DCIT, NEW DELHI vs. M/S. DLF LTD., NEW DELHI

2.5 That the learned CIT(A) has not appreciated that no such finding on satisfaction, as amended by law, has been recorded by the Assessing Officer and as such provisions of section 14A of the Act cannot be invoked.

3.1 That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant‟s case in confirming the net addition of Rs. 11,55,271/- [i.e. after allowing standard deduction @ 30% on gross addition of Rs. 16,50,387/- which works out to Rs.4,95,116/-] made by the Assessing Officer on account of notional rent where security deposits were received from the tenants but no rental income has been shown by the appellant, whereas in fact the appellant has not received any rental income from these tenants. [Page 228-231 of C IT(A)‟s Order] 3.2 That learned CIT(A) has grossly erred in law arid on the facts and in the circumstances of the appellant‟s case in appreciating the fact that the taxable income means real income and not a fictional income.

3.3 That in the alternative, claim of maintenance expenses may be considered and allowed as permissible deduction.

4.1 That learned CIT(A) has grossly erred in law and on the facts and in the circumstances of the appellant‟s case in confirming the disallowance of Rs. 1,16,935/- on account of interest on late deposit of TDS. [Page 253- 259 of CIT(A)‟s Order] 4.2 That claim of interest is permissible deduction under law and Assessing Officer may be directed to accept the same.

4.1 That learned CIT (A) has grossly erred in law and on the facts and in the circumstances of the appellant‟s case in confirming the addition of Rs.4,61,57,388/- on account of short deposit of Dividend Distribution Tax. [Page 259-264 of CIT (A)‟s Order] 5.2 That impugned order is without proper appreciation of facts and /application of mind.

6. That the order passed by the learned CIT(Appeals) is bad in law as well as wrong on facts and erroneous in points of law and right is reserved to assail the same on such other ground or grounds as may be advanced at the time of hearing for which the appellant craves leave to amend, vary or add to the grounds hereinbefore appearing.

1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.3,09,16,658/- made by the AO on account of disallowance of prior period expenses ? 2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.7,72,65,10,922/- made on account of disallowance of deduction u/s. 80 IAB of the IT Act, 1961?

2A Whether the CIT(A) under the facts and circumstances of the case and in law was correct in allowing deduction of Rs.772,62k,10,922/- u/s. 80 IAB of the Act, without deducting the short allocation of overheads of Rs.15,48,61,000/- to the SEZ division as worked out by the Special Auditor? 3. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the disallowance of Rs.77,83,55,804/- on account of artificially estimated IDC charges, and pre-ponement of construction cost? 4. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in restricting the disallowance to Rs.83,02,737/- as against Rs.4,00,44,936/- as made by the AO on account of Brokerage & Commission ? 5. Whether the CIT (A) under the facts and circumstances of the case and in law was justified in deleting the disallowance of Rs.5,46,83,000/- on account of interest capitalization ? 6. Whether the CIT(A) under the facts and circumstances of the in law was justified in deleting the addition of Rs.1,66,71,710/- on account of late construction charge? 7. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.28,837/- on account of contingency deposits received during the year ? 8. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.63,159/- on account interest free security deposit? 9. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.25,37,61,992/- on account of registration charges? 10. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.25,37,81,038/- on account of non allocation of overheads to group companies ? 11. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in restricting the disallowance u/s. 14A of the IT Act, 1961 read with Rule 8 D of the Income Tax Rule, 1962 to lRs.10,01,00,000/- as against the disallowance of Rs.71,02,72,000/- made by the Assessing Officer ? 12. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.1,05,19,606/- on account of capitalization of expenses on commercial project not commended? 13. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.13,82,35,746/- on account of reclassification of income from house property to income from business or profession ? 14. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.15,41,010/- on account of notional rental income on vacant / leased properties ? 15. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.6,36,614/- on account of recalculation of depreciation in respect of earlier let out DLF Centre Building, now converted to self occupied property ? 16. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.30,12,202/- on a/c of disallowance of expenses where bills were not in the name of the company ? 17. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.3,48,396/- on a/c of disallowance of excess payment of rent? 18. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing.

is with respect to the deletion of the addition of ₹ 30,916,658/– on account of disallowance of prior period expenses. The learned CIT A dealt with this issue at paragraph number seven of his order. The learned authorized representative submitted that this issue is covered in favour of the assessee as per the order of the coordinate bench for assessment year 2006 – 07 as well as in ITA number 2749/del/2013 for assessment year 2008 – 09 dated 27/05/2019. He referred to paragraph number 42 – 45 at page number 35 – 38 of that decision.

