of order of the ITAT have been addressed by the tribunal and issue is covered by the order of the ITAT in the immediately preceding year. 20. We have gone through orders of the Assessing Officer and CIT(A) and also perused the order of the ITAT. The tribunal has examined all the issues arising out of the order of the Assessing Officer and CIT(A) and various arguments ra .....

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rification of factual mistake in the order of the tribunal, miscellaneous application has been field and same has also been heard, but order is still awaited. Without making any comment on the same, we are of the view that no such issue was raised by the Ld. CIT DR or fact about any such admission was brought on record. 21. In the ultimate analyses, we are of the view that the issue is fully and squarely covered by order of ITAT for A.Y. 2006-07 and accordingly disallowance is confirmed to the e .....

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: Observation and Conclusion of AO s Order (Page 352-356 of the Assessment Order) The Special Auditors have reported that : 23.11 The Assessee Company has incurred ₹ 28,17,090/- vide 1st RA bill dated 17.02.2007 WC 10 of M/s HI TECH ENGINEERS & CONSULTANTS on account of purchase of 2 No. s D.G. sets installed at Shopping Mall - Office. The aforesaid expenditure incurred on account of purchase of 2 No. s D.G. sets has been charged as revenue expenditure under the head Repair & Maint .....

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nce of an asset in order to keep in working condition is revenue expenditure but replacement of complete asset by another asset is capital expenditure. This proposition of law now settled by the apex court in the case of Sarvana Spg. Mills Ltd. 293 ITR 201. The relevant portion of this citation is reproduced below: ………………. Therefore, the claim of the assessee to be extent to ₹ 28,17,090/- during the course of purchase of two DG Sets is disallowed. .....

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rom the perusal of bills filed by the appellant vide its submission dated 08.05.2012 that the expenditure of ₹ 28,17,090/- has been incurred for purchase of DG Sets from M/s Hi- Tech Engineers & Consultants. The appellant has claimed that the two DG sets have been repaired or overhauled and the same is not replacement of old DG Sets. It is also claimed by the appellant that these expenses have been incurred on changing batteries, Fuel Tank etc. However it is seen that from the descript .....

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d such replacement of worn out parts are not current repairs and has to be considered as capital expenditure. In this regard the ASSESSING OFFICER has placed reliance on the judgment of Hon ble Supreme Court in the case of CIT vs. Sarvana Spinning Mills Pvt. Ltd. 293 ITR 201 (SC). The judgment is squarely applicable on the facts of the appellant s case. Hence, the expenditure incurred on DG Sets of ₹ 28,17,090/- is held as capital expenditure and the decision of the ASSESSING OFFICER is co .....

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se laws : a. CIT vs Mahalakshmi Textile Mills Limited 66 ITR 710 (SC) b. CIT v. Modi Industries Ltd. 197 Taxman 76 (Delhi HC) c. CIT vs. Chowgule And Co.Pvt. Ltd. 214 / ITR / 523 (Bom) d. CIT v. Gitanjali Mills Ltd. 265 ITR 681 (Mad) e. Nathmal Bankatlal Works Co. Ltd. v CIT 122 ITR 168 (AP HC) f. CIT v. Janakram Mills Ltd 275 ITR 403 (Mad) 26. On the other hand, ld. DR relied upon the orders of lower authorities. It was contended that the expense under dispute are in the nature capital expenses .....

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fficer has considered this claim as of capital nature on the ground that same is relating to purchase of generator sets. However, Assessing Officer has not made reference to any purchase bill or any other evidence to demonstrate that the claim is in the nature of purchase of new generator set. The CIT(A) confirmed the disallowance made by the AO. The appellant has argued that the claim is in respect of repair and maintenance of generator sets and made reference to the details submitted vide pape .....

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lso failed to make any comments in respect of details submitted by the appellant. There is thus, no justification for treating the same as of capital nature and accordingly the impugned disallowance is deleted and this ground of appeal is allowed 29. Ground No. 4 is against disallowance and capitalization of ₹ 51,51,360/- being claim of interest on loan taken for purchase of Aircraft. The assessing officer has considered the disallowance u/s 36(1)(iii) on the ground that deduction of inter .....

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use needs to be capitalised. The relevant extracts in this regard from the Special Audit Report are reproduced below: 23.2 As per the terms of reference, the scope of audit can be divided into two broad categories - (I) whether the asset capitalized is correct with reference to the date for the purpose of claiming depreciation; and (ii) Whether any capital expenditure is claimed as revenue expenditure. One of the major items capitalized during the year is in relation to purchase of an aircraft. .....

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Bill of Entry dated 01.03.2007. Therefore, in order to verify whether the aircraft was to put to use for a period of 180 days or more during the relevant financial year, a clarification was sought from the assessee vide our letter dated 6th April 2010, copy of which is annexed hereto as Annexure A . Page 386 The reply of the assessee was considered and from the reply and substantiating documents filed by the assessee it emerges that the aircraft purchased by the assessee was put to use from 18.0 .....

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this point the assessee has not furnished any documentary evidence. Therefore the date of put to use of aircraft is taken as 16.08.2010. The assessee has claimed deduction of interest paid to GE capital Services Ltd on loan taken for purchase of aircraft. The interest deduction has been claimed from July 2006. As per section 36(1)(iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : [Provided that any amount of the interest paid, i .....

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from the date of acquisition of an asset till the date on which such asset was first put to use will not be allowable as deduction. In this case as per the assessee s own admission the aircraft was first put to use on 16.08.2006. Therefore the deduction of interest is allowable only from 16.08.2006 i.e. the date from which aircraft was first put to use. The assessee has claimed deduction on loan taken from GE capital Services from July 06 and consequently the deduction of interest for the period .....

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% and depreciation allowable comes to ₹ 34,34,239/-. The interest disallowed is ₹ 88,54,351/- and depreciation allowable is ₹ 35,41,740/-, the net disallowance would come to ₹ 51,51,360/-. Finding and conclusion of CIT(A) [ Para 27.7, page 249-250 of CIT(A) s Order] : 27.7 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and the material available on record. It is seen that the aircraft was purchased vide invoice dated 19.06.2006 fro .....

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was put to use on this date. The contention of the appellant that delivery of the Air Craft was taken on 3rd July 2006 in USA and since then it was used for business purposes regularly is not based on any material evidence. Therefore, the date of put to use is to be taken as 18.08.2006. The appellant has claimed deduction of interest paid GE Capital Services Ltd. on loan taken for purchase of air craft. The deduction of interest on such loan has been claimed from July 2006. However, the provisi .....

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put to use i.e. 18.08.2006. The appellant has claimed interest on loan for July and part of August at ₹ 85,85,599/-. Therefore, the interest component of ₹ 85,85,599/- is not an allowable expenditure and same is to be capitalized since the air craft put to use on 18.08.2006. The ASSESSING OFFICER after capitalizing this interest has allowed depreciation @ 40% which was worked out at ₹ 34,34,239/- and same was allowed out of the disallowance of interest of ₹ 85,85,599/- an .....

