TMI Blog2021 (1) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for earlier years. The latest order with respect to the above issue is covered in the decision of the coordinate bench for assessment year 2008-09 - We dismiss ground number 3 of the appeal of the learned assessing officer and confirm the order of the learned CIT-A in deleting the disallowance on account of estimated IDC charges and commencement of construction cost. Disallowance on account of brokerage and commission expenses relating to leased out properties - in the alternative, if same is attributable to lease income, adjustment is required to be made while working out rental income as per provisions of section 23(1) - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessment year 2006-07 and assessment year 2008-09 [ 2019 (6) TMI 1288 - ITAT DELHI] in favour of the assessee stating that expenditure towards brokerage and commission paid to brokers for booking and sale of certain properties is allowable firstly in view of the facts that assessee's treatment of such expenditure has been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears, we confirm the order of the learned CIT-A and dismiss ground of the appeal of the assessing officer. Addition on account of net interest free security deposit, disallowance on account of net registration charges - HELD THAT:- It is noted that this is the amount which is collected by the buyers with specific object of getting exclusion of conveyance deed in favour of the buyer. In fact, it is an advance collected by the assessee from the buyer towards registration charges with the office of the Registrar for conveyance deed registration. At the time of registration, assessee incurs this expenditure by debiting to this account of that particular customer. The total receipt of registration charges is identified with respect to each of the buyer and there are movement in respective accounts. In fact, it is a past through cost collected by the assessee from the buyer to be incurred by assessee on behalf of the buyer. These receipts cannot partake character of the revenue in the hands of the assessee. It is also not the case of the AO that the depositors are not identified and despite the conveyance deed executed by the assessee, the amount has not been incurred. In absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirm the order of the learned CIT-A to the extent of deletion of the disallowance of interest expenditure u/s. 14 A read with rule 8D (2) of the act. Coming to the ground number 2 of the appeal of the assessee wherein the confirmation of disallowance of administrative expenditure is challenged, respectfully following paragraph number 11.1 of the order of the coordinate bench for assessment year 2008-09, we set aside the whole issue of administrative expenses with similar direction back to the file of the learned assessing officer. Assessee may raise any ground with respect to above disallowance. Disallowance on account of expenses on commercial projects which are not commenced - HELD THAT:- The assessee has incurred this expenditure on proportionate and feasibility of various construction projects in which business the assessee is engaged into. Before embarking on to any of the projects, it is a common practice to obtain a feasibility and economic viability of construction projects at different geographical location. These expenses are for facilitating the existing business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed the sum merely on the basis of increase in the earlier year compared to the increase in the current year. Increase in the earlier year was more than 50% whereas increase in the current year is merely 19%. The learned assessing officer has not brought on record any material to show that what was the market rate of the rent of the flat. In absence of such information it cannot be said that what is paid by the assessee to a related party is excessive. All these exercised by the learned assessing officer are missing in this case. In view of this we do not find any infirmity in the order of the learned CIT-A in deleting the addition. Addition on account on notional rent where security deposits were received but no rental was shown - HELD THAT:- No justification for addition as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted. Disallowance on account of interest on late deposit of tax deduction at source - HELD THAT:- We hold that such an interest on late payment of deposit of TDS cannot be allowed as expenditure u/s. 37. Consequently, this issue is deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in confirming the disallowance made by AO u/s. 14A of the Income-tax Act, 1961, to the extent of ₹ 10,01,00,000/-. [Page 189-205 of CIT(A)'s Order] 2.2 That the learned CIT(A) has failed to appreciate that no interest, administrative or any other expenditure was incurred by the appellant in relation to investments during the assessment year 2009-10. That the learned CIT(A) ought to have held that no amount of interest, administrative or other expenditure was disallowable u/s. 14A of the I Income-tax Act, 1961. 2.3 That the learned CIT(A) has grossly erred in applying section 14A of the Act without appreciating that this section has no application to the present case. 2.4 Without prejudice to above, the learned CIT(A) has erred in law, on facts and in circumstance of the case in not appreciating that for the purpose of making disallowance u/s. 14A of the Act the assessing officer, having regard to accounts of the assessee for previous year, has to be not satisfied with-(a) the correctness of the claim of the expenditure made by the assessee or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned assessing officer raising following grounds of appeal:- 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 3,09,16,658/- made by the AO on account of disallowance of prior period expenses? 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 7,72,65,10,922/- made on account of disallowance of deduction u/s. 80 IAB of the IT Act, 1961? 2A Whether the CIT(A) under the facts and circumstances of the case and in law was correct in allowing deduction of ₹ 7,72,62,10,922/- u/s. 80 IAB of the Act, without deducting the short allocation of overheads of ₹ 15,48,61,000/- to the SEZ division as worked out by the Special Auditor? 3. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the disallowance of ₹ 77,83,55,804/- on account of artificially estimated IDC charges, and preponement of construction cost? 4. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in restricting the disallowance to ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 6,36,614/- on account of recalculation of depreciation in respect of earlier let out DLF Centre Building, now converted to self occupied property? 16. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 30,12,202/- on a/c of disallowance of expenses where bills were not in the name of the company? 17. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 3,48,396/- on a/c of disallowance of excess payment of rent? 18. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing. 4. Facts show that Assessee Company is engaged in the business of real estate development. It filed its return of income on 29 September 2009 declaring an income of ₹ 6,91,24,07,270. The above return was further revised on 30 June 2010 wherein the total income declared was ₹ 6,60,40,96,800/-. It further revised its return of income on 31st of March 2011 declaring the income that was declared in a revised return; however, certain tax deduction at source claims was made. 5. