TMI Blog2021 (4) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... rt upon. CIT(A) after examining the facts in detail and also discussing the settled judicial precedents decided in favour of the assessee allowing the claim of development expenses claimed on estimated basis of development expenses for Assessment Year 2013-14 and partly allowing the claim of development expenses for Assessment Year 2010-11. A.O denied the claim of development expenses claimed by the assessee without providing on record any cogent material to show that the assessee has received cash over and above the amount recorded in the books of accounts. None of the buyers of the plots in their statement recorded by the Ld. A.O has stated about the payment of cash to the assessee. The fact of the matter is that whatever the buyers have confirmed in their statement recorded before Ld. A.O all those payments are duly recorded in the respective ledger account. It is also not in dispute that the excess development charges recovered at ₹ 61,21,220/- are offered to tax in Assessment Year 2015-16 which includes sum of ₹ 39,21,275/- pertaining to the Assessment Year 2013-14 A.O has raised no doubt about the genuineness of the actual development charges incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her amount of estimated development expenses. The excess amount charged in the preceding years has been offered to tax in Assessment Year 2015-16 and it would not be justified to tax an income already offered to tax in the correct year as there is no loss to the revenue department. It is a settled law that once an amount has been subjected to tax in a given assessment year, it cannot be taxed again in another assessment year. This principle emerged from the decision of Hon ble Supreme Court in the case of Excel Industries Ltd. [ 2013 (10) TMI 324 - SUPREME COURT] CIT(A) was justified in allowing the claim of estimated development expenses booked by the assessee in the Profit Loss Account on matching concept by adopting scientific method allowable u/s 37(1) of the Act and thus the theory adopted by the Ld. A.O of the assessee having received the development charges in cash is just in air and has no legs to stand for since there is no evidence to prove it and it is merely on surmises and conjectures. The fact remains that the assessee had been consistently incurring development expenses and the genuineness of the same has not been doubted by the revenue authorities at any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.03.2016 framed by ACIT-5(1) Indore. 2. Revenue has raised following grounds of appeal:- ITA No.784/Ind/2018 A.Y 2010-11 1. The Ld. CIT(A) has erred in deleting the disallowance made by AO on account of Development expenses of ₹ 2,93,76,568/-, even though the assessee has already charged this amount from the customers to whom property was transferred during F.Y 2009-10. 2. Whether on the facts and in the circumstances of the case the Ld. CIT (A) was justified in holding that the AO has made addition by disallowing development expenses of ₹ 2,93,76,558/- on presumption basis whereas the fact is that the claim made by the assessee for development expenses has been disallowed as the assessee has received this expenditure from the customers therefore the Ld. CIT(A) has grossly erred in holding that the addition was made presuming that the assessee has received the same in cash. 3. The appellant craves leave to add to or deduct from or otherwise amend the above ground of appeal. ITA No.786/Ind/2018 A.Y 2013-14 1. The Ld. CIT(A) has erred in deleting the disallowance made by AO on account of Development expenses of ₹ 7,14,97,410/-, while th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue out of the sale proceeds. The assessee has sold out an area of 6,74,480 Sq. Feet up to AY. 2012-13 and out of the balance area of 19,59,785 Sq. Feet (26,34,265 - 6,74,480 Sq. Feet), the assessee has sold an area of 4,20,573 Sq. Feet in Infocity Project during the year under consideration. The assessee has incurred development expenses for Infocity Project and has claimed these expenses on actual basis during A.Y.2009-10 to AY.2012-13. However, w.e.f. A.Y.2013-14, the assessee Company decided to change accounting policy and estimated the expenses on development to be incurred in this project at ₹ 33,31,66,000/- (apart from the development expenses which are already incurred by the assessee till A.Y.2012-13). These expenses are estimated on the basis of the report given by Architect Engineer namely M/s Mathur and Associates (copy enclosed). Since the balance unsold area as on 01.04.2012 was 19,59,785 Sq. Feet and the estimated development expenses as per the Architect was ₹ 33,31,66,000/-, the assessee