TMI Blog2019 (7) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... f investment made by the appellant company was taxable as business income as declared in the return of income. As a result, grounds raised by the appellant are allowed. Addition in respect of sale of commercial area - collaboration agreement was also entered between the appellant and M/s. DLF Ltd. to develop the land - agreement for proportionate expenditure on account of advertisement and marketing - out of proportionate sale proceeds was ₹ 103.42 crores. M/s. DLF deducted ₹ 13.92 crores and credited ₹ 89.50 crores to appellant - HELD THAT:- The aforesaid agreements supported by independent confirmation obtained u/s 133(6) by the learned Officer in the remand proceedings, to which, no contrary evidence has been placed on record, we are of the opinion sum taxable is ₹ 89.50 crores and not at ₹ 103.42 crores as taxed in the impugned orders. In our considered opinion, income accrued is only ₹ 89.50 crores which is also supported by an audited certified statement and thus, addition so made is not in accordance with law and therefore, is deleted. Grounds raised by the appellant are allowed. Addition under the head income from house propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articularly when no adverse comments had been made by the AO in his report in respect of such evidences and as such the findings recorded by the learned CIT(A) in his order while confirming the order of assessment and holding that said transaction is not genuine is apparently arbitrary and is thus misconceived both on facts and in law. In fact the findings recorded by the learned CIT(A) in his order are highly vague. 1.3 That the learned CIT(A) has further erred when he held that the documentary evidences have been created only to create smoke screen, is based on no material. No such adverse finding could have been recorded by him without bringing any evidence whatsoever. The findings are based on mere assumptions and presumptions and upon ignoring documentary evidences furnished by the assessee. 2. That the learned CIT(A) has erred both on facts and in law in sustaining the disallowance of loss of ₹ 103.50 crores out of the loss suffered of ₹ 104.50 crores on redemption of debentures. The findings thus are apparently contradictory to the conclusion arrived at by him. 2.1 That the learned CIT(A) has further failed to appreciate that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents referred to by him in para 4.1.6 which have no semblance of resemblance with the facts of the instant case. 2.9 That the findings recorded by the learned CIT(A) confirming a disallowance of ₹ 103.50 crores is contradictory since the loss suffered by the assessee aggregated to ₹ 104.50 crores. In fact, in the absence of any adverse finding in respect of the transaction where assessee had earned a gain of ₹ 1 crores on sale of debentures subscribed by it, the findings recorded by the learned CIT(A) is without application of mind. 3. That the learned CIT(A) has further erred in sustaining an addition of ₹ 13.92 crores and that too on an assumption that there was an obligation of the assessee to deduct tax at source in respect of expenditure incurred by M/s DLF Universal Ltd.; whereas neither there was any such obligation to deduct tax at source by the assessee nor there was any failure to do so. 4. That the learned CIT(A) has thus grossly erred thus in sustaining the addition made of ₹ 13.92 crores and disregarding that the assessee had offered the income as accrued and received by it from M/s DLF Universal Ltd. under an agreement d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits of the disallowances/addition made by authorities below. No submissions were made in respect of Grounds No. 1 to 1.3 of Grounds of Appeal separately and otherwise too are general and therefore dismissed as such. 6. Ground Nos. 2 to 2.9 relates to disallowance of expenditure incurred of ₹ 103.50 crores under the head finance cost by the assessee company. Relevant facts qua this issue are that the assessee company during the year, had issued secured unrated fully transferable unlisted 9,500 debentures of face value of ₹ 10 lacs each aggregating to ₹ 950 crores at a discount of ₹ 3,62,421/- per debenture aggregating to total discount of ₹ 350 crores, i.e., at net issue price of ₹ 6,31,579/- per debenture, aggregating to ₹ 600 crores for a tenure of three years at a coupon rate of 2% per annum to M/s. India Bulls Housing Finance Ltd. These debentures were issued on 17.12.2015 and redeemed from the open market from 30.3.2015 at a price of ₹ 104.50 crores. Thus, as a consequence of redemption of debentures, the appellant incurred expenditure on redemption of debentures of ₹ 104.50 crores (704.50 crores 600 crores). 