TMI Blog2023 (2) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has completed the project which was declared in the Books of Accounts as work-in-progress at the end of the year which was subsequently transferred to its sister concern. Therefore, it is proper and just to estimate the profit @7.71% on the value of work-in-progress transferred to its sister concern. AO is directed to add the profit on these projects @7.71% on the value of work-in-progress transferred during the year at the value of ₹.7.2 crores. Accordingly, ground raised by the assessee as well as revenue are partly allowed. Addition made on account of land cost claimed as expenses by the assessee - CIT-A deleted addition on the basis of the fresh evidence, without giving an opportunity to the Assessing Officer as per the provisions of Rule 46A - HELD THAT:- Considered the rival submissions and material placed on record, we observe from the record that the Ld.CIT(A) considered the various submissions of the assessee and while deleting the addition made by the Assessing Officer he heavily relied on the information contained in the assignment deed based on which the project was transferred to its sister concern. Therefore, it clearly shows that it is not an additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013, ITA NO. 2528/MUM/2013, ITA NO. 4787/MUM/2014, ITA.No. 6154/MUM/2014 - - - Dated:- 30-1-2023 - Shri Aby T. Varkey, Hon'ble Judicial Member And Shri S. Rifaur Rahman, Hon'ble Accountant Member For the Assessee : Shri Suyog Bhave And Shri Kalpesh Turalkar For the Department : Shri K.C. Salvamani ORDER PER S. RIFAUR RAHMAN (AM) 1. The appeals in ITA Nos. 656 2528/MUM/2013 are cross appeals filled by assessee and revenue respectively against order of the Learned Commissioner of Income Tax (Appeals)-6, Mumbai [hereinafter in short Ld.CIT(A) ] dated 07.01.2013 for the A.Y. 2007-08. Appeal in ITA.No. 4787 6154/MUM/2014 are filed by the revenue against orders passed by the Ld.CIT(A) u/s. 154 and u/s. 271(1)(c) of Income-tax Act, 1961 (in short Act ) respectively for the A.Y. 2007-08. 2. First we shall deal with the cross appeals filed by the assessee as well as revenue. 3. Brief facts of the case are, assessee is a Company in which public are not substantially interested and which is engaged in the business of construction. Assessee filed the return of income for A.Y.2007-08 declaring total income of ₹.13,63,310/- on 31.10.2007. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit/loss in respect of only two Profit and Loss Accounts and the said profit is transferred to the General Profit and Loss Account. He observed that in the General Profit and Loss Account in addition to the profits transferred from Sale of development rights Profit and Loss Account and Business Centre Profit and Loss Account the assessee also credited interest received on Fixed Deposit and against these incomes, the assessee claimed expenses under various heads such as audit fees, bank interest, depreciation, legal expenses, repairs and maintenance, salary and bonus, etc., to arrive at profit of ₹.13,61,587/-. 6. With the above observation of the Assessing Officer, we observe that assessee has taken five grounds of appeal before us and Ld. AR submitted that assessee is not pressing Ground No. 1 and 5, accordingly, these grounds are dismissed. With regard to Ground No. 3 and 4 he submitted that Ld.CIT(A) has allowed these grounds in the appeal filed before him passed u/s. 154 of the Act. Therefore, assessee is not pressing these two grounds at this stage. Accordingly, we dismiss these grounds as not pressed at this stage. 7. Ld. AR submitted that assessee is pressing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of work-in-progress was ₹.16,11,24,323/- and the advance against the sale of said flats received by the assessee was ₹.22,17,94,752/-. Whereas, the assessee claims to have transferred both the above liability and assets to M/s.Indorigin Electric Limited, which is factually not true. Assessing Officer observed that since the above liability and assets are shown to have been Nil as on 31.03.2007 as per the books of accounts of the assessee, the difference between the two working out to ₹.6,06,70,429/- is treated as assessee's income during the year from the above project in Phase I for the present assessment year i.e. A.Y. 2007-08. 12. Similarly, Assessing Officer observed that assessee showed a liability of ₹.7,53,12,160/- to M/s.Indorigin Electric Limited, which is stated to be payable by the assessee in connection with the acquisition of development rights by the said company from the assessee. He further observed that, it is not understood as to why the assessee has to pay the above amount to M/s.Indorigin Electric Limited when the said company has to pay the sale consideration to the assessee. 13. Assessing Officer by referring to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, we observe from the record that assessee has partly completed the two projects namely Kapil Malhar Intelligent Homes Phase-II and development rights and transferred the same at the end of the current assessment year to its sister concern M/s Indorigin Electric Ltd. It is fact on record that assessee has transferred the same as per the Books of Accounts at cost without adding any profit of the effort put in by the assessee on these projects. On enquiry assessee has declared profit earned by sister concern i.e. M/s Indorigin Electric Limited at 7.71% after completion of the projects. Therefore, to the extent the assessee has completed the project which was declared in the Books of Accounts as work-in-progress at the end of the year which was subsequently transferred to its sister concern. Therefore, it is proper and just to estimate the profit @7.71% on the value of work-in-progress transferred to its sister concern. Accordingly, Assessing Officer is directed to add the profit on these projects @7.71% on the value of work-in-progress transferred during the year at the value of ₹.7.2 crores. Accordingly, ground raised by the assessee as well as revenue are partly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ld.CIT(A) dated 07.01.2013 and in the rectification application assessee has contended that there are certain mistakes apparent on record and accordingly, filed the following information, for the sake of clarity it is reproduced below: - Our client is in receipt of Your Honour's Order passed for Assessment Year 2007-08 on 7th January, 2013. Under the instructions and on behalf of our clients we most humbly state submit herewith as under:- 1) Income from Business Centre: We may bring to Your Honour's kind notice that for earlier assessments i.e., Asst. Years 2005-2006, 2004-2005 and 2003-2004, the learned A. O. have assessed said income as Income from Business. The fact was submitted in statement of facts attached with Appeal memo. In the said circumstances, We most humbly request Your Honour to rectify the assessment u/s. 154 of the Income Tax Act, 1961 relying on C.I.T. vs Bilhari Investment (P) Ltd. (2008). 