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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI ABY T VARKEY, JM & SHRI PRASHANT MAHARISHI, AM
This appeal is filed by Balaji Homes, Panvel (assessee appellant) against the appellate order passed by the National faceless appeal Centre (NFAC), Delhi (the learned CIT – A) for assessment year 2010 – 11 passed
Assessee is aggrieved with the same and is in appeal before us wherein the only issue involved is the disallowance of ₹ 50 lakhs towards completion expenses towards project Balaji Galaxy claimed by the assessee.
In the case of the assessee for this assessment year, this is the second round of appeal before the coordinate bench.
Earlier in ITA number 4490/M/2016 for assessment year 2010 – 11 dated 6/4/2018 when the disallowance of provision for expenses amounting to ₹ 50 lakhs against the project Balaji Galaxy made by the learned assessing officer and confirmed by the ld CIT (A) , on appeal by assessee, the coordinate bench per para number 5 restored the matter back to the file of the learned CIT – A to re-appreciate the claim of the assessee and directed assessee to demonstrate actual /crystallization of these expenses in the impugned assessment year.
Brief facts of the case shows that the assessee is a partnership firm carrying on the business as builder and developer, has filed return of income declaring a total income of ₹ 10,866,650 on 14/10/2010.
ii. Both the projects have been completed during the year and therefore the complete income and expenditure is offered for taxation during this year. iii. The learned assessing officer on perusal of the details filed by the assessee found that assessee has debited provision for expenses towards Balaji Galaxy project of ₹ 50 lakhs. The assessee was asked to explain why the above provision should not be disallowed. iv. The assessee explained that these are the absolutely eligible claims under section 37 (1) as the above provision has been made on the basis of the expert opinion of the architect by letter dated 31/3/2010 wherein it is indicated that the amount of expenditure remaining to be incurred for completion of the above project is ₹ 50 lakhs. These expenses have been provided for in the accounts of the assessee on completion of the project for which the complete revenue has been offered by the assessee. It was further stated that the above expenditure could not have been provided for in the books of account for subsequent years. vi. Accordingly the addition was made in the total income of the assessee was determined at ₹ 17,709,235/– by assessment order dated 6/3/2013. vii. When the assessee approached the learned CIT – A, he confirmed the action of the learned assessing officer holding that the assessee is trying to debit the estimated expenses of the future years as its provisions and further these provisions have also been made based on the anticipated cost of the project. He further held that the provision was not an unascertained liability and therefore the deduction cannot be granted. Accordingly, the disallowance was confirmed.
Assessee approached the coordinate bench wherein in ITA number 4490/M/2016 for assessment year 2010 – 11 the appellate order was passed on 6/4/2018 by the coordinate bench wherein as per paragraph number 5 the issue was restored back to the file of the learned CIT – A to reappreciate the claim of the assessee and again adjudicate the same with a direction to the assessee to demonstrate/crystallization of these expenses in the impugned assessment year.
The learned CIT – A rejected the explanation of the assessee for the reason that the coordinate bench has
The assessee is aggrieved with appellate order has preferred appeal before us. The learned authorized representative has submitted a detailed paper book containing 60 pages submitting the same information, which was submitted before the lower authorities. He extensively referred to sales summary of the project, details of year wise expenditure incurred in the project, project -wise profitability with the closing stock working, details of expenditure incurred in subsequent period and certificate of architect dated 31st of March 2010. He also referred to the completion certificate dated 23 June 2011 of the project. He relied upon the decision of the coordinate bench in Ashiana housing limited ITA number 714//2018 to drive home his argument.
We have carefully considered the rival contentions, used the orders of the lower authorities, considered the order of ITAT wherein a direction was given to the assessee and the learned CIT – A. The simple issue involved in this year is that assessee is following the project completion method. On the completion of the partial project, assessee has booked the revenue, whether the necessary cost incurred to complete the project should be allowed to the assessee as a deduction or not. Facts show that the project area of 13,808 ft² will have the estimated project construction cost of ₹ 22,230,880 on completion of the project. The assessee has shown revenue to the extent of 77.50% of the project team 31/3/2010. Therefore, the estimated expenses until 31/3/2010 should have been incurred/ booked by the assessee is ₹ 17,230,880. /–. On perusal of page number 38 and 39 of the paper book shows that the total project cost is Rs 254,31,953/– out of which the closing stock at the end of
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 30.10.2023.