TMI Blog2020 (10) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... which is formed with the main object of renting up of the properties. In view of the above, respectfully following the decision of coordinate Bench of the ITAT in the case of assessee for AY 2005-06, we confirm the order of CIT(A) in taxing the rental income as income from house property. In the result the ground of the revenue's appeal is dismissed. Addition on account of notional rent/additional annual lighting value in respect of the vacant and leased out properties - HELD THAT:- Bonafide lease agreement between the appellant and third parties cannot be disregarded without having any adverse information in this regard and based on conjectures and surmises. Hence, the addition made by the Assessing Officer on this issued is deleted. Notional addition made by the Assessing Officer under the head income from house property on account of notional income u/s 23(1) (a) of the Income Tax Act is deleted. Disallowance on account of depreciation claimed 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 no appeal was filed against the same b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only in respect of land and same cannot be applied on transfer of building. Recognition of revenue relating to real estate projects is governed by AS-7 and the assessee has been consistently following POCM which has accepted by the Tribunal in assessee s own case for AY 2006-07. Hence, such a reasoning of the AO to disallow proportionate deduction cannot be sustained. Thus, in view of our finding given above, the order of the ld. CIT (A) in allowing the claim of benefit u/s.80IAB is confirmed and consequently the ground raised by the Revenue is dismissed. Disallowance of deduction for short allocation of overheads to SEZ division - HELD THAT:- On perusal of the expenditure and the orders of the lower authorities, it is apparent that the director s salary is being paid to the directors of the company including a commission thereof is for the purpose of managing the business of the DLF assessee. For the protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders activity. Advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all perta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has given funds borrowed at a higher rates from financial institution and banks to group entities at lower rates which is distorting the correct taxable profits of the company - HELD THAT:- Once the genuineness of the borrowing is proved and the interest is paid on the borrowing it is not within the powers of the learned assessing officer disallowed the deduction either on the ground that the rate of interest is unreasonably high of that the assessee had himself charged the lower rate of interest on the money which it has advanced. The learned departmental representative could not controvert the above finding of the learned CIT A. In view of this, we confirm the order of the learned CIT capital and dismiss ground of the appeal. Non-ending back of the disallowance of the items to the competition of total income - HELD THAT:- With respect to this the learned CIT A has directed the learned assessing officer to go through the necessary evidences filed during the assessment proceedings and delete the addition if it is found that the assessee has already offered the above amount for the taxation. No reason why the learned assessing officer is aggrieved with the direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 7,69,038/- [i.e. after allowing standard deduction @ 30% on gross addition of ₹ 10,98,626/- which works out to ₹ 3,29,588/-] made by the Assessing Officer on account of notional rent, whereas in fact the appellant has not received any rental income from these tenants. [Page 136-140 CIT(A) s Order] 2.2 That learned CIT(A) has grossly erred in law and on the facts in not appreciating the fact that the taxable income means real income and not a fictional income. 3. That learned CIT(A) has grossly erred on the facts and in law in confirming the disallowance made by the Assessing Officer to the ₹ 20,42,053/- on account of registration fee for the Gujarat and Karnataka windmills by treating the same as capital in nature. [Page 151-177 of CIT(A) s Order] 4. That the appellant reserves its right to assail the same on such other ground or grounds as may be advanced at the time of hearing for which the appellant craves leave to amend, vary or add to the grounds hereinbefore appearing. 3. The learned AO in ITA number 4793/del/2015 has raised following grounds of appeal. ITA No. 4793/DEL/2015 AY 2010-11 1. The Commissioner of Income Tax(Appeals) has er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 6,29,430/- on account of notional rental income on vacant properties. 13. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in deleting the addition of ₹ 5,64,961/- on account of recalculation of depreciation in respect of earlier let out DLF Centre Building, now converted to self occupied property. 14. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in deleting the addition of ₹ 4,75,95,830/- made by the AO on account of disallowance of prior period expenses. 15. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in restricting the disallowance to ₹ 20,42,053/- as against the disallowance of ₹ 735,03,187/- made by the Assessing Officer on account of disallowance of capital expenses. 16. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in deleting the addition of ₹ 4,96,29,551/- on account of expenses not incurred wholly and exclusively for the business purposes under different heads by holding them being personal in nature. 17. The Commissioner of Income Tax(Appeals) has erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the learned assessing officer. The learned authorised representative submitted a detailed chart and submitted that except ground number 16 of the appeal all other grounds are covered by the decision of the coordinate bench dated 27th of May 2019 ITA number 2749/del/2013 for assessment year 2008 09 in favour of the assessee. He therefore submitted that the coordinate bench order needs to be followed. We have carefully considered the rival arguments and also considered the decision of the coordinate bench for assessment year 2008 09 in case of the assessee. We also found that most of the issues are squarely covered by the decision of that assessment year of the coordinate bench. 6. Ground number one of the appeal is with respect to allowing the deduction of ₹ 1 78,61,73,799/ u/s 80 IA B of the income tax act. Both the parties agreed that same is covered by the decision of the coordinate bench in assessee s own case for assessment year 2008 09 wherein ground number two of that appeal covers this issue. The coordinate bench has decided this issue as Under:- Disallowance of SEZ deduction u/s 80IAB. 46. The next issue relates to deletion of addition on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of buildings can take place without the sale of land. Also explain that how any income arising from such transfer of assets is covered under section 80-IAB and eligible for deduction. * The SEZ Act notifies specified authorized operations which alone qualify for exemptions, deductions. Please explain how sale of constructed buildings can be classified as authorized operations eligible for deduction under section 80-IAB especially with reference to the Notification No. SO/1846(E) dated 27.10.2006 and also with reference to the approval dated 14.02.2007 granted by Government of India, Ministry of Commerce Industry. * A modified approval dated 01.06.2009 was granted by Board of Approval, SEZ to codeveloper i.e. DLF Assets Ltd. after taking into account the Co-developer agreement dated 20.03.2008. It has been stated in the aforesaid approval that the transactions were approved subject to the condition that as per terms and conditions of lease agreement between developer and co-developer will not have any bearing on the treatment of income by way of lease / rentals / down payment / premium etc. for the purpose of assessment under the prevalent Income Tax Rules. The AO will ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assessee company in any one financial year. 50. In light of above observations of the AO, assessee made detail submissions with regard to the specific queries raised by the Assessing Officer which has been noted and dealt by him from paragraph 2.20 to 2.41 of the assessment order. However, ld. Assessing Officer apparently without adverting to the various points and issues raised by the assessee, held that the claim of deduction u/s.80IAB is not allowable predominantly in view of the fact that Hon'ble Punjab and Haryana High Court has held that acquisition of SEZ land was illegal and also the sale of building to a cobuilder is neither a business activity nor one of the authorized operations of SEZ. Accordingly, he denied entire claim of deduction and added the same to the income of the assessee. 