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s own case for assessment year 2008-09 in ITA number 2749/Del/2013 has dealt with this issue as Under:- 42. In so far as the first issue is concerned, the facts in brief are that the Special Auditors have pointed out that assessee has claimed prior period expenses amounting to ₹ 70,12,062/- on the basis of which, ld. Assessing Officer issued a show cause notice to the assessee. In response, the assessee submitted that first of all, an amount of ₹ 14,63,017/- was on account of purchase of assets being the cost of office equipment and computers and was never claimed as admissible expenses but have been capitalized as fixed assets. The balance amount was stated to be on account of reimbursement to their employees on account of telephone expenses, travelling, printing, and stationary and these are reimbursed if the employees submit the claims after proper verification. The claim though relates to earlier years, but bills were presented and settled during the year under reference, therefore, the same is allowable in this year. Similarly, with regard to legal and professional charges which was paid to various consultants, these payments were made after due verification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The reliance of the ld. AR on the decision of Hon'ble Delhi High Court in CIT vs. Modipan Ltd.- 334 ITR 102 is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowability of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition of ₹ 22,98,510/- on account of prior period expenditure. In the result, ground no. 26 of the revenue's appeal is dismissed. 45. Since, similar issue has been allowed by the Tribunal following the ratio and principle laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Modipon Ltd. (supra), therefore, following the same precedence, we allow the claim of the assessee and consequently the Revenue's ground is dismissed. 10. In view of the above finding of the coordinate bench in assessee's own case, we respectfully following the same dismiss ground number 1 of the appeal. 11. Ground number 2 is with respect to the deletion of addition on account of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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 relinquishment of right is irrevocable. c. Though SEZ Act prohibits for sale of land thereby implicitly denying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese 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 ₹ 1,68,686 lacs and ₹ 1,63,049 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 benefited from the overhead expenditure incurred by DLF Ltd. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... associated concerns to the assessee company some portion of such expenses are to be allocated to the associated companies. 12.9 The assessee has also cited judgment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 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 Chennai. The only activity in this company is the development of SEZ building and the administrative activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived 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 assessee has passed on some benefit to those companies. The amount of 75% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition 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. 14. Therefore, respectfully following the decision of the coordinate bench in assessee's own case, ground number 2 and 2A of the appeal of the learned assessing officer are dismissed. 15. Ground number 3 is with respect to the deletion of addition on account of estimated IDC charges and revenue recognition as per percentage completion method cost of the construction. The learned authorised representative submitted that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee's own case for assessment year 2006-07 as per paragraph number 35-42 at page number 58-62 and further in assessment year 2008-09 also the coordinate bench following the order of the coordinate bench for assessment year 2006-07 has allowed the claim of the assessee. He further referred to paragraph number 81-87 of the order of the coordinate bench for assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,43,28,160 4,88,79,491 Pinnacle 45,32,46,474 49,38,96,094 4,06,49,620 4,39,97,615 28,41,42,051 Icon 38,56,98,510 41,54,67,530 2,97,69,020 4,05,73,424 93,46,81,602 Summit 67,87,31,045 69,82,35,605 1,95,04,559 1,28,23,779 - Magnolias 526,66,86,898 5,36,95,65,201 10,28,78,303 2,17,22,670 - The Belaire 322,94,28,422 3,29,92,89,020 6,98,60,598 1,55,03,253 - The Park Place 250,38,47,408 2,570,346,411 66,499,003 - - Wellington (49,17,634) (4,917,634) - - - Princeton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,872 33,99,87,214 2,22,56,87,056 Accordingly, AO made the addition of ₹ 42,92,17,872/-. 85. Ld. CIT(A) after detailed finding has deleted the said addition after observing and holding as under: 9.8 I have considered the submission of appellant, observation of the ASSESSING OFFICER Special Auditors comments, decision of Hon'ble ITAT in appellant's own case in A.Y. 1994-95 and treatment given to this issue in earlier assessment years by ASSESSING OFFICER as well as appellate authorities. It is also noticed that this issue has been decided in favour of the appellant vide order dated 25.03.2011 passed by CIT(A)-XVIII, New Delhi, for A.Y. 2006-07 (page Nos. 122-153 of the said order) and in my own order in appellant's own case for the immediately preceding year relevant to assessment year 2007-08 (page Nos. 108-139 of the said order). It is seen that whenever appellant company starts a new building/project, it prepares a budgeted statement of total cost to be incurred for completing the building or Project and the total revenue which can be derived from sale of such building or project. The budgeted statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f matching revenue with cost there would be distortion in the matter of arriving at income. This distortion needs to be avoided for the purpose of ascertaining the true profit/loss of the appellant. As per the initial estimate prepared by the appellant the cost on internal development charges was estimated at ₹ 230 crores for its phase V projects. The same has been prepared by Shri Sunil Arora having diploma in civil engineering with an experience of 16 years and Sh. Devender Singh, B.E. (Civil) having an experience of 24 years. The cost estimate of ₹ 230 crores is further backed by individual items of cost, such as earth work, road work, storm water drainage work, horticulture work, water supply work, sewerage work, boundary wall, electrical work etc. In turn, there is a cost break down of all these broad heads. 9.9 In view of the detailed facts discussed above, the IDC is a part of budgeted cost prepared by the appellant. The budgeted IDC is prepared on scientific basis. The appellant has an experience of more than 30 years in this line of business and over the years the budgeted IDC estimated by the appellant company has been accepted as part of budgete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion method, the element of cost cannot change. Once IDC is accepted to be an element of cost, then whichever method one apply, it has to be allowed as a cost of the project for working out the true profit and loss account in respect thereof. 9.10 I am therefore, of the considered view that ASSESSING OFFICER was not justified in replacing budgeted IDC with actual IDC cost incurred for recognizing revenue as per POCM Method. The Budgeted IDC is a part of cost and same has to be accepted for recognizing revenue as per POCM which is being consistently accepted by the department. Hence, the addition of ₹ 39,52,39,897/- made by the ASSESSING OFFICER on this issue is uncalled for and the same is, therefore, deleted. (II) Labour Cost: 9.11 Special Auditors have increased cost of construction actually incurred by ₹ 3,39,77,973/- on the ground that expenditure in relation to contract work performed during FY 2007-08 has been booked in subsequent financial year i.e. F.Y. 2008-09. They have based their findings on the period of measurement as given by contractors. 9.12 The AR submitted that the balance addition of ₹ 3,39,77,973/- is on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure should have been claimed as deduction in the earlier year and not in the subsequent year and accordingly, disallowed the claim. The Commissioner (Appeals) confirmed the order but the Tribunal held that the liability could be ascertained only in the accounting year relevant to the assessment year 1990-91. On a reference: Held, that the expenditure was deductible in the assessment year 1990-91. Thus, by applying the same principles it is requested that the allocation of expenses by the Special Auditors, against the bills which were received subsequently, was not justified. Reliance is placed on the decision in the case of CIT vs. Modipon Ltd. [2011] 334 ITR 0102 wherein the similar issue was decided in the favour of assessee. 