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls Housing Finance Ltd. ₹ 600 crores) has gone back to India Bulls Group companies, M/s. India Bulls Housing Finance Ltd. (₹ 550 crores) and M/s. India Bulls Infrastructure Ltd. (₹ 50 crores). Likewise, he has held that from the flow chart B, even on redemption of debentures, i.e., on 30.3.2015, the money originating from M/s. India Bulls Group companies, India Bulls Housing Finance Ltd. ₹ 550 crores and M/s. India Bulls Commercial ₹ 50 crores has been routed through the same companies to which the assessee had given loans and finally it is finding its way back to M/s. India Bulls Housing Finance Ltd (₹ 703.61 crores). He also held that from flow chart C, it is evident that the assessee company took advances aggregating to ₹ 588 crores from five independent entities namely, Mendell Developers (P) Ltd., Caspar Developers (P) Ltd., Espo Developers (P) Ltd., Sanaskar Buidtech (P) Ltd., Nakshtra Buildcon (P) Ltd. and paid ₹ 588 crores to Dewu Developers Pvt. Ltd. It has been stated that even in the aforesaid layers of transactions, it will be seen that through a web of companies, the funds originated from M/s. Vatika Ltd. on 10.12.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had disallowed the such loss and had held that such los is a contrived loss. The AO had found that (which is a matter of record): Many companies have similar addresses. In fact the undersigned would like to mention that more apt word is same address for most companies; Common email id meaning thereby that they are being controlled b the same person and are group entities. The undersigned agrees this factual observation of the AO; and The capital base of these companies is very low meagre, meaning that such companies have been working as a pure conduits to create fictitious expenses. The undersigned agreed to till observation of the AO. The AO has done an extremely essential exercise and has mapped the money trail in the assessment order, by way of detailed flowchart showing the movement of money from the Indiabulls groups of companies and he receipt of money back to the Indiabulls groups of companies. The whole chain of events shows that the assessee had some preconceive notion to siphon off money and book losses to evade tax. This fact is further strengthened by the fact which has also. been mentioned in the assessment order by the AO, that the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to other severe consequences like penalty u/s 271C or prosecution proceedings etc. Hence, this argument of the appellant totally fails. 8. Before us, the learned Senior Advocate for the appellant assessee contended that the authorities below have failed to appreciate the factual matrix of the claim of the appellant company and also the statutory provisions of law. He submitted that the appellant had issued debentures on 17.12.2014 to M/s. India Bulls Housing Finance Ltd. and same were redeemed on 30.3.2015. It was contended that the amount borrowed had been utilized for the purpose of business and it was supported by documents placed on record in the Paper Book. It was also submitted that the utilization of funds was done for the purpose of business by advancing the same to three companies for the purpose of acquiring the land. The details of the advances made in the agreements as tabulated in the synopsis is as under: Sr. No. Particulars Amount (Rs. in crores) Date of agreement Copy of agreement i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, the denial of claim was not in accordance with law. It was further submitted that the learned Assessing Officer has made no enquiries in respect of evidences furnished to prove utilization of funds and therefore, in light of the judgments of Hon ble Delhi High Court in the case of CIT vs. Fair Finvest Ltd. reported in 357 ITR 146 and Pr. CIT vs. Laxman Industrial Resources Ltd. reported in 397 ITR 106, the revenue was incorrect to deny the claim of deduction made by the appellant company. As regards flow charts prepared and relied in the order of assessment, in the written submissions it has been submitted as under: I Flow Chart A prepared by the AO allegedly reflects the money trail on 17.12.2014 (copy enclosed as Annexure A of synopsis). Findings of AO: The learned Assessing Officer has held the said chart establishes the amounts advanced to the assessee of ₹ 600 crores on 17.12.2014 by M/s Indiabulls Housing Finance Ltd. had reached back to M/s Indiabulls Housing Finance Ltd. Contention of the appellant: The case of the assessee is that in so far as the said chart is concerned, it shows the utilisation of the funds by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Vatika Ltd. was correctly declared as business income of the appellant. 