M/S MITTAL HOSPITAL LTD.,AJMER vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, AJMER

PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 13th July, 2017 of ld. CIT (A), Ajmer for the assessment year 2013-14. The assessee has raised the following grounds of appeal :-

“ (1) That the learned commissioner of Income-Tax (Appeals), Ajmer has grossly erred in law as well as on facts in upholding the addition of boundary wall of Rs. 8,55,750/- to the cost of construction of Mittal College of Nursing, Ajmer. (2) That as per books of accounts of the appellant company, the value of Civil Construction of Nursing College comes to Rs. 4,30,17,650/- before adding expenditure on electrification of Rs. 9,11,871/- in the cost of construction of Nursing College of Rs. 4,30,17,650/-, the valuation comes to Rs. 4,39,29,521/-.

2 ITA No. 747/JP/2017 Mittal Hospital, Ajmer.

(2)(ii) The valuer has given the valuation of building of Mittal College of Nursing at Rs. 4,24,09,061/- and if we added boundary cost of Rs. 8,55,750/- in it, the total valuation comes to Rs. 4,32,64,810/- as against books of accounts, it is Rs. 4,39,29,521/-.

In view of the facts and circumstances of the case the addition of Rs. 8,55,750/- are contrary to the facts and bad-in-law and deserve to be deleted. Therefore, it is prayed that the addition of Rs. 8,55,750/- which is already included in cost of Mittal College of Nursing building may please be deleted.

(3) The appellant further begs to leave, to add, to alter, amend or delete any grounds on or before the date of hearing of the appeal.”

adjudication is the addition made by the AO on account of the cost of construction of

the building of Mittal Nursing College to the extent of Rs. 8,55,750/- being the cost

of boundary wall.

material on record. During the course of assessment proceedings, the AO noted

that the assessee has made an addition of Rs. 11,30,44,635/- in the building

account. As per the details furnished by the assessee and valuation report dated

8.3.2016 prepared by the Approved Valuer, the cost of construction as shown in the

books of accounts and as per the Valuation Report is given by the AO in para 4.3 as

under :-

As per Approved Valuer As per Difference Books/CA Total Less Supervision Net value of assessment charges/Cheaper property of cost material @ 5% Nursing 4,46,41,116/- 22,32,056/- 4,24,09,060/- 4,30,17,650/- (-) 6,08,590/- College Hospital 4,37,48,717/- 21,87,436/- 4,15,61,281/- 4,08,24,869/- 7,36,412/- Building

3 ITA No. 747/JP/2017 Mittal Hospital, Ajmer.

The dispute is only regarding the cost of construction of boundary wall of Nursing

College of assessee. As per the details given in the above table, the assessee has

shown the cost of construction of the building at Rs. 4,30,17,650/- which was shown

in the Valuation Report of the Approved Valuer at Rs. 4,24,09,060/-. Thus there was

a difference of Rs. 6,08,590/- which is shown by the assessee more in the books of

accounts in comparison to the cost of construction estimated by the Approved

Valuer. The AO further noted that the valuer has not taken into consideration the

cost of boundary wall while estimating the cost of construction and accordingly the

AO has made an addition of Rs. 8,55,750/- on account of the cost of construction of

compound/boundary wall of Nursing College. The assessee challenged the action of

the AO before ld. CIT (A) but could not succeed. We find that when the AO has

accepted the Valuation Report of the Approved Valuer, then the addition made by

the AO of Rs. 8,55,750/- without giving the credit of Rs. 6,08,590/-, which is more

as per the books of accounts of the assessee in comparison to the cost of

construction estimated by the Approved Valuer is not justified. Our attention was

also invited to the details of the expenditure incurred by the assessee on cost of

construction and as per the ledger accounts maintained for construction purpose, we

find that the assessee has separately shown the cost of electrical items to the extent

of Rs. 9,89,587/- which is not part of the cost of construction of Rs. 4,30,17,650/-

shown by the assessee in the books of accounts in respect of Nursing College

building. Whereas as per the Valuation Report the Approved Valuer has estimated

the cost of construction by including the cost of electrical items at 10% of the total

cost of construction. Thus when the assessee has separately included more than Rs.

9.00 lacs as cost of electrical items apart from the cost of construction of building,

4 ITA No. 747/JP/2017 Mittal Hospital, Ajmer. then the total cost of construction including the electrical items shown by the assessee in the books of accounts would come to about Rs. 4.40 crores in comparison to the cost of construction estimated by the Approved Valuer at Rs. 4.24 crores. In view of the above facts and circumstances of the case, we find that the addition made by the AO on account of cost of construction of the boundary wall without appreciating the fact that the assessee has shown more cost of construction in the books of accounts than the cost of construction estimated by the AO. Thus the said addition is not justified. Even otherwise, the addition made by the AO is within the tolerance range as the difference is only around 2% and, therefore, when the AO has accepted the Valuation Report of the Approved Valuer, no further addition is called for. Accordingly, we delete the addition made by the AO on this account. 4. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 03/05/2018. Sd/- Sd/- ¼ HkkxpUn½ ¼ fot; iky jkWo ½ (BHAGCHAND) ( VIJAY PAL RAO ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated :- 03/05/2018. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s. Mittal Hospital, Ajmer. 2. izR;FkhZ@ The Respondent-The ACIT Circle-2, Ajmer. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 747/JP/2017} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत

5 ITA No. 747/JP/2017 Mittal Hospital, Ajmer.