has worked out average development expenses at the rate of ₹ 170/- per Sq. Feet (₹ 33,31,66,000 divided by 19,59,785 Sq. Feet). During year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative of the assessee filed following written submissions:- 1. CHANGE IN METHOD OF ACCOUNTING:- Your honour, the assessee company has till F.Y. 2011-12, has debited the expenses actually incurred the sale of developed plot, a detailed chart for the year-wise sale and development expenses claimed is enclosed (Enc.157). From the above chart it may be noted that the total area of plot sold in four years (A.Y. 2009-10 to A.Y. 2012-13) was only 6,74,480 Sq.Ft, which was only 25.60% of total salable area of 26,34,265 sq. Fts in the Info-city project. In the A.Y. 2013-14, due to introduction of section 43CA in the Income Tax Act, many of the customers who have only booked the plot by paying small amount of advance, but not turning out for registry of the plot, assessee company has rigorously followed them to get their plot registered and pay the difference amount. On such follow up many of the customers (Plot area sold was 4,20,573 Sq. Fts during A.Y. 2013-14, which is about 16% saleable area of 26,34,265 sq. Fts) have got registered their plot in the last quarter of the F.Y. 2012-13. The plots which were sold by the assessee company, were developed plots but however, developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses of ₹ 7,14,97,410/- and also did not allowed the claim of actual development expenses incurred for Assessment Year 2010-11 at ₹ 1,94,74,600/- , observing as follows:- On consideration of the above facts and circumstances, it emerges that:- a) The assessee has carried out development work on the plots of 'Infocity' Projects which it has debited on actual basis up to A.Y.20 12-13. However, during the AY. Under consideration, the development expenses have been worked out on an estimated basis at the rate of ₹ 170/- per Sq. Feet and claimed at ₹ 7,14,97,410/- accordingly. As the said expenditure is on projection basis i.e. contingent in nature and has not been actually, incurred during the year, the same is not allowable as an deduction in terms of the provisions of section 37(1) of the Act and hence disallowable. b) In para 14 above, it has been established that the assessee has been charging development charges at the rate of ₹ 170/- per Sq. Feet as also recorded by the assessee in its books of accounts in respect of the buyers who have paid the amounts by cheques. However, in respect of the buyers who have paid the amounts in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... succeeded as the claim of the assessee was allowed by Ld. CIT(A) giving detailed finding of fact, placing reliance on settled judicial pronouncements and also observing that there is no iota of evidence of any cash sum received by the assessee towards development charges other than those received by cheque from the parties mentioned by the Ld. A.O in the impugned order, secondly the genuineness of actual expenses incurred by the assessee is not in doubt and excess development charges received from some customers has been offered to tax in the Assessment Year 2015-16. 11. Aggrieved Revenue is in appeal before the Tribunal. 12. Ld. Departmental Representative vehemently argued supporting the order of Ld. A.O. Reference was also made to the paper book filed on 27.11.2020 which included the comments of Ld. A.O. Ld. Departmental Representative further submitted that the claim of the assessee of having received development charges from 22 persons are with regard to special location is totally misconceived since the Director incharge of the project have refused to have charged extra money for locational advantages. Further he submitted that it is totally unacceptable that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has incurred development expenses for this project and has claimed these expenses on the basis of actual expenses incurred during relevant F.Ys. w.e.f. A.Y. 2009-10 to A.Y. 2012-13. However, w.e.f. A.Y. 2013-14, the appellant Company has estimated the expenses on development to be incurred in this project at ₹ 33,31,66,000/- (apart from the development expenses which are already incurred by the appellant till A.Y. 2012-13). These expenses are estimated on the basis of the report given by Architect namely M/s Mathur and Associates. The total expenditure to be incurred w.e.f. 01.04.2012 was estimated at ₹ 33,31,66,000/- by the said Architect. The balance unsold area as on 01.04.2012 was 19,59,785 Sq. Ft. as shown by the appellant and the estimated development expenses as per the Architect was ₹ 33,31,66,000/-. The appellant has worked out average development expense at the rate of ₹ 170/- per Sq. Ft. (₹ 33,31,66,000 19,59,785 Sq. Ft.) and applied this rate for working out and claiming this expenditure in various assessment years from A.Y. 2013-14. 