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evidences placed on record. Ld. Counsel took us though detailed chart of flight operation details placed at Paperbook Pg 102-179 and contended that the aircraft was put into operation in the month of July 2006 itself and it took first flight on 13.07.2006. It was also submitted that the aircraft was being used for trial run and commercial purposes during the said period and as such the assessing was not justified in disallowing the claim of interest for the intervening period starting from 01.0 .....

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erest amounting to ₹ 51,51,360/- which was in respect of acquisition of air craft and related to period 1st July 2006 to 17th August 2006 treating is to be in the nature of capital expenditure. The Assessing Officer observed that air craft was not used during the relevant period for the purpose of business and as such same was treated as capital expenditure being part of cost of acquisition. The CIT(A) confirmed the finding of Assessing Officer. 35. The appellant has disputed the factual f .....

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pported the order of Assessing Officer and CIT(A). 37. We have gone through facts of the case, contention of the parties and details placed in the paper book. In our considered opinion, the use of aircrafts for trial run and training of pilots is part of the business activities and as such there is merit in the contention of the appellant that air craft was used for the purpose of business. Further, principle laid down by Supreme Court in the case of Core Health Care Ltd.(supra) also support the .....

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nterest as permissible deduction. 38. Ground No. 5 is against addition of ₹ 12,60,000/- being in the nature of notional rent from Kiosks. The assessing officer and CIT(A) have considered the addition on the ground that assessee is the owner of Kiosks and rental income from same is assessable in its hands. 39. The observation and finding of AO and CIT(A) are as under : Observations and Conclusion of AO at Pages 463-464 of the Assessment Order. From the reply filed by the assessee it emerges .....

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ry of the assessee. The reason for income being shown by DLF Services Ltd as given by the assessee is that DLF Services Ltd being the agency responsible to maintain the building were authorised to received rent to meet its cost of maintenance of building even though the security deposit was received by the assessee company. This contention of the assessee is not acceptable since the place is owned by DLF Ltd, the rental agreement with the tenants for kiosks is entered into with DLF Ltd. and secu .....

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service providing agency must have received maintenance charges from the various shopkeepers in the mall. The assessee has not furnished any agreement under which it had authorised DLF Services Ltd to collect rent from kiosks. The assessee had only filed a letter dated 12.12.2005 wherein it has been mentioned that DLF Services Ltd are authorised to keep money recovered from third parties using the kiosks to meet as a part of cost of promotional activities. The letter submitted by the assessee i .....

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s have been included in the taxable income of DLF Services Ltd. In view of the same the rental income from these four tenants is to be included in the taxable income of the assessee as per the following details : NAME OF THE TENANT RENT / LICENSE FEE P.M. (RS.) AMOUNT (RS.) BELGIQUE CHOCOLATIERS 50,000/- 6,00,000/- SWASTIK FOOD SOLUTIONS 45,000/- 5,40,000/- ROYAL TOUCH 15,000/- 1,80,000/- VRINIKA OVERSEAS PVT. LTD. 40,000/- 4,80,000/- TOTAL (RS.) 18,00,000/- Accordingly amount of ₹ 18,00,0 .....

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ique Chocolatiers, Swastik Food Solutions, Royal Touch, Vrinka Overseas Pvt. Ltd, owned by the appellant company. It is also seen that lease agreements for giving these properties on rent have been entered into between the appellant and said parties. The deposit received from such parties of ₹ 18,40,260/- has been credited by the appellant in its books of accounts. It is claimed by the appellant that the rent receivable from such parties was assigned to DLF Services Ltd., a company who has .....

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er allowing 30% deduction from the rent income is confirmed. 40. Ld. Counsel for the assessee resisted the finding of AO and CIT(A) on the ground that rental income from the Kiosks is being assessed in the hands of M/s. DLF Services Ltd. on account of diversion by overriding title. It was contended that assessee has appointed M/s. DLF Services Ltd. for providing maintenance and upkeep services of mall and Kiosks and as per the said arrangement, the assessee has assigned the right to recover rent .....

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Ashish Plastics Industries v. ACIT[2015] 373 ITR 45 (SC). Reference was also made to another decision of Hon ble Supreme Court in the case of Excel Industries Ltd. 358 ITR 295 (SC). 41. The Ld CIT DR, on the other hand, relied upon the order of AO and CIT(A) and contended that since the assessee is the owner of Kiosks, the rental income is to be taxed in the hands of assessee only. 42. We have heard the rival submissions and perused the material on record. The ground is regarding addition of &# .....

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nd maintenance of Mall, owned and run by appellant. For maintenance services being rendered by DLF Services Ltd., the appellant assigned the lease rental to DLF Services Ltd. as part of maintenance cost. The appellant contended that the diversion of lease rent was towards reimbursement of maintenance services rendered by M/s. DLF Services Ltd. and as such diversion was towards provisions of maintenance services. It was further contended that the rental income as diverted to DLF Services Ltd. has .....

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the view that the appellant assigned DLF Services Ltd. right to recover lease rent for maintenance and upkeep services of Mall and as such there was a genuine business arrangement between the parties. If the lease income is considered as chargeable to tax in the case of appellant, the appellant may be eligible for claim of expenses on account of maintenance of Mall which was owned and run by the appellant and as such appellant has not derived any tax benefit on the basis of such arrangement and .....

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ssee is partly allowed. 48 Now we take up the appeal filed by the revenue. 49. At the outset, the Ld. AR pointed out that most of the grounds are covered by order of the ITAT dated 11/03/2016 for A.Y. 2006-07. It was submitted that after the order of the CIT(A) for assessment year under reference, Tribunal has considered the appeal of the assessee and revenue for A.Y. 2006-07 and adjudicated various grounds which were in dispute. The Ld. AR placed on record, a chart at Paperbook Pg 1-4 giving de .....

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leted the addition by taking into account relevant facts and provisions of Rule 6DD(I) read with section 40A(3) of the Act. 51. The ld. CIT DR relied on the order of AO and on the other hand the ld. Counsel for the assessee supported the order of CIT(A). 52. After going through the order of the AO and CIT(A), no interference is called for and the order of the CIT(A) is confirmed and accordingly this ground of the revenue is dismissed. 53. Ground No. 2 is against deletion of disallowance of ͅ .....

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. 334 ITR 102 (Del). 54. The ld. CIT DR relied on the order of AO and on the other hand the ld. Counsel for the assessee submitted that the issue is covered in favour of assessee by the order of Tribunal in immediately preceding AY 2006-07. 55. We have gone through order of AO & CIT(A). It is noticed that the issue of prior period was adjudicated by ITAT for A.Y. 2006-07 vide para 227-231 of the consolidated order. The Ld.AR submitted that claim of prior period was on the basis of liability .....

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ee has advanced interest bearing funds to its sister concerns. As the assessee is having common pool of funds, the AO considered proportionate disallowance of interest. The CIT(A) after going through the submissions of the assessee has given a categorical finding that the interest income declared by the assessee is much more than interest expense claimed and as such there could be no case of any proportionate disallowance. 57. The observation and finding of AO and CIT(A) are extracted hereunder .....

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est money which is to be adjusted upon conveyancing of purchase of land. The assessee later on decided that the land owning process be assigned to an intermediary namely, DLF Commercial Projects Corporation (DCPC), since the number of land owning companies kept on growing with the increased requirement of land. The assessee therefore, decided that hitherto, DCPC should be responsible for purchase of development rights from the land owning companies and will in turn provided these rights of conti .....