51. In the first appeal, Ld. CIT (A) after considering the entire gamut of materials placed on record and after detailed discussion has allowed the assessee s claim. The relevant finding and observations are as under: - 8.25 From the clarifications dated 18.01.2011 10.01.2011 issued by the Ministry as well as the correspondence between the Ministry of Commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disclaimer condition mentioned in the codeveloper approval letter dated 01.06.2009 is primarily put in by the Board of approvals in the approvals to put a curb on the wrong practices of leasing the land for long periods and receiving onetime payment in the form of lease rental/down payments/premiums etc. which tantamount to sale of land in the guise of long term lease. The appellant has obtained requisite approval from the Board of Approvals by disclosing all facts. The entire controversy as to whether the transfer of bare shell buildings to the co-developer was an authorized operation has been set at rest by the correspondence made between the Ministry of Commerce and Department of Revenue and also by clarification letters issued, dated 18.01.2011 20.01.2011 by Ministry of Commerce. I am satisfied that all the conditions as required to be satisfied under the SEZ Act/Rules are fulfilled and the appellant is an approved developer for all intent and purpose of Section 80 IAB of the Act. Consequent upon approval granted by the Board of Approvals for the transfer of bare shells to the co-developer for a consideration is an authorized operation and income derived from such transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had to be spread over the period of 49 years. The appellant has contended without prejudice to the other grounds that if the contentions of the Assessing Officer are accepted that either the appellant was not the lawful owner of the land on which SEZ has been set up or sale of bare shell buildings by the appellant was impermissible then the amount received by the appellant has to be refunded to the co-developer. The appellant has contended that it had been engaged in the business of real estate and the development of such commercial projects is the main object of the appellant. The appellant had been following the Percentage of Completion Method (POCM) for recognizing revenue of various projects as per the Accounting Standards issued by the Institute of Chartered Accountants of India and it has been accepted by the department since inception. It is a matter of record that the Assessing Officer herself has accepted such incomes as business income of all the projects developed by the appellant even during the year under consideration. It is seen that the appellant has been following mercantile system of accounting and has been recognizing the revenue in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital asset. The stock in trade is specifically excluded from the definition of Capital Asset Under section 2(14) of the Act. The development of the bare shell buildings in the SEZ and subsequent transfer thereof cannot be considered as giving rise to short term capital gain considering the business of the appellant and accounting treatment adopted in the books of account irrespective of the treatment by the codeveloper in the books of accounts as fixed assets. The observations of the Assessing Officer on this issue are erroneous, legally untenable and misdirected in holding that the income can be assessed as capital gains. I have gone through the judicial rulings relied upon by the appellant in support to its claim. Further, the appellant has disputed the decision of the Assessing Officer in holding that the development income was relatable to 49 years of lease period and only 1/49th could have been earned by the appellant in one year. The appellant has contended that having held so the Assessing Officer ought to have allowed a deduction of ₹ 22,83,81,280/-U/s 80 IAB and excluded the remaining income pertaining to the subsequent years for the computation thereby resultin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds pertains to the observation of the Assessing Officer wherein the Assessing Officer held that without prejudice to the disallowance made U/s 80 IAB, if at any higher appellate stage the assessee is allowed deduction U/s 80 IAB of the IT Act, then the quantum of deduction is to be reduced by ₹ 24,20,98,512/- on the basis of findings given by the Special Auditors in para 3.15 to 3.22 at page Nos.25-29 in Volume-IIIA of the Special Audit Report. The appellant has contended that the Assessing Officer has made these observations on the basis of Special Audit Report wherein the Special Auditors have stated that there is short allocation of overheads to the SEZ Division. The Special Auditors proposed that some expenses ought to have been allocated to the SEZ project out of the other non-SEZ project. The AR of the appellant has drawn my attention to the details filed during the course of assessment proceedings as well as before the Special Auditors. These details have been filed in the paper book at pages 258-271. The AR of the appellant has vehemently argued that the appellant is a listed company and its accounts are subjected to various checks and audits. Particularly for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made on the basis of presumptions and some material has to be brought on record to justify such reallocation of expenses for working out deduction U/s 80 IAB. It is seen that this issue has been considered by me while passing the appellate order dated 19.12.2012 in appeal No.71/12-13 in the case of DLF Commercial Developers Ltd. where the similar disallowance has been directed to be deleted. In view of the factual position, the Assessing Officer is directed to allow the deduction U/s 80 IAB as claimed by the appellant in the return of income without making any reallocation. 52. The Ld. Spl. Counsel appearing on behalf of the Revenue, after referring to the facts as noted in the assessment order, also summarised the findings of the AO given from pages 31 to 81 of the assessment order, in his written submissions. 53. At the outset, he submitted that in the Assessment Year 2009-10, the Hon'ble High Court in the case of DLF Commercial Developers Ltd., (2018) 92 Taxmann.com 10 has remanded the matter to the Tribunal analyzed the case in the light of the provision of SEZ Act, 2005 which Tribunal has not independently done and set aside the matter back to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t might not appear to approving authorities that the intention was to transfer both land and buildings to the codeveloper, particularly when they realized that sale of land in SEZ was not permitted. This fact can be vouched from point 3 of the facts of the case mentioned above. Combined reading of all the clauses of Co-Developer Agreement and Lease deed clearly shows that the intention of the assessee company was to sell land to their related company and they have booked business income out of the transaction. Thereafter the deduction u/s 80-IAB has been claimed out of the business income which should not be allowed for the reason that sale of land is not permitted as per SEZ Act and Rules. iii. When the Board of Approval (BoA) later examined this issue, they were of the categorical view that transfer and handover of buildings on payment of development consideration was against the spirit of SEZ. This issue will be discussed in detail later. The fact remains that the assessee merely built the structure and sold the same to the codeveloper. iv. It is seen that section 3(8) of SEZ Act specifically states that the Central Government may prescribe the requirements for establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Board noted that in the meeting held on 23.02.2009 it was decided to defer the 4 proposals of co-developers in respect of same Developer, i.e., M/s DLF Limited as the representative of the DoR pointed out that the co-developer agreement refers to transfer and hand over deeds which states that co-developer shall be the owner of the SEZ buildings on payment of development consideration, which is against the spirit of SEZ Act and Rules. Following this observation, the proposals were deferred and it was decided to examine the case on file. DoC examined these proposals on file in consultation with CBDT and the agreements were revised by the co-developer. The proposals were approved subject to the condition that particular terms and conditions of lease agreement will not have any bearing on the treatment of income by way of lease rentals/down payment/premium etc. for the purpose of assessment under the prevalent Income Tax Act and Rules. The Assessing Officer, will have the right to examine the taxability of these amounts under the income tax Act. Copy of Minutes of 32nd Meeting and 34th Meeting of BOA are enclosed with these Submissions. ix. Section 27 of the SEZ Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co- Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the relinquishment of right is irrevocable. c. Though SEZ Act prohibits for sale of land thereby implicitly denying any benefit to a developer who is basically interested in deriving income by transfer of assets, the assessee has found a way to overcome this prohibition by creating 49 years lease in favour of co-developer. It is pertinent to note that the lease deed is renewable further and thus effectively transferring the land also. Para 2.3 and 5.1 of the Lease Deed clearly allows the parties to renew the lease deed. Thus, the assessee company has transferred the land in actual sense and substance of this present transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 2(47)(v), this issue was examined in great details by AAR Tribunal in the case of Mr. Jasbir Singh Sarkaria (2007) 294 ITR196, it was held that the transaction of the nature referred to in clause (v) of section 2(47) had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively. It was further held that to attract clause (v) of section 2(47), it is not necessary that the entire sale consideration