9.13 The AR further submitted that the facts of Saurashtra Cement and Chemical Industries Ltd. Vs. CIT (1995) 213 ITR 523 (Guj.) were similar to the facts of the instant case, in which it was held that earlier years expenses could be allowed in the year in which the liability is accepted and paid. Hon'ble Gujarat High Court in the case of Saurashtra Cement and Chemicals Industries Ltd. vs. CIT (1995) 213 ITR 523 (Guj.), has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on which the assessee had claimed this deduction for that year was that the liability had accrued and crystallized only on 30-6-1981 when the assessee came to know the actual sales made by its dealers. As far as the purchase of material is concerned the entry of purchases and stocks is made only after receipt of material, inspection of material and Material Receipt Note (MRN). It is, therefore, submitted that liability accrued only when material is accepted and MRN is made. Therefore, the appellant submitted that the effect of this proposed addition of ₹ 3,39,77,973/- recommended by the special auditors may please be deleted. 9.14 I have carefully considered submission of the appellant, observation of Assessing Officer and various judicial pronouncements relied upon by the appellant. It is also noticed that this issue has been decided in favour of the appellant vide order dated 25.03.2011 passed by learned CIT(A)-XVIII, New Delhi, for A.Y. 2006-07 (page Nos. 122-153 of the said order) and my own order in appellant's own case for the immediately preceding year relevant to assessment year 2007-08 (page Nos. 108-139 of the said order). As discussed abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r doing job works and made a payment of ₹ 1,36,767/- to B in respect of certain jobs done by it from December 1988 to June 1989. The bills were raised by the party in the month of August 1989. According to the assessee, as it was not aware of the actual liability on the last date of the accounting period, it claimed this deduction only when the bills were submitted by the corporation. The Assessing Officer however, held that as the assessee was following mercantile system of accounting, the expenditure should have been claimed as deduction in the earlier year and not in the subsequent year and accordingly, disallowed the claim. The Commissioner (Appeals) confirmed the order but the Tribunal held that the liability could be ascertained only in the accounting year relevant to the assessment year 1990-91. On a reference Held, that the expenditure was deductible in the assessment year 1990-91. COMMISSIONER OF INCOME-TAX V. MODIPON LTD. (No. 1) [2011] 334 ITR 0102- BUSINESS EXPENDITURE--DEDUCTION ONLY ON ACTUAL PAYMENT--DISALLOWANCE ON GROUND THAT EXPENSES RELATED TO PRIOR PERIOD AND NOT PRESENT ASSESSMENT YEAR--TRIBUNAL FINDING ALL EXPENSES SETTLED IN CURRENT YEA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind 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 rival contentions and also given a careful thought to the offer of ld. DR for setting aside this ground of appeal to the file of the AO for determination of threshold limit of 30% of the total project cost incurred up to this year or not. Before that we would like to address the issue of threshold percentages determined by the assessee of 30% instead of 25 % provided in the guidance note on accounting for real estate transactions issued by ICAI in 2012. Firstly assessee has submitted the instances where in the identical facts and circumstances there is trade practice of adopting threshold of 30 % of the achievement of total project cost for commencement of recognising of revenue. According to that guidance note it is provided that 5.3 Further to the conditions in paragraph 5.2 there is a rebuttable presumption that the outcome of a real estate project can be estimated reliably and that revenue should be recognised under the percentage co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 percentage of completion of project are available in the assessment order itself. However after careful consideration and agreed by both the parties, we set aside this issue to the file of the AO to determine with respect to Magnolia Project and Summit Project following:- (i) To determine the total project cost of both these projects including the cost of internal and external development charges of the project (ii) To determine whether the actual cost of expenditure incurred up to 31.03.2006 is less than 30% of the total project cost estimated by the assessee; (iii) If the threshold limit of 30% is crossed then to determine the income of both these projects on percentage completion method in this year; (iv) To give appropriate relief in subsequent years, if any income is taxed on these projects in those years; (v) If the project cost incurred up to this year has not crossed threshold of 30% limit of the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,74,610/-. 100. Ld. Assessing Officer on the basis of comments of Special Auditors observed that certain expenses such as brokerage and commission are being claimed in the P L account while the matching revenues are not credited to the P L account. He has discussed in detail various observations and note of the Special Auditors and observed that assessee's reliance on accounting standard-7 is not misplaced as it applies to construction contract and not to development project undertaken by the assessee himself. Further, the reliance placed by the assessee upon the order of the ld. CIT(A) for the Assessment Year 1983-84 is also misplaced as accounting policy is followed for recognition of revenue in Assessment Year 1983-84 is to be from the accounting policy followed for the year under assessment. The assessee has not paid this brokerage as a selling cost for procuring any construction contract. He has paid this money for selling of this various project even before the construction project was started. He further held liability of expenditure for the purpose of determining the taxable income is determined by the Income Tax Act and not by the accounting standard. He also made r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the appellant by Hon'ble ITAT in its order for A.Y. 1984-85. However, the ASSESSING OFFICER has observed that the accounting policy followed by the appellant company for recognition of revenue in the A.Y. 1983-84 were different from the accounting policy followed during the year under consideration. It is seen that in A.Y. 1983-84 also the selling cost i.e. brokerage and commission were claimed in the year in which they are incurred and same were not recognized on the basis of revenue recognition. Therefore, the ratio of the said judgment is still applicable in the case of appellant and the brokerage and commission has to be allowed in the year in which they are incurred and cannot be associated with construction cost. The contention of the ASSESSING OFFICER that the brokerage expenditure to be postponed to subsequent year as per AS-9 cannot be accepted, as brokerage and commission are related to the sale of flats and properties. By incurring the same the appellant has not derived any enduring advantage in subsequent years. The ASSESSING OFFICER has relied upon the Supreme Court judgment in the case of Madras Industrial Investment Corp. 225 ITR 802. (SC), and has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge paid for giving the property on rent, therefore, the expenditure incurred by the appellant of ₹ 64,51,161/- (for Grand Mall ₹ 3,65,378/-+ town square mall ₹ 60,85,783/-) is not an allowable expenditure. In the result, this ground of appeal is partly allowed and appellant gets a relief of ₹ 2,99,74,600/-. 