3. The details of area sold out, development expenses incurred and development expenses incurabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d development expenses which were actually incurred. 5. During the year under consideration, the appellant has sold out 4,20,573 Sq. ft. of land after developing the same in the plots. Accordingly, the appellant has estimated development expenses of ₹ 71,497,410/- (420573 Sq. ft. x ₹ 170/-) whereas actual expenses incurred during the year was only at ₹ 1,94,74,600/-. It is clear from the above introductory part of submissions that from A.Y. 2009-10 to 2012-13, the appellant had been debiting the development expenditure on actual basis. The total area sold was 6,74,480 Sq. ft. and total amount of ₹ 5,28,67,078/- was incurred as development expenditure which gives cost of ₹ 78.38 per Sq. ft. 6. However, for the relevant assessment year, the appellant has debited an amount of ₹ 7,14,97,410/- against sold area of 4,20,573 Sq. ft. at average cost of ₹ 170/- per Sq. ft. which is more than double of developmental cost as shown during the period from F.Y. 2008-09 to F.Y.2011-12. Further perusal of record reveals that during the relevant assessment year, actual cost of development incurred was ₹ 1,94,74,600/- whereas the appellant has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich cannot be allowed. Further the AO has specifically concluded at para 10 of assessment order that investment in construction of club house amounting to ₹ 3.48 crores was not allowable for the detailed reasons and documents placed at page no. 10 of the assessment order. 10. Apparently the department is in appeal with following ground: 1. The Ld.CIT (A) has erred in deleting the disallowances made by AO on account of Development charge of ₹ 7,14,97,410/-, while the development expenses have not yet been incurred in respect of all the plots of the entire Infocity Projects and the amount. 2. The Ld.CIT (A) has erred in deleting the disallowance made by AO on account of Development charge of ₹ 7,14,97,410/-, while it was contingent in nature. 11. The issue has neither been considered nor adjudicated by CIT (A) nor has it been decided by him. Therefore, on this issue/point, either the matter has to go to CIT (A) for proper adjudication or the issue is to be decided in favour of revenue on merits. 12. Further, ongoing through the grounds of appeal filed before CIT (A) as reproduced in page No. 1 of the appeal order, it is noticed that above discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been reflected at ₹ 1,94,74,600/- (Please refer a chart at page no. 3 of the assessment order). 16. The AO has unambiguously concluded that the actual expenses of ₹ 1,94,74,600/- on account of development charges have been recovered separately from the customers and the same don t find part of sale turnover of ₹ 12.60 reflected during the A.Y. 2013-14. Therefore, it cannot be debited to Trading and Profit Loss account, as such it s charge to the profit is not allowable. It is quite logical because whatever has been spent on developing the land has directly been spent by the customer (the purchaser of the plot). While registering the sale deed, this part of amount has not been included in the sale consideration. The assessee has shown only the cost of plot in sale consideration. 17. Therefore, the AO has concluded that expenditure on account of development of land has been directly incurred by the purchaser; the assessee was not to be allowed the claim of such expenditure. This aspect has implication on the assessments for A.Y. 2009-10 to 2012-13. The basis adopted by AO to reach to above conclusion. 18. During the course of assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these 22 parties insisted on paying the entire consideration by cheques. Therefore, the appellant had no choice but to disclose the same in the accounts of later years though the same should have been disclosed in same assessment year in which the sale deed was registered. This clearly meant that where the payments were received by cheque on account of development charges, the same was disclosed but in all other cases, it was received in cash as such not disclosed. Now what are the basis before AO to reach the above conclusion? (a) All the 22 listed persons had paid the development charges by cheque and none paid by cash. (b) The plots belonged to the same project without having added advantages over each other. (c) The sale deeds have been found registered on the cost of plot only excluding development charges in