9. The learned CIT DR on the other hand contended that claim of deduction was correctly denied in the order of assessment and also by the learned CIT (A). He submitted that the loan raised on 17.12.2014 against issue of debentures from M/s. India Bulls Housing Finance Ltd. on the same date to M/s. India Bulls Housing Finance Ltd. and likewise even on the redemption of debentures, the money flew was actually reversed in as much as money originated from M/s. India Bulls Housing Finance Ltd. was returned to M/s. India Bulls companies. In the written submissions filed by the learned CIT DR, it was contended as under: 1. The assessee has claimed deduction of ₹ 1,03,50,00,000 2. The assessee had taken loan of ₹ 6,00,00,000 against issue of debentures from India Bulls Housing Finance Ltd. on 17.12.2014. As per flow chart A in assessment order, the entire amount went back to India Bulls Group Companies (India Bulls Housing Finance Ltd. and India Bulls Infrastructure) on the same date i.e. 17.12.2014 through a maze of companies. Mainly conduit companies. 3. The assessee redeemed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise of their own. 12. As mentioned in para 3.29 the agreement no where specifies what land will be bought upon. 13. As mentioned in para 3.30, agreement entered upon by assessee company is not a registered agreement. 14. As mentioned in para 3.34, detailed reasons have been given by AO as to how transactions were not at arm s length. 15. As mentioned in para 3.35, the transaction was SHAM because. i) The money originated from India Bulls and went back to India Bulls Group of companies on the same day. ii) When money was to be returned on 30.3.2015, money originated from India Bulls and went back to India Bulls Group of companies iii) Money was channeled through various conduit companies without any approval of board or agreement or agreement or any other documentation. 16. As mentioned in para 3.36, the assessee has treated income as capital receipts, expenses have been treated as business loss/interest expense. 17. As mentioned in para 3.39, in no money lending business, interest rates are as high as 70% which assessee has paid to India Bulls. 9.1 The learned CIT DR further placed reliance on the following judgments: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bombay Samachar Ltd. reported in 74 ITR 723 has held as under: In our opinion the view taken by the Income-tax Officer is clearly unsustainable. As has been pointed out by the Madhya Pradesh High Court in Ram Kishan Oil Mills v. Commissioner of Income-tax [1965] 56 ITR 186 the only conditions required to be satisfied in order to enable the asseesee to claim a deduction in respect of the interest under section 10(2)(iii) are, firstly, that money must have been borrowed by the assessee ; secondly, it must have been borrowed for the purpose of business and, thirdly, the assessee must have paid interest on the said amount and claimed it as a deduction. It is not the requirement of the provision that the assessee must further show that the borrowing of the capital was necessary for the business so that if at the time of borrowing the assessee had sufficient amount of its own, the deduction could not be allowed. Similarly, the Madras High Court in Amna Bai Hajee Issa v. Commissioner of Income-tax [1964] 51 ITR 835 has held that in deciding whether a claim for interest on borrowing can be allowed the fact that the assessee had ample resources at its disposal and need not have borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the issue to be appreciated is, whether the utilization of funds raised by the appellant company is for the purpose of business or not. The borrowings by the appellant company from M/s. India Bulls Housing Finance Ltd. through the issue of debentures is neither denied nor has been disputed by the authorities below. According to the appellant, the aforesaid sums raised through the debentures have been utilized for advanced to the three companies namely, M/s. Winston Developers Pvt. Ltd., M/s. Avenio Developers Pvt. Ltd. and M/s. Famous Dwellers Pvt. Ltd. It is also not in dispute that there are three different agreements entered into by the appellant company with each of the aforesaid three entities. One of the agreements is dated 18.8.2013 and the addendum to the agreement is dated 1.9.2014 with M/s. Winston Developers Pvt. Ltd. Likewise, agreement with M/s. Avenio Developers Pvt. Ltd. is dated 14.10.2013 and agreement with M/s. Famous Dwellers Pvt. Ltd. is dated 20.11.2013. Each of the aforesaid agreements were for purchase of land situated at Sectors 88A, 888B and 93, Gurgaon, Near Dwarka. Expressway