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ce received from the various LOC s (Rs. 743.73 cr.) and the balance amount paid to DCPC was out of the utilization of bank limits etc. In the background of the above stated facts in response to non charging of interest on these advances the assessee has mentioned that no interest was chargeable on the same as it was a business advance given for procuring land. The assessee in its accounts has capitalised interest in respect of advance given to DCPC for purchase of land. The total interest capita .....

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aracter to advance given to DCPC. The assessee has capitalised interest on advance given to DCPC in the financial statements as mentioned above and accordingly the interest on advance of ₹ 743.73 crores from 31st August 2006 to 15 November 2006 is to be capitalised and disallowed accordingly. The interest amount calculated comes to ₹ 15,88,17,344/-. The rate of interest has been taken at 10.25% which is the same rate as being paid on loans taken from banks by the company. It is furth .....

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ister concerns and earning interest income of ₹ 270.09 crores. The assessee is stated to have borrowed for the purpose of business and in almost all cases for the specific construction projects. The assessee while utilizing such borrowed funds has given advance to its subsidiary companies. The assessee has charged interest on such advance also. The amount borrowed is all mixed up with own funds and interest free funds by way of advances received from customers. The amount received by asses .....

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ation of such funds for uncompleted residential projects or for the commercial projects or for granting loan / advances to group concerns cannot be correlated. On the basis of above discussion, a proposition/formula can be laid down that if an assessee is having interest-free funds, in the form of capital, reserves and other funds without interest bearing related to business on one side and interest bearing borrowed funds on other side, the loans/advances given to group entities have come from b .....

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e interest on fixed period loan where only part of revenue recognized However, all such disallowance are comprised within the overall figure of ₹ 267.84 crores claimed in the P&L Account. As discussed above in the case of mixed use funds the disallowance of gross interest is required to be carried out after carrying out proportionate netting against the interest income earned and credited in the P&L Account. Such an exercise in respect of all the above issues has been collectively .....

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ompany is engaged in the business of real estate and it is normal practice of the appellant company to buy the land through its associate concerns. The appellant company was regularly advancing money to its associate companies to enable them to purchase the land for appellant company. In this particular case, the 27 land owning companies were not able to purchase land for the appellant company, therefore, the amount was refunded after 2 ½ months from the date of receipt of the money. It i .....

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e. These MOUs were made for purchase of land by land owning companies and thereafter, these LOC s will transfer the development rights to the appellant company. It is mentioned in these MOUs that appellant shall pay to these land owning companies, such sum as interest free advance from time to time for purchase of land for appellant company. It is also seen that while giving advances there was no intention to charge interest on such advances as the same were given wholly and exclusively for busi .....

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interest of ₹ 463.86 crore during the year. Out of this an interest to the extent of ₹ 196.02 crore has been capitalized over the projects. As a result, the total interest claimed in the profit & loss account on fixed termed loans comes to ₹ 267.84 crore. The appellant has also paid over draft interest and interest paid to others of ₹ 35.15 crore. Thus, the total interest claimed in the profit & loss account is at ₹ 302.99 crores. As against this the appella .....

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ch the interest received is much more than the interest claimed in the profit and loss account by the appellant. Therefore, it cannot be said that appellant has diverted interest bearing funds to reduce its tax liability. The formula devised by the ASSESSING OFFICER of mixed funds to work out proportionate notional disallowance of interest is not based on any scientific method. When interest payment claimed by the appellant is less than the interest income offered in the profit and loss account, .....

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dvanced to charitable trust is not sustainable Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 1995-96 - During relevant previous year, appellant lent substantial amounts to 'J' Trust as interest-free advances - Assessing Officer was of view that appellant used to deposit huge amount in bank out of surplus money available with him - He further noted that appellant all of a sudden resorted to shifting of deposit standing in his name and other surplus to &# .....

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that Assessing Officer was wrong in including notional interest as assessable income of appellant - Tribunal upheld order passed by Commissioner (Appeals) - Whether in a taxing statute, one has to look merely at what is said in relevant provision and there is no presumption as to a tax - Held, yes - Whether since revenue had not shown any provision of law to charge notional income, Tribunal was justified in deleting impugned addition made by Assessing Officer - Held, yes [In favour of appellant .....

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expediency. The expression commercial expediency is one of wide important and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. Decisions relating to section 37 will also be applicable to section 36(1)(iii) because in section 37 also the expression used is for the purpose of the busines .....

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t is not utilized by the appellant in its own business but had been advanced as interest free loan to its sister concern is not relevant. What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. The facts of the appellant s case are identical with the facts of the above cited judicial pronouncements. Therefore, ratio of the said judgments is squarely applicable to the appellant s .....

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his issue has also been adjudicated by ITAT vide para 43-50 of the consolidated order of the ITAT for A.Y. 2006-07. As the facts and basis of disallowance is same as in the preceding year, there is no infirmity in the order of the CIT(A) and the ground of the revenue is dismissed as same is covered in favour of appellant vide order of ITAT for A.Y. 2006-07. 60. Ground No. 4 is against deletion of addition of ₹ 7,53,00,000/- on account of notional interest on debentures. The AO has made not .....

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se as the interest receipts of the assessee is much higher than interest payments. 61. The ld. CIT DR relied upon the findings of AO. On the other hand, the ld. Counsel for the assessee submitted that there is no concept of notional income under the provisions of Income Tax Act, 1961. It was further argued that non charging of interest was in accordance with terms of issue Debentures which was mutually agreed between the parties. The ld. Counsel also relied upon decision of Hon ble Delhi High Co .....

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firmed and this ground of revenue is dismissed. 63. Ground No. 5 is against deletion of disallowance of ₹ 7,05,00,000/- on account of capitalization of interest in respect of Project Keventor Lane at Sardar Patel Marg, New Delhi. 64. The relevant finding and observation of AO and CIT(A) are extracted as under : Observation of assessing officer Pages 70 to 73 of the Assessment Order) The observations and findings in the Special Audit Report and the reply furnished by the assessee have been .....

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s and claimed in the profit & loss Account during the financial year 2006-07. However, the revenue from the Keventor Lane project has not been recognized so far till financial Year ending 2007. The reply of the assessee is that according to AS-16 issued by ICAI, and with reference to para 14 and 16 of the said Accounting Standard interest cost for this project could not be capitalized. No discrepancy was noted regarding capitalization of interest in line with the provisions of AS- 16 issued .....

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uted and assessed in accordance with provisions of the Income Tax Act, 1961. Under the Income Tax Act there is no such requirement that interest cost in respect of a project where construction activities could not commence should be claimed as revenue. It is seen that in respect of advances given to land owning companies for acquiring land the assessee has himself capitalized the interest cost. Therefore, there is no reason why a different treatment should be given in respect of the loan of S .....

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ed period loans. The case of the assessee is peculiar where mixed funds in the form of interest bearing and interest free funds are available. The funds available in business have been utilised for twin purposes- firstly for carrying out the activity of real estate development and secondly for giving interest bearing advances to sister concerns and earning interest income of ₹ 270.09 crores. The assessee is stated to have borrowed for the purpose of business and in almost all cases for the .....

