TMI Blog2023 (11) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ght Bride Pvt. Ltd. Unit No.G-1 shop / garage is directed to be excluded from while calculating the weighted average and actual price should be taken. Accordingly, for all other 12 units the rate for estimating the sales is taken at Rs. 17,172/-. Thus, ld. AO is directed to work out the consequential relief and accordingly, the appeal of the Revenue is partly allowed. Similarly, for A.Y.2012-13 and 2013-14 also the weighted average rate is Rs. 17,636 and Rs. 18,136/- respectively. Thus, ld. AO is directed to give consequential relief by applying this weighted average rate and our finding given will apply mutatis mutandis for these two years also. Accordingly, the appeal of the Revenue on this issue is partly allowed. Disallowance of construction expenditure - expenses have been incurred after the issue of occupation certificate (OC) hence, these expenses cannot be allowed - According to the AO, once the OC has been issued, the construction of the building is said to be completed and that after the said date, there cannot be any expenditure - HELD THAT:- The expenses are mostly for maintaining building and during the course of defect liability period assessee was responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged more than 9% ignoring that advances made to the sister concerns were only to the tune of Rs. 7,40,39,682/- in the interest of other loan to the tune of Rs. 60,27,55,727/- cannot be disallowed. Thus, disallowance in such a case at the most can be made in respect of differential interest rates of loans given to sister concern of Rs. 7.40 Crores. Thus, the action of the ld. CIT (A) in restricting the disallowance is justified which does not warrant any interference. Accordingly, this ground raised by the Revenue is dismissed. Disallowance of interest made u/s. 14A - HELD THAT:- CIT (A) has correctly deleted the disallowance on the ground that assessee has sufficient own funds to make the investment which were to the extent of 53.61 Crores as against value of investment of Rs. 33.5 Crores. This issue now stands covered by the decision of the Hon ble Supreme Court in the case of South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] - Accordingly, the action of the ld. CIT(A) deleting the said disallowance is upheld. Disallowance u/s. 40(a)(ia) - Assessee had not deducted TDS on interest paid to Kotak Mahindra Prime Ltd. - CIT(A) restricting the disallowance to 30% - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had additional areas like store room, flower bed and passage area and lastly, some of the units had no natural ventilation and due to certain market conditions also, the price bookings and rates are varied. Apart from that, it was also submitted that the project was on off-location and no good development and constructions in the surrounding area was there during that period and it was covered with slums all around the building premises. 4. The ld. Assessing Officer rejected all the contentions after giving his detailed reasoning stating that, firstly, the project was centrally located and directly assessable to Eastern Express Highway and easily accessible from Mumbai International Airport and Domestic Airport, and newly build freeway flyovers have come connecting to various important places. Apart from that, he also rebutted the assessee s contention of the additional flower bed area and passage area on the grounds that as per the Municipal rules builder can only sell area as per the approved plans and any encroachment done on the flower bed or any alteration without the permission of the Municipal authorities is not permissible and the passage area is only common area proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1822 27,951 31.8.10 50980000 NIL 2. Premal Thakar/ Darshana P. Thakar 1102 101.18 1088 17,463 31.8.10 19020000 11410944 3 Black Stone Infra Projects P. Ltd. 1104 207.65 2233 16,650 30.8.10 40000000 25235133 4 Sushil Budhia / Suchitra Budhia/ Usha Gopalan 1103 117.50 1264 16,650 16.6.10 21645500 14284464 5 Sterling wilson Powergen P. Ltd. 1001-1006 962.50 10352 16,650 26.5.10 172500000 116987952 6 Pratibha Pipes Structural Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re adopted the highest sale rate in respect of unit no 1101 being Rs. 27,951/- per sq. ft. during the year and applied the same in respect of all other units sold by the appellant during the Year and made the addition on account of alleged suppressed sale of Rs. 46,75,48,737/-. The AR of the assessee has vehemently opposed the addition made and has submitted that the rates adopted by the Assessing Officer, as price of unit no. 1101 as calculated by the Assessing Officer is higher since the calculation is being made on the basis of the consideration as well as the area stated in the agreement only. However, it was contended that the said party was A also allowed