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TMI Blog2022 (8) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,82,45,910/-. While doing so, the Assessing Officer made (i) addition of Rs.18,69,491/- u/s 14A, (ii) addition on account of notional rent on unsold flats of Rs.89,68,680/- and (iii) addition by disallowance of provision of Rs.11,38,26,228/-. The factual background of the above disallowances is as under :- During the course of assessment proceedings, the Assessing Officer observed that the appellant company made investments in partnership firm, namely, M/s Marigold Properties and income from which is exempt from tax in the hands of the appellant company. The appellant also made investments with partnership firm and in equity shares, income from which is also exempt. On noticing that the appellant had not offered any suo moto disallowance u/s 14A, the appellant was called upon to explain as to why disallowance u/s 14A cannot be made. In response to the same, the appellant filed letter dated 28.11.2016 stating that it had not incurred any expenditure for earning the exempt income. Therefore, the question of disallowance u/s 14A does not arise. Rejecting the above contention, the Assessing Officer had proceeded with making of disallowance under the provisions of Rule 8D(2)(iii) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,35,60,537/- which has been debited to the Profit & Loss Account rejecting the contention of the appellant that the provision for expense was made in respect of flats sold on the matching principle, the expenses should be allowed as deduction. 6. Being aggrieved by the order of the ld. CIT(A), the appellant is in appeal before us in the present appeal. 7. Ground of appeal no.1 is general in nature does not require any adjudication. 8. Ground of appeal no.2 to 4 challenges the order of the ld. CIT(A) in confirming the disallowance of Rs.18,69,491/- u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules. It is contended before us that before embarking upon the disallowance under the provisions of section 14A, it is incumbent upon the Assessing Officer to record a satisfaction as to the correctness of the claim of the assessee that no expenditure was incurred to earn exempt income. Taking us through the submission made before the ld. CIT(A), he submits that the appellant took stand that no expenditure was incurred for the purpose of earning the exempt income and the question of disallowance does not arise. The Assessing Officer as well as the ld. CIT(A) had proceeded with making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those cases where the assessee in his return has himself apportioned but the Assessing Officer was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, the nature of the loan taken by the assessee for purchasing the shares/ making the investment in shares is to be examined by the Assessing Officer'' 11. The Hon'ble Supreme in the case of Godrej & Boyce Manufacturing Company Ltd. vs. DCIT, 394 ITR 449 (SC) held as follows :- "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Subsections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of section 22 of the Act. The assessee explained vide its submissions dated 09-03-2016, we note that the main contention of ld. AR is that the unsold flats forms part of stock in trade and there is no intention for the assessee to let out the said unsold flats but only to sell in the market. The AO rejected the contention raised by the assessee and calculated the deemed rental income regarding the above said unsold flats by deputing the Inspector for field enquiry ascertaining the monthly fair market rent. The CIT(A) in the impugned order agreed with the view taken by the AO. A similar issue came up before this Tribunal in assessee‟s sister concern in the case of Kumar Properties and Real Estate Private Limited in ITA No. 2977/PUN/2017 for A.Y. 2013-14. The Co-ordinate Bench of Tribunal vide order dated 28-04- 2021 discussed the issue in detail from Para Nos. 3 to 13 of the said order and held that an exception has been carried out in section 22 of the Act that any such property or its part, which is occupied by the assessee for the purposes of any business or profession carried, the profits of which are chargeable to income-tax, shall be excluded on satisfy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction as business expenses, it is not necessary that the amount has only been paid and it is sufficient if the liability for payment incurred and liability had accrued during the relevant accounting year. It is further submitted that when the corresponding sales have been offered to tax, disallowance of corresponding expenditure results in the distortion of true picture of the taxable income. 16. On the other hand, ld. CIT-DR submitted that the expenses were incurred in respect of area of sold flats and balance was formed part of the closing work-in-progress requires verification and this contention was not raised before the Assessing Officer. 17. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal relates to the allowability of the provisions for expenses of Rs.2,03,08,768/-. It is settled position of law that if liability for expenditure had crystallized during the previous year relevant to the assessment year under consideration, then the deduction should be allowed, although the liability is discharged at future date. Reliance in this regard can be placed on the decision of the Hon'ble Apex Court in the case of Bhar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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