102. Again, this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for Assessment Year 2006-07 in the following manner: 69. We have carefully considered the rival contentions. We have also perused the order of ITAT in assessee's own case for AY 1984-85 submitted before us by the ld. AR. This decision has also been considered by the AO at page 188 of the assessment order. The AO has not followed this decision as it could not be verified whether the issue has been taken up by the department before the Hon'ble Delhi High Court or not. Before us, ld. DR also could not point out that why this decision cannot be followed nor we could find any reason for not following the same by AO except that whether it is accepted by the department or not is not verified. Ld. CIT (A) has also deleted the addition f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not distinguish the facts of the case in this year compared to the facts in the case for assessment year 2006-07 as well as assessment year 2008-09. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. On perusal of the order of the coordinate benches in assessee's own case for earlier years it is apparent that the issue is squarely covered in favour of the assessee. By the latest decision of the coordinate benches for assessment year 2008-09 which dealt with this issue at paragraph number 94-98 of this issue as Under:- 94. The next issue pertains to deletion of addition on account of disallowance of capitalization of interest of ₹ 7,93,00,000/-. Ld. Assessing Officer on the basis of Special Auditor's comment observed that interest capitalization is also required on interest paid on loan taken for M/s. Edward Keventer Project, and therefore, net interest eligible for capitalization is to be bifurcated into interest capitalization on Keventer loan and interest capitalization on project under execution. The Special Auditor has recommended that out of net interest of ₹ 34.86 crore requiring capitalizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment claimed in the P L A/c comes to ₹ 425.60 crores. As against this appellant has offered interest received from banks, customers, loans to subsidiaries and associates to the tune of ₹ 411.99 crore in the profit and loss account. If the interest pertaining to bank overdraft and interest paid to others is excluded from the total interest charged to the profit and loss account, then the remaining interest debited to P L A/c comes to ₹ 249.54 crores, which is less than the interest income of ₹ 411.99 crores as offered in the P L A/c. Since, the interest payable is less than the interest received from different sources. No further notional interest can be capitalized over the projects. The interest pertaining to projects has already been capitalized by the appellant to the extent to ₹ 354.89 crores, which is specific to the projects under execution. The further capitalization of ₹ 7.93 crores is based on presumptions, there is no scientific method worked out by the ASSESSING OFFICER for capitalizing the further interest of ₹ 7.93 crores. The net impact of the interest in Profit Loss A/c is positive income after excluding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure 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 to be capitalized in the books of accounts as per AS-16. Therefore we do not agree with the arguments of AR that AS-16 does not apply to inventory. However, those are the provisions which are applicable for the maintenance of the accounts of the company and interest is allowable according to provisions of section 36(1) (iii) of the act. Further according to us, the provisions of Accounting Standards and provisions of the Act are two different set of regulations and while deciding this issue, it is well settled judicial precedent that is if there is a contradiction between the two, the provisions of the Act shall prevail. Provisions of section 36(1)(iii) provides that the amount of interest paid in respect of capital borrowed for the purposes of the business or profession deduction is required to be allowed. Proviso inserted w.e.f. 01.04.2004 is the only restriction if condition laid down u/s. 36(1) (iii) are satisfied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-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 Project of construction of flats under the Kandivali Project. Therefore, the loan was for obtaining stock-in-trade. That, the Kandivali Project constituted the stock-in-trade of the assessee. That, the Project did not constitute a fixed asset of the assessee. In this case, we are concerned with deduction under section 36(1)(iii). Since the assessee had received loan for obtaining stock-in-trade (Kandivali Project), the assessee was entitled to deduction under section 36(1)(iii) of the Act. That, while adjudicating the claim for deduction under section 36(1)(iii) of the Act, the nature of the expense-whether the expense was on capital account or revenue account-was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That, the utilization of the capital was irrelevant for the purposes of adjudicating the claim for deduction under section 36(1)(iii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orking 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 Power limited 313 ITR 340] We reverse the order of the CIT (A) confirming the disallowance of expenditure of ₹ 27.40 crores and direct the AO to allow this interest expenditure u/s. 36(1) (iii) of the Act. 98. Accordingly, respectfully following the aforesaid precedence which is applicable on the facts of the present year also, we decide this issue in favour of the assessee. 27. Therefore respectfully following the decision of the coordinate bench in assessee's own case as there is no change in the facts and circumstances of the case, we dismiss ground number 5 of the appeal of the learned assessing officer confirming the order of the learned CIT-A. To the deletion of addition on account of interest expenditure of ₹ 54,683,000/-. 28. Ground number 6 is with respect to the deletion of addition on account of disallowance of late construction charges received from the customers of ₹ 1,66,71,710/-. 29. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late construction charges received by the assessee-company is to be taxed in the year of receipt. 105. Ld. CIT(A) has deleted the said company in the following manner: 14.9 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and judgment of Hon'ble Supreme Court in this regard. It is seen that Hon'ble Supreme Court has set aside the judgment of Hon'ble Punjab Haryana High Court and has accepted the appellant's right to collect the late construction charges from customers, if they fail to commence the construction activities within stipulated time. It may be seen that Hon'ble Punjab Haryana High Court had declared such levy as illegal, therefore, appellant was showing such charges as its liability instead of showing such late construction charges as its income. Because of that judgment these charges were not treated as appellant's income and the amount of late construction charges cannot be said to have accrued to appellant unless the appellant acquires a right to receive it. Had the Hon'ble Supreme Court would have approved the judgment of Punjab Haryana High Court, the appellant would have refunded such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in view of the matter being under litigation. The assessee himself has stated that if the Hon'ble Supreme Court decides that the assessee cannot collect late construction charges then only charges will be returned to concerned customers. It is noted that as per the High Court order, the assessee company had no right to collect late construction charges from its customers. However, the Supreme Court by its order dated 19.11.2010 has set aside the order of the High Court and therefore, it cannot be said that receipts in question are not accrued income. As the order of the Hon'ble Supreme Court is dated 19.11.2010 the amount collected is the income for financial year 2010-11. 26.11 An amount cannot be said to accrue unless enforceable debt is created in favour of assessee. Reference can be made to the judgment of Hon'ble Supreme Court in the case of E.D. Sassoon Co. Ltd. v. CIT [1954] 26 ITR 27. Their Lordships at page 51 observed as under: That the words 'arising or accruing' are general words descriptive of a right to receive profits... If the assessee acquires a right to receive the income, the income can be said to have accrued to him. Though it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that assessee has correctly recognised revenue in the year the issue attained certainty. Therefore on perusal of the decision of CIT (A) we are of the view that there is no infirmity in the order. Hence we confirm the order of CIT (A) and dismiss ground no. 25 of the appeal. 