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on projects or for giving advance to subsidiaries. Thus, there is no direct nexus which can be established to hold that the loans for specific projects were utilized for such projects only. The own funds or other funds available to the assessee by way of interest free funds are mixed up with the borrowed funds and the utilization of such funds for uncompleted residential projects or for the commercial projects or for granting loan / advances to group concerns cannot be correlated. On the basis o .....

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talization thereof is called for. These issue are as under :- * Proportionate Interest on Earnest Money advanced interest free * Proportionate Disallowance of Interest for non charging of interest on debentures issued to group entities. * Disallowance of Interest on loan for Project- Keventer Lane * Disallowance of proportionate interest on fixed period lane where only part of revenue recognized However, all such disallowance are comprised within the overall figure of ₹ 267.84 crores claim .....

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₹ 7,05,00,000/-. Observation and finding of CIT(A):[ Para 7.6 at Page 75 to 77 of CIT(A) s Order] 7.6 I have considered the submission of the appellant and observations of the ASSESSING OFFICER as well as observation of the Special Auditors. It is seen that appellant had purchased shares of Edward Keventor (Successors) Pvt. Ltd. during the F.Y. 2005-06 for ₹ 438.92 crores. Out of this an amount of ₹ 370 crore was sanctioned by the ICICI Bank as loan to finance the acquisition .....

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use from dairy farming to residential . The Writ Petition filed against the order of Land & Development Officer, Ministry of Urban Development, Union of India, is pending before Hon ble High Court. Therefore, no development activity could be started on this land. In view of the accounting para 14 and 16 of AS-16, the interest pertaining to this project cannot be capitalized and has to be debited to the P&L a/c, as the interest expenditure pertaining to this project is wholly and exclusi .....

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issue in that year. There is no change in the facts and circumstances of this issue in the year under consideration. Hence, interest cannot be capitalized. Further, the appellant has made investment of ₹ 438.92 crore for acquiring shares of Edward Keventor (Successor) Pvt. Ltd. The investment has already been considered by the ASSESSING OFFICER while working out the disallowance of interest u/s 14A. Therefore, further capitalization of interest on this issue will amount to double addition. .....

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aimed in the profit & loss account is at ₹ 302.99 crores. As against this the appellant has shown receipt of interest from bank deposits, customers and subsidiary and associates to the extent of ₹ 284.51 crore. If the interest payment on over drafts is taken out from the total interest claimed in the profit and loss account, then the total interest claimed in profit and loss account is ₹ 267.84 crore which is less than the interest receipts offered by the appellant from ban .....

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nterest payment claimed by the appellant is less than the interest income offered in the profit and loss account, there was no justification to work out any formula based on mixed funds theory which is based on permutation and computation. The case of the appellant is interest neutral, therefore, notional interest cannot be capitalized on Edward Keventor Project. Hence the capitalization of interest of ₹ 7.05 crore is deleted. 65. The ld. CIT DR supported the findings recorded by AO. On th .....

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ubmission and gone through order of ITAT for the preceding assessment year. The ITAT has allowed relief after taking into consideration decision of Supreme Court in the case of Core Health Care Ltd. (supra). Further, the CIT(A) has considered this issue in great detail and observed that the appellant has declared higher interest receipt then the claim of interest as expenditure and even on the basis of mixed fund theory, there is no case of any adverse revenue implication. Considering the detail .....

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ar reasoning as extracted by us while deciding Ground no. 5 of the revenue s appeal. 68. The ld.CIT DR relied upon the order of AO whereas the ld. Counsel for the assessee stated that this issue is identical to that involved in Ground no. 5 of the revenue s appeal and argument made in that ground are relevant for this as well. The facts and basis of disallowance is same as considered in ground No. 5. In the light of finding recording in respect of ground No. 5, the order of the CIT(A) is confirm .....

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l to ground No. 3 adjudicated above and considering the parity of reasoning, the order of the CIT(A) is confirmed and this ground of revenue is rejected. 71. Ground No. 8 is against deletion of disallowance of ₹ 17,12,33,363/- on account of brokerage and commission. The AO has considered the disallowance on the ground of matching principle. The AO has further observed that since the assessee is following POCM method of recognition of revenue from real estate projects, the brokerage and com .....

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.04.2015. It was also submitted that identical issue came for consideration before ITAT in immediately preceding AY 2006-07 wherein the Tribunal deleted the addition by relying upon above referred orders. This issue is also covered by order of the ITAT for A.Y. 2006-07. The tribunal made reference to order of Delhi High Court in the case of DLF Universal Ltd., sister concern of the assessee and held that entire claim of brokerage and commission is permissible deduction as same is in the nature o .....

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₹ 7.21 crores on account of expenses not reckoned for computing the actual IDC. The AO has relied upon observations of special auditor in reaching the conclusion that budgeted IDC declared by the assessee in computing revenue under POCM is inflated. The CIT(A) deleted the addition by observing that POCM system of accounting followed by the assessee is a recognised method as per which budgeted IDC forms part of overall cost of the project. 74. The ld. CIT DR relied upon order of AO whereas .....

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y followed. The observation of the CIT(A) to the effect that exercise made by statutory auditor and followed by AO is revenue neutral as it would make no difference to the revenue except merely increasing academic work load of shifting expenses from one year to another is very significant. In this connection, reference to decision of Supreme Court in the case of Excel Industries Ltd. Vs. CIT 358 ITR 295 is relevant as per which if any claim has no adverse revenue implication and dispute is merel .....

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aid system, the proposed addition by the AO on hypothetical basis is of no relevance unless such adjustments are not in conformity with POCM method. The CIT(A) has appreciated the facts and correctly considered the claim of expenses under POCM method. In our opinion, there is no distortion of claim of income or expenses and accordingly order of the CIT(A) is confirmed and this ground of revenue is dismissed. 76. Ground no. 10 is against deletion of addition of ₹ 1,61,38,767/- on account of .....

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amount as income chargeable to tax in FY 2010-11. 77. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 78. The issue of late construction charges is also covered by order of the ITAT for A.Y. 2006-07. The revenue has not disputed factual position to this effect. In any case, the is .....

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ssessable as income of the assessee. The CIT(A) has deleted the addition on the ground that the contingency deposit is collected for specific purpose and under contractual obligation and same cannot be treated as income of the assessee. 80. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tri .....

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deletion of addition of ₹ 24,064/- on account of interest free security deposit received during the year. The AO has relied upon the observation of Special Auditor and finding recorded in assessment order for AY 2006-07. The CIT(A) deleted the addition by observing that as per agreement to sell the deposit so collected are refundable to customers/resident associations as soon as they are formed. Further the assessee is maintained a separate account for such deposits and as such the same a .....

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, However, the ld.CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 85. Ground No. 13 is against deletion of addition of ₹ 2,03,00,000/- on account of net registration charges received during the year. The AO has relied upon the observation of Special Auditor and has held that the tr .....

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hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 87. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld.CIT DR has relied on order of the AO, However, the ld.CIT DR was fair enough to accept that this issue is covered in favour of the assessee v .....