up to the last installment should be received by the owner. In the above-mentioned case the judges have gone into detailed examination of the issue and applicability of provisions section 2(47)(v). To make the issue clearer, it is relevant to reproduce some relevant paragraphs as under: There is no doubt that the agreement to transfer the entire right, title and interest of the owners for a consideration specified in the agreement and in accordance with the terms thereof answers the description of a contract falling within the scope of section 53-A of the Transfer of Property Act. The crucia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definitely postponed. True, it may not be profitable for the developer to allow this situation to linger for long as the process of transfer of flats to the prospective purchasers will get delayed. At the same time, the other side of the picture cannot be overlooked. There is a possibility of the owner with the connivance of the transferee postponing the payment of capital gain tax on the ostensible ground that the entire consideration has not been received and some balance is left. The mischief sought to be remedied, will then perpetuate. We are, therefore of the view that possession given to the developers need not ripen itself into exclusive possession on payment of all the installments in entirety for the purpose of determining the date of transfer. While on the point of possession, we would like to clarify one more aspect. What is spoken to in clause (v) of section 2(47) is the 'transaction' which involves allowing the possession to be taken. By means of such transaction, a transferee like a developer is allowed to undertake development work on the land by assuming general control over the property in part performance of the contract. The date of that transaction de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is not an activity of development of SEZ. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the agreement that the intention from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. CO-developer agreement is very clearly showing that the developer loses all rights over these assets and the relinquishment of right is irrevocable. 58. Referring to the provisions contained in Section 80IAB, he submitted that the word derived is very crucial in appreciating any kind of deduction which would fall within the ambit of the said provision. Here, in this case, the source of income is a sale of bare shell of the building and there is no question of development of SEZ. The same has been done by co-developer. In support, he has also relied upon the following decisions. CYBER PEARL INFORMATION TECHNOLOGY PARK P. LTD V. INCOME TAX OFFICER- (2017) 399 ITR 310(Mad) Hon'ble Madras High Court held that the consistent view of the courts has been that wherever, in such like sections, the expression derived is used, as against a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments have been taken in respect of claim of deduction u/s.80IAB. He has tabulated the various arguments and point-wise rebuttal of ld. Special counsel in his written submissions. 61. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material referred to before us. The main issue is with regard to allowability of claim of deduction u/s.80IAB in respect of profit arising from sale of bare shell building in SEZ by assessee to M/s. DLF Pvt. Ltd. As a part of its business activities, the assessee has undertaken to develop SEZ project in a Govt. designate Special Economic Zone after obtaining requisite approval under SEZ Act and SEZ Rules in terms of provisions of Section 80IAB of the Income Tax Act. As brought on record, assessee had undertaken to develop SEZ project which was duly approved by Government of India and later on had entered into MOU with codeveloper, wherein it was agreed that assessee shall develop the bare shell building and transfer to M/s. DLF Pvt. Ltd. (co-developer) for further development and lease of the same to eligible tenants. It was also agreed that land on which building was to be constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in dispute in view of the decision of Punjab Haryana High Court and as such the claim of deduction is inadmissible in absence existence of SEZ project. B. Transfer of building cannot be considered as activity of development of SEZ and as such the profit arising from such transfer is not eligible for deduction u/s 80IAB. The activity of development and sale of building is neither an authorized operation under SEZ Act nor approved by competent authority. Further, lease of land for 30 years to M/s. DLF Asset Ltd. tantamount to transfer of land which is an impermissible activity in terms of Rule 11(9) of SEZ Rules, 2006. (Which AO has wrongly construed the period of lease as 49 Years) C. Isolated transaction of sale of building is assessable under the head income from capital gain and as such the provisions of section 80IAB are not applicable. Further, as the purchaser M/s. DLF Asset Ltd. has shown the said bare shell building as fixed asset in its Balance Sheet, the same constitute capital asset of the appellant and as such profit arising from sale of bare shell is in the nature of Short-Term Capital Gain. D. Alternatively, the profit from the project should be apportione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch transferee Developer for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee Developer. (3) The provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA shall apply to the Special Economic Zones for the purpose of allowing deductions under sub-section (1). Explanation-For the purposes of this section, Developer and Special Economic Zone shall have the same meanings respectively as assigned to them in clauses (g) and (za) of section 2 of the Special Economic Zones Act, 2005. 64. Ergo, the benefit u/s.80IAB is eligible only in respect of project approved by Board of Approval under the aegis of Ministry of Commerce and Industry and once the approval is granted by BOA, the statutory benefit has to be granted so as to give effect to such approval. The SEZ Act, 2005 has been enacted as a self-contained code and is a Special Act which has an overriding effect on any other Act including the Income Tax Act, 1961, in view of provision of Section 51 and r.w.s. 27 of the SEZ Act 2005. 65. Before us, the learned counsel has given the sequence of various approvals which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, learned counsel before us has clarified that assessee was a bona fide purchaser of the property in respect of which approval for development of SEZ project was duly granted by Government of India. In any case, the Hon ble P H High Court has not commented upon SEZ Project developed on said piece of land and the decision will not at all affect the right of the assessee. In these circumstances, the decision of P H High Court shall have no bearing on the claim of deduction u/s 80IAB of the Act particularly when the infrastructure project has already been executed and completed. In any case, the order of P H High Court pronounced on 03/02/2011 was challenged before Supreme Court by the assessee and other parties and now the Hon ble Supreme Court vide order dated 20/06/2011 has stayed the operation of judgment of P H High Court and therefore, the adverse inference on the basis of order of P H High Court is not sustainable. He clarified that assessment order was passed on 27/04/2011, i.e., before passing of the order by the Hon ble Supreme Court and thus, the observation of the assessing officer is no longer relevant and this controversy has no legs to stand. 67. We find that, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veloping SEZ notified under the SEZ Act, 2005. Here in this case, all the conditions stood satisfied and Assessing Officer has also not pointed out as to which of the conditions have not been fulfilled. Likewise, in the present case, it is an undisputed fact that, firstly, the area has been notified as Special Economic Zone vide notification dated 06.12.2006 and 19.03.2007; secondly, the assessee has been approved as Developer by BOA vide letter dated 25.10.2006 and 14.12.2007; and lastly, the operation of developing of building has been approved as authorized operations and as such the income has been derived from developing and sale of bare shell building in SEZ. The term Developing a Special Economic Zone has to be seen in terms of authorized operations specified by BOA under the SEZ Act, 2005. Though Income Tax Act does not define the term Developing a Special Economic Zone , however, the meaning of the same has to be deduced from the SEZ Act. Here, in this case, not only the BOA has recognized the existence of SEZ but has also approved the activity of developing and transfer of bare shell as authorized operation of developing of SEZ and assessee has been recognized as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was nothing in the minutes of meetings of Board of Approval held on 23.02.2009 and 19.06.2009, indicating that there was any objection with regard to proposed transfer of bare shells by the assessee to Codeveloper. The assessing officer has relied upon clause (xvii) of Para 3 of letter dated 01.06.2009 while reaching to the erroneous conclusion that taxability of entire transaction is open for examination and assessment. However, it is seen that the assessing officer in fact has failed to appreciate the above clause in right perspective and has attempted to make use of the same for justifying