8. The learned departmental representative also stated that the coordinate bench has considered identical issue. However, he relied upon the order of the learned assessing officer.

9. We have carefully considered the rival contentions and perused the orders of the learned lower authorities. The coordinate bench in assessee‟s own case for assessment year 2008 – 09 in ITA number 2749/Del/2013 has dealt with this issue as Under:- “42. In so far as the first issue is concerned, the facts in brief are that the Special Auditors have pointed out that assessee has claimed prior period expenses amounting to ₹ 70,12,062/- on the basis of which, ld. Assessing Officer issued a show cause notice to the assessee. In response, the assessee submitted that first of all, an amount of ₹ 14,63,017/- was on account of purchase of assets being the cost of office equipment and computers and was never claimed as admissible expenses but have been capitalized as fixed assets. The balance amount was stated to be on account of reimbursement to their employees on account of telephone expenses, travelling, printing, and stationary and these are reimbursed if the employees submit the claims after proper verification. The claim though relates to earlier years, but bills were presented and settled during the year under reference, therefore, the same is allowable in this year. Similarly, with regard to legal and professional charges which was paid to various consultants, these payments were made after due verification of the services rendered and the claim was finally settled during the year, hence, allowable in this year only. Likewise, repair and maintenance expenses, the same was on account of annual maintenance, contract overlapping in the subsequent year or miscellaneous repair maintenance for which bills were received after the closing of the year, therefore, all these expenses were crystallized during the year. Ld. Assessing Officer, however, disallowed the amount of ₹ 55,36,471/- which was on account reimbursement relating to employees; and legal and professional expenses.

43. Ld. CIT(A) relying upon the judgment of Hon'ble Delhi High Court in the case of CIT vs. Modipon Ltd., 334 ITR 102 (Del) has allowed the appeal.

44. After considering the rival submissions, we find that precisely similar issue has arisen in assessee‟s own case for assessment year 2006-07 wherein the Tribunal has allowed the same nature of expenditures, after observing and holding as under: “231. We have carefully considered the rival contentions. ₹ 18.51 lakhs were regarding to the leave travel assistance claims of the assessee an ₹ 63 lakhs were on account of reimbursement and telephone and conveyance expenses of the assessee. These expenses were disallowed by the AO. The details of these expenses are enclosed as per Annexure „A‟ at page 101 along with explanatory statement. These bills are pertaining to the regular staff of the employees and are payable and paid at the time of settlement of their entitlement. It is irrespective of the time when employee has actual travelled. In same way, the telephone and conveyance expenses are also reimbursement of the expenditure which would be determining the claim of the employees and admitted by the employer. The special auditor has held so because of the reason that the actual travelling has taken in the previous year. Naturally, it is a matter of common sense for the purpose of LTA claim, the travelling of the employees is prior to the claims submitted by the employees. The CIT (A) has specifically dealt with one instance in para 27.3 of his order. After verification of the details, it was received by the assessee from its employees during this period and after following the decision of Hon‟ble jurisdictional High Court in the case of CIT vs. Shriram Piston – 174 taxman 147, the disallowance is deleted. The reliance of the ld. AR on the decision of Hon‟ble Delhi High Court in CIT vs. Modipan Ltd. - 334 ITR 102 is also apt as the expenditure are settled during the year. Further genuineness of these expenditure is not in doubt and allowabaility of these expenditure is also not in question except classifying them as prior period expenses and there is no difference in rate of taxes for respective years. In the result, we confirm the order of the CIT (A) in deleting the addition of ₹ 22,98,510/- on account of prior period expenditure. In the result, ground no.26 of the revenue‟s appeal is dismissed.”

45. Since, similar issue has been allowed by the Tribunal following the ratio and principle laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Modipon Ltd. (supra), therefore, following the same precedence, we allow the claim of the assessee and consequently the Revenue‟s ground is dismissed.”

10. In view of the above finding of the coordinate bench in assessee‟s own case, we respectfully following the same dismiss ground number 1 of the appeal.