had been entered much prior to the issue of debentures by the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Winston Developers (P) Ltd. for details of around 28 acres land at Sectors 88B and 89A , Gurgaon enclosing land schedule, jamanbandi, site plan highlighting the location etc. 475-481 vi) 12.7.2014 Copy of letter to Winston Developers (P) Ltd. by the appellant company 482 vii) 25.7.2014 Copy of letter from M/s Winston Developers (P) Ltd. for details of around 40 acres land enclosing jamanbandi 483 viii) 15.8.2013 Copy of addendum agreement 484-485 ix) 20.11.2014 Copy of letter from M/s Winston Developers (P) Ltd. enclosing site plan of the land and request for payment 486-491 x) 9.12.2014 Copy of letter to M/s Winston Developers (P) Ltd. from appellant company enclosing fund transfer letter dated 11.12.2014 492 xi) 18.3.2015 Copy of letter to M/s Winston Developers (P) Ltd. from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 15.8.2013 due to peculiar economical, commercial and political scenario 608 xxii) 30.3.2015 Copy of letter from M/s Avenio Developers (P) Ltd. to appellant company for refund of advance Famous Dwellers (P) Ltd. 609 xxiii) 18.9.2013 Copy of letter from M/s Famous Dwellers (P) Ltd for offering service for purchase of agricultural land in Sectors 89A, and 89B, Gurgaon 746 xxiv) 12.10.2013 Copy of letter to M/s Famous Dwellers (P) Ltd regarding terms and conditions for acquiring land 747 xxv) 24.11.2013 Copy of letter from appellant to Famous Dwellers (P) Ltd. for signing of agreement dated 20.11.2013 748-752 xxvi) 14.1.2014 Copy of letter to appellant company from M/s Famous Dwellers (P) Ltd. enclosing original agreement dated 20.11.2013 signed by them 753 xxvii) 2.3.2014 Copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished by the appellant company before the authorities below, have remained un-rebutted in respect of utilization of the funds for the business of the appellant company and therefore, in absence of any enquiries having been made so as to negate the above evidences furnished by the appellant company, prima facie utilization of funds for the business of the appellant company cannot be denied. 13. Moreover, it appears that the revenue has tried to examine the entire transaction in a truncated manner. The case of the revenue flows from the emphasis that the money never remained with the appellant company and therefore, there could not be any occasion for the appellant company to have utilized the funds for the purpose of the business of the appellant company and as such, the expenditure so incurred and claimed is a mere colourable device which is not allowable expenditure and or is a contrived loss. The fallacy in the aforesaid view becomes so apparent in the face of order of assessment dated 29.12.2017 in the case of M/s Dreamcart Reality Services Pvt. Ltd. It would be pertinent to state the relevant facts on which our attention was drawn and are necessary in the aforesaid context. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of real estate. 3. During the course of assessment proceedings, it is observed that assessee has purchased debentures of Shivsagar Builder Private Limited in total purchase consideration of ₹ 7,04,00,00,000/- from M/s Youthstar Tradelink Private Limited and the same were redeemed in total consideration of ₹ 7,04,50,00,000/-. In the total transaction assessee earned profit of ₹ 50,00,000/- and treated it as its capital gain. The above said debenture in initially purchased by M/s Indiabullls Housing Finance Limited and subsequently sold it to M/s Youthstar Tradelink Private Limited. However, as per CBDT Circular dated 15.02.2002, the profit from redemption of debenture by intermediate purchaser will be taxable as interest or business income. The relevant portion of the same is being reproduced as under: 6.1 Where the bond is redeemed by an intermediate purchaser, the difference between the redemption price and the cost of the bond to such purchaser will be taxable as interest or business income, as the case may be. In the view of the same, vide note sheet entry dated 08.12.2017, the AR of the assessee was asked to why the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled colourable transaction solely to contrived loss by the assessee company to reduce its taxable income. Firstly , Assessee Company would pay huge sum by way of interest on debenture, (which is akin to a loan) from its own capital duly disclosed in the books of account in the garb of business expenditure to a reputed public limited company, M/s. India Bulls Housing Finance Ltd. Secondly , M/s. India Bulls Housing Finance Ltd. in return would have paid equal amount in cash back to the assessee, i.e., facilitating some kind