exclusive use of additional area of AHU admeasuring 1647.54 Sq. Ft. abutting the location of the said unit and specifically earmarked to the said unit. Thus, if the total benefit of the area under use and occupation by the said unit holder was considered, it would be noticed that the rate per square feet was Rs. 14,691/- ps. Ft. Instead of Rs. 27,952/- ps. Ft. as per the Assessing Officer. The appellant therefore prayed that the comparison has to be done between the sale price of various units after taking into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-12. The A.O. has not made any inquiry and has not brought any material or any evidence on record for holding that the appellant had received unaccounted sale consideration of Rs. 46,75,48,737/-. In contrast the books of accounts of the assessee are found to be duly audited without any adverse remark of the auditor. The books of accounts were not rejected during the assessment proceedings. It is a known fact that in a project which is spread over several years, the market price is bound to be different in different years. The mere difference in sale price of agreement is no evidence unless is corroborated by some concrete evidence of unaccounted sale transactions. 6. Before us, ld. Counsel for the assessee submitted that before the ld. CIT(A) assessee has raised various propositions which can be summarized in the following manner:- a. It is submitted that there are no evidences with the Ld. AO to presume that assessee has suppressed sales. In absence of any adverse evidence, Ld. AO cannot rewrite the sale consideration on presumption and surmises. Moreover, the Ld. AO has not rejected the books of account. Having accepted the book results, he could not have replaced the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent sizes ranging from 895 sq ft to 10,360 sq ft. The per sq ft rate of unit cannot be same for different size of units. Further, while estimating, even the sales rate for garage is taken at rate at which other self-compliant unit is sold. h. Identical issues decided by Hon'ble judiciary in various decisions wherein it has been held that sale price of a unit cannot be estimated on presumption and surmises without any corroborative evidences. 6.1 He further submitted that from the perusal of the details furnished in the paper book, it can be seen that there were certain units who had access to much larger area like common area, balcony and flower bed where unit alone had an access and therefore, variation in the price is fully justified. 7. On the other hand ld. CIT DR in HER counter submissions has stated as under:- (i) The main contention of the assessee, which has been accepted by the Ld. CIT(A), is that some of the units have fetched higher sale price because of the additional area abutted to the said units. This contention of the assessee is incorrect as in none of the agreements, as admitted by the assessee itself, the said additional areas were included Now o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to look through the arrangement between the apparent and the real situation. The reasons for such arbitrary pricing of units sold, which were booked in the same period, is best known to the parties concerned viz., the seller and the buyer and the same are within their exclusive knowledge. The Assessing Officer can draw inference only from the surrounding circumstances under the peculiar facts and circumstances of each case. Since the assessee has not brought on record any plausible reason to justify such extreme variation in the sale rates and since there is no uniformity in the sale rates of units sold in the same building in the same period, it is clear that there has been suppression of sale receipts. In the absence of any specific agreement, principle of uniformity in prices shall be followed. Thus, the onus is on the assessee to establish genuineness of claim of justified discriminatory rates, which he failed to do so. (iv) In this regard, reliance is placed on the decision of the Hon'ble ITAT, Mumbai in the case of Income-tax Officer 19(3)(1), Mumbai vs. Diamond Investments Properties (ITA No. 5537/Mum/2009 dated 29.07.2010), wherein the Hon'ble ITAT has uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of all the units sold for all the assessment years. In response, assessee had filed following charts as a comparison for all the three assessment years which for the sake of ready reference is reproduced herein below, TO SEE THE WEIGHTED AVERAGE OF ALL THE SALE PRICE AND RATE :- AY 2011-12 (l) Name of Party (2) Unit No. (3) Agreement value (4) Agreement Area (5) Rate (6) [4/51 Rate where actual rate is less than weighted average rate Value (8) [5*7] Difference (9) [8/4] Remarks 1 Action Construction Equipment Ltd. 605 3,80,00,000 2,123 17,899 This company also purchased unit - 606 admeasuring 2,235 sq,.ft. in A.Y, 1213 @ 19,016/- 2 Kumud I Mehta 607 1,38,69,000 