11. Ground number 2 is with respect to the deletion of addition on account of deduction u/s 80 IA B of the income tax act. The learned authorised representative also stated that issue is squarely covered by the order of the coordinate bench in assessee‟s own case for assessment year 2008 – 09 in ITA number 2714/del/2013. He also referred paragraph number 125 at page number 138 of the order. 12. The learned departmental representative also stated that issue is already been decided by the coordinate bench however he relied upon the order of the learned assessing officer. 13. We have carefully considered the rival contention and orders of the learned that lower authorities stopped be find that issue is squarely covered for assessment year 2008 – 09 is per order dated 27 May 2019 as under:- “125. In ground no.12, the Revenue has challenged the deletion of addition ₹ 15,02,99,365/- on account of disallowance of expenses towards non allocation of overheads. 126. Ld. Assessing Officer based on Special auditor‟s observation noted that there were certain discrepancies with regard to apportionment of common overhead expenses incurred by the assessee company but attributable to group concern were benefitting from such expenditure. Based on the observations of the Special Auditors, the Assessing Officer required the assessee as to why the expenditure of ₹ 15,02,99,365/- benefit of which has accrued to the group entities like, DLF Infocity developers (Chennai Limited) and DLF Cyber City Developers Ltd. be apportioned to them and correspondingly the same should be disallowed in the hands of the assessee. In response, the assessee has submitted the detail reply and submitted that if income expenditure has been incurred on behalf of company, the same have been duly recovered from those companies specifically and assessee has not debited to the P&L account. For the specific expenses which were debited to the concern group companies there is no expenditure which pertains to other group companies and all the expenses debited in the P&L account are related to the business of the assessee. Even the Special auditors have not been pointed out even a single voucher pertaining to other group company which has been wrongly debited to the P & L account of the assessee. Regarding overhead allocation the assessee has submitted as under:

a. That the assessee company has not developed the SEZ rather only constructed the buildings. The deduction u/s 80-IAB is available only in the case of development of SEZ. Mere construction of Bare shell buildings will allow the assessee the deduction u/s 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co- Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the relinquishment of right is irrevocable. c. Though SEZ Act prohibits for sale of land thereby implicitly denying any benefit to a developer who is basically interested in deriving income by transfer of assets, the assessee has found a way to overcome this prohibition by creating 49 years lease in favour of co-developer. It is pertinent to note that the lease deed is renewable further and thus effectively transferring the land also. Para 2.3 and 5.1 of the Lease Deed clearly allows the parties to renew the lease deed. Thus, the assessee company has transferred the land in actual sense and substance of this present transaction means sale of land. In most of the cases, substance of the transaction and its form are one and the same. However, the substance can be different from the form of the transaction in many cases. In the present case, the assessing officer has rightly gone for the substance of the transaction and disallowed the deduction u/s 80-IAB claimed by the assessee company as the lease deed is mere eye wash and actual transaction was sale of land which is clearly not permissible under SEZ Act. Relevant paras of Lease deed are at page 135 & 136 of the Paper Book II filed by the Counsel of the assessee. d. The transfer of building is absolute and as per the amended agreement and lease deed, Co-developer shall be treated as owner of the bare shell building and the warm shell building after additions etc and will have exclusive rights to let, mortgage, or allow use of all or any part of buildings. e. That if the deduction u/s 80-IAB is allowed to the assessee company in this case and the Co-developer does not develop the SEZ later on , how can we say that the SEZ has been developed and why should the deduction be allowed to the assessee company at this stage where the development of SEZ has not been done . Allowing the deduction at the stage of construction of bare shell building would be against the provisions of SEZ and Income Tax Act.