107. Accordingly, following the aforesaid order of the Tribunal in assessee's own case, this issue is decided in favour of the assessee. 32. Therefore respectfully following the decision of the coordinate bench, ground number 6 of the appeal of the learned assessing officer is dismissed. 33. Ground number 7 is with respect to the deletion of addition on account of the contingency deposit of ₹ 28,837/-. 34. Both the parties confirm that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for assessment year 2006-07 and further it was also confirmed that the revenue has not preferred appeal before the higher forum. The learned authorised representative that in the subsequent years that is in assessment year 2016-17 no such disallowance has been made also stated it. The learned departmental representative h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 pay to the appellant or any other agency appointed by the appellant in respect of insurance premium, maintenance etc. These amounts are refundable to customers/resident associations, once a society or association is formed. In the agreement to sell, it is specifically mentioned that these interest free deposits were taken from the customers to meet certain future liabilities like insurance premium and maintenance charges of the building. For these receipts, a separate account is maintained and as and when the buildings or the complex is handed over to the resident association or condominium association such deposits are handed over to them for maintaining the building and payment of insurance premium of building out of interest received from such deposits. Such deposits are not forming part of sale proceeds, therefore, the same cannot be treated as trading receipts in the hands of the appellant. There is a regular movement of funds for utilization of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before the higher forum on this issue and further the learned assessing officer has not made such disallowance from assessment year 2012-13 onwards. The learned authorised representative therefore submitted that this issue is squarely covered in favour of the assessee. 42. The learned departmental representative supported the order of the learned assessing officer however stated that issue is already been decided in favour of the assessee. 43. We have carefully considered the rival contention and perused the orders of the lower authorities. The coordinate benches in assessee's own case have considered this issue for assessment year 2006-07 and 2008-09. Further the revenue has accepted the order of the coordinate bench and has not preferred any appeal before the honourable High Court. The coordinate bench for assessment year 2008-09 has decided this issue as Under:- 116. The next issue relates to deletion of addition on account of net registration charges received at ₹ 8,49,20,884/-. 117. Ld. Assessing Officer noted that as per clause 13 of the 'Buyers' agreement', it is mentioned that the company along with subsidiary company will prepare and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 registration could not takes place due to non availability of person concerned or for want of other formalities or documents. Therefore, the money received in this account is kept in a separate acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 44. In view of the facts stated above, respectfully following the decision of the coordinate bench, we dismiss ground number 9 of the appeal of the AO. 45. Ground number 10 of the appeal is with respect to deletion of addition on account of expenses towards non allocation of overheads to group companies amounting to ₹ 1,35,381,038/-. 46. Both the parties confirm that this issue is identical to the facts of the case for assessment year 2006-07 and 2008-09 wherein the coordinate bench deletes the identical disallowance made by the learned assessing officer. The learned authorised representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relinquishment of right is irrevocable. c. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ₹ 1,68,686 lacs and ₹ 1,63,049 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 ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction 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. 12.9 The assessee has also cited judgment 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 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Chennai. The only activity in this company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses, 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 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. 49. In view of above facts, respectfully following the decision of the coordinate bench in assessee's own case for earlier years and also for the reason that this decision has been accepted by the revenue by not preferring an appeal on this issue before the honourable High Court and also for the reason that the learned assessing officer himself has not made these additions from assessment year 2012-13 onwards, we dismiss ground number 10 of the appeal. 50. Ground number 11 of the appeal is with respect to the deletion of addition on account of disallowance of expenses u/s. 14 A of the income tax act. The brief facts of the case show that the assessee has earned dividend from mutual fund amounting to ₹ 79,276,451/-. Before the assessing officer assessee submitted that it has not incurred any expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bench in assessee's own case for assessment year 2008-09 is per paragraph number 131-132 of the order as Under:- 131. In ground no. 13, the Revenue has challenged the deletion of addition on account of disallowance of expenses u/s. 14A r.w. Rule 8D. 132. Admittedly, this issue is similar and linked with the grounds no. 2 and 3 of appeal and in view of our finding given therein, the grounds raised by the Revenue is dismissed . 55. On careful consideration of the order of the coordinate bench for assessment year 2008-09, where the issue with respect to the disallowance u/s. 14 A of the income tax act was considered as Under:- 3. Coming to the issue of disallowance u/s. 14A, the facts in brief are that the Assessing Officer has made disallowance u/s. 14A to the extent of ₹ 35,40,91,000/- in accordance with Rule 8D. The Assessing Officer noted that the special auditors to whom matter was referred u/s. 142A have pointed out that assessee-company has made investment for an amount aggregating to ₹ 89.97 crore as on 31st March, 2008 in 12 partnership firms as its capital contribution. These investments have been made out of interest bearing funds having direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ASSESSING OFFICER, orders of CIT (A)-XVIII for AY 2006-07 and my own order for AY 2007-08 in appellant's own case and various judicial pronouncements relied upon by the appellant on this issue. It is seen that during the year, the appellant has earned exempt income of ₹ 87,20,11,847/- as share of profit from partnership firms and dividend income on mutual funds. It is also seen that appellant has made average investment of ₹ 1197.30 crore in various partnership firms and in the shares of various group companies and mutual funds. The appellant has shown total average assets during the year of 17,319.40 crore in the balance sheet. Vide my decision on ground No. 6 and 7, 1 have held that appellant has shown interest incurred on fixed period loan of ₹ 604.43 crore. Out of this, an amount of ₹ 354.89 crore has been capitalized over the project. The appellant has also paid interest on over draft etc. to the tune of ₹ 176.06 crore. As such the total interest payment during the year comes to ₹ 425.60 crore. As against this, the appellant has shown interest receipts of ₹ 411.99 crore in the P L account. If the interest paid on bank ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire investment is out of assessee's own fund, however has confirmed the disallowance of ₹ 6.53 crore consisting of proportionate interest of ₹ 54 lac on loan taken for purchase of shares of M/s. Edward Keventor Pvt. Ltd. and ₹ 5.99 crores under Rule 8D(2)(iii). He submitted that investment in the share of M/s. Edward Keventor Pvt. Ltd. was purely a strategic investment, and therefore, no disallowance can be made u/s. 14A. Apart from that, he submitted that assessee has substantial amount of own funds in the form of share capital and reserves and entire investments are fully made out of non interest bearing free funds. The details of share capital and reserves as on 31.03.2008 and corresponding investment appearing in the balance sheet were as under: Amount (Rs. in Lacs) a. Share Capital 34,095.95 b. Reserve and Surplus 10,92,818.68 Own funds Total investment in shares/partnership firms 11,26,914.63 As per Balance sheet 1,75,349.69 6. He further provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate limited companies. 