regards of plots to the parties other than these 22 parties. (d) In regard with some of these 22 parties, in their statement, they have clearly stated that development charges were separately charged and not included in cost of plot. In cases of parties other than 22 parties, the plots have been registered only on cost of plots. (e) In the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be a charges on the assessee s profit as the same would be commensurately recoverable from the buyers of the plots. Also, the assessee has itself shown the entries of the development charge received from 22 buyers by cheques by passing general entries in assessment year 2015-16 for which the assessee has already filed its return of income. (Copy of P L A/c for A.Y. 2015-16 is marks as Annexure A ). 26. Now the issue is whether the AO was correct in concluding that the assessee has wrongly claimed development expenditure in all the assessment years i.e. A.Y. 2009-10 to 2013-14 on the basis of statements/confirmations by a few customers and accounting followed in the case of 22 customers in whose cases, the development charges were received separately and accounted for separately and disclosed in the F.Y. 2014-15 i.e. A.Y. 2015-16. This was solely for the reasons that these 22 customers insisted for making payment by cheque only. 27. The AO had correctly concluded that the assessee has not disclosed the development charges received from various customers in cash in all the AYs. i.e. A.Y. 2009-10 to 2012-13 because out of 22 customers, in case of 03 customers , the deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any support to the assessee's contention. (1) 60 I.T.R.239 (1) 76 I.T.R.719. For the reasons mentioned above, We are unable to agree with .the High Court that the Sales.-tax Officer. had arbitrarily assessed the assessee. It was next contended that in are assessment under,s. 19(1) of the Act, Sale-tax Officer was- not competent to- make. 'best. judgment assessment' as no such power was conferred on him under the said section. This contentions had been rejected by the; High Court and the assessee had not appealed against that part of the judgment. Be that as it may, even though s. 19 does not in specific terms confer on the assessing authority power to make 'best-judgment assessment' that section specifically says that the .assessment made under that section is a reassessment. Section 18 deals with assessment of tax. Section 18 (4) says If a registered dealer X X a) x x x x (b) x x x x (c) x x x x (d) has not maintained any account or has not regularly employed any method of accounting, or if the. method employed is such that in the opinion of the Commissioner assessment cannot properly be made on the basis thereof; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Andra Pradesh High Court in State of Andhra Pradesh v. Bavuri V. Narasimhan, (1) relied on by the assessee was not correctly decided. For the reasons mentioned above, we allow these appeals, vacate the answers given by the High Court to Questions Nos. 1 and 3 and answer those questions in favour of the Department i.e. that the estimate of taxable turnover under the 'State Act and the 'Central Act' made by the assessing authority for the period from November 1, 1959 to October 20, 1960 on the basis of ₹ 31,171.28 as the escaped turnover for a period of 19 days was legal and justified and consequently the penalty of ₹ 2,000/imposed on the assessee was in accordance with law. The assessee shall pay the costs of the Department both in this Court and in the High Court. The findings of CIT (A) 29. The concluding part of order of CIT (A) starts from para 3.6 of appeal order. It will be imperative to examine the findings para wise. Para 3.6:- The CIT (A) has stated that development charges @ ₹ 170/- were considered only in case of 07 customers whereas in case of 15 customers, it was ranging between ₹ 7/- to ₹ 165/- only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges only on account of those parties who had paid the same by cheques. Further the CIT (A) has failed to take note of detailed discussions and copies of statements and confirmation by the parties which are duly pasted in the assessment order at page No. 11 to 33 of the assessment order. Para 3.17:- The finding of CIT (A), that the AO has not brought on record any evidence is far from reality as can be seen from the detailed discussion running in to 35 pages . Nothing had prevented the CIT (A) to reach the truth by invoking section 251 (4) of IT Act. Para 3.18:- Regarding allowing of cross examination of Shri N.M. Mathur, the architect, there is nothing on record to prove that the assessee had sought cross-examination. Further, not giving cross- examination is not sufficient ground for allowing the appeal of assessee as held in following cases of Hon ble Apex Court. M/s Pebble Investment and Finance ltd., Vs ITO Supreme Court 2017 2017-TIOL-238-SC-IT ITO Vs M. Piral Choodi Supreme Court 2010 [2012] 20 taxman.com 733 (SC)/[2011]33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. If these conditions are not met, no provision can be recognized. It is evident from the plain reading of facts of present case that it did not fit into the parameters laid down by Hon ble Apex Court. 