932 14,883 2,289 21,32,568 15-38 Purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 522 54,08,056 3.14 This company purchased entire i4th Fl 25,026 sq. ft. @ 13.222/-.Further, balance units- 1307-1312admeasuring 2,508 sq.ft. pur. in A.Y. 1213 @16,789/- 11 SHL Property Holdings Ltd 1,108 4,82,02,155 2,080 23,173 12 D. Thakkar Construction Pvt Ltd 1,105 3,47,30,000 2,235 15,538 1,634 36,51,851 10.51 This Company also purchased entire106 unit of1959 sq.ft. @ I7,728/- at the same time 13 Techno Force(I) Pvt Ltd. 1,107 3,50,00,000 1,766 19,818 - - - The said unit was having 4 car parking space TOTAL 73,97,71,655 43,080 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Average Rate 17,636 AY 2013-14 Sr. No. (1) Name of Party (2) Unit No. (3) Agreement value(4) Agreement Area (5) Agreement Rate(6) [4/51 Difference in rate where actual rate is less than weighted average rate Difference in value %difference 1 Lukesh Gupta Aarti Gupta 1007 2,68,00,000 1,902 14,090 4,045 76,94,399 28.71 2 Rashmi Jain 1008 to1010 5,00,00,000 3,212 15,567 2,569 82,52,371 16.50 3 Novels Lines Logistics Pvt. Ltd. 1201 1206 5,00,00,000 2,655 18,832 - - - 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the Revenue on this issue is partly allowed. 11. Coming to the issue of disallowance of Rs. 21,65,79,666/- in respect of construction expenditure, the Assessing Officer in his assessment order has observed that the expenses have been incurred by the assessee after the issue of occupation certificate (OC) i.e., after 16/02/2010 and hence, these expenses cannot be allowed. According to the AO, once the OC has been issued, the construction of the building is said to be completed and that after the said date, there cannot be any expenditure. For this purpose, the AO has relied upon the inquiries made with BMC seeking information with respect to the completion of the building. Referring to the nature of expenses incurred, the Assessing Officer has stated that the finishing work refers to the finishing work of all core areas, lift, lobby, passage and toilet. The AO stated that the Dy. Chief Engineer (Building Proposal) would not have given the OC if the said work was pending. Therefore, the claim of the assessee that the said work was completed during the year under appeal cannot be accepted. He has further observed that after receiving the OC, the expenditure incurred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of defect liability period, the assessee builder is responsible to replace any damages in the building construction work. Moreover, if some work is completed but it is not of proper quality or specifications, then the assessee builder is responsible to again make it. The expenses are also in the nature of butler services, housekeeping and cleaning services which are in the nature of maintenance expenses. It can be seen that the nature of work which was incurred by the assessee during the year are not of such type which can affect the occupancy of the building by the occupants. c. As regards claim of expenditure of the earlier year, i.e. A.Y. 2010-11, the assessee submitted that although the bills and evidences for claim of expenditure would show that while the bills are dated and related to the earlier year, the expenditure was booked and incurred in the year under consideration since the bills were belatedly received. Further, the assessee also submitted that some bills could have been received on a later date for which the work would have commenced and completed and which are subject to defect liability period. In such cases, the expense are not accounted and boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee to be provided to the customers. 14. Further, it was submitted that out of expenses disallowed by Ld. AO, part of the expenses were in the nature of maintenance of building which were incurred by the assessee on behalf of the their customers. It is submitted that the society was formed in 2017. Till such time, the assessee was incurring common maintenance cost for running and maintaining the building and thereafter recovering such costs from the tenants in the proportion of area. These facts are reflected at Recital no. 16 of the agreement entered by the assessee with the purchasers. Further, even in subsequent years, the assessee had incurred cost on behalf of all tenants and raised bills on the parties for such common maintenance expenses. These expenses were debited to profit and loss account and claimed as expenditure and the receipts from the parties is credited to profit and loss account and offered as income in the return of income. 