the denial of claim of deduction u/s 80IAB of the Act. It is pertinent to note here that clause (xvii) of Para 3 is only with regard to terms and conditions of lease agreement and same cannot be inferred to dispute the transaction of transfer of bare shell building and profit arising therefrom. In the present case, the assessee has claimed deduction of profit from sale of bare shell building and as such the clause relating to issue of taxability of lease income is of no help to the revenue. The CIT(A) has given express finding on this issue vide para 8.25 of his order which is qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the business activity carried out by the assessee pursuant to such approvals constitute business of Developing a Special Economic Zone within the meaning of Section 80IAB of the Act. Under section 80IAB, the AO s authority is limited to examine whether the provisions of section 80IAB read along with the relevant Rules have been complied or not. For instance, some of the conditions as stipulated in the section which the AO may examine may include: - -Whether the assessee is a developer under the SEZ Act and is in the business of developing a SEZ. -The SEZ has been notified on or after the 1st day of April 2005 under the Special Economic Zone Act, 2005. -Whether the profits have been derived from the business of development, operation and maintenance of a SEZ. 72. The case of assessee has been that the land has been given on lease for a period of 30 years and lease rentals per annum are being received over a period of lease term on annual basis and not up-front for all the years under the lease. The disclaimer condition mentioned in clause 3(xvii) of the approval letter dated 01.06.2009 does not give any additional power to the AO to examine the taxability of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for deduction u/s.80IAB because they were in consonance not only under the SEZ but also BOA has approved such activities. 77. The Assessing Officer as an alternative has also held that isolated transaction of sale of building is assessable under the head income from capital gain , and therefore, provision of Section 80IAB is not applicable and since the purchaser M/s. DLF Ltd. has shown the bare shell building as fixed assets with balance-sheet, therefore, the same constitutes the capital assets of the assessee and thus, the profit arising from sale of bare shell is in the nature of Short Term Capital Gain. The aforesaid observations of the ld. Assessing Officer cannot be accepted because assessee is engaged assessee is engaged in the business of real estate and the building in SEZ has been shown as stock-in-trade on which revenue has been recognized as per Percentage Completion method (POCM) prescribed under AS-7. The SEZ project was part of regular business activity of the assessee and as such there is no case to treat this transaction in different context so as to re-characterize income under the head capital gain merely to defeat the claim of deduction based on requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is dismissed. 80. Lastly, in so far as the reliance placed by the Ld. Spl. Counsel for the revenue that the Hon ble High Court in the case of one of the sister concerns, has set-aside the issue for deciding on merits while upholding the revision us/s 263 by the CIT, is also sans any merits, because, nowhere the Hon ble High Court has adversely commented on the claim of deduction u/s 80IAB on merits. In fact, matter has been restored back to the Tribunal to decide the issue on merits afresh after considering all the facts and the relevant provisions of SEZ Act, which we have already discussed in detail. Thus, reliance placed by the Revenue to draw any adverse inference on merits cannot be sustained. 7. The learned departmental representative could not show was any reason to deviate from the order of the coordinate bench. The learned CIT A has also decided the issue accordingly in favour of the assessee. In view of this ground number one of the appeal is dismissed and the order of the learned CIT appeal is confirmed to that extent. 8. The ground number two is with respect to the deletion of addition on account of disallowance of deduction for short allocation of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: a. That the assessee company has not developed the SEZ rather only constructed the buildings. The deduction u/s 80-IAB is available only in the case of development of SEZ. Mere construction of Bare shell buildings will allow the assessee the deduction u/s 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co- Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the main project undertaken by the two companies is development of SEZ and hence administrative activities in these companies are minimal and there is no need for allocation of further overheads. Both these companies have incurred overhead expenditure which formed part of development cost considered in POCM. This argument of the company is not tenable as the two companies DLF Info City Developers (Chennai) Ltd and DLF Cyber City Developer Ltd. during the Asstt. year 2008-09 had earned development income of ₹ 1,68,686.15 lacs and ₹ 1,63,049.03 lacs respectively and against the same the overhead expenditure shown by these companies is ₹ 71.58 lacs and ₹ 1,194.51 lacs respectively. In fact, in case of DLF Cyber City Developers, the expenditure of ₹ 1194.51 lacs includes commission and brokerage expenditure of ₹ 1155.79 Lacs and if this is reduced then the overhead expenditure incurred would be just ₹ 38.72 Lacs. It is difficult to imagine that the two companies earning development income of ₹ 168686 lacs and ₹ 163049 lacs would have incurred overhead expenditure of ₹ 71.58 lac and 38.72 lacs only. This clearly points to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The associated concerns has claimed 100% deduction u/s 80IAB and therefore by transferring the expenses of associated concerns to the assessee company some portion of such expenses are to be allocated to the associated companies. 12.9The assessee has also cited judgement in the case of Nestle India Limited Vs DCIT (2009) 27 SOT 9(Delhi). In this case it was held that the assessee company had incurred expenditure on account of advertisement and sales promotion in respect of only those products in which the Indian company dealing in. Thus, the expenditure had been incurred to promote sales in India. Therefore, those expenses were incurred wholly and exclusively for the purpose of business of the assessee. In this case the associated concerns of Nestle India are situated outside India and it was easily established by Nestle that the advertisement expenses were incurred in respect of products dealt by the Indian company. However, in the case of the assessee the line of business of the assessee company and its associated concerns is identical and therefore the percentage of overhead expenditure incurred by the assessee and its associated concerns would be similar. The Special A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were previously looking after the affairs of group entities, to the respective entities. After October 2006, the group entities started incurring their own expenses themselves and this fact has been verified by the Special Auditors during the course of Special Audit. It is seen that there are certain heads of expenses which were exclusively pertaining to the appellant company and could not have been allocated to the other group entities. It is also seen from the Special Audit report that the Special Auditors have not brought out any instance of expenditure specifically pertaining to other group companies but has been claimed in the profit and loss account of appellant company during the year. The allocation made out by the Special Auditors was based on the presumption without bringing any material on record. No allocation of overheads is needed in the case of M/s. DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd. because these subsidiaries have their own resources and are meeting out their expenses own their own. In the case of M/s DLF Info City Developers (Chennai) Ltd. it is seen that this company has only one project that is the development of SEZ at Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such expenses, the expenditure cannot be allocated to the companies who have also derived some benefit. The genuineness of the impugned expenditure for the purpose of business has not been disputed by the AO. Further, under the facts and circumstances as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant s business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of ₹ 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted. 129. The Tribunal in Assessment Year 2006-07 has dismissed the Revenue s appeal on this issue after observing and holding as under: 121. We have carefully considered the rival contentions. The brief fact is that certain overhead expenses incurred by the assessee have been apportioned to the other group companies for the reason that by incurring those expenses, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Hence, we confirm the order of the CIT (A) deleting the addition of ₹ 14,55,37,400/-. Ground No.4 of the revenue s appeal is dismissed. 130. In view of the aforesaid observation and the finding of the Tribunal which is applicable in this year also, therefore, respectfully following the same, the Revenue s ground is dismissed. As the revenue could not dispute that the issue is covered by the decision of the coordinate bench, we respectfully following the decision of the coordinate bench dismissed ground number two of the appeal and confirm the order of the learned CIT A to that extent. 