31. The decision of Hon ble Indore Bench of ITAT as cited by the CIT (A) is also clearly distinguishable on facts as such cannot be applied on the facts of present case. In view of the facts brought out above and detailed discussion based on various documents, inquires, statement of various purchasers and judicial decisions, we request Hon ble Bench, ITAT, Indore to set aside the order of CIT (A) and restore the order of Assessing Officer. Sd/- (Lal Chand) Commissioner of Income Tax (Audit) Bhopal (Assigned charge- CIT (DR)) 13. Per contra Ld. Counsel for the assessee apart from supporting the order of Ld. CIT(A) and also relied on the following submissions:- 1. Assessee is a developer engaged in the business of development of land by developing the colony and selling of developed plots of the colony. 2. During the impugned year, assessee had undertaken two projects, namely, Info-City and Royal Premium Park. During both the years under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 126 60,375 2,93,250 170 228 4 Anu Kumar Gargav 957 1725 7,65,000 43 60,375 2,93,250 170 228 5 Rampukar Tiwari 122 2400 5,80,000 44 84,000 4,08,000 170 228 6 Satyanaray an Dhruv 464 4260 4,22,000 45 1,49,100 2,72,900 64.06 228 7 Anita Suresh Sharma 882 2100 4,20,000 43 172 73,500 3,46,500 165 228 8 Nirmal Rajendra Tiwari 986 1725 6,82,500 187-188 60,375 2,93,250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee itself has offered it to tax and AY 2013-14 wherein it is done by the Ld. Authority. [AO Para 14 Page 17 Table and CIT(A) Para 3.4 Page 14-15] 9. The amount of development charges from the ten buyers for ₹ 39,21,275 has already been reported in the return for AY 2015-16 which is an undisputed fact. Also refer Annexure A to the impugned assessment order wherein the audited P L account and its relevant Note 14 for AY 2015-16 is enclosed by the Ld. AO as part of the assessment order. Para 14 of the assessment order states this fact of reporting of ₹ 61,21,220 in respect of development charges recovered from 22 buyers in AY 2015-16 which has been tabulated at page 17. This amount of ₹ 61,21,220 is included in the Note 14 to the Statement of Profit and Loss for AY 2015-16 forming part of the impugned assessment order as Annexure A . 10. It is a settled law that once an amount has been subjected to tax in a given assessment year, it cannot be taxed again in another assessment year. This principle emerged from the decision of Hon ble Supreme Court in the case of Excel Industries Ltd. 358 ITR 295 (SC) [2013]. It was held Thirdly, the real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner (Appeals) in ultimate analysis and was, thus, not an aggrieved party, in Revenue s appeal, Tribunal committed a mistake by not permitting assessee (respondent before it) to support final order of Commissioner (Appeals) by assailing findings of Commissioner (Appeals) on issues that had been decided against him. 14. Combined reading of Explanation 2(a) to Section 153, section 153(6)(i) and section 150(1) also fortifies the contention of the assessee to have the direction of the Hon ble Bench to re-compute the total income of AY 2015-16 and / or AY 2013-14, as the case may be, so as to bring to charge the amount of ₹ 39,21,275/- only once. The combined reading of these sections provides that the appellate authority may direct for re-computation of total income to give effect to a finding in an order passed by it under an appeal. 15. Up to assessment year 2012-13, assessee had charged actual expenditure incurred on development of land to the Profit and Loss account irrespective of the area sold in that particular year. 16. From AY 2013-14, i.e. the impugned year, assessee changed its accounting policy in this respect owing to following reasons a) Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his standard is applicable in case of contractors. 18. Ld. AO while making disallowance of development expenses of ₹ 7,14,97,410 held that these expenses are contingent in nature and charged on projected basis. [AO Page 33, para (a)] 19. Development charges claimed by the assessee in Profit and Loss account of ₹ 7,14,97,410 are towards development of plots of land for which sales revenue has been taken in the Profit and Loss Statement and these are legitimate business expenses allowable under section 37(1), computed on a scientific basis by relying on report of an expert. 