15. On this issue, Ld. CIT DR stated as under:- (i) Enquiry u/s. 133(6) of the Act was carried out with Dy. Chief Engineer (Building Proposal), ES-I, BMC, which revealed that architect had submitted building completion cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e building should be ready and constructed and that no work would be pending on the receipt of occupancy certificate. The expenses are mostly for maintaining building and during the course of defect liability period assessee was responsible to replace any damages in the building construction work. Moreover, if some work is completed but it is not of proper quality or specifications, then the assessee builder is responsible to again make it. Further it is seen that most of the expenses are also in the nature of butler services, housekeeping and cleaning services which are in the nature of maintenance expenses. It is seen that the nature of work which was incurred by the assessee during the year are not of such type which can affect the occupancy of the building by the occupants. There are certain expenditures which assessee had stated that although bills and evidences and bills related to earlier date, however, the expenditure has been booked and incurred in the year under consideration since the bills were belatedly received and some of the bills were received on a later date where the work had completed which was subject to defect liability period. Thus, it cannot be held that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 21. Ld. CIT (A) had deleted the addition after observing as under:- 7.7 I have perused the assessment order of the A.O. and the submissions of the appellant in this regard. The Assessing Officer in his assessment order had noted that the appellant had taken secured loans from various parties at the Interest rate ranging from 14.50% to 23% pa and unsecured loans taken at the interest rate ranging from 12% to 15% pa. As against the same, the appellant had given ICDs to its sister concern, i.e. Tulip Shares Structures Pvt. Ltd. at interest rate of 9% pa. The Assessing Officer observed that the interest-bearing funds were diverted by the appellant to its sister concern at a lower interest rate and hence excess interest on the amount advanced is required to be disallowed. Accordingly, the Assessing Officer determined the interest paid to the 10 parties at higher interest rate and disallowed the interest in excess of 9% which was charged by the said parties! The AR of the appellant has submitted that no disallowance can be made in the present case it can be seen that the advances were in the nature of commercial expediency. The appellant has further contended that it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of interest by holding that disallowance of interest, if any, is to be restricted to the amount of advance actually given by the assessee to sister concern. Having regards to the facts and circumstances of the case it is held that the assessee has given advances to its sister Concern out of unsecured loans on which interest has been debited to the Profit loss account therefore, the addition made by the AO on this issue is directed to be restricted to Rs. 37,98,236/- and the balance addition is deleted. Accordingly this ground of appeal is partly allowed. 22. From the perusal of the impugned order, we find that differential interest rate on loans to the extent of advances to M/s Tulip Shares Structures Pvt. Ltd. cannot be disallowed because the loan given to the said party was to the tune of Rs. 7.40 Crores, whereas interest rate by the assessee to various parties in respect of loan aggregating to Rs. 50.27 Crores which has been considered by the ld. AO. The ld. AO has disallowed interest of all the loans where interest was charged more than 9% ignoring that advances made to the sister concerns were only to the tune of Rs. 7,40,39,682/- in the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s identical to the ground No.3 in A.Y.2011-12 and same facts and reasoning have been given by the ld. CIT(A) and therefore, in view of the finding given above wherein we have confirmed the order of the ld. CIT(A), the ground raised by the Revenue is dismissed. 26. Lastly, in ground No. 4 department has challenged the action of the ld. CIT (A) in restricting the disallowance u/s. 40(a)(ia) to the tune of Rs. 8,45,106/- applying the proviso to Section 40(a)(ia) in restricting the disallowance to 30%. The ld. AO has stated in his assessment order that assessee had not deducted TDS on interest paid to Kotak Mahindra Prime Ltd. and hence the claim of expenditure of Rs. 8,45,106/- has been disallowed u/s. 40(a)(ia). 27. However, the order of the ld. CIT(A) while confirming the disallowance by restricting to 30% of the expenditure u/s. 40(a)(ia) is not correct, because the said amendment was brought in the statute w.e.f. 01/04/2015 and is applicable prospectively. This has been held so by the Hon ble Supreme Court in the case of Shree Choudhary Transport Co. vs. ITO reported in 426 ITR 289. Hence, the action of the ld. CIT(A) in restricting the disallowance to 30% is not correct. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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