MACROTECH DEVELOPERS LIMITED (MDL),MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 7(3), MUMBAI

2. On facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of Rs. 1,83,03,063/- made u/s 36(1)(vii) of the act.

3. Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 16,22,342 made by the Assessing Officer under the head "marketing expenses" paid to M/s Lodha Developers UK Ltd, without considering without considering the fact that the ITSC order dated was sustained by Hon'ble Bombay High Court vide its order dated 14th February 2017 and Hon'ble Supreme Court vide its order dated 18.01.2018?

4. Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs.1,12,449/- made on account of foreign exchange loss without considering the fact that the assessee had already capitalized all directly related project expenses to work in progress and If the expenses are capitalized, the foreign exchange loss arising from these costs should also be capitalized as part of the project cost?

7. Whether on facts and circumstances of the case and in law, the learned CIT(A) was right in deleting the disallowance of Rs 720,74,02,961/-relying upon the decision of the judgement of the jurisdictional High Court in the case of Lokhandwala Construction India Pvt Ltd.260 ITR 579 which was rendered before the proviso to Section 36(1)(iii) of the Act.?

8. Whether on the facts and circumstances of the case and in law, the learned CIT(A) is justified in deleting the disallowance of Rs. 15,84,12,237/- made w/s. 14A of the Act without considering the fact that restricting the disallowance to the extent of exempt income earned is not in conformity with statuary provisions and also as per CBDT Circular No. 5 of 2014 dated 11.02.2014?

10. Whether on the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 16,22,342 made by the Assessing Officer under the head 10 "marketing expenses" paid to M/s Lodha Developers UK Ltd, without considering the observations and directions of the Hon'ble ITSC in its order dated 28/11/2014 under Section 245D(4) of the Act ?

11. Whether on the facts and circumstances of the case and in law, the learned CIT(A) overlooked the fact that the ITSC, in its order dated 28/11/2014, had already examined and disallowed 50% of the marketing expenses in the assessee's group case due to the inability to substantiate the actual work done and the circumstances in the current assessment year are identical, and as per the ITSC's earlier decision, 50% of the claimed expenses, amounting to Rs. 16,22,342, should be disallowed?.”

The Learned Authorised Representative (ld. AR) of the assessee submits that assessee-company is a part of Lodha Builders and Developers Group, Mumbai. Majority of grounds of appeal raised by Revenue are covered by the decision of Tribunal either in assessee’s own case or in case of assesses group. The ld. AR of the assessee also furnished ground-wise chart narrating the relevant part of orders of lower authorities’ and the details of decisions of Tribunal or Higher Courts. The ld. AR sought permission of the Bench to begin with its submission. The learned Departmental Representative (ld. Sr.

DR) for the revenue has not opposed to the prayer of ld. AR of the assessee for allowing him to make submission of both the appeals.

3. Ground no. 1 & 2 in revenue’s appeal relates to disallowance for provision of doubtful debts/ advances. The ld. AR of the assessee submits that during assessment, the assessing officer noted that assessee has made a provision of doubtful debts against the advances made to various parties. The assessee was asked to explain as to how provisions are allowable deduction. The assessee in its submission explained the fact that assessee made various advances for acquiring land for different project. The deals were not materialized nor were the advances paid to parties or land aggregator returned back. As recovery of such advances was doubtful, thus, provisions were made against such advances. The assessing officer doubted advances of Rs. 1.83 crore though the assessee has made provision of 3.13 crore. The ld. CIT(A) allowed relief to the assessee on appreciating the fact that assessee has claimed business loss under section 28. The assessee also relied on the decision of Bombay High Court. Bombay High Court in assessee’s group case in Asthavinayak Real Estate Private Limited allowed relief by treating the same as a business loss. The ld. CIT(A) while allowing relief to the assessee followed decision of Bombay High Court in Mahindra and Mahindra Ltd. Vs CIT (2023) 456 ITR 723 (Bom). The ld AR of the assessee submits that these grounds of appeal are covered and may be dismissed.

5. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that ld. AR of the assessee explained the fact correctly. The assessing officer disallowed the provisions of advances under section 36(1)(vii) by taking view that assessee does not fulfilled the addition of section 36(2). Moreover, the assessee has not actually written off bad debt but merely a provision of as evident in the books of account. The assessee has not reduced the debt from individual ledger of debtors, but reduced the same from the total advance which clearly shows that assessee merely made a provision for doubtful debts and not actually written off. Before ld. CIT(A), the assessee filed a details written submission. The submissions of assessee are duly recorded on page no. 15 – 19 of impugned order. The assessee submits that assessee has written off advances paid for purchase of land as it has become recoverable. The assessee in its books mentioned terminology “provision for doubtful advances” in effect it has been written off. The assessing officer not accepted the submission of made a disallowance of Rs. 1.83 crore. The assessee also furnished relevant extract of auditor accounts. The assessee also explained that they are engaged in development of real estate project. The assessee made advances for business activities for purchase of land. The payments were shown as advances. The advances were outstanding from long period and could not be recovered despite several attempts. The assessee also furnished party-wise details of advances and copy of agreements. The assessee also relied on the decision of Hon’ble Apex Court in Ramchandar Shivnarayan Vs CIT 111 ITR 263. The assessee also submitted that on similar set of fact in assessee’s group case in Asthavinayak Real Estate Pvt. Ltd. in respect of non-recovery of advances towards stamp duty was claimed as business loss and was allowed by ld. CIT(A). The assessee also relied on the decision of Jurisdictional High Court in Mahindra and Mahindra vs CIT (supra).

