TMI Blog2019 (3) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition of the other material expenses - HELD THAT:- The assessee incurred the expenses in the earlier assessment year which were carried forward to the year under consideration. We note that there was no such disallowance made by the authorities below in the immediately preceding assessment Year. Therefore we are of the view the opening balances which have been carried forward from the earlier Years cannot be disturbed in the year under consideration. We also note that genuineness and the business connections of the expenses have not been doubted. The only reason for the disallowance is that these expenses are not in pursuance to the joint development agreement. Thus such expenses were either to be allowed to the assessee or Goyal & Co. and both the companies are paying the tax at the same rate. Therefore, respectfully following the reasoning as given in the preceding ground no. 2 Para 14 of this order, we reverese the order of the authorities below. Thus we set aside the order of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the appellant's case, Ld. CIT(A) has erred in confirming disallowance of miscellaneous work expenses for ₹ 12.93,301/- incurred for housing constructed by it when no such disallowance is called for. The same may be deleted. 5. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in not giving direction to the Assessing officer for charging interest u/s.234A, 234B and 234C of the Act. 6. The appellant craves to add to, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing the appeal. 3. The 1st issue raised by the assessee is that Ld. CIT(A) erred in confirming the addition made by the AO by sustaining the disallowance of ₹ 11,32,288/- on account of diversion of the fund. 4. Briefly stated facts are that the assessee is a partnership firm engaged in the business of developing, organizing the building projects. The assessee in the year 2007-08 has entered into a joint development agreement with M/s Goyal company for the development of the residential project namely Riviera Elegance consisting of 44 flats. 4.1 As per the agreement, the assessee was to receive 21 fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale deed as 1st party. 5.1 The marketing activities were carried out by Goyal Co, and therefore it was having its reputation and brand value as well as trusts in the market. Therefore all the units of the assessee were sold by Goyal Co. So the sale consideration was 1st received by Goyal Co. 5.2 Indeed there is a clause in the agreement that both the parties can collect the sale proceeds, but there was no prohibition that one party cannot receive sale consideration on behalf of another party. 5.3 However the Ld. CIT(A) rejected the contention of the assessee by observing that there was no reason to hold the payment of the assessee by the Goyal Co. Accordingly, the Ld. CIT-A confirmed the disallowance made by the AO on account of interest expenses. 6. Being aggrieved by the order of Ld. CIT(A) assessee is in appeal before us. 7. The Ld. AR before us filed a paper book running from pages 1 to 274 and submitted that in the identical facts and circumstances this tribunal in the case of the CIT Vs. M/s Ansul associates in ITA No. 3063/AHD/2015 vide order dated 16th April 2018 decided the issue in favor of the assessee. 8. On the other hand the Ld. DR veheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces made by the A.O. and therefore decline to interfere with the findings of the ld. CIT(A). All the grounds taken together are accordingly dismissed. 9.1 As the facts of the case on hand are identical to the facts of the case as discussed above, we respectfully following the same reverse the order of authorities below. Thus we set aside the order of Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 10. The 2nd issue raised by the assessee is that the Ld. CIT (A) erred in confirming the disallowance of wooden material expenses of ₹ 16,63,880/- only. 10.1 The assessee in its opening work in progress has claimed the expenses for wooden material amounting to ₹ 16,63,880/- only which was carried forward from the preceding year to the year under consideration. 10.2 However, the AO was of the view that the assessee is not authorized to incur the expenses on such wooden material as discussed above in pursuance to the joint development agreement with the Goyal Co. Accordingly, an explanation was sought by the AO from the assessee. In compliance to it, the assessee submitted that the wooden w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. 12. The Ld. AR before us submitted that in the identical facts and circumstances this tribunal in the case of the CIT Vs. M/s Anshul associates in ITA No. 3063/AHD/2015 vide order dated 16th April 2018 decided the issue in favor of the assessee. 13. On the other hand the Ld. DR vehemently supported the order of authorities below. 14. We have heard the rival contentions and perused the materials available on record. At the outset, we note that M/s Goyal Co was having a similar contract with M/s Anshul associates. In the case of M/s, Anshul associates the ITAT was pleased to delete the addition made by the AO. The relevant extract of the order is reproduced as above in ground no 1. As the facts of the case on hand are identical to the facts of the case as discussed above, we respectfully following the same reverse the order of authorities below. 14.1 We also note that the assessee has furnished all the bills in support of wooden material expenses and there was no defect pointed out by the authorities below. 14.2 We also note that the assessee and Goyal Co are paying taxes at the same rate of tax. Therefore it can be safely concluded that there is no loss to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. We find that in AY 2005-06 this issue has been decided by the Coordinate Bench (ITATAhmedabad) against the assessee on identical facts, but the assessee was not able to prove that recipients of the interest were also paying tax at maximum marginal rate, however in the instant case, the ld.counsel for the assessee has submitted the details at page No.37 of the paper-book which shows that the recipients of the interest were also paying maximum marginal rate of tax, therefore there is no evasion of tax. The undisputed facts are that the transactions have been effected between the related parties as contemplated u/s.40A(2)(b) of the Act. The assessee has paid interest @15% and interest received on advances to its sister-concern @ 10%. The AO made addition on the basis that the assessee received only 10% of interest, however, paid @15%, thereby the payment of interest @15% was excessive. It is also recorded by the AO that the payment of interest was not for the commercial expediency. The Hon'ble High Court of Bombay in the case of CIT vs. Indo Saudi Services (Travel) (P) Ltd.(supra), has held that the learned advocate appearing for the appellant was also not in a position t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses such as chemicals, small pipe, etc. which were not incurred as per the joint development agreement. 16.1 However, the assessee in support of the expenses filed the copies of the bills and submitted that the payment was made through banking channel. 16.2 However, the AO disregarded the contention of the assessee by holding that these expenses were not incurred in pursuance of the agreement as discussed above and assessee failed to substantiate that these expenses were incurred in connection with the work allocated to it. Accordingly, the AO disallowed the sum of ₹ 8,89,664/- and added to the total income of the assessee. 17. Aggrieved assessee preferred an appeal to the Ld. CIT(A), the assessee before the Ld. CIT(A) submitted that all the expenses were incurred in connection with the business of the assessee. The assessee in support of such expenses filed the copies of the bills of the 3rd parties. 17.1 From the above it could be seen from the bills of the third party that material expenses include : (1) tile protector used in tiles work (2) disinfectant treatment in a building which is part of the construction. Not considered as part of finishing. (3) Mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Co. and both the companies are paying the tax at the same rate. Therefore, respectfully following the reasoning as given in the preceding ground no. 2 Para 14 of this order, we reverese the order of the authorities below. Thus we set aside the order of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 22. The last issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance of miscellaneous work expenses amounting to 12,93,300/-. 23. The assessee during the year has made payment was labor charges amounting to ₹ 12,93,300/-to 5 parties. All the payments were made through banking channel. 23.1 However the AO found that the assessee was not authorized to incurred such expenses as per the joint development agreement. The AO also noted that the assessee failed to prove the genuineness of the expenses. Therefore the same was disallowed and added to the total income of the assessee. 24. Aggrieved assessee preferred an appeal to the Ld. CIT(A). The assessee before the Ld. CIT(A) a filed the initial pieces of evidence in support of his claim. Accordingly the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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