of accommodation entry; and Lastly , M/s. India Bulls Housing Finance Ltd. will then pay huge taxes on the entire interest received from assessee. Such an arrangement is unfathomable, firstly, for the reason that no material has been brought on record to allege such kind of arrangement; neither there has any been inquiry conducted by the revenue from M/s. India Bulls Housing Finance Ltd. to prove such colorable transaction. Secondly, why a public limited company like India Bulls Finance Ltd. would connive with assessee and pay not only cash in return but also pay taxes on the interest received. Lastly, why would Assessee Company wipe out its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . has been allowed as business expenditure and has been accepted by the revenue. Thus, once the revenue accepts the set of transaction of issue of debentures of M/s. Vatika Ltd. to M/s. India Bulls Housing Finance Ltd. as genuine transaction whereby expenditure incurred by M/s. Vatika Ltd. for issue of debentures is genuine expenditure then having the same parallel, it would be incorrect for the revenue to contend that the expenditure incurred by the appellant on issue of redemption of debentures to M/s. India Bulls Housing Finance Ltd. is a contrived expenditure. In our considered opinion, the revenue merely by relying on flow charts could not have fairly treated the expenditure claimed as an artificial expenditure which is not allowable as genuine business expenditure. 16. Moreover, emphasis has also been made is the common addresses of various companies to whom advances had been given by the appellant company. This fact does raises some doubt, but that alone on the facts of the case cannot be conclusive to draw adverse inference as no further logical inquiry has been done to implicate assessee s involvement. In this regard, it would be relevant to refer to the ratio laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f proof. Here, the appellant company has discharged its onus by placing on record material to prove utilization of funds for the purpose of business of the appellant company and the revenue merely on theoretical surmises and hypothetical presumptions has proceeded to deny the claim. In our opinion, half baked enquires without taking them to a logical conclusion and proceeding on notions which are contrary to the evidence on record does not form part of due process of rule of law and therefore, could not be a foundation to deny the claim of the appellant company. 18. The next related aspect of the matter is in respect of investment made in debentures by the appellant company. The appellant has contended that M/s. Vatika Ltd. had issued debentures on 13.6.2014 to M/s. India Bulls Housing Finance Ltd. for ₹ 500 crores. It has been further stated that these debentures were transferred by M/s. India Bulls Housing Finance Ltd. to M/s. Sunrise Stock Broking (P) Ltd. and M/s. Tower Securities Services (P) Ltd. and on 14.7.2014, aforesaid companies transferred the same to M/s. Dewu Developers (P) Ltd. for ₹ 587.92 crores. The appellant company on 10.12.2014 borrowed money agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant had purchased debentures of M/s. Vatika Ltd. from independent entity M/s. Dewu Developers Pvt. Ltd. on a payment of consideration of ₹ 588 crores after deduction of TDS of ₹ 8.89 crores. This purchase has neither been disputed either in the order of assessment or in the order of CIT (A). It is also not in dispute that the debentures purchased by the appellant had been redeemed by M/s. Vatika Ltd. It is also a matter of record that on the redemption of debentures, bank account of the appellant had been credited by the sums received of ₹ 589 crores. Furthermore, no enquiries have been made or referred in the order of assessment to suggest that the income earned on issue of investment and disinvestment in the above debentures was also a contrived income. The issue of debentures is otherwise too supported by documentary evidence which includes terms and conditions of the issue of debentures and Board resolutions of M/s Vatika Ltd. including resolution filed with the Registrar of Companies of Vatika Ltd. Demat statement of investment in debentures is also placed on record and thus having regard to the aforesaid, in our considered opinion, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of its business then interest paid is an allowable deduction. In the instant case sequence of events show that the entire purpose of issue of debentures by the appellant was to borrow the funds for the purpose of its business. The appellant in the business of real estate it intended to acquire Gurgaon and for financing such project needed sufficient funds and had approached the vender companies after identifying such vender certain companies, who were involved in such activity and had thus entered into agreements, when it sought the assistance of such companies. 