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cial Auditor and has held that the accounting treatment by the assesse in showing this amount as liability is not correct and as the amount is outstanding for number of years, the same has become barred by limitation. The CIT(A) deleted the addition by observing that amount collected from prospective buyers is genuine and the observation of Special auditor and AO are factually incorrect. Further the assesse is maintained a separate account for such deposits in which there is regular movement and .....

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on order of the AO, However, the ld.CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 91. Ground no. 15 is against deletion of disallowance of ₹ 20,70,28,248/- on account of non allocation of overhead expenses to sister concerns. The AO has relied upon observation of Special Auditor .....

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ober 2006 and as such the disallowance made by AO is merely on the basis presumption in absence of any material. 92. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition has been deleted by the tribunal. 93. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR reli .....

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Mercantiles Ltd.. The brief facts of the case are that assessee raised a debit note on M/s. Galaxy Mercantiles Ltd. for these expenses which was non accepted and refused by the said party and consequently the assessee claimed the same as its business expenses. The AO has disallowed the claim on sole ground that same does not pertain to the assessee. The CIT(A) granted relief by holding as under : 19.12 I have considered the submission of the appellant, observation of the Assessing Officer and va .....

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p; professional expenses, recruitment & training expenses and sanitation expenses. M/s Galaxy Mercantiles Limited disowned the debit note and refused to pay such expenses to the appellant company. Therefore, the debit note raised in the name of M/s Galaxy Mercantiles Limited was reversed by the appellant company and expenses mentioned in the debit note were claimed by the appellant company as these expenses were incurred for the bonafide business requirement of the appellant company, though .....

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of the debit note raised in the name of M/s Galaxy Mercantiles Limited does not affect allowbility of these expenditure in the hands of the appellant. This exercise is also revenue neutral, if the common expenses are disallowed in the hands of the appellant then such expenses has to allowed in the hands of M/s Galaxy Mercantiles Limited. The appellant had incurred all the expenses for its own set up and business and allocation of these expenses was not made under any legal obligation or under a .....

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ses are in the normal course of business and as such the claim of the assessee is allowable u/s 37 of the Act. Reliance was also placed on decision of Tribunal in immediately preceding AY 2006-07 in which while deciding the issue of allocation of expenses the court held that genuine business expenses are allowable inspite of the fact that certain indirect benefit has accrued to sister concern. 96. We have carefully considered the grounds on the basis of which AO has made impugned disallowance. T .....

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behalf of M/s. Galaxy Mercantile Ltd. and appellant has not been able to recover the same inspite of raising a debit note against the said party. The CIT(A) observed that these expenses were incurred as a part of business expenses and in the capacity as partner of joint venture. The CIT(A) has also relied on decision of Delhi Bench of Tribunal in the case of Nestle India Ltd. v. DCIT 27 SOT 9. In our opinion, CIT(A) was right in observing that the allowability of these expenses in the hands of .....

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provisions of section 41(1) of the Act. Subjected to these observation, the order of the CIT(A) is confirmed. 97. Ground no. 17 is against deletion of disallowance of ₹ 61,90,518/- on account of non allocation of common expenses to sister concerns. The AO has relied upon observation of Special Auditor and has held that assessee has incurred miscellaneous expenses such as printing and stationary, business promotion, staff welfare, repair and maintenance etc on behalf of its sister concerns .....

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has been deleted by the tribunal. 99. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld. CIT DR has relied on order of the AO, However, the ld. CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 1 .....

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submitted by the assessee are not stamped/acknowledged by the state authorities. The CIT(A) after verification of facts and documents deleted the addition. 102. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee supported the order of CIT(A) and submitted that there is no case of any unpaid liability in terms of provisions of section 43B of the Act. In the light of finding of CIT(A) that claim is in accordance with provisions of sec. 43B of the Act, .....

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assessee and as such the expenses incurred for the same are to be capitalized being preoperative in nature. The CIT(A) has deleted the disallowance by rendering following observation : 23.10 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, and various judicial pronouncements relied upon by the appellant. It is seen that the appellant is engaged in the business of developing real estate like development of plots, multi storey buildings, commercial complexe .....

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t that conducting feasibility and viability study for developing SEZ was not a new line of business but it was expansion/extension of the same line of business. Development of SEZ is very akin development of commercial projects which falls within the objectives of the MOA of the appellant company. Any expenditure incurred for expansion or extension of same line of business with complete unity of control, common fund and with the common management is a revenue expenditure and same cannot be held .....

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High Court, the disallowance of ₹ 1,81,95,513/- made by the Assessing Officer on this account is deleted. 104. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in favour of assessee by the order of tribunal in immediately preceding AY 2006-07 wherein the addition of similar ground has been deleted by the tribunal. It was further argued that assessee is one of biggest real estate company in India carrying our va .....

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this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 106. Ground No.21 is against deletion of disallowance of ₹ 1,79,83,814/- on account of expenses on projects not commenced. The AO has considered the disallowance on the ground that expenses incurred in connection with projects at inception stage cannot be allowed as deduc .....

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eal estate like development of plots, multi storey buildings, commercial complexes etc. During the year, the appellant has incurred certain expenditure on Soil Investigation, Environment impact assessment, examination of title expenses, lay out expenses, designing, site planning, interior design services, site identity, consultation expenses etc. for developing commercial projects at various locations like Noida, Karnataka etc. On these studies as well as other services, the appellant has incurr .....

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nt and any expenses incurred relating to such projects before their commencement like identification of sites, examination of title deed, soil investigation, environment impact assessment, interior-exterior designs, lay out etc. are expenses incurred for bonafide business requirement of the appellant and such expenses falls within the objectives of the MOA of the appellant company. Any expenditure incurred for the projects is to be undertaken in future and viability of such projects are business .....

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holly and exclusively for the business requirement of the appellant company. In view of the above, the disallowance made by the ASSESSING OFFICER of such expenses cannot be sustained. Therefore, respectfully following the decisions of jurisdictional High Court, the disallowance of ₹ 1,79,83,814/- made by the Assessing Officer on this account is deleted. 107. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee submitted that issue is covered in fa .....

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e ld.CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 109. Ground no. 22 is against deletion of disallowance of ₹ 1,04,32,923/- on account of expenses incurred in connection of issue of bonus shares and conversion of debenture into equity. The AO has treated these expenses as of cap .....

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capital of the appellant company which was as under:- (i) For issue of bonus shares ₹ 1,04,32,923.00 (ii) For issue of equity shares ₹ 74,61,077.00 Total ₹ 1,78,94,000.00 Out of ₹ 1,78,94,000/-, a sum of ₹ 74,61,077/- was related to issue of fresh share capital, therefore, the same was treated as capital expenditure by the appellant company and disallowed in the computation of income. The remaining amount of ₹ 1,04,32,923/- was claimed as revenue expenditure, .....

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uring the course of assessment proceedings as well as in the appellate proceedings appellant submitted that expenditure incurred on issue of bonus shares and conversion of debentures in equity shares is revenue expenditure in view of the Hon ble Supreme Court judgment in the case of CIT vs. General Insurance Corp. 156 Taxman 96 (SC) wherein the expenditure incurred in connection with issuance of bonus shares is held as revenue expenditure. It was contended by the appellant that judgment of Hon b .....