20. The claim of the assessee is fortified by the decision of Hon ble Jurisdictional Indore ITAT Bench in the case of Balaji Neemuch Infrastructure Pvt Ltd in ITA 918 to 920 / Ind / 2016, order pronounced on 27.09.2017. It was held in Para 48 49 as .when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the profit and loss account on account of actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -City . There are total 1142 plots in the Info-City and the assessee has sold 56,120, 54,33, 168, 4 6 during Assessment Year 2009-10 to 2015-16. There is no dispute with regard to number of plots sold. From Assessment Year 2009-10 onwards till Assessment Year 2012-13 assessee was claiming actual development expenses incurred during the year. For Assessment Year 2010-11 ₹ 2,97,47,218/- was claimed. 15. From Assessment Year 2013-14 onwards though the assessee was incurring development expenses regularly but it opted to change the accounting policy and claimed the development expenses in the Profit Loss account on estimated basis calculated @₹ 170/- per sq. feet if for the area sold during the year and the development expenses were booked in the books. Average rate of development expenses @₹ 170/- per sq.feet was arrived on the basis of the report prepared by an expert Architect Engineer M/s Mathur Associates as per which the development expenses remaining to be incurred from 1.4.2012 onwards was ₹ 33,31,66,000/- and this amount was divided by the unsold area as on 1.4.2012 which was 1959785 sq.feet. During the assessment proceedings this claim of es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be commensurately recoverable from the buyers of the plots. Also, the assessee has itself shown the entries of the development charges received from 22 buyers by cheques by passing general entries in assessment year 2015-16 for which the assessee has already filed its return of income. 17. From perusal of the above observation by Ld. A.O we find that firstly he mentions that development expenses has not yet been incurred in respect of all the plots and then he further observes that actual development expenses actually incurred would have to be considered for deduction but he fails to give the benefit of actual expenses incurred by the assessee during the year and thirdly he applies a complete different approach with regard to the development charges whether received or not but would accrue to the assessee @ ₹ 170/- per sq.feet at par with 22 buyers of plots. Looking to the above observation of Ld. A.O we are of the view that his approach is neither here nor there. Ld. A.O is not sure what actually he want to assert upon. 18. We further find that when the matter came up before the Ld. CIT(A) he after examining the facts in detail and also discussing the settled j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. A chart given by appellant, is forming the part of submission made by appellant, which is reproduced as below: S.NO Name of the Plot Holder Plot No. booked Area Amount Development charges received and offered for tax in F.Y 2014-15 MPEB @ ₹ 35/- Club House Maintenance Financal Year of Registry 1 CHETNA W/0 R.K. MISHRA 888 2100 247,595 174,095 73,500 0 0 2008-09 2 SANJAY BADJATIYA 145 2800 148600 50,600 98,000 0 0 2008-09 3 VINAY KUMAR TIWARI 837 2100 357,000 283,500 73,500 0 0 2008-09 4 GOVIND VIDYAVATI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,375 0 0 2012-13 15 RAJEEV KUMAR NIKHAR 991 1725 997,500 293,250 60,375 55000 36,000 2012-13 16 ANU KUMAR GARGAV 957 1725 765,000 293,250 60,375 55000 36,000 2012-13 17 RAMPUKAR TIWARI 122 2400 580,000 408,000 84,000 55000 33,000 2012-13 18 SATANARAY AN DHRUV 464 4260 422,000 272,900 149,000 0 0 2012-13 19 ANITA W/O SURESH SHARMA 882 2100 420,000 346,500 73,500 0 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount from each and every customer and therefore, from the expenditure incurred towards development, the learned AO had disallowed a sum of Rs. I7,14,97,410/- being the amount actually incurred and charged to Profit loss account by holding that Development Charges whether received or not would accrue to the appellant at the rate of ₹ 170 per sq. feet and also presumed that the same was received from each and every customer over and above what was recorded and offered by the appellant company. 3.10 On the other hand of the appellant had submitted that the appellant had a valid reason for change in accounting policy in AY 2013-14 which has already been reproduced above. Further the learned AO has not rejected the books of accounts of the appellant. The only finding of the learned AO, for disallowing the claim of the appellant was that this expenditure is contingent in nature. 