21. Another contention raised by the revenue is that the borrowing raised by the appellant did not materialise into any tangible business venture in as much as advances paid to three companies for purchase of land were repaid prior to redemption of debentures. In our opinion, the relevant test is the borrowing and utilisation for the purpose of business. The fact that aforesaid funds utilised for the purpose business did not result into any income or any tangible business assets is not a relevant consideration. The Hon ble Apex Court in the case of Apex Court in the case of CIT v. Rajendra Prasad Mody reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther taken support of the decision rendered by Coordinate bench of Delhi Tribunal in the case of Assessing Officer vs. Shiva Gases (Supra). In the said case as noted by Assessing Officer was that sale of shares on which loss has been claimed was non-genuine transaction and had been manipulated with the sister concern with a view to reduce the liability. However, the facts prevailing in the instant case would show that the debentures were issued to independent entities and that independent entities are duly assessed to tax. Under these set of facts, we are of the view that the Ld CIT was not justified in placing reliance on the decision of Hon'ble Delhi bench of Tribunal rendered in the case of Assessing Officer vs. Shiva Gases (Supra). 22.2 The learned CIT DR during the course of proceedings has relied on the judgment of Karnataka High Court in the case of CIT vs. Wipro Ltd. In the said case, the assessee was engaged in the business of software exports, computer peripherals, manufacture and sale of various products etc. It acquired shares of a company on 31.3.1999 namely WNL for a consideration of ₹ 15.11 crores. It sold certain shares on 5.8.1999 to KPN for a conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hadow on the genuineness of the transaction as the shares were sold at a throw away price, when earlier to the sale, the assessee had purchased the shares of Wipro Finance Limited at a premium. Despite disinvesting the shares on such a throw away price under the guise of complying with the legal requirements as directed by RBI, the assessee chose to infuse fresh capital to the extent of ₹ 95 crores at par on the same day and took back the amount on the same day under different head. In the end, they did not comply with the procedures of the law. On the contrary, application filed to the RBI was withdrawn. These undisputed facts borne out from the record clearly establishes the real intention underlying this scheme which they have propounded. 23. It will be apparent that the facts of the said case and the facts in the case of appellant are totally distinguishable. Here it is not a case that the transaction of issue of debentures by the appellant company and thereafter, redemption of debentures with M/s. Indiabulls Housing Finance Ltd. is a sham transaction. It is a matter of record that M/s. Indiabulls Housing Finance Ltd. is a well recognized company in the field of hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not file any particulars about the purchase and sale of shares in their returns. Also, share price of the company was neither known nor reported and there was no basis to suggest that how the share price of a company could increase more than 70 times when these shares were neither quoted nor listed. Thus, the facts as apparently are completely distinguished from the case of appellant company and therefore, could not be made a basis to reject the claim made by the appellant company. 25. In view of the foregoing, we conclude that the appellant is entitled to deduction of ₹ 104.50 crores incurred on redemption of debentures under section 36(1)(iii) of the Act. Furthermore, we also hold that ₹ 1 crores earned by the appellant on redemption of debentures by M/s. Vatika Ltd. in respect of investment made by the appellant company was taxable as business income as declared in the return of income. As a result, grounds raised by the appellant are allowed. 26. Grounds No. 3 and 4 relate to addition of ₹ 13.92 crores in respect of sale of commercial area by the appellant company. The factual matrix is that appellant in 2006, acquired 10.356 acres of land at Gurugram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expense and expects the revenue to accept the same without examining its allowability which is not a justified basis to allow the same. 27. The CIT (A) also upheld the addition by observing that since the claim of the appellant is not supported by adequate evidences therefore, expenditure incurred by DLF was not an eligible expenditure and therefore, confirmed the addition. 