9. Ground number three of the appeal is with respect to the deletion of addition on account of estimated ITC charges and P commencement of the construction cost. Both the parties confirm that this issue is covered by the paragraph number 81/87 of the order of the coordinate bench for assessment year 2008 09 as Under:- 86. We find that the similar issue was also involved before this Tribunal in the appeal for the Assessment Year 2006-07, wherein the Tribunal has decided this issue in favour the assessee in the following manner: 42. We have carefully considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein. According to one of the conditions specified there in is reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. Therefore the threshold suggested by ICAI is the minimum threshold and it is not prohibited that looking to the business conditions assessee cannot fix up higher threshold. More so when the assessee has stated that many identical companies are also following similar threshold of 30 % of the total project cost, no fault can be found with the estimate made by the assessee. It is also undisputed that in subsequent years the special auditor appointed by revenue has accepted the threshold of 30 % adopted by assessee and AO has accepted the same. In view of above we are of the opinion that assessee has rightly accepted the threshold of 30 % of achievement of total project cost for commencement of revenue recognition. Further the working of the total project should also include all types of development charges required to be included in the same. Ld. AR has stated that the details of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal reads as under: 49. We have carefully considered the rival contentions. It appears that the AO has made this addition mainly because of note mentioned by assessee in its accounting policies with respect to borrowing costs according to Accounting Standard 16 issues by ICAI. We have perused notes attached to financial statements and we are of opinion that these notes have arisen in the financial statement of the assessee because of the issue of applicability of Accounting Standard 16 issued by the ICAI. According to Accounting Standard 1 i.e. disclosure of accounting policies, each and every company is required to disclose the accounting policy with respect to various significant income, expenditure and assets and liabilities etc. applicable to it. Borrowing cost is also one of them. ICAI has issued Accounting Standard 16 Accounting for Borrowing Cost wherein it is provided that in case of interest expenditure incurred by the company, it is required to be capitalized if the borrowing is related to the qualifying assets. In this case the inventory is a qualifying assets as it is held for more than 12 months and therefore interest attributable to it is required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the activities were assessed under section 28 of the Income-tax Act. In this case, we are concerned with the second activity (hereinafter referred to, for the sake of brevity, as Kandivali Project ). According to the Commissioner, loan was raised for securing land/development rights from the Mandal. That, the loan was utilised for purchasing the development rights, which, according to the Commissioner, constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest incurred thereon constituted part of capital expenditure. This finding of the Commissioner was erroneous. In the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 , it was held by the Supreme Court that in cases where the act of borrowing was incidental to carrying on of business, the loan obtained was not an asset. That, for the purposes of deciding the claim of deduction under section 10(2)(iii) of the Income-tax Act, 1922 [section 36(1)(iii) of the present Income-tax Act], it was irrelevant to consider the purpose for which the loan was obtained. In the present case, the assessee was a builder. In the present case, the assessee had undertaken the Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (A) on disallowance of interest of ₹ 24.75 crores u/s 36(1) (iii) of the Act. The alternative argument of the assesse regarding adoption of any artificial formula for the purpose of computing interest disallowance. Ld. CIT (A) has presumed proportion of utilisation of funds in absence of the nexus holding that assesse has used mixed funds. Honourable Bombay High court in case of CIT V Reliance Utilities Power limited 313 ITR 340 has held that The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. Therefore we are of the view that presumption is to be assumed in favour of the assesse and not against assesse. Hence, we reject the formulae adopted by CIT (A) of working out proportionate disallowance by adopting artificial formulae. Therefore respectfully following decisions of Honourable Bombay High court in CIT vs. Lokhandwala Constructions Industries Ltd. [ 131 taxman 810] and CIT V Reliance Utilities Powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Madras Industrial Investment Corporation Ltd. vs. CIT, (1997) 225 ITR 0802 (SC) and out of total claim of ₹ 10,63,46,742/-, he made disallowance of ₹ 3,64,25,771/-. 101. Ld. CIT(A) has discussed the issue in detail and has allowed part relief after observing and holding as under: 13.20 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, accounting standard AS-2 AS-7 and judgment of ITAT in earlier years and CIT (Appeals) in appellant s own case for A.Yrs. 2006-07 and 2007-08. It is seen that as per para-19 of AS-7, it is mentioned that the selling cost cannot be attributed to contract activity or cannot be allocated to a contract under construction. Even as per AS-2 Valuation of Inventory issued by ICAI, it is seen that selling and distribution cost cannot be considered as part of the cost of inventory and such expense has to recognized in the period in which they are incurred. The cost which can be attributed /allocated over the inventory should comprise all the cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. In the case of constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of such expenditure is continued in the ensuing years. The facts of this judgment cannot be applied to the appellant s case as Brokerage and Commission linked with the services rendered by the brokers to the appellant for selling the flats and other properties. There is a nexus between the expenses and services rendered which cannot be spread to several years. The benefit of the brokerage and commission is related to a particular property or flat sold and it cannot be extended to other properties. Therefore, brokerage expenses cannot be postponed for the future years. Therefore, ratio of the said judgment is not applicable in the case of appellant. 13.21 The appellant has placed reliance on the decision of the jurisdictional High Court in the case of Nokia Corporation vs. DIT, Delhi, 2007, 162 Taxman 369 (Delhi), wherein it is held that even if the Department has filed further appeal against the last order, which is in favour of the appellant, the last order is judicially binding on the subordinate authority. Hence, respectfully following the order of the Hon ble Income Tax appellate Tribunal for AY 1984-85 and the order of CIT(Appeals) for the immediately preceding years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely because the decision is not accepted by revenue disallowance has been made. As observed by the CIT (A), these expenses related to brokerage of flats as part of selling expenses and, therefore, cannot be included in the cost of construction for the purpose of value of closing stock of WIP and in view of Accounting Standards issued by the ICAI. Respectfully following the decision of Honourable high court in case of CIT V DLF universal Limited in ITA no 1136/2009 dated 16.04.2015 while deciding ground no 4 of the appeal of the revenue honourable high court has held that expenditure towards brokerage and commission paid to brokers for booking and sale of certain properties is allowable firstly in view f the facts that assessee s treatment of such expenditure has been decided in favour of the assessee and revenue has not challenged it and secondly such expenditure are allowable. In view of the above facts and following the decision of coordinate Bench as facts are not distinguished by revenue, we confirm the order of CIT (A) in deleting the addition of ₹ 20,87,70,567/- on account of brokerage expenses for sale of various properties. Therefore, ground no.14 is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n spending of this amount on any liability, such deposits were required to be refunded to the owners of the plot/flat holders. Since these deposits have been collected for specific purposes, therefore, the same cannot be treated as receipts of the appellant and same cannot be taxed in the head of the appellant as trading receipts . It is also seen from this deposit account that there is a regular movement of funds and large amounts have been incurred on account of meeting the contingent liabilities like fixing of transformers, laying of electric of line and other demands from Govt. of Haryana. Since this deposit account is maintained for performance of contractual obligations as per clause- 4 of the agreement to sell entered with the respective customers, the same cannot be treated as trading receipts of the appellant. Hence, the addition on account of these receipts amounting to ₹ 1,14,837/- is deleted. 