9911796707
TMI Blog2021 (12) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored. 4. Apropos ground No.1 Brief facts of the case are as under:- During the assessment proceedings, A.O. has noticed that the appellant company made payments of Rs. 6,52,000/- to Mrs. Shobha Jain, Director of the company, and Rs. 6,28,000/- to Smt. Sudha Gupta, wife of Shri M.L. Gupta, Director of the company on account of rent expense. Thus, 'total payment of Rs. 12,80,000/- was made to two persons who are covered under section 40A(2)(b) of the Act. With a view to ascertain reasonableness of these rent payments, A.O. has examined the rental agreements and found that the arrangements for making claim of rent payments was not acceptable, as the same does not appeal to an ordinary business practice, more so when the owner of the flats was a Director, or spouse of a Director. AO has also recorded the finding that onus is on the assessee to prove that the said arrangement is real and is wholly and exclusively for its business purposes. 5. Upon assessee's appeal, Ld.CIT(A) decided the issue in favour of the assessee, he also inter-alia found that identical issue has decided by ITAT in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 & 2012-13. The issue has been decided in favour of the appellant by Hon'ble ITAT, Mumbai in its order dated 15.02.2017 arising out of appeals in ITA No. 921/Mum/2016 and ITA No. 1404/Mum/2016 for the A.Y. 2011-12, and in ITA No. 5488/Mum/2016 for A.Y. 2012-13. The relevant extracts of the ITAT order for A.Y. 201 1-12 is as follows:- We have gone through the facts and circumstances of the case as well as orders passed by the lower authorities and also the submissions made before us. Undoubtedly, the assessee is best judge to make any expenditure keeping in view commercial expediency and best interest of its business. But when a question is raised by the AO about the business necessity and genuineness of expenditure, especially when the payment has been made to related parties, there is bounder duty on the shoulders of the assessee to show that payment has been genuinely made and same has been utilized for the purpose of business of the assessee. The facts of this case as were brought before us show that it was claimed by the assessee that the payment was made towards rental for using 50% share of the Flats owned by these two persons. It was explained that these premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance was required to be made on account of rent paid to related persons under section 40A(2)(b). A.O. is directed to delete the addition of Rs. 12,80,000/- made in the assessment order on this account. Accordingly, this ground of appeal is allowed." 6. Against the above order, revenue is in appeal before us. 7. We have heard both the parties and perused the records. We find that as noted by Ld.CIT(A) above, the issue is covered in favour of the assessee as ITAT in assessee's own case has decided the issue in favour of the assessee. It is not the case that order of ITAT has been reversed by Hon'ble Bombay High Court. Hence, respectfully following the precedent, we uphold the order of Ld.CIT(A). Apropos ground No.2 8. On this issue, AO made the addition of claim for provision for construction expenses. Upon AO enquiry in this regard, about the provision made, assessee has responded that actually all these expenses were incurred next year. However in order to comply with matching concept of accountancy provision in this regard was made. However, AO was not satisfied. He made impugned addition. The order of AO in this regard as under:- " During the course of assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment/execution of agreement (whichever is earlier) and also sale completely recorded on booking of previous years as the project is near to completion. The disclosure of accounting policy makes it clear that the sales are being recognized when the project is near completion, regardless of the fact whether or not the sales consideration has been completely realized. In particular, in respect of the Manavstahal (Malad) project, the appellant has submitted a project account showing that sales of Rs. 61,06,47,262/- from Manavsthal (Malad) project was recognized as Revenue during the F. Y. 2012-13. This total sales amount includes receivable amount of Rs. 30,55,92,484/-, which is shown as Sundry debtors in the books. As against this Sales, total direct expenses of Rs. 33,88,25,752/- towards construction cost have been claimed in respect of the same project. This total direct expenses includes provision for amount of Rs. 14,31,40,000/- towards construction cost incurred in succeeding years. The appellant has contended that sales have already been recognized during the year, and the claim of expenses has been made in accordance with the matching principle of accountancy, i.e. dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, was certainly allowable deduction, in arriving at the profits and gains of the business of the appellant under section 10(1) of the Act, there being no prohibition against it, express or implied, in the Act." On the facts and circumstances of the case, in view of the prevailing position of law, I find that no disallowance of provision of construction cost can be made, for the reasons elaborated in the above paragraphs. A.O. is directed to delete the disallowance of Rs. 14,31,40,000/- made in assessment order on this account. This ground of appeal is allowed. Ground No.6 relates to levying interest under section 234B & 234C of the Act. The levy of interest is mandatory as held by the Hon'ble Supreme Court in the case of CIT V Anjum M H Ghaswala (2001) (252 ITR 1) (SC). Hence, the contention of the appellant cannot be considered to be legally tenable. Therefore this ground of appeal is dismissed. In Ground No. 7 the assessee contested initiation of penalty u/s 271(1)(c). This ground of appeal does not have any merit as no prejudice is caused to appellant merely by initiation of penalty proceedings. Penalty is a separate proceedings and appellant is entitled to an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