127. Ld. Assessing Officer after considering the assessee‟s reply had observed as under: “12.5 The reply of the assessee has been considered and from the reply it emerges that the assessee has stated that it is a listed company and not incurred any expenditure on behalf of its associated companies. The assessee company has argued that in case of both the companies to which the expenses have been allocated the main project undertaken by the two companies is development of SEZ and hence administrative activities in these companies are minimal and there is no need for allocation of further overheads. Both these companies have incurred overhead expenditure which formed part of development cost considered in POCM. This argument of the company is not tenable as the two companies DLF Info City Developers (Chennai) Ltd and DLF Cyber City Developer Ltd. during the Asstt. year 2008-09 had earned development income of ₹ 1,68,686.15 lacs and ₹ 1,63,049.03 lacs respectively and against the same the overhead expenditure shown by these companies is ₹ 71.58 lacs and ₹ 1,194.51 lacs respectively. In fact, in case of DLF Cyber City Developers, the expenditure of ₹ 1194.51 lacs includes commission and brokerage expenditure of ₹ 1155.79 Lacs and if this is reduced then the overhead expenditure incurred would be just ₹ 38.72 Lacs. It is difficult to imagine that the two companies earning development income of ₹ 168686 lacs and ₹ 163049 lacs would have incurred overhead expenditure of ₹ 71.58 lac and 38.72 lacs only. This clearly points to the fact that these two companies must have benefitted from the overhead expenditure incurred by DLF Ltd. In the previous year's also DLF Ltd has itself allocated overhead expenditure to its associated concerns. 12.6 The assessee has contended that revenue impact of whole of this exercise is revenue neutral since if certain amount of expenses is held to be allocable to group entities, the same will have to be allowed in the hands of those entities. In this respect the point to be observed is that the two companies identified by the Special Auditors which had incurred negligible overheads have earned income from development of SEZ and claimed deduction equal to 100% of profit earned on SEZ development u/s 801AB, hence the argument of the assessee that this exercise would be revenue neutral is incorrect. 12.7 The assessee has stated in the reply that in these two companies even though construction activities were going on, there was no marketing, planning or any other HO level administrative work involved during the year. The assessee has not been able to substantiate this argument with any documentary evidence. 12.8 The assessee has relied on certain citations wherein it has been held that expenses incurred for business requirement are allowable and any incidental benefit arising to a third party out of such expenditure cannot be made basis for disallowing the same. These citations are not relevant in the present case since the expenses incurred by the assessee have benefitted the associated companies of the assessee who are in similar line of business as that of the assessee and in the past also the assessee itself had allocated certain expenditure to its associated companies. The assessee has also mentioned certain citations regarding business expediency and stated that the expenses must be incidental to the business of the assessee. The question here is that the expenses incurred by the assessee have benefitted the associated concerns and therefore the same are to be apportioned to the associated concerns. The associated concerns during the year have developed SEZ and the assessee company during the year had also earned income from development of SEZ but there is substantial variance in the level of expenses incurred and accordingly some expenses are to be attributable for the benefit of associated concerns since there is similar line of business. The associated concerns has claimed 100% deduction u/s 80IAB and therefore by transferring the expenses of associated concerns to the assessee company some portion of such expenses are to be allocated to the associated companies. 12.9The assessee has also cited judgement in the case of Nestle India Limited Vs DCIT (2009) 27 SOT 9(Delhi). In this case it was held that the assessee company had incurred expenditure on account of advertisement and sales promotion in respect of only those products in which the Indian company dealing in. Thus, the expenditure had been incurred to promote sales in India. Therefore, those expenses were incurred wholly and exclusively for the purpose of business of the assessee. In this case the associated concerns of Nestle India are situated outside India and it was easily established by Nestle that the advertisement expenses were incurred in respect of products dealt by the Indian company. However, in the case of the assessee the line of business of the assessee company and its associated concerns is identical and therefore the percentage of overhead expenditure incurred by the assessee and its associated concerns would be similar. The Special Auditor in their report have reported that DLF Ltd have incurred administrative overheads of 3.18% of the total turnover but in the case of DLF Info City Developers (Chennai) Ltd. the company has incurred administrative overheads of ₹ 71.58 Lacs against development income of ₹ 168686 Lacs which is just 0.042% of total turnover and DLF Cyber City Developers Ltd have incurred administrative overheads of ₹ 38.72 Lacs (after reducing brokerage and commission) against development income of ₹ 163049 Lacs which is just 0.023% of total turnover. The line of business of the assessee company and associated concern being identical, the proportion of overhead expenditure to the level of business should also be similar but as mentioned above there is substantial variance in the proportion of overhead expenditure incurred by the assessee company vis-a-vis the two associated concerns. The judgment of Nestle quoted by the assessee is not at all relevant in the present case since the assessee has not been able to prove that the overhead expenses incurred were wholly and exclusively for its benefit and had not benefitted the associated concerns. The assessee has not been able to convincingly explain the extremely low level of administrative overhead expenditure incurred by the two associated concerns as compared to the assessee company considering the similar line of business. 12.10 In view of the same it can be inferred that a part of overhead expenses relatable to the two entities stand in the books of the assessee. Since the benefit of such expenditure does not accrue to the assessee but to the two group entities also, the expenditure of ₹ 15,02,99,365/- as worked out by the special auditors is disallowed.”

In the case of M/s. DLF Cyber City Developers Ltd, it is noted that the main project was only development of SEZ project at Sector 25 Gurgaon. Besides, the above project this company has only rental income. The administrative activity in this company is also minimal and hence there is no need of allocation of any further overheads. This Company is again self sufficient and has its own resources to carry out the activity and hence no further allocation is required. Apart from the above, the company had incurred overhead expenditure which formed part of the development cost which has been considered for POCM. The details of such expenditure was furnished to the Assessing Officer at page No.2 of appellant‟s letter dated 31.3.2011. The total cost of the overhead expenditure forming part of development cost is ₹ 9,73,06,213/-. This expenditure includes the overhead expenses incurred by the DLF Cybercity Developer Ltd. 19.23 Hence, it is clear that no benefit has accrued to group companies namely DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd from the expenses of ₹ 150,299,365/-, as these expenses were exclusively for the business of the appellant company. There was no justification for disallowing these expenses. The ASSESSING OFFICER as well as Special Auditors have not brought any material on record which can prove that expenditure debited in the P&L account of the appellant company was not incurred for the bonafide business needs of the appellant company. The appellant company is main group company and expenditure incurred in this company are bound to be higher and in the process of incurring such expenditure if other group companies derived some benefit from such expenses, the expenditure cannot be allocated to the companies who have also derived some benefit. The genuineness of the impugned expenditure for the purpose of business has not been disputed by the AO. Further, under the facts and circumstances as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant‟s business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of ₹ 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted.”