8. He further strongly relied upon the judgment of Hon'ble Delhi High Court in the case of ACB India Ltd. vs. ACIT reported in (2015) 374 ITR 108, wherein it has been upheld that while calculating the disallowance under Rule 8D(2)(ii) Assessing Officer has to adopt average value of the investment the income from which does not form part of the total income and disallowance can only be computed in respect to investment which has yielded exempt income during the year. The assessee has earned exempt income from the investments made in partnership firm and mutual fund and not from other investments, and therefore, disallowance if any should be restricted to the extent of ₹ 53.75 lac, the working of which was given in the following manner: Average investment in Partnership Firms and Mutual Funds Opening as on 01/04/2007 = '84+10 cr. Closing as on 31/03/2008 = '90+31 cr Total '215 cr Average investment = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest. The other loans taken from the assessee-company on which interest has been paid, purely related to business undertaken by the assessee and business advance to the group companies. Based on such findings he has held that interest of such loan cannot be considered for disallowance u/s. 14A. However, he has confirmed the disallowance of ₹ 653 lacs mostly arising out of disallowance of administrative expenditure under Rule 8D(2)(iii) and disallowance of interest on the investment made in the shares of M/s. Edward Keventor P. Ltd. which has been stated to be strategic investment. 11. In so far as disallowance of interest is concerned, we find that, not only the ld. CIT (A) has properly examined the utilization of interest bearing funds for the assessee which was purely for the purpose of business but also from the bare perusal of the balance sheet, it is seen that the interest free funds available with the assessee in the form of reserves and surplus far exceeds the total investment made in shares/partnership firms including the investment made in the shares of M/s. Edward Keventor P. Ltd. which has been stated to be strategic investment. If that is so, then no disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the assessee is set aside to the file of the learned assessing officer with above direction. 57. The next ground of appeal of the learned assessing officer i.e. ground number 12 of the appeal is with respect to the deletion of addition/disallowance on account of expenses on commercial projects which are not commenced amounting to ₹ 1,05,19,606/-. 58. The parties confirm that this issue is identical to the issue decided by the coordinate bench in assessee's own case for assessment year 2006-07 and 2008-09. It was further submitted that this issue has not been preferred by the revenue before the honourable High Court in appeal of the revenue. Therefore the learned authorized representative price to that this issue is now concluded in favour of the assessee by the decision of the coordinate bench. The learned departmental representative vehemently supported the order of the learned assessing officer. 59. We have carefully considered rival contention and perused the orders of the lower authorities as well as the orders of the coordinate bench. The issue has already been decided by the coordinate bench in assessee's favour by the decision dated 27 May 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 141. Ld. CIT (A) has deleted the addition in the following manner: 23.11 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 the appellant company wherein the issue was decided in favour of the appellant. It is seen that the appellant is engaged in the business of developing real estate like developme Assessing Officer nt of plots, multi storey buildings, commercial complexes etc. During the year, the appellant has incurred certain expenditure on legal and professional fees paid for drafting the joint venture agreements, preparing draft report for Gujral Design Plus Valuation, Purchase of preferential shares by DAL Singapore from Lehmen Brothers, drafting of memorandum corporation with Fraport AG for joint venture and airport projects, acquisition of companies, advice taken for cross border investments etc and other expenses on feasibility and viability of the various projects. It is seen that the appellant has paid these expenses for taking legal and professional advice on the issues mentioned above and have paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise as these expenses were incurred on legal and professional advice and preparing joint venture agreements. However, after the feasibility and viability study these proposed joint ventures or valuation reports were not found suitable for carrying out further investments and same were abandoned. The expenses were incurred for extension of same line business and such expenses has to be allowed as revenue expenditure. In view of the above, the disallowance made by the ASSESSING OFFICER on account of capitalisation of such expenses cannot be sustained. Therefore, respectfully following the decisions of jurisdictional High Court and my own order for AY 2007-08 in appellant's case (Page 229-237), the disallowance of ₹ 1,30,38,853/- made by the Assessing Officer on this account is deleted. 142. We find that the Tribunal also in Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: 216. We have carefully considered the rival contentions. The assessee has incurred this expenditure on proportionate and feasibility of various construction projects in which business the assessee is engaged into. Before embarking on to any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance sheet as on 31st March, 2008 and also noted their comments in the following manner: Properties reflected as Fixed Assets in the Balance Sheet:- S. No. Name of the property 1. DLF, Centre, Sansad Marg, New Delhi (Partly held as office). . 40F Connaught Place New Delhi. . Shops at Belvedere Park, Gurgaon (CWIP) . Shops at Belvedere Tower, Gurgaon (CWIP) . Shops at Grand Mall, Gurgaon (CWIP) Copy of fixed assets register in substantiation of the above is enclosed as Annexure A (Page 15). b) Properties shown as current assets:- S. No. Name of the property 1. Corporate Park. 2. Shops at Centre Point Faridabad. 3. Le Millennia Supermart, Windsor Court , Phase-V, Gurgaon. 4. Le Millennia Supermart, Carlton Estate, Phase-V, Gurgaon. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,57,524.00 2. INCOME FROM BUSINESS PROFESSION a) Corporate Park 8,46,69,205.00 b) Shops at Centre Point, Faridabad 7,15,586.00 c) Le Milennia Supermart, Windsor Court , Ph-IV, Gurgaon 7,17,876.00 d) Le Milennia Supermart, Carlton Estate, Ph- IV, Gurgaon 1,02,600.00 e) Rent/License Fee for Apartments at DLF City, Gurgaon 16,63,333.00 f) Shops at DLF City Centre, Gurgaon 9,49,912.00 g) Shops at Ridgewood Estate 7,50,000.00 h) American Express Bank Ltd., Phase-V, DLF City Gurgaon 5,89,25,991.00 i) Felicite Builders Construction Pvt. Ltd., I-E, Jhandewalan 88,000.00 j) DLF Centre, Sansad Marg, New Delhi 19,39,85,629.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me received from the properties owned by the appellant and shown in the balance sheet has to be assessed as income from house property. Therefore, the ASSESSING OFFICER is directed to treat the income from such properties as income from house property and allow deduction u/s. 24(a) of the IT Act. Hence, the addition made by the ASSESSING OFFICER of ₹ 9,40,52,455/- is deleted. 