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of Bombay High Court which was delivered in the Month of August, 2005, the Hon ble Supreme Court in the case of CIT vs. General Insurance Corp. which was delivered in September 2006 has held that expenses relating to issuance of bonus shares is a revenue expenditure. Therefore, the judgment of Hon ble Bombay High Court in the case of Sessa Goa Ltd. is no more a good judgment and judgment of Hon ble Supreme Court which was delivered on later date will prevail. Subsequent to Hon ble Supreme Court .....

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res is a revenue expenditure. In view of the above, the expenditure incurred of ₹ 1,04,32,923/- with respect to issuance of bonus shares and conversion of debentures into equity shares is held to be revenue expenditure and not a capital expenditure. Therefore, the addition made by the ASSESSING OFFICER on this issue is deleted. 110. The ld. CIT DR relied upon order of AO. On the other hand, the ld. Counsel for the assessee relied upon the finding of CIT(A) and also made reference to decisi .....

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R and referred to by CIT(A). In our considered opinion, the claim of the appellant is supported from decision referred to above and accordingly no interference is called for in the order of the CIT(A) and this ground of revenue is dismissed. 112. Ground No. 23 is against deletion of disallowance of ₹ 1,89,05,487/- made u/s 40(a)(i) of the act. The assessee has paid an amount of ₹ 1,46,03,295/- to M/s. Paul, Hastings, Janofsky & Walker LLP for assisting in the contemplated joint v .....

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8377; 1,46,03,295/- paid to Paul, Hastings, Janofsky & Walker LLP for assisting in the contemplated joint venture agreement with Hilton International, the said services though utilized in India have not been performed in India. The assessee has further relied on Article 15 of DTAA with USA and stated that on reading of the Article 15 it emerged that services rendered by a resident of USA shall be taxable in India only if such non-resident has a fixed base regularly available to him in India .....

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e of the non-resident though chargeable to tax under the domestic Indian law is exempt from tax as per the Indo-US DTAA. On this argument of the assessee on reading of DTAA with USA it emerges that the payment made by the assessee to Paul, Hastings, Janofsky & Walker LLP for assisting in the contemplated joint venture agreement with Hilton International is covered by Article 12 of the treaty and not Article 15 as stated by the assessee in its reply. The contents of Article 12 of the DTAA are .....

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n India as admitted by the assessee himself in its reply the relevant text of assessee s reply in this regard is quoted as under. With regard to the show cause query, it is respectfully submitted that in the case of legal fees paid to Paul, Hastings, Janofsky & Walker LLP for assisting in the contemplated joint venture agreement with Hilton International, the said services though utilized in India have not been performed in India. Therefore the assessee was liable to deduct TDS on payment to .....

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ingapore, the Singapore DTAA with India will need to be seen for any exemption available. Article 12 of the Indo-Singapore Treaty is the relevant Article under which such payments are covered. This definition as per clause (b) of section 4 of Article 12 states that technical services are such that, they make available to the recipient knowledge or skill such that it enables the person acquiring the services to apply the technology contained therein, themselves. In the present case, the non-resid .....

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e DTAA. The assessee s argument on this ground is not acceptable since control risk has through their expert knowledge carried out a risk assessment in India and based on their work issued a report and provided consultancy services to the assessee. The report issued by them is property of the assessee company and can be used by them any manner. Control Rick Group by issuing report has made available to the assessee company their knowledge and technical skill through the contents of their report. .....

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he payments to non-residence recipient Prima Facie bears a character of Income of recipient and, therefore, tax of payments is deducted U/S 195(1). The assessee, who has not obtained the determination of the Income by the Assessing Officer U/S 195(2) and, therefore, the contention of the assessee that no part of the payment has resulted in any taxable Income in the hands of non-residence recipient is not sustainable, therefore, disallowance of ₹ 1,89,05,487/- is made U/S 40(a)(i) of the Ac .....

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elied upon by the appellant in this regard. During the year appellant had made payment without deduction of withholding tax thereon to two Non Residents namely M/s. Paul, Hastings, Janofsky & Walker LLP and Controlled Risk Groups (S) Pte. Ltd of ₹ 1,46,03,295/- and ₹ 43,02,192/- respectively for assisting in the contemplated join venture with Hilton International Ltd. and for obtaining report on the personal and corporate risks assessment of the appellant company. The appellant c .....

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nor it was received or deemed to be received in India. The section 9 is a deeming section as per which income which do not accrue and arise in India is deemed to accrue or arise in India. The said section seeks to tax income of the nature of technical services earned by Non Resident, even though such income does not accrue or arise in India. Therefore, the services rendered by Paul Hastings, Janofsky and Walker LLP to the appellant company shall fall within the ambit of section 9(1)(vii) of the .....

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the copies of invoice, which is a limited liability partnership firm, which is covered by Article 15 of Indo-US DTAA. The provision of article 15 are reproduced hereunder:- ARTICLE 15 - Independent Personal Services 1. Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxab .....

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eeding in the aggregate 90 days in the relevant taxable year. 2. The term, professional services includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. The reading of the Article 15 shows that services rendered by a resident of USA shall be taxable in India only if such non resident has a fixed place of business in India and such person stay in .....

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The provisions of the Indo-US DTAA override the provisions of Indian Income Tax Law, therefore, the payment made to M/s Paul Hastings, Janofsky and Walker LLP cannot be taxed in India in view of Article 15 of Indo-US DTAA which prevails over the provisions of section 9 of the IT Act. Hence, the withholding tax was not required to be deducted in this case and provisions of section 40(a)(i) are not applicable. Reliance in this regard is placed on the judgment of Hon ble Supreme Court in the case .....

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t mere issue of a report does not lead to any technical/consultancy services being rendered by a non resident to the appellant. In this regard, the appellant has relied upon the Bombay High Court judgment in the case of Diamond Services International Pvt. Ltd. vs. UOI 304 ITR 201 [2008]. It is submitted by the appellant that even if the said remittance is treated as technical services as per section 9(1)(vii), the chargebility of such services needs to be examine with reference to Indo-Singapore .....

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iary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology cont .....

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d thereafter issued a report after assessing the personal and corporate risk for appellant company. The non-resident has in no way made available to the appellant any skill/knowledge in a way which enables the appellant company to carry out such risk assessments in the future itself. Thus, the non-resident has not made available any knowledge or technology or skill to the appellant, which falls within the definition of fees for technical services as per the Indo-Singapore DTAA. Therefore, the re .....

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atisfied. Therefore, the provision of the Article-12 of Indo-Singapore-DTAA is not fulfilled. Therefore, the remittance made is not covered under fee for technical services and same is not taxable in other contracting states i.e. India in the present case. In view of the above, the provision of section 40(a)(i) are not applicable and the remittance made of ₹ 43,02,190/- cannot be disallowed. 114. The ld. CIT DR relied upon the order of AO. 115. On the other hand, the ld. Counsel for the as .....