129. The Tribunal in Assessment Year 2006-07 has dismissed the Revenue‟s appeal on this issue after observing and holding as under: “121. We have carefully considered the rival contentions. The brief fact is that certain overhead expenses incurred by the assessee have been apportioned to the other group companies for the reason that by incurring those expenses, the assessee has passed on some benefit to those companies. The amount of 75% of that expenditure has been transferred to the group companies and 30% of that expenditure is borne by the assessee company. During the course of assessment proceedings, the AO found that an amount of ₹ 20,79,10,574/- expenditure pertaining to payment to Directors, advertisements, printing and stationery, security charges, leave encashment and salary and wages are not apportioned to group companies and, therefore, AO disallowed 70% of those expenditure amounting to ₹ 14,55,37,401/-. It is not the case of the AO that these amount of expenditure are not incurred by the assessee and further veracity of those expenditure have also not been doubted. The only reason for disallowance is that assessee has not allocated this expenditure to its various group companies and, therefore, AO was of the view that this expenditure has not been incurred wholly and exclusively for the business purpose of the company. On perusal of the expenditure and the orders of the lower authorities, it is apparent that the director‟s salary is being paid to the directors of the company including a commission thereof is for the purpose of managing the business of the DLF – assessee. Further, for the protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders‟ activity. Furthermore, the advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all pertaining to the business of the company. No evidence / instances have been cited by AO that any of this expenditure has not been incurred by the company and they are not related to the business of the assessee. It may happen that by incurring certain expenditure by the assessee for the purpose of his business may result into some indirect benefit to the group companies but that cannot be the ground for disallowance of that expenditure in the hands of the assessee. The CIT (A) relying upon the decision of ITAT, Delhi Bench in the case of Nestle India Ltd. vs. DICT – 27 SOT 9 has deleted the addition. We do not find any infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with instances that these are not incurred by the assessee wholly and exclusively for the purposes of the business of the assessee. Hence, we confirm the order of the CIT (A) deleting the addition of ₹ 14,55,37,400/-. Ground No.4 of the revenue‟s appeal is dismissed.”

130. In view of the aforesaid observation and the finding of the Tribunal which is applicable in this year also, therefore, respectfully following the same, the Revenue‟s ground is dismissed.”