110. The Tribunal also in Assessment Year 2006-07 has dismissed the Revenue s appeal after observing and holding as under: 236. We have carefully considered the rival contentions. This amount has been collected by the assessee at predetermined rate from the buyers wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer himself has not made any addition in the hands of the assessee. The coordinate bench decided this issue as Under:- 112. In ground no.9, the Revenue has challenged the deletion of addition on account of net interest fee security deposits receipt of ₹ 3,30,893/-. This amount has been added by the Assessing Officer on the ground that maintenance charges collected by the assessee are the same as has been collected by the maintenance agencies. There was no liability of the assessee to pay back this amount to the buyers, and therefore, this amount is income generated by the assessee which should be liable to be taxed. 113. Ld. CIT(A) has deleted the addition made by the Assessing Officer in the following manner: 16.9 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, decision of CIT (Appeals) for A.Y. 2006-07 and A.Y. 2007-08 which have decided this issue in favour of the appellant company and various judicial pronouncements available on the issue. It is seen that that these deposits were received in terms of sale agreement from customers as interest free security deposits on account of buyers obligation to regularly p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation cast upon the assessee. Hence, ground no.28 of the revenue s appeal is dismissed. 115. Accordingly, following the aforesaid order, this issue is decided in favour of the assessee and revenue s ground is dismissed. Accordingly following the order of the coordinate bench in assessee s own case we dismiss ground number seven of the appeal. 14. Ground number eight is against the deletion of addition on account of net registration charges. Both the parties confirm that this issue is covered in favour of the assessee by the order of the coordinate bench for assessment year 2008 09 wherein it followed the decision of the coordinate bench in assessee s own case for assessment year 2006 07 and the revenue has not prefer any appeal against that order and further the learned assessing officer himself has not made any addition on this issue from assessment year 2012 13 onwards and therefore the issue becomes conclusively decided in favour of the assessee. These facts are not disputed by the learned departmental representative. The coordinate bench decided this issue as Under:- 116. The next issue relates to deletion of addition on account of net registration char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n after observing as under: 17.15 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, decision of CIT (Appeals) for Assessment Years 2006-07 and 2007-08 in appellant s own case wherein this issue has been decided in favour of the appellant and various judicial pronouncements on the issue. It is seen that registration charges are received from the buyers of the plots/flats alongwith other charges to get the flats/plots registered in the name of buyer. There is time gap between the receipt of such charges and actual registration of the flat/plot. Before actual registration takes place, the appellant has to pay stamp charges or it has to get the documents franking for the stamp charges. Therefore, after payment of franking/stamp charges a date is fixed for registration of the property. This procedure takes time, therefore, the amount received on account of registration charges are credited in the account maintained under the head registration charges . These registration charges have been shown as liability in the balance sheet of the appellant. It is also seen that some time registration charges are received from the customers but actual regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers. Ground No.29 of the revenue s appeal is dismissed. 2. Further, the department has accepted this issue as the above finding of Hon ble ITAT in AY 2006-07 has not been challenged before High Court. Also, the assessing officer himself has accepted this claim from AY 2012-13 onwards and no addition has been made in this regard. 120. Further, learned counsel has informed that this issue is decided in favour of the assessee by ld. CIT (A) in assessee s own case for Assessment Year 2007-08 and the Department has not preferred any second appeal and further, no addition has been made from Assessment Year 2012-13 onwards. In view of the Tribunal order and as a matter of consistency, in this year also we delete the said addition. Therefore respectfully following the decision of the coordinate bench we confirm the order of the learned CIT A deleting the addition of ₹ 6,34,45,144/ and dismiss ground number eight of the appeal. 15. Ground number nine of the appeal is with respect to the deletion of disallowance on account of expenses towards non-allocation of override to group companies. The learned assessing officer has disallowed the sum of ₹ 62,452,456/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of development of SEZ. Mere construction of Bare shell buildings will allow the assessee the deduction u/s 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co- Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the relinquishment of right is irrevocable. c. Though SEZ Act prohibits for sale of land thereby implicitly denying any benefit to a developer who is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no need for allocation of further overheads. Both these companies have incurred overhead expenditure which formed part of development cost considered in POCM. This argument of the company is not tenable as the two companies DLF Info City Developers (Chennai) Ltd and DLF Cyber City Developer Ltd. during the Asstt. year 2008-09 had earned development income of ₹ 1,68,686.15 lacs and ₹ 1,63,049.03 lacs respectively and against the same the overhead expenditure shown by these companies is ₹ 71.58 lacs and ₹ 1,194.51 lacs respectively. In fact, in case of DLF Cyber City Developers, the expenditure of ₹ 1194.51 lacs includes commission and brokerage expenditure of ₹ 1155.79 Lacs and if this is reduced then the overhead expenditure incurred would be just ₹ 38.72 Lacs. It is difficult to imagine that the two companies earning development income of ₹ 168686 lacs and ₹ 163049 lacs would have incurred overhead expenditure of ₹ 71.58 lac and 38.72 lacs only. This clearly points to the fact that these two companies must have benefitted from the overhead expenditure incurred by DLF Ltd. In the previous year's also DLF Ltd has i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany some portion of such expenses are to be allocated to the associated companies. 12.9The assessee has also cited judgement in the case of Nestle India Limited Vs DCIT (2009) 27 SOT 9(Delhi). In this case it was held that the assessee company had incurred expenditure on account of advertisement and sales promotion in respect of only those products in which the Indian company dealing in. Thus, the expenditure had been incurred to promote sales in India. Therefore, those expenses were incurred wholly and exclusively for the purpose of business of the assessee. In this case the associated concerns of Nestle India are situated outside India and it was easily established by Nestle that the advertisement expenses were incurred in respect of products dealt by the Indian company. However, in the case of the assessee the line of business of the assessee company and its associated concerns is identical and therefore the percentage of overhead expenditure incurred by the assessee and its associated concerns would be similar. The Special Auditor in their report have reported that DLF Ltd have incurred administrative overheads of 3.18% of the total turnover but in the case of DLF Info City ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own expenses themselves and this fact has been verified by the Special Auditors during the course of Special Audit. It is seen that there are certain heads of expenses which were exclusively pertaining to the appellant company and could not have been allocated to the other group entities. It is also seen from the Special Audit report that the Special Auditors have not brought out any instance of expenditure specifically pertaining to other group companies but has been claimed in the profit and loss account of appellant company during the year. The allocation made out by the Special Auditors was based on the presumption without bringing any material on record. No allocation of overheads is needed in the case of M/s. DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd. because these subsidiaries have their own resources and are meeting out their expenses own their own. In the case of M/s DLF Info City Developers (Chennai) Ltd. it is seen that this company has only one project that is the development of SEZ at Chennai. The only activity in this company is the development of SEZ building and the administrative activity is bare minimum and hence there was no requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of business has not been disputed by the AO. Further, under the facts and circumstances as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant s business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of ₹ 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted. 129. The Tribunal in Assessment Year 2006-07 has dismissed the Revenue s appeal on this issue after observing and holding as under: 121. We have carefully considered the rival contentions. The brief fact is that certain overhead expenses incurred by the assessee have been apportioned to the other group companies for the reason that by incurring those expenses, the assessee has passed on some benefit to those companies. The amount of 75% of that expenditure has been transferred to the group companies and 30% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed. 130. In view of the aforesaid observation and the finding of the Tribunal which is applicable in this year also, therefore, respectfully following the same, the Revenue s ground is dismissed. Therefore respectfully following the decision of the coordinate bench, we confirm the order of the learned CIT capital and deleting the above addition of ₹ 62,452,456/ and accordingly ground number nine of the appeal is dismissed. 