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placed reliance on latest decision of Mumbai ITAT in the case of Linklaters LLP v. DCIT [2017] 79 taxmann.com 12. It was also argued that even in case the services rendered falls under article 15 of the DTAA, still there would not be any case of TDS since the service provider does not have any PE in India and neither any personnel has stayed for period more than 90 days in India. 116. With respect to disallowance of ₹ 43,02,192/ being payment made to Control Risks Group (S) Pte Ltd, a Sing .....

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The ld. Counsel submitted that the case is covered by the decision of Delhi bench of ITAT in the case of Romer Labs Singapore Pte. Ltd. v. ADIT [2013] 22 ITR 224. 117. We have heard the rival submission and gone through the order of AO and CIT(A). We find that payment of legal and professional charges to a firm is covered under Article 15 of Indo-US DTAA. There is also no dispute to the factual position that the service provider does not have any PE in India or any of its personnel stayed for m .....

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obtaining assessment report. The AO has held the payment to be in the nature of Fees for technical service as per Article 12 of Indo-Singapore DTAA. We find that satisfaction of Make Available clause is sine qua non for a payment to be considered as Fees for technical Services in terms of Article 12 of Indo-Singapore DTAA. Further, the CIT(A) has categorically held that mere issuance of report does not tantamount to making technology available in India. The ITAT Delhi bench decision in the case .....

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hri Ram School on behalf of DLF Qutub Enclave Complex Educational Charitable Trust and same has been paid to the trust without deduction of TDS. The AO has made the disallowance u/s 40(a)(ia) of the Act. The CIT(A) has deleted the disallowance on the ground that the said entry is merely a pass through entry and assessee has not claimed any deduction in profit and loss a/c. The relevant finding of CIT(A) is as under : 29.12 I have considered the submission of the appellant, observation of the ASS .....

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page 73 to 129 of the appellant s submission dated 08.05.2012, the said property was awarded in favour of DLF Qutub Enclave Complex Educational Charitable Trust. Therefore, the rent received from the Shri Ram School was the income of the above said trust. However, since the lease deed was between appellant company and the tenant, therefore, such rent was received by the appellant company and shown the same as liability payable to the Trust. Such rent receipts were passed on to DLF Qutub Enclave .....

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ture on account payment made to DLF Qutub Enclave Complex Educational Charitable Trust. Since no expenditure on account of this payment of ₹ 49,34,000/- has been claimed, therefore, provisions of section 40(a)(ia) are not applicable. Hence, the disallowance of ₹ 49,34,000/- made by the Assessing Officer is deleted. 120. The ld. CIT DR relied upon order of AO. On the other hand the ld counsel for the assessee reiterated the submissions made before CIT(A) and argued that the impugned e .....

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account of payment made to DLF Qutub Enclave Complex Educational Charitable Trust. The entries recorded by appellant were merely pass through entries and as such there is no case of any adverse revenue implication. The order of CIT(A) is confirmed. 122. Ground no. 25 is against deletion of disallowance of ₹ 27,08,664/- u/s 40(a)(ia) on account of non deduction of TDS on payments made to two trusts. The AO has made the disallowance on the ground that the assessee has not produced certifica .....

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7; 506556/- in respect of M/s DLF Qutub Enclave Complex Educational Charitable Trust and M/s DLF Qutub Enclave Complex Medical Charitable Trust respectively was clearly mentioned in the column amount of rent expected to be realized during F.Y. 2006-07 . These certificates were signed by ITO TDS Ward 49(4), New Delhi and same are filed before me from page 170 to 175 of the appellant s submission dated 08.05.2012. In view of the above it is established that the certificates issued by the ITO were .....

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order of CIT(A). 124. We have gone through the order of the CIT(A) and noticed that the relief was allowed by CIT(A) after taking into consideration certificate issued by ITO, TDS Ward-49(4), New Delhi and as such there is no default on the part of the assessee in not deducting TDS on such payment. The order of the CIT(A) is based on proper appreciation of facts and there is thus no justification for any interference and this ground of revenue is dismissed. 125. Ground no. 26 is against deletion .....

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the assessee supported the finding of CIT(A) and relied upon decision of Hon ble Delhi High Court in the case of CIT vs. Rajinder Kumar [2014] 362 ITR 241 in which it has been held that first proviso to section 40(a)(ia) inserted vide Finance Act 2010 is retrospective in nature. 127. The issue under consideration is disallowance of ₹ 4,20,000/- u/s. 40(a)(ia) on the ground that there was delay in deposit of TDS. The CIT(A) has taken note of the fact that TDS was deposited before due date .....

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the assessee, the claim of TDS in respect of same amount is not allowable. The CIT(A) allowed the relief by observing that as the TDS has been deducted and deposited with government and M/s DLF Qutub Enclave Complex Educational Charitable Trust to whom the amount has been transferred has not claimed the benefit of TDS, the claim of the assessee is legally sustainable. 129. The ld. CIT DR relied upon the order of AO. On the other hand, the ld. Counsel for the assessee argued that as the TDS has .....

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that rent has been transferred to DLF Qutub Enclave Complex Educational Charitable Trust, but as TDS is in the name of appellant, benefit of same is to be allowed to appellant. We are not impressed with the finding of the CIT(A). The appellant having transferred the rent to DLF Qutub Enclave Complex Educational Charitable Trust, the TDS is also required to be transferred. The claim of TDS is directly related to the issue of rent. If the rent belongs to another entity, the TDS is also to be tran .....

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under head business income instead of income from house property. The CIT(A) has deleted the addition by relying upon order of Tribunal in assessee s own case for AY 1996-97. 132. The ld. CIT DR relied upon order of AO. On the other hand, ld. Counsel for the assessee argued that this issue is covered in the favour of assessee by the order of tribunal for immediately preceding AY 2006-07 in which the court has held that rental income from property is to be assessed under head income from house pr .....

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st deletion of addition of ₹ 3,28,52,595/- on account of notional rent on vacant properties. The AO has made reference to observation of special auditor and finding in preceding AY 2005-06 and 2006-07 wherein identical addition was considered. The CIT(A) has deleted the addition by relying upon decision of Tribunal in the case of sister concern of the assessee M/s DLF Office Developers Ltd. Vs. ACIT reported in 23 SOT 19 (Del) . Further, CIT(A) has also discussed relevant legal provisions .....

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or A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld. CIT DR has relied on order of the AO. However, the ld. CIT DR was fair enough to accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 137. Ground No. 30 is against deletion of addition of ₹ 5,14,734/- on account of mismatch in TDS certifica .....

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ference in income as per books of account and TDS certificates is on account of either the payee deducted the excess TDS or part of the income on account of increase in rent has been booked and offered for taxation in the F.Y. 2007-08 relevant to A.Y. 2008-09. It is noted that, that all incomes have been recorded by the appellant either in this year or has been offered in the subsequent year. In view of the above, the addition of ₹ 5,41,734/- made by the Assessing Officer is deleted as no .....

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addition can be considered merely on the basis of TDS certificates especially in the case of income from house property. It was also argued that the addition is revenue neutral in nature as the excess has been offered for taxation in subsequent year. 139. We have heard the rival submission and considered the order of the ITAT for A.Y. 2006-07. Whereas the Ld. AR relied on the order of ITAT, the ld. CIT DR has relied on order of the AO. However, the ld. CIT DR was fair enough to accept that this .....