6. We find that ld. CIT(A) on considering the submission of assessee held that in principal the amount cannot be treated as bad debt as it did not form part of revenue receipt in earlier years. However, the amounts were advanced in a regular course of business and have become irrecoverable, therefore, can be allowed as a business loss. The ld. CIT(A) also followed the decision of Bombay High Court in Mahindra and Mahindra Vs CIT (supra). On independent appreciation of facts, we find that the assessee has made advances in the course of business activities for purchase of land. Neither the deals of land was materialised nor the amount has not been recovered, therefore, it is a pure business loss. Thus, we affirmed the order of ld. CIT(A), with our additional observation. In the result, ground No. 1 & 2 of revenues appeal are dismissed.

Further, on similar set of fact on similar disallowance, the Tribunal in assessee’s group case in Macrotech Developers Ltd. also allowed similar relief dated 28.03.2022 copy of said decision is also placed on record.

9. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities. We find that the assessing officer while passing the assessment order noted that Income Tax Settlement Commission in its order dated 28.11.2014 in assessee’s group cases held that assessee was not able to fully substantiate their claim of marketing and selling expenses and 50% of said expenses to Lodha Developers UK Ltd. was disallowed. The assessing officer on the basis of his observation disallowed 50% of the reimbursement made to Lodha Developers UK Ltd. The assessee during the relevant financial years paid Rs. 32,44,685/- on account of reimbursement of marketing services. The assessing officer disallowed 50% of such reimbursement. The ld. CIT(A) recorded that similar disallowance was made in A.Y. 2014-15 and on appeal before Tribunal, the matter was restored back to assessing officer to re-examine the allowability of such expenses. The assessing officer passed the order giving effect dated 30.11.2022 and allowed entire expenses. The ld. CIT(A) on the basis of order giving effect allowed relief to the assessee. Before us, the ld. CIT-DR for the revenue failed to bring any material either on fact or on law to take any other view. Once the similar disallowance has been allowed by assessing officer in his order giving effect in A.Y. 2014-15, therefore, we do not find any merit in the grounds of appeal raised by revenue. In the result, ground no. 3, 10 & 11 are dismissed.

The ld. AR of the assessee submits that this ground of appeal is also covered by the decision of Tribunal in assesses own case A.Y. 2015-16 dated and further in assessee’s group case in MMR Social Housing Pvt Ltd in dated 21.09.2022.

Out of total interest expenses of Rs. 53.28 crore, the assessee has capitalised interest of Rs. 20.74 crore of work in progress. The assessee has claimed deduction of Rs. 20.74 crore in the return of income. The assessee was issued show cause notice as to why interest expenses claimed in return of income by not disallowed. The assessee filed its reply and also submitted that interest expenses have been claimed as deduction in the year of incurrence thereof for the reasons that interest is a periodic cost and was claimed in the year which was incurred. The assessee also submitted that such interest cost has been claimed as deduction and the same is allowed under section 36(1)(iii) as interest pertaining to stock in trade of assessee. The assessee also relied on the decision of Hon’ble Apex Court in Taparia Tools Pvt. Ltd. Vs JCIT (Civil Appeal No. 6366/2003 SC) and CIT Vs Lokhandwala Construction India Limited (260 ITR 579 Bom). The reply of assessee was not accepted by assessing officer. The assessing officer was of the view that assessee has not followed the correct method for accounting the expenses towards project developed by assessee. The entire interest expenses have to be carried over to the work in progress and shall be allowable as deduction in the year in which the revenue pertaining to said interest shall be offered for taxation.

19. On the other hand, the ld. CIT-DR for the Revenue supported the order of assessing officer. The assessing officer made disallowance in accordance with the formula provided in Rule 8D

ITA No. 1272/M/2025 (Assesses’s Appeal)

The assessee further submitted that assessing officer without appreciating the fact that amount sold to MVAT since not due has not been discharged by the assessee and procedure to disallow. The assessee by referring section 42 of Maharashtra Value Added Tax Act-2002, submitted that such section empowered the State Government to provide composition schemes for different classes of dealers. As per notification dated 09.07.2010 by State Government for composition scheme for registered dealer who undertakes construction of flats or unit and in pursuance of agreement along with interest of land underline. As per notification, the assessee is required to levy 1.00% of aggregate amount specified in the agreement or for the purpose of stamp duty, whichever is higher. Further, as per notification, the dealer (assessee) shall make e-payment of amount of composition for return period in which agreement is registered. Thus, the assessee has been discharging the liability in accordance with the provisions of respective statute (State Act) and prayed for deleting the addition. The ld. CIT(A) on considering the submissions of assessee upheld the action of assessing officer. The ld. CIT(A) held that expenditure of Rs. 16,88,815/- cannot be allowed to assessee as expenditure as it has neither due nor paid before due date of filing return of income. The assessing officer rightly disallowed the same and added to the income of assessee. Thus, further appeal by assessee before Tribunal.

Order pronounced in the open Court on 21/07/2025.