28. Before us, the learned Senior Advocate contended that Assessing Officer had made addition on the premise that the appellant has yet to receive ₹ 103.42 crores which was based on an erroneous assumption as under the agreement with the DLF, appellant was entitled to only ₹ 89.50 crores and not ₹ 103.42 crores. It was submitted that the reply dated 24.1.2019 from M/s. DLF under section 133(6) of the Act clarified that DLF had paid only ₹ 89.50 crores to the appellant and therefore, this amount of ₹ 13.92 crores had been offered for tax by DLF under the percentage of completion method which has been duly assessed to tax in their order of assessment. In such circumstances, it was prayed that addition so made and sustained was not in accordance with law and therefore, may kindly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said details, your goodself can observe that the pending full final payment of ₹ 11.04.Cr was made by the company after the decree of compromise agreement. Copy of the Compromise which is duly decreed by the Court is has already been enclosed. So far as, treatment in assessee s books is concerned, it is submitted that all the transactions are duly recorded in the audited financials of the DHDL and the amount of ₹ 13.92 Cr has duly been offered to tax as part of overall revenue of the project bases Percentage of completion method (POCM) on year to year basis as per the applicable laws. It is worthwhile to mention here that the assessee company was duly been assessed u/s 143(3) for AY 2015-16. Even, Scrutiny assessment for AY 2016-17 has also been concluded by DCIT, Circle 7(2), New Delhi. All the assessment orders are part of departmental record. 30. Thus, having regard to the aforesaid agreements supported by independent confirmation obtained under section 133(6) of the Act by the learned Officer in the remand proceedings, to which, no contrary evidence has been placed on record, we are of the opinion sum taxable is ₹ 89.50 crores and not at & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23(1) of the Act. In the said case, properties under consideration were the properties which which are lying vacant or were under construction or were let out or were self occupied for the purpose of business purpose and in respect of properties which were used by the assessee for his own office/ business purpose it was held that FMV of the properties used by the assessee for business purpose admittedly cannot be determined u/s 23(1) of the Act. It has been held as under: 6. However, nowhere the Assessing Officer has given any basis for determination of fair market rent, that is, from which source or information he has arrived at the market rent. He has also not excluded the properties which were; firstly, under construction as mentioned in the earlier table; and secondly, one shop which was used by the assessee for his own office/business purpose. The FMV of the properties under construction and property/shop used by assessee for business purpose admittedly cannot be determined u/s 23(1). The Assessing Officer is thus directed to exclude the ALV of the two properties which were under construction and also the property which was used by the assessee for his own business/profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Profits and gains from business or profession . More recently, the Hon ble Supreme Court in Rayala Corporation Pvt. Ltd. Vs. ACIT (2016) 386 ITR 500 (SC) considered a situation in which the assessee was engaged in the business of renting its properties. The assessee claimed such rental income as falling under the head Profits and gains of business or profession . The AO denied such a treatment. When the matter finally came up before the Hon ble Supreme Court, it considered both the judgments, namely, S.G. Mercantile Corporation (supra) and Chennai Properties and Investments Ltd (supra) and thereafter held that : `the law laid down by this Court in the case of Chennai Properties (supra) shows the correct position of law . That is how, their Lordships held that the income was to be charged to tax under the head Profits and gains of business or profession . 5 In view of the foregoing discussion, it is apparent that the view point bolstered by the authorities that Annual Letting Value in respect of unsold properties lying with the assessee as a stock in trade, should be determined u/s. 23 of the Act, cannot be countenanced in the hue of the later judgments of the Hon ble Sum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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