3.11 The learned AO has also disallowed this u/s 37(1) that the expenses been charged on projected basis. 3.12 The appellant had pointed out that on the one hand the learned AO has mentioned that the expenditure debited should be on actual basis and the expenditure actually incurred shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 135 2700 16,800 6.22 5 KAVITA MUNDRA 2009-10 175 3200 9,600 3.00 6 LALITA W/O SURESH KABRA 2009-10 381 2025 344,250 170.00 TOTAL 2009-10 7925 370650 7 DEVI KISHAN SHARMA 2011-12 120 2400 408,000 170.00 8 DR. SHAILESH J.N. PRASAD 2011-12 124 125 5400 511,000 94.63 9 PRAJUN S/O RAJENNDRA SONI 2011-12 485 3700 45,500 12.30 10 PUSHPA WASDEV GABA 2011-12 215 2800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here to examine the decision of the Hon'ble Supreme Court of India in the case of CALCUTIA CO. LTD. vs. COMMISSIONER OF INCOME TAX. CALCUTTA CO. LTD. vs. COMMISSIONER OF INCOME TAX SUPREME COURT OF INDIA (1959) 37 ITR 0001 Business expenditure-Conditions for allowing deduction of expenses-Assessee engaged in the Business of land and property development-Assessee following mercantile system of accounting-Expenditure actually incurred but not during the relevant year is still allowable if such expenditure was incidental to the carrying on of the business. Facts The assessee deals in land and property and carries on land developing business and, in the course of business, it buys land, develops it so as to make it fit for building purposes and sells it at a profit in plots. Whenever a plot is sold, the purchase 1 pays about 25 of the purchase price in cash and undertakes to pay the balance with interest at a certain rate in ten annual instalments which he secures by creating a charge on the land purchased. The assessee undertakes to carry out the developments including laying out roads, provision of drainage system etc., within a reasonable time. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, did nothing of the sort and insisted upon having its pound of flesh, asking to delete the whole of the item of ₹ 24,809 from the debit side of the account which it was certainly not entitled to do.-Calcutta Co. Ltd. vs. CIT (1953) 24 ITR 454 (Cal) : TC16R.204 overruled. 3.17 The learned AO has not brought on record, any evidence against the appellant, to prove that the actual expenditure incurred is not actual expenditure, except for his own presumption that the appellant would have received development charges in cash. Further, no evidence brought on record by the learned AO to prove that the plot sold was not developed plot. 3.18 From the assessment order it is found that the learned AO had recorded the statement of Shri M. M. Mathur Engineer, who had issued the report for development expenditure required to be incurred @ ₹ 170/- sq. ft. on the remaining project. It is also a fact on record that he was never allowed to be cross examined by the appellant company. 3.19 His report was relied upon by the learned AO to come to the conclusion that the cost estimated includes the cost of club house and the learned AO has completely relied on his rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will= be required to settle the obligation, and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. The principle is that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts S110W that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37. ITAT INDORE In Case of BALAJI NEEMUCH INFRASTRUCTURE Business Expenditure - U/s 37 of the Income-Tax Act, 1961 -AO made addition in respect of provision for repair and maintenance-CIT(A) deleted the additions-HELDS The assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 VINAY KUMAR TIWARI 2009-10 837 2100 2,83,500 135.00 TOTAL 2009-10 7000 5,08,195 4 GOVIND VIDYAVATI BAGHORE 2010-11 135 2700 16,800 6.22 5 KAVITA MUNDRA 2010-11 175 3200 9,600 3.00 6 LALITA W/O SURESH KABRA 2010-11 381 2025 3,44,250 170.00 TOTAL 2010-11 7925 3,70,650 7 DEVI KISHAN SHARMA 2012-13 120 2400 4,08,000 170.00 8 DR. SHAILESH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 391 2100 3,26,500 155.48 22 AMIT SHANTILAL 2013-14 345 2100 1,71,500 81.67 TOTAL 2013-14 28060 39,21,275 GRAND TOTAL 61,21,220 20. We are surprised to note that the Ld. A.O has raised no doubt about the genuineness of the actual development charges incurred by the assessee nor has he pointed out any mistake in the books of accounts maintained by the assessee except about the claim of development charges. The assessee has been consistently claiming the actual development charges from Assessment Year 