299 ITR 1 (SC) and Radhasoami Satsang Vs. CIT 193 ITR 321(SC) ie. consistency of system of accounting adopted in earlier years. 2) Estimation of Income of Rs. 1,41,36,133/ Your office has estimated income at 10% of Work-in-progress (W.I.P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi. Loans and Advances 7,53,67,519.00 13,48,48,439.00 Less: Liability i. Liability Bank Loan 3,43,01,227.00 ii. Current Liability 8,44,03,076,00 iii. Provision 5,42,350.00 11,92,46,653.00 In the said circumstances, we most humbly request Your Honour to pass an order u/s. 154 of the Income Tax Act, 1961 to allow interest expense of Rs. 50,96,138/- as business expenses and. We further submit that the same order be passed considering abovementioned decision being of jurisdictional court i.e. Bombay High Court. 4) Addition of Rs. 1,38,16,738/ on account of transfer of sundry creditors: We most Humbly want's to draw Your Honour's kind attention towards the. fact that your office is erred in confirming the addition of Rs. 1,38,16,738/on account of transfer of sundry cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the appellant from the records has occurred. The same therefore deserves to be rectified and the appellant is entitled to deduction of interest expenditure of Rs.50,96,138/-. I hold accordingly. The AO is directed to allow deduction of interest expenditure of Rs 50,96,138/- 6.10. Without prejudice to the above (for the sake of repetition to some extent), it may be noted that following facts are on record [both before the AO as well as Ld. CIT(A)]; a. The appellant had obtained the loan of Rs. 4 crores from Bank of Maharashtra for construction of project of Kapil Malhar. During the year under consideration, the remaining part of this project Kapil Malhar has been sold to Indorigin Electric Ltd. However, the loan outstanding against Bank of Maharashtra as on 31st of March 2006 has not been transferred to the transferee company Indorigin Electric Ltd as a liability. b. It was the contention of the appellant [both before the AO and Ld. CIT(A)] that the balance amount of loan (at Rs.2,53,76,467/-) was utilised for giving deposit of Rs.2,95,00,000/- against the leave and license agreement of commercial building at Balewadi, Pune (ie. the Business Centre of the appellant) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HDFC Bank Ltd, Law College Road, Pune 10,02,980.76 HDFC Bank Ltd, FC Road, Pune 1,02,620.67 IDS (AY 2007-08) 12,41,669.00 Prepaid Brokerage 14,25,600.00 Total 3,46,94,266.00 Total 3,48,76,192.31 g. Apparently the above table could not be seen by the Ld. CIT(A), while deciding the claim of the appellant for grant of the claim of the appellant in respect of interest of Rs.50,96,138/-. 6.11 Hence, it is clear that from the records that the interest liability on bank loan was an allowable deduction. Apparently, the Ld. CIT(A) had not considered the overall facts and circumstances as were available on records which resulted in a mistake which was apparent from records. Due to non-consideration of these facts already on record, a mistake apparent from records has occurred. Hence, the AO, as already indicated above, is directed to allow ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of the said buildings or all claims, damages, compensation or expenses payable in consequence of any accident or injury sustained by any workmen or other person whether in employment of the Developers or not shall be paid by the Developers and not by the Owners and the Promoters. The Developers shall keep the Owners and the Promoters indemnified from all such claims and demands whatsoever. Page No. 20, Column No. 20: That all sums receivable and recovered by way of consideration or otherwise in the said the scheme i.e. constructions and sale of 90 tenements in the proposed 3 buildings namely i.e. T-04, T-05 T-06 to be constructed on the portion of land at measuring 6500 sq. mtrs. of area out of the said land shall accrue to the benefit and to the account of Developers. .. The said amount shall be received by the Developers towards reimbursement of all the expenses and costs incurred by them pursuant to the provisions of this agreement and towards their consideration for assuming the obligations under this agreement. In the event however, if any loss being suffered whatsoever then and in that event, the same shall be on account of the Developers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had an outstanding creditors liability in its Books of Accounts. However, during the year assessee has transferred the development rights and projects to its sister concern and as per the assignment agreement they agreed to transfer the remaining project on as is and where is basis and the liability in respect of the sundry creditors outstanding in the above said projects are automatically transferred to the sister concern. Therefore, there is no liability in the Books of Accounts as per the transfer of the projects to its sister concern. Therefore, the Assessing Officer has merely presumed that the assessee has written off these sundry creditors and he presumed that this falls under deemed income of the assessee. Ld.CIT(A) has verified the development agreement and came to the conclusion that the assessee has transferred the project along with the liability to its sister concern. Therefore, there is no reason to interfere with the findings of the Ld.CIT(A). Accordingly, Ground No. 3 raised by the revenue is dismissed. 30. Ground No. 1 and 4 are general in nature, accordingly, these grounds are also dismissed. 31. In the result, appeal filed by the Revenue is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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