85. Ld. CIT(A) after detailed finding has deleted the said addition after observing and holding as under: “9.8 I have considered the submission of appellant, observation of the ASSESSING OFFICER & Special Auditors comments, decision of Hon‟ble ITAT in appellant‟s own case in A.Y. 1994-95 and treatment given to this issue in earlier assessment years by ASSESSING OFFICER as well as appellate authorities. It is also noticed that this issue has been decided in favour of the appellant vide order dated 25.03.2011 passed by CIT(A)-XVIII, New Delhi, for A.Y. 2006-07 (page Nos.122-153 of the said order) and in my own order in appellant‟s own case for the immediately preceding year relevant to assessment year 2007-08 (page Nos.108-139 of the said order). It is seen that whenever appellant company starts a new building/ project, it prepares a budgeted statement of total cost to be incurred for completing the building or Project and the total revenue which can be derived from sale of such building or project. The budgeted statement of Revenue and cost gives the budgeted margin on such building or project. When the actual construction of building or project starts, the actual cost incurred at the end of financial year is compared with total budgeted cost to determine the percentage of completion of building or project. The appellant has following components of cost to be included in the budgeted cost:- • cost of land (including Land under agreements to purchase) • estimated internal development cost (IDC), • external development charges, • construction costs and development/ construction materials, Internal Development Charges are incurred towards amount spent on roads, parks, water supply, electricity and other facilities required for habitation inside the peripheral of a colony. Since the expenditure is common for total colony and cannot be directly correlated with the particular project or Building, the total internal development charges (IDC) are required to be apportioned on some scientific basis over the projects. The availability of approach road, sewage and other infrastructure facilities are an essential part of sale transaction and therefore, it is a liability committed by the appellant at the very initial stage of sale of property itself. Without the provision of these infrastructure facilities, the constructed building cannot be habitable and no customer may even buy the property of the appellant without these essential facilities. Thus, there is a direct nexus between the sale price and the expenditure to be incurred on these infrastructure facilities by the appellant. The sale revenue as well as expenditure on internal development works is inextricably linked with each other and, since the estimated revenue includes charges for internal development work, the corresponding estimated expenditure on internal development work also has to be taken into consideration in the total cost to be incurred. In other words, internal Development Work is inbuilt in the total estimated revenue; the corresponding expenditure has to be necessarily included in the total cost to be incurred. The appellant is bound to apply the matching principles i.e. matching revenue with cost to be incurred to earn the revenue. On this principle alone and by itself the inclusion of IDC in the total cost to be incurred is reasonable and justified, as without applying the principle of matching revenue with cost there would be distortion in the matter of arriving at income. This distortion needs to be avoided for the purpose of ascertaining the true profit/loss of the appellant. As per the initial estimate prepared by the appellant the cost on internal development charges was estimated at ₹ 230 crores for its phase V projects. The same has been prepared by Shri Sunil Arora having diploma in civil engineering with an experience of 16 years and Sh. Devender Singh, B.E. (Civil) having an experience of 24 years. The cost estimate of ₹ 230 crores is further backed by individual items of cost, such as earth work, road work, storm water drainage work, horticulture work, water supply work, sewerage work, boundary wall, electrical work etc. In turn, there is a cost break down of all these broad heads. 9.9 In view of the detailed facts discussed above, the IDC is a part of budgeted cost prepared by the appellant. The budgeted IDC is prepared on scientific basis. The appellant has an experience of more than 30 years in this line of business and over the years the budgeted IDC estimated by the appellant company has been accepted as part of budgeted cost by the department. In between there was a difference between the budgeted cost and the cost estimated by the department which was finally settled before the ITAT in A.Y. 1994-95 wherein the budgeted cost of IDC as estimated by the appellant was accepted as part of the budgeted cost and issue was settled in favour of the appellant. It is also seen that the budgeted IDC has been accepted by the department from A.Y. 1988-89 to 1994-95. For A.Y. 1995-96 to 2000-01, the department has made certain additions which have been deleted by CIT (A) as well as ITAT and no further appeal has been filed by the department. From A.Y. 2001-02 to 2005- 06, no additions have also been made on this issue except in A.Y. 2002-03 wherein an addition of ₹ 4,43,994/- was made, which was deleted by CIT(A). It is also seen that Hon‟ble ITAT in the appellant‟s own case has held that appellant can claim upto 30% as IDC cost of the budgeted sales. It may be seen that revised IDC of ₹ 236.05 crore claimed by the appellant for Phase-V project is less than the 30% of budgeted sales as stated supra. It is also seen that budgeted cost of the IDC has been accepted in A.Y. 2004-05 and 2005-06 in the appellant‟s case. It may be seen that IDC is an integral part of the cost of the project and based on these estimates, the project has been approved by the Director Town and Country Planning, Govt. of Haryana. If there is no provision for IDC in the project then, appellant‟s project may not be approved by the Director Town and Country Planning, Haryana. It is also an accepted fact that whenever project is taken for development, initially flats are constructed and thereafter the basic infrastructure facilities like roads, sewage, lightning, park, water supply line etc. are developed. Therefore, the observation of the ASSESSING OFFICER that only ₹ 60.39 (36.07 + 24.32) crore have been spent on IDC till 31.03.2008 cannot be given much weightage and provision of such facilities has to be taken into account as part of budgeted cost. Merely because the contract for internal development work has not been awarded in the current assessment year or in the absence of actual payment of IDC, cannot lead the revision of the IDC cost from its budgeted level to actual cost incurred. In my considered view, whether one follow project completion method or percentage of completion method, the element of cost cannot change. Once IDC is accepted to be an element of cost, then whichever method one apply, it has to be allowed as a cost of the project for working out the true profit and loss account in respect thereof. 9.10 I am therefore, of the considered view that ASSESSING OFFICER was not justified in replacing budgeted IDC with actual IDC cost incurred for recognizing revenue as per POCM Method. The Budgeted IDC is a part of cost and same has to be accepted for recognizing revenue as per POCM which is being consistently accepted by the department. Hence, the addition of ₹ 39,52,39,897/- made by the ASSESSING OFFICER on this issue is uncalled for and the same is, therefore, deleted. (II) Labour Cost: 9.11 Special Auditors have increased cost of construction actually incurred by ₹ 3,39,77,973/- on the ground that expenditure in relation to contract work performed during FY 2007-08 has been booked in subsequent financial year i.e F.Y. 2008-09. They have based their findings on the period of measurement as given by contractors. 