2009-10 till Assessment Year 2012-13. Though actual expenses are incurred subsequently also but expenses are booked in the Profit and Loss account based on a scientific method i.e. report of technical expert. The rate of ₹ 170/- per sq. ft a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouses. In all this process development charges ought to be incurred. They were incurred and were consistently charged to Profit Loss Account. The change of accounting policy effected from Assessment Year 2013-14 was based on the accounting standard AS-5 issued by Institute of Chartered Accountants of India which permits the change and which was done so to make appropriate presentation of financial statements of the enterprise. The same was taken up since the highest number of plots were sold by the assessee during Assessment Year 2013-14 which were 168 in number. Almost 16% of saleable area was sold during the year. Change in accounting policy is duly disclosed in the audited financials by way of note. Actual development charges incurring during the year are also reported in the balance sheet. 22. We find that the development charges which were taken from some of the purchasers of plot and were excess in nature in comparison to the amount charged to other plot purchasers the excess amount of ₹ 61,21,220/- have already been offered to tax in Assessment Year 2015-16 and the chart showing year wise amount of income offered during Assessment Year 2015-16 has already been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estimated Develpoment Expenses Rs. - - - - 7,14,97,410 14,62,000 20,41,020 7,50,00,430 ACTUAL EXPENCES INCURRED Rs. 1,15,87,720 2,97,47,218 91,16,040 24,16,100 1,94,74,600 1,36,26,544 1,01,17,084 9,60,85,306 25. From going through the above chart we find that at the end of Assessment Year 2015-16 the actual development charges incurred by the assessee from Assessment Year 2009-10 to Assessment Year 2015-16 is ₹ 9,60,85,306/-. Development charges booked on estimated basis from Assessment Year 2013-14 to Assessment Year 2015-16 are ₹ 7,50,00,430/-. For Assessment Year 2014-15 and Assessment Year 2015-16 the estimated development expenses charged to Profit Loss account are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conceded that even in the present case, the rate of tax remained the same in both the assessment years i.e. 2005-06 and 2007- 08. Following the above judgment of the Hon ble Supreme Court, it must be held that the dispute raised by the revenue is essentially academic. The issue may have some tax effect in that if the department is correct and the amount ought to have been brought to tax two years earlier, there would be loss of interest for two years on the amount of ₹ 31,10,000/-. The department has not raised the claim in that regard. We do not wish to express any opinion as to the right of the department to claim interest. 28. The claim of the assessee is fortified by the decision of Hon ble Jurisdictional Indore ITAT Bench in the case of Balaji Neemuch Infrastructure Pvt Ltd in ITA 918 to 920/Ind/ 2016, order pronounced on 27.09.2017. It was held in Para 48 49 as .when after scientific estimation of maintenance and repairs, the assessee made a provision by debiting the profit and loss account and crediting the provision account then the accounting policy of the assessee cannot be held as faulty as undisputedly the assessee did not debit any amount to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of application of Rule 27, held that where assessee succeeded before Commissioner (Appeals) in ultimate analysis and was, thus, not an aggrieved party, in Revenue s appeal, Tribunal committed a mistake by not permitting assessee (respondent before it) to support final order of Commissioner (Appeals) by assailing findings of Commissioner (Appeals) on issues that had been decided against him. . In the instant case for Assessment Year 2010-11 the assessee claimed actual development expenses at ₹ 2,97,47,218/-. Ld. A.O disallowed this claim. In the first appeal before Ld. CIT(A) allowed the claim of ₹ 2,93,76,558/- and for remaining amount of ₹ 3,70,650/- Ld. CIT(A) observed as under:- 3.19 However, I agree with the view taken by the AO that the income should be offered in the year in which it is received. Since the income towards the sale of plot based on execution of respective sale deeds was offered in ASSESSMENT YEAR 2010-11 in case of 3 customers, the excess amount paid by these customers should be considered as income in ASSESSMENT YEAR 2010-11 of ₹ 3,70,650/-. 32. Before us the Ld. Counsel for the assessee submitted that the amount of developm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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