16. Ground number 10 of the appeal is against the disallowance deleted by the learned CIT A u/s 14 A of the income tax act. The learned authorised representative submitted that this issue is interlinked with the ground number one of the assessee s appeal. The assessee has challenged it stating that the learned assessing officer has not recorded any satisfaction with respect to the disallowance offered by the assessee and therefore the only addition is required to be deleted. The learned assessing officer has disallowed ₹ 1,326,681,000 u/s 14 A of the act read with rule 8D of the income tax rules. The AO observed that the investment in partnership firm s and in shares of the companies in mutual funds the income of is exempt has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cancelled. 17. The learned departmental representative vehemently supported the order of the lower authorities and submitted that the learned assessing officer has given a categorical finding that there has to be an involvement of the staff, there has to be further infrastructure expenditure as well as the involvement of the senior officers and hence the satisfaction has been properly recorded. 18. We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently in this case the learned assessing officer has not recorded the satisfaction stating that why the claim of the assessee that it has incurred only ₹ 1,815,695 on account of in admissible expenditure u/s 14 A of the act. The learned assessing officer has only given a general observation. The issue is squarely covered by the decision of the honourable Delhi High Court in case of Eicher Motors Ltd. v. Commissioner of Income-tax-III* [2017] 86 taxmann.com 49 (Delhi)/[2017] 250 Taxman 532 (Delhi)/[2017] 398 ITR 51 (Delhi) 13. As regards the disallowance of expenditure for earning exempt income in terms of Section 14A of the Act, the settled legal position is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ground number 11 of the appeal is with respect to the deletion of addition on account of reclassification of income from income from house property to income from business and profession. Both the parties confirm that this issue is decided by the coordinate bench in assessee zone case for assessment year 2006 07 on 11 March 2016 which has been followed in the subsequent year i.e. assessment year 2008 09 by the coordinate bench dated 27/05/2019. For assessment year 2008 09 coordinate bench decided this issue as Under:- 157. Ld. Assessing Officer based on similar observation and following the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Neha Builders, 296 ITR 661, reiterated the addition and computation made by the Special Auditor. 158. Ld. CIT (A) has deleted the addition in the following manner: 27.13 I have considered the submission of the appellant and observation of the ASSESSING OFFICER and decision of Hon ble ITAT for A.Y. 1996-97 in appellant s own case and decision of the Hon ble CIT(A)-XVIII for A.Y. 2006-07 and my own decision in appellant s own case for A.Y. 2007-08. It is seen that the issue in this ground is covered in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is a developer and hence, the decision of Hon ble Supreme Court in the case of Chennai Properties is rendered in the context of the company which is formed with the main object of renting up of the properties. In view of the above, respectfully following the decision of coordinate Bench of the ITAT in the case of assessee for AY 2005-06, we confirm the order of CIT(A) in taxing the rental income as income from house property. In the result the ground no.17 of the revenue's appeal is dismissed. 160. Since this issue has been dealt by the Tribunal in various years, therefore, consistent with the view taken, the order of the ld. CIT (A) has confirmed and consequently the Revenue s ground is dismissed. Therefore respectfully following the decision of the coordinate bench we dismiss ground number 11 of the appeal accordingly. 20. Ground number 12 of the appeal is against the deletion of addition on account of notional rent/additional annual lighting value in respect of the vacant and leased out properties amounting to ₹ 629,430/ . Both the parties agreed that this issue is also covered in favour of the assessee by the decision of the coordinate bench for assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of vacant properties. The decision of the ASSESSING OFFICER was not justified. 164. The Tribunal also in assessee s own case for Assessment Year 2006-07 has dismissed the Revenue s appeal after observing and holding as under: 196. We have carefully considered the rival contentions. We have also perused the order of the coordinate Bench of the ITAT in ITA No.3561/Del/2013 wherein ground no.3 have considered the identical issue where in para no 16 to 23 addition is deleted by ITAT as under :- 16. The Assessing Officer made an addition of ₹ 3,02,61,251/- on account of notional rent/ additional annual letting value (ALB) u/s 23(1) (a) of the Income tax Act,1961, in respect of vacant properties. The details of the addition as per the assessment order is as under: - - DLF City Centre ₹ 2,36,01,310/- - DLF Commercial Shopping Complex ₹ 27,21,360/- DLF Corporate Park ₹ 1,69,07,688/- ₹ 4,32,30,358/- Less: Standard Deduction u/s 24(1) ₹ 1,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of notional rent on properties that remained vacant for part of the previous year, the AR reiterated submissions made before the AO and emphasized that the matter is covered in favour of the appellant by judgment in the case of one of the appellant's group concerns M/s DLF Office Developers Vs. ACIT reported in 23 SOT 19 (Del) and orders of CIT(Appeals) in appellant's own case for the Assessment years 2006-07, 2007-08 2008-09. It is observed that where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value will have to be worked out under section 23(l)(c) of the IT Act and according to this clause, if the actual rent received / receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property. In the case of appellant, the appellant had intention to let such properties but could not get suitable tenant. In such a situation, the AL V will be Nil as per provision of section 23(1)(c) of the IT Act. Section 23(1)(a) r.w.s 23(1)(c) clearly provides that if the property remain vacant wholly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act is deleted. 22. We find that the first appellate order on the issue as discussed above is reasonable and view supported with this decision. Hence, we are not inclined to interfere with the order, the same is upheld. Ground no.3 is accordingly rejected. 197. Therefore, following the decision of the coordinate Bench of the ITAT in the case of the assessee for AY 2005-06 , the addition of ₹ 3,27,52,542/-is deleted. In the result, ground no.19 is dismissed. 165. Once this issue has been consistently decided in favour of th the assessee, then in this year, without any change in material facts no different view can be taken. Respectfully following the aforesaid decision of the Tribunal, we dismiss the ground raised by the Revenue. Accordingly we confirm the order of the learned CIT A and dismiss ground number 12 of the appeal. 21. Ground number 13 is against the deletion of addition/disallowance on account of depreciation claimed on DLF Centre building. Both the parties confirm that this issue is identical to the issue in assessee s own case for assessment year 2008 09 wherein the coordinate bench has deleted the above disallowance confirming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above and respectfully following the judgment of Hon ble Supreme Court in the case of CIT vs. Doomdooma India Limited (2009) 178 Taxman 261 (SC) and the judgment of the CIT (Appeals) in the case of the appellant for A.Y. 2006-07 and 2007-08 (supra), the disallowance of depreciation of ₹ 7,17,794/- made by the ASSESSING OFFICER is deleted. 169. The Tribunal also in assessee s own case for Assessment Year 2007-08 has dismissed the Revenue s appeal after observing and holding as under: 151. We have gone through the submission of the parties. The 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 no appeal was filed against the same before ITAT. In the light of above position and as per the decision of Hon ble Supreme Court in the case of CIT v. J K Charitable Trust [2008] 308 ITR 161 (SC), the revenue could not be permitted to agitate the very same issue in the year under reference. Accordingly, the order of CIT(A) is confirmed. 