9.12 The AR submitted that the balance addition of ₹ 3,39,77,973/- is on account of increase in labour cost / material cost by shifting this cost from F.Y. 2008-09 to current financial year i.e. F.Y. 2007-08 based on the observation of the Special Auditors. The Submissions filed by the appellant on this point is as under:- “Summary of all the bills, made by the special auditors in Volume IVA to IVD of Special Audit Report was furnished before the Assessing Officer at page Nos. 67 of our letter dated 24.03.2011 and all the bills mentioned therein were produced in original before the Assessing Officer. A copy of the same was furnished before me by the appellant vide its submission dated 29.11.2012 at page No.91 of Paper Book (Volume II). It was submitted that no liability has been accrued or arisen upto 31.3.2008. On perusal of this summary, it will be appreciated that all these bills were for over lapped period beginning in the previous year and continuing in the subsequent year. Obviously, the bills were received after the close of the year and after receipt of such bills due verification of the work was done. After verification and measurement of the work done, bills were approved. Till that date no expenditure accrues or arises and that date falls in the subsequent financial year. The company consistently follows the policy of accruing and booking costs on the basis of the date on which bills were approved and verified which can only be after the date of receipt of the bill. In the opening balance also, similar policy has been adopted. This is the only possible way for accounting. The law does not require the assessee to do the impossible. The Hon‟ble Chhattisgarh High Court in the latest judgment reported in 323 ITR 252 (Chhattisgarh) in the case of Beekay Engineering Corporation has decided the similar issue. Head Note of the said judgment is reproduced for your ready reference as under:- “The assessee entered into a contract for doing job works and made a payment of ₹ 1,36,767 to B in respect of certain jobs done by it from December 1988 to June 1989. The bills were raised by the party in the month of August 1989. According to the assessee, as it was not aware of the actual liability on the last date of the accounting period, it claimed this deduction only when the bills were submitted by the corporation. The Assessing Officer however, held that as the assessee was following mercantile system of accounting, the expenditure should have been claimed as deduction in the earlier year and not in the subsequent year and accordingly, disallowed the claim. The Commissioner (Appeals) confirmed the order but the Tribunal held that the liability could be ascertained only in the accounting year relevant to the assessment year 1990- 91. On a reference: Held, that the expenditure was deductible in the assessment year 1990-91.” Thus, by applying the same principles it is requested that the allocation of expenses by the Special Auditors, against the bills which were received subsequently, was not justified. Reliance is placed on the decision in the case of CIT vs. Modipon Ltd. [2011] 334 ITR 0102 wherein the similar issue was decided in the favour of assessee. 9.13 The AR further submitted that the facts of Saurashtra Cement and Chemical Industries Ltd. Vs. CIT (1995) 213 ITR 523 (Guj.) were similar to the facts of the instant case, in which it was held that earlier years expenses could be allowed in the year in which the liability is accepted and paid. Hon‟ble Gujarat High Court in the case of Saurashtra Cement and Chemicals Industries Ltd. vs. CIT (1995) 213 ITR 523 (Guj.), has held as follows: “. . . Merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. In each case where the accounts are maintained on the mercantile basis it has to be found in respect of any claim, whether such liability was crystallized and quantified during the previous year so as to be required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years it cannot be disallowed as deduction merely on the basis the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. . . .” (p. 531) Further reliance was placed on the judgment in the case of National Agricultural Co-operative Federation of India Ltd. vs. Jt. CIT (2008) 304 ITR (AT) 303 (Delhi) wherein it has been held that the liability is deductible only when it crystallizes into an ascertained liability. In this case as per an arbitration award interest was payable by the assessee on the sum awarded only up to the date of award of the arbitrator. Thereafter, a decree was passed by the High Court, for further interest on amount of award from the date of the award by the arbitrator till the date of payment, after the end of the accounting year. In the circumstances of the case it was held by the Hon„ble jurisdictional Tribunal that there was no liability to pay interest after the award of the arbitrator and such liability arose only after the decree of the High Court. Thus, the liability to pay future interest had crystallized in the next assessment year and not in the assessment year in question and hence the deduction was not allowable in the current assessment year. Reliance was also placed on the judgment in the case of CIT v Shri Ram Pistons & Rings Ltd (2008) 174 Taxman 147 (Del), wherein it was held that: “4. In terms of the scheme, as extended, the assessee incurred a liability of ₹ 1,40,541 and according to the assessee this amount was liable to be adjusted in the assessment year 1983-84. The basis on which the assessee had claimed this deduction for that year was that the liability had accrued and crystallized only on 30-6-1981 when the assessee came to know the actual sales made by its dealers.” As far as the purchase of material is concerned the entry of purchases and stocks is made only after receipt of material, inspection of material and Material Receipt Note (MRN). It is, therefore, submitted that liability accrued only when material is accepted and MRN is made. Therefore, the appellant submitted that the effect of this proposed addition of ₹ 3,39,77,973/- recommended by the special auditors may please be deleted.” 9.14 I have carefully considered submission of the appellant, observation of Assessing Officer and various judicial pronouncements relied upon by the appellant. It is also noticed that this issue has been decided in favour of the appellant vide order dated 25.03.2011 passed by learned CIT(A)-XVIII, New Delhi, for A.Y. 2006-07 (page Nos.122-153 of the said order) and my own order in appellant‟s own case for the immediately preceding year relevant to assessment year 2007-08 (page Nos.108-139 of the said order). As discussed above, in large construction contracts, it is natural that contractors submits running bills which may sometime overlap the accounting year. These bills per se did not accrue and become payable merely on their raising. The measurements etc done by the inspection staff have to be checked and verified by the concerned person and only after due verification and examination of the measurements and quality of the work done, the contract bills are approved and liability of such work is crystallized. The appellant has accounted for the bills of contract work, material and labour work only after proper verification of receipt of material, work done by the labours and measurement of the work done by the concerned person. Once it is certified of having material received upto the desired standard and quantity, and work done by the labour and contractor upto proper satisfaction, then only the liability is crystallized and entered into the books of account. The various bills of material, labour and contract mentioned by the Special Auditors and ASSESSING OFFICER, as pertaining to the F.Y. 2007-08 were, in fact, crystallized during the F.Y. 2008-09 and on the basis of same rightly accounted for in F.Y. 2008-09. The cost of ₹ 3,39,77,973/- pertaining to labour charges, contract and material which was accounted for in F.Y. 2008-09 on the basis of crystallization of liability cannot be preponed from assessment year 2009-10 to the current Assessment Year 2008-09. Again, this attempt and exercise made by the Special Auditors and the ASSESSING OFFICER is revenue neutral and it would make no difference to the Revenue except resulting in increased administrative work load of shifting expenses from one year to another. In my view, it is only a futile exercise and consequently, the addition based on the said increase of cost of construction is deleted. In this regard, reliance is placed on the judgment of Hon‟ble Chattisgarh High Court in the case of Beekay Engineering Corporation India 323 ITR 252 (Chattisgarh). The head note of the same is reproduced as under:- “BUSINESS EXPENDITURE--YEAR IN WHICH DEDUCTIBLE-- ASSESSEE DOING JOB WORK FOR ENGINEERING CORPORATION FROM DECEMBER 1988 TO JUNE 1989--BILLS SUBMITTED BY CORPORATION IN AUGUST 1989-- EXPENDITURE DEDUCTIBLE IN ASSESSMENT YEAR 1990-91-- INCOME-TAX ACT, 1961, S.