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ed relief to the assessee by holding the assesee has duly offered the advance rent as income in subsequent AY 2008-09 in which no TDS has been claimed and as such the claim of TDS in present AY 2007-08 is in accordance with law. 141. The ld. CIT DR relied upon order of AO. On the other hand, ld. Counsel for the assessee argued that this issue is covered in the favour of assessee by the order of tribunal for immediately preceding AY 2006-07 wherein the tribunal has categorically as TDS u/s 194I i .....

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accept that this issue is covered in favour of the assessee vide order of ITAT for A.Y. 2006-07. In view of the above position, no interference is called for in the order of CIT(A) and accordingly this ground of revenue is dismissed. 143. Ground No. 32 is against deletion of addition of ₹ 1,36,81,610/- on account of substitution of sale price of shares by NAV of the shares of Diwakar Estates Ltd. and Monishka Builders & Developers Pvt. Ltd.. The relevant observation and finding of AO a .....

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lso at ₹ 10/- when the NAV per share is ₹ 6359.53, more so when the persons from whom the shares were purchased is different from the person to whom the shares were sold. The company has not given any other business need for sale at ₹ 10/-. Therefore for the purpose of taking the fair market value of shares of Diwakar Estates Ltd, it should be taken at ₹ 6359.53 per share. In the case of Monishka Builders and Developers P Ltd, the company has stated that it was the origin .....

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of these shares to arrive at the gain on sale of shares. After taking the fair market value of shares in place of sale price accounted by the assessee, the amount to be added is as under: S. No. Name of company Net Asset Value as on 31.3.2007 (Rs.) Sale Price as per Books of Account (Rs.) Addition al consider ation (Rs.) No. of Shares Amount of Addition (Rs.) 1 Diwakar Estates Limited 6359.53 10.11 6349.42 1880 1,19,36,910 2 Monishka Builkders & Developers Pvt. Ltd. 184.47 10.00 174.47 1000 .....

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hares of Monishka Builders and Developers Pvt. Ltd. in F.Y. 2005-06 at the face value of ₹ 10 each. Similary the shares of Diwakar Estates Pvt. Ltd. were purchased in F.Y. 2003-04 of ₹ 10 per share. The appellant has sold shares of these companies to DLF Home Developers Ltd another subsidiary of the company at par. In the assessment proceedings, the ASSESSING OFFICER has held that NAV of the shares of Monishka Builders and Developers Pvt. Ltd. as on 31.03.2007 was ₹ 184.47/- si .....

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laimed by the appellant that it is not the case that any underhand payment has been received by the appellant. The appellant has also contended that actual sales consideration cannot be replaced by the Fair Market Value. In the appellate proceedings it was submitted by the AR of the appellant that value of the sale of the shares was substituted by the ASSESSING OFFICER without appreciating the facts and correct position of law. The value of the shares of Diwakar Estates Pvt. Ltd. and Monishka Bu .....

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ot brought any information on record that shares were sold at a price other than actual price of ₹ 10/- per share. The transaction is not in doubt and same has been confirmed by both the parties. The ASSESSING OFFICER has not brought any positive evidence which could suggest that transaction of sale of shares had actually taken place at a price higher than apparent sales consideration. Section 48 of the IT Act provides the mode of computation which read as under:- The income chargeable und .....

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acquisition/index cost of acquisition from full value of consideration received or accrued from such transfer. There is no provision in the Act which empowers the ASSESSING Assessing Officer to substitute the sale consideration at which transaction actually takes place with fair market value of such assets unless the Assessing Officer bring some positive information about such transactions that the value of the transactions was more than what actually has been declared by the appellant. In the .....

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e estimation of long term capital gain of ₹ 1,36,81,610/- was not justified and deleted. In support of my above decision reliance is placed on following judicial pronouncements. K.P. Varghese vs. Income-tax Officer [1981] 7 TAXMAN 13 (SC) Commissioner of Income-tax vs. Shivakami Co. (P.) Ltd. [1986] 25 TAXMAN 80K (SC) Commissioner of Income-tax v. Smt. Nandini Nopany [1998] 230 ITR 679 (CAL.) The facts of the above cited judicial pronouncements are identical with the facts of the appellant .....

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of AO. On the other hand, the ld. Counsel for the assessee supported the order of CIT(A). The ld. Counsel further argued that the AO has not disputed the genuineness of sales consideration and the addition is merely on notional and hypothetical basis. 145. We have considered the facts of the case and gone through the order of AO and CIT(A). The only issue in dispute is whether the capital gain is to be worked out on the basis of full value of consideration received or accrued as a result of tran .....

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f cases and it may be appropriate to make reference to decision of Delhi High Court in the case of CIT v. Gulshan Kumar[2002] 257 ITR 703. In view of the settled legal position and in the absence of any evidence regarding non-disclosure of full value of consideration, there is no infirmity in the order of CIT(A) and same is confirmed. 146. Ground no. 33 is against deletion of disallowance of ₹ 65,08,264/- on account of claim of expenses in respect of which bills are not in the name of asse .....

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erved from pages 479 to 483 of the assessment order that the appellant has explained each and every item of expenditure in detail. It is seen that these expenses are in the nature of electricity bill and water charges pertaining to Jhandewalan Office of the appellant, reimbursement made to the employees and other group companies. As explained by the appellant that Jhandewalan Property belong to the appellant since so many years but same was given on rent to M/s DCM Ltd. and Nestle India Pvt. Ltd .....

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ills are in the name of earlier tenants the same cannot be disallowed. It is also submitted by the appellant that water and electricity bill in the name of Raisina Cold Storage are also being utilized by the appellant for its business purposes. This company has been merged with the appellant, therefore, these expenses also pertains to the appellant s business purposes. The reimbursement made to the employees and group companies for the expenses incurred by them on behalf of the appellant is also .....

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mpany in the immediately preceding assessment year relevant to assessment year 2006-07 (page Nos.243-254 of the said order). Therefore, the disallowance of ₹ 65,08,264/- is deleted. 147 The ld. CIT DR relied upon finding of AO. On the other hand, the ld. Counsel for the assessee submitted that this issue is covered in favour of assessee by the order of Tribunal for immediately preceding AY 2006-07 wherein the disallowance made on identical ground was deleted by Tribunal. 148. Both the part .....

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AY 2006-07 wherein identical disallowance was made. The CIT(A) deleted the disallowance by holding as under : 41.6 I have considered the submission of the appellant and observation of the ASSESSING OFFICER. It is seen that the AO has recalculated written down value as on 01.04.2005 by notionally deducting depreciation from the WDV as on 01.04.1999. The amount of notional depreciation for the period 01.04.1999 01.04.2005 during which period the property had been leased and the income taxed under .....

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alue means the actual cost to the appellant less all depreciation actually allowed under the Act. From the facts and the judgment of Hon ble Supreme Court in the case of CIT vs. Doomdooma India Limited (2009) 178 Taxman 261 (SC), it is clear that the depreciation is to be allowed on the basis of actual WDV and same cannot be reduced on notional basis for the period for which property was not used for business purposes and no depreciation was claimed on such part of the property. From the facts a .....

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