170. In view of the above, this issue is decided against the Revenue. Therefore respectfully following the decision of the coordinate bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 334 ITR 102 (Del) has allowed the appeal. 44. After considering the rival submissions, we find that precisely similar issue has arisen in assessee s own case for assessment year 2006-07 wherein the Tribunal has allowed the same nature of expenditures, after observing and holding as under: 231. We have carefully considered the rival contentions. ₹ 18.51 lakhs were regarding to the leave travel assistance claims of the assessee an ₹ 63 lakhs were on account of reimbursement and telephone and conveyance expenses of the assessee. These expenses were disallowed by the AO. The details of these expenses are enclosed as per Annexure A at page 101 along with explanatory statement. These bills are pertaining to the regular staff of the employees and are payable and paid at the time of settlement of their entitlement. It is irrespective of the time when employee has actual travelled. In same way, the telephone and conveyance expenses are also reimbursement of the expenditure which would be determining the claim of the employees and admitted by the employer. The special auditor has held so because of the reason that the actual travelling has taken in the previous year. Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preoperative expenses (on SEZ projects not commenced). 134. Ld. Assessing Officer has treated the various business expenses relating to development of various commercial projects to be part of project cost, and therefore, such cost of the project needs to be capitalized. 135. Ld. CIT (A) has deleted the addition in the following manner: 22.12 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, and various judicial pronouncements relied upon by the appellant and my own order for AY 2007-08 in the case of appellant, wherein this issue was decided in favour of the appellant company. It is seen that the appellant is engaged in the business of developing real estate like development of plots, multi storey buildings, commercial complexes etc. During the year, the appellant has incurred certain expenditure on market study, feasibility report and viability report on possibility of developing SEZ projects at various locations like Jaipur, Bhuvaneshwar, Gandhinagar, Ambala, Ludhiana, West Bengal, etc. On these studies, the appellant has incurred an expenditure of ₹ 1,26,11,958/-. In the assessment proceedings these expenses have been treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easibility and viability report is part of regular business operations and as such the assessing officer was not justified in identifying these expenses with specific project and capitalizing the same. It is pertinant to note that development of SEZ is part of business activities of the assessee and cannot be considered as altogether a new line of business. The CIT (A) therefore has rightly deleted the disallowance after examining the purpose of these expenses in the light of principle laid down by Hon ble Delhi High Court. 137. We find that the Tribunal also in Assessment Year 2006-07 has dismissed the Revenue s appeal after observing and holding as under: 96. We have carefully considered the rival contention. Admittedly assessee is in business s of the real estate development. The tender fees paid for bidding of modernization of airport cannot be said to be the new line of business but it is the same line of business i.e. of development of real estate. Therefore according to us the expenditure if incurred for the tender fees same is allowable u/s 37(1) of the act. The decision cited by the AR of the appellant has held that the when the assessee proposed to set up new proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or unrelated to the business of the assessee. Therefore, in our view, this expenditure are wholly and exclusively incurred for the purposes of the business of the assessee. Hence, we confirm the order of CIT (A) and delete this ground of revenue s appeal. 143. Thus, when similar nature of expenditure has been incurred for the purpose of business then in this year also we do not find any reason to deviate from such a finding and accordingly ground of the Revenue on this score is dismissed. In view of the order of the coordinate bench covering the identical issue in favour of the assessee which has not been challenged by the learned assessing officer before the honourable High Court and further has been accepted for assessment year 2016 17 onwards, respectfully following the decision of the coordinate bench we dismiss ground number 15 of the appeal. 24. Ground number 16 and 17 of the appeal is with respect to the disallowance of expenses not incurred wholly and exclusively for business purposes amounting to ₹ 49,629,551 and operational expenditure of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting the above disallowance. Accordingly ground number 16 and 17 of the appeal of the learned assessing officer is dismissed. 25. Ground number 18 and 19 is with respect to the disallowance of interest expenditure of ₹ 693,100,000 and ₹ 45,515,013/ the learned authorised representative confirmed that this issue is covered in favour of the assessee by the decision of the coordinate bench in the case of one of the group concern which was confirmed by the honourable Delhi High Court as per order dated 11 August 2015 in ITA number 559/2015. 26. The issue before us that the learned assessing officer has made the addition of ₹ 693,100,000 on account of short charging of interest from the subsidiaries and further disallowed a sum of ₹ 455,15,030 on account of not charging of interest on loans given to related parties for business purposes. The main reason for the disallowances that the assessee has given funds borrowed at a higher rates from financial institution and banks to group entities at lower rates which is distorting the correct taxable profits of the company. Therefore the learned assessing officer computed the disallowance of ₹ 69.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative further submitted that no such direction has been carried out by the learned assessing officer given by the learned CIT A. We direct the learned assessing officer to carry out the necessary verification is required by the order of the learned CIT A. Accordingly we do not find any reason that how the assessing officer is aggrieved when the matter is set aside to his file for verification. Accordingly ground number 20 of the appeal is dismissed. 28. Ground number 21 of the appeal is with respect to the addition on account of non charging of interest on loans given to Saket Courtyard hospitality a sister concern of the assessee. This issue is already covered by our direction in ground number 18 and 19 of the appeal of the learned assessing officer. Hence same is dismissed. 29. Ground number 22 of the appeal of the learned assessing officer is general in nature and therefore it does not require any adjudication, hence, same is dismissed. 30. Accordingly ITA number 4793/del/2015 filed by the learned assessing officer is dismissed. 31. Now we come to the appeal of the assessee in ITA number 4187/del/2015. The ground number 1 of the appeal is already been ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is duly subjected to tax in its hands and accordingly there is no loss to the revenue. 23. This precise issue had come up for consideration before the Tribunal in assessee s own case in the earlier year, wherein it has been observed and held as under: 42. We have heard the rival submissions and perused the material on record. The ground is regarding addition of ₹ 12,60,000/- as rental income. The Assessing Officer observed that the assessee was owner of Kiosks installed at Malls which were leased to various parties at the lease rent of ₹ 18,00,000/- per annum. The Assessing Officer after accepting statutory deduction of 30%, considered the net rental income at ₹ 12,60,000/-. The CIT(A) confirmed the finding of the Assessing Officer. 43. The appellant contended that M/s. DLF Services Ltd. was appointed as maintenance agency for upkeep and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnected to the ground number 15 of the appeal of the learned assessing officer wherein the disallowance of the capital expenditure of ₹ 74,061,134/ was considered. The learned departmental representative also did not dispute the same. Therefore on the basis of our decision for the ground number 15 of the appeal of the learned assessing officer we direct the learned AO to delete the disallowance of ₹ 2,042,053/ with respect to the registration expenditure. Accordingly ground number three of the appeal is allowed. 34. Ground number 4 is general in nature and therefore same is dismissed. 35. The assessee has raised another additional ground before us with respect to the disallowance of expenses of ₹ 116,31,062 out of the rates and taxes and legal and professional expenses which were treated as a capital expenditure. The additional ground raised by the assessee states as Under:- that the learned CIT A in law and on facts in confirming the disallowance of ₹ 116,31,062/ out of legal and professional expenses by holding the same as expenditure of capital nature ignoring the fact that the appellant had itself added back in its computation of total in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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