159. The Tribunal in assessee's own case for Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: 184. Further, Ld. DR has relied upon the decision of Hon'ble Supreme Court in the case of Chennai Properties and Investment Ltd. vs. CIT in Civil Appeal No. 4494/2004 wherein Hon'ble Supreme Court has held that letting out of the properties is in fact the business of the assessee. We have gone through the decision of Hon'ble Supreme Court and we are of the view that this decision favours the argument of the assessee. At page 4 of the decision, the Hon'ble Supreme Court has considered the judgment of that court in East India Housing and Land Trust Ltd. The court has considered that decision that where the main objection the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer noted that Special Auditor has pointed out that number of immovable property owned by the assessee were lying vacant and notional rent in respect of such properties has been worked out at ₹ 12,28,340/-. 163. Ld. CIT (A) has deleted the addition in the following manner: 28.13 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various judicial pronouncements available on the issue and order of Commissioner of Income Tax (Appeals)-XVIII for AY 2006-07 and my own order for AY 2007-08 in the case of appellant wherein this issue was decided in favour of appellant. It is seen that impugned addition made 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 yea ' 2006-07 and 2007-08. It is observed that where there was an intention to let out the house prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; Bench of the Tribunal on an identical issue in the assessee's group concern M/s. DLF Office Developers vs. ACIT reported in 23 SOT 19 (Del) and first appellate orders in the assessee's own case for the assessment yea ' 2006-07, 2007-08 and 2008-09. 18. In support of the ground the Ld. Departmental Representative has basically placed reliance on the assessment order. 19. The Ld. AR on the other hand reiterated the submissions made before the Ld. CIT (A) and the decisions cited and relied upon before him. 20. Considering the above submission, we find that the Ld. CIT (A) has decided the issue in favour of the assessee narrating the observation made in the cited decisions in case of M/s. DLF Office Developers vs. ACIT (Supra) and other 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 have to be worked out u/s. 23(1) (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. He has according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent can be estimated in the case of vacant properties. The decision of the Assessing Officer was not justified. As regards, the Assessing Officer's decision of computing the notional rent based on highest rent in respect of each building, it is seen that the properties have been given to various parties which are not related to the appellant and some of them are of International repute like GE Capital, KPMG. The rent has been charged based on the location of the property, area of lease property and timing of lease agreement. It is seen that appellant has filed copies of the all lease agreement before Assessing Officer for verification and no discrepancy in the rental income in the books of accounts, as compared to the lease agreement was pointed out by the Assessing Officer. It is not the case that appellant has received some under hand rent from the tenants. In this regard the Assessing Officer has not brought any evidence on record and no enquiry in this direction was conducted by him. Therefore, assuming the rent for all properties based on the highest lease agreement was not justifiable. As regards Assessing Officer's reliance on various judgments in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative further submitted that this issue arose in assessment year 2008-09 in assessee's own case wherein the coordinate bench as per order dated 27 May 2019 has deleted the above disallowance confirming the order of the learned CIT-A therefore the issue is squarely covered in favour of the assessee. 72. The learned departmental representative vehemently supported the order of the learned assessing officer 73. We have carefully considered the issue, orders of lower authorities, orders of coordinate bench in assessee's own case for assessment year 2008-09 wherein at paragraph number 166 to 170 the coordinate bench decided this issue in favour of the assessee as Under 166. In ground no. 20, the Revenue has challenged the deletion of addition ₹ 7,17,794/- on account of depreciation claimed on DLF Centre Building. 167. The Assessing Officer on the basis of Special Audit Report observed that assessee company has charged excess depreciation of ₹ 9,14,277/- on certain portion in respect of building on DLF Center which was earlier let out but during the Assessment Year the same has been converted into self occupied already therefore excess depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 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. 74. Therefore, respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2008-09 we dismiss ground number 15 of the appeal of the learned assessing officer. 75. Ground number 16 relates to the disallowance on account of expenses were bills are not in the name of the company which is deleted by the learned CIT-A amounting to ₹ 30,12,202. 76. Both the parties confirmed that identical issue arose in case of the assessee for assessment year 2006-07 and 2008-09 wherein the issue is decided in favour of the assessee. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusively for the business purposes of the appellant as these premises are being used by the appellant for its office purposes. Merely because the water and electricity bills are in the name of earlier tenants, the same cannot be disallowed. It is also submitted by the appellant that water and electricity bill pertaining to Raisina Cold Storage are also being utilized by the appellant as property in the name of said company is in the possession of the appellant. This company has been merged with the appellant, therefore, these expenses also pertain to the appellant's and therefore, incurred only for the business purposes of the appellant. The reimbursement made to the group companies and employees of the appellant company for the expenses incurred by them on behalf of the appellant also pertains to the appellant as these expenses were incurred on behalf of the appellant for its business purposes. Considering the facts it is established that these expenses were pertaining to appellant company and services or utilization thereof were for the purposes of the business of appellant company. Hence, the same are allowable. In view of the above discussions the disallowance of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal before the learned CIT-A he deleted the above disallowance on the basis of details filed by the assessee in the form of lease deed and Yearwise chart of rent paid. He noted that it is an admitted fact that the rent has been paid for the accommodation of director of the appellant company. The same rent has been considered as a perquisite in the hence of the director and tax at source has been deducted thereon. The payment has been made by cheque. The recipient offers the income. During the year the increase in the rent is only 19% whereas in earlier years it was more than 50%. He further noted that in assessment year 2008-09 the learned AO did not make any disallowance when increase in the rent was more than 50%. He noted that during the year the increase in rent is just 19% which is in line with the current market trend. Therefore he deleted the disallowance. 82. The learned departmental representative submitted that the reasons given by the learned and CIT-A in para number 26.9 of his order are not in conformity with the provisions of Section 40 A (2) (a) of the act. He submitted that the consideration that payment is made by cheque, tax deduction at source is made, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion expenses related to the lease out property is amounting to ₹ 83,02,737 confirmed by the learned Commissioner of income tax (A) of the act. In the chart submitted before us the assessee stated that above ground was not pressed before the coordinate bench when the identical issue arose in case of assessee for assessment year 2006-07 and 2008-09. In view of this the addition/disallowance made by the learned CIT-A for those years were confirmed. Therefore, this issue is already decided against the assessee in that year hence ground number 1 of the appeal is dismissed. 90. Ground number 2 related to the disallowance u/s. 14 A of the income tax act confirmed by the learned CIT-A to the extent of ₹ 10.01 crores, has already been dealt with while dealing with the ground number 11 of the appeal of the learned assessing officer wherein the issue to the extent of computation of the disallowance of administrative expenses is set-aside to the file of the learned assessing officer with certain directions. Therefore, ground number two is allowed accordingly. 91. Ground number 3 of the appeal is against the confirmation of the addition of ₹ 11,55,271 on account of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by M/s. DLF Services Ltd. and as such diversion was towards provisions of maintenance services. It was further contended that the rental income as diverted to DLF Services Ltd. has being subjected to tax in the case of M/s. DLF Services Ltd. and there is no case of subjecting the same income again in the case of appellant. In this connection, the appellant made reference to decision of Supreme Court in the case of M/s. Ashish Plastic Industries Vs. ACIT 373 ITR 45, as per which same income cannot be subjected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- paid on late deposit of TDS has been claimed against interest received on income tax refund and the interest payment on late deposit of TDS is not allowable expenditure. In response to the show cause notice, the assessee relied upon the judgment of Hon'ble Karnataka High Court in the case of CIT vs. Oriental Insurance Company Ltd., (2009) 183 Taxman 186 (Kar.). However, the ld. Assessing Officer held that the assessee has not furnished any statement regarding late deposit of TDS. 34. Ld. CIT(A) has confirmed the said addition after observing and holding as under: 33.10 I have considered the observations of Special Auditors as well as of the Assessing Officer and submission of the appellant. It is seen that the appellant company has received interest on income tax refund of ₹ 30,31,199/-. This interest was credited in the account interest paid others-Income Tax and this interest on refund was adjusted against the interest paid on late payment of TDS of ₹ 28,79,372/-. Thus, an amount of ₹ 28,79,372/- was adjusted against the interest received on income-tax refund and balance amount was offered as interest income. The interest paid on late paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. In view of the above judgment, there remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction. The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions. The assessee claims the specified expenses of certain amount in its profit loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down by the Hon'ble Apex Court in the case of Bharat Commerce Industries Ltd. Vs. CIT reported in (1998) 230 ITR 733 cannot be applied to the case on hand. Thus, in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of TDS represents the amount of income tax which is payable by the party on whose behalf the deductor has deducted the tax and pays to the Government Exchequer. The TDS amount does not represent tax liability of the assessee albeit it is the tax of the other party, but it has to be paid by the assessee. In case there is any delay in payment of tax deducted by the assessee on behalf of the deductee, then it cannot be linked or reckoned as income tax of the assessee payable by the assessee, and moreover the interest herein is more of compensatory in nature. Though, Co-ordinate Bench of ITAT Kolkata in the case of DCIT vs. M/s. Narayani Ispat Pvt. Ltd. (supra) has allowed the said expenditure. Even though, we may be persuaded by such a reasoning, however, we find that Hon'ble Madras High Court as pointed out by the ld. Special Counsel for the revenue, in the context of interest u/s. 201(1A) only, has held that the TDS partakes the character of income tax and is not allowable as business expenditure. The relevant observation of the Hon'ble Court reads as under: The liability for deduction of tax arises by reason of the provisions of the Act. Under s. 201, the consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or advance tax arises in the computation of the profits and gains of business . The Court further held that: Under the IT Act, the payment of such interest is inextricably connected with the assessee's tax liability. If income-tax itself is not a permissible deduction under s. 37, any interest payable for default committed by the assessee in discharging his statutory obligation under the IT Act, which is calculated with reference to the tax on income, cannot be allowed as deduction . Before holding so, the Court considered the decision of the apex Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT (1980) 16 CTR (SC) 198: (1980) 123 ITR 429 (SC): TC 17R.877 a decision rendered by three learned Judges of the apex Court and held that the ratio of that judgment had no application to the case before it in the case of Bharat Commerce Industries Ltd. vs. CIT (supra). The assessee in the case of Mahalakshmi Sugar Mills Co. (supra), had claimed deduction of interest paid on arrears of sugarcane cess. The payment of sugarcane cess, as it was observed by the Court in the case of Bharat Commerce Industries (supra), is very much a part of the assessee's busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness expenditure. Further liability for interest which had been incurred by the assessee therein was regarded as compensatory in nature and allowable as business expenditure. 11. The ratio of those cases is not applicable here. Income-tax is not allowable as business expenditure. The amount deducted as tax is not an item of expenditure. The amount not deducted and remitted has the character of tax and has to be remitted to the State and cannot be utilised by the assessee for its own business. The Supreme Court in the case of Bharat Commerce Industries (supra), rejected the argument advanced by the assessee that retention of money payable to the State as tax or income-tax would augment the capital of the assessee and the expenditure incurred, namely, interest-paid for the period of such retention would assume character of business expenditure. The Court held that an assessee could not possibly claim that it was borrowing from the State, the amounts payable by it as income-tax, and utilising the same as capital in its business, to contend that the interest paid for the period of delay in payment of tax amounted to a business expenditure. 39. Since, this is the onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividend distribution tax paid is short it can be taxed as an income of the assessee. He extensively referred the provisions of Section 115 O, 115 P and Section 115 Q. He therefore submitted that the addition made by the learned assessing officer and confirmed by the learned CIT-A is devoid of any merit and is not in accordance with the law. 99. The learned departmental representative vehemently supported the orders of the lower authorities. 100. We have carefully considered the rival contentions and perused the orders of the lower authorities. In fact, without going into the merits of the case whether the assessee has short paid dividend distribution tax or has properly discharged its duty, the moot question is whether shorter payment of dividend distribution tax can be considered as income of the assessee or not. According to the provisions of Section 115O of the act any amount declared, distributed or paid by a specified company by way of dividends on or after 1 April 2003 shall be subject to additional income tax in the form of dividend distribution tax at the specified rate. According to subsection (6) dividend submission tax is not payable on distributed profit in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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