37. The assessee entered into a contract for doing job works and made a payment of ₹ 1,36,767/- to B in respect of certain jobs done by it from December 1988 to June 1989. The bills were raised by the party in the month of August 1989. According to the assessee, as it was not aware of the actual liability on the last date of the accounting period, it claimed this deduction only when the bills were submitted by the corporation. The Assessing Officer however, held that as the assessee was following mercantile system of accounting, the expenditure should have been claimed as deduction in the earlier year and not in the subsequent year and accordingly, disallowed the claim. The Commissioner (Appeals) confirmed the order but the Tribunal held that the liability could be ascertained only in the accounting year relevant to the assessment year 1990- 91. On a reference Held, that the expenditure was deductible in the assessment year 1990-91. COMMISSIONER OF INCOME-TAX V. MODIPON LTD. (No. 1) [2011] 334 ITR 0102- BUSINESS EXPENDITURE--DEDUCTION ONLY ON ACTUAL PAYMENT--DISALLOWANCE ON GROUND THAT EXPENSES RELATED TO PRIOR PERIOD AND NOT PRESENT ASSESSMENT YEAR--TRIBUNAL FINDING ALL EXPENSES SETTLED IN CURRENT YEAR AND COVERED UNDER SECTION 43B(D)-- JUSTIFIED-- INCOME-TAX ACT, 1961, S. 43B(D). The assessee for the assessment year 2004-05 filed the return claiming certain expenses allowable as business expenditure. The Assessing Officer was of the view that out of those, expenses to the tune of ₹ 41,95,719 related to the prior period and did not pertain to the financial year 2003-04 relevant to the assessment year 2004-05, as the assessee-company was following the mercantile system of accounting and therefore, these expenses should have been claimed in the previous year. The Commissioner (Appeals) confirmed this view whereas the Tribunal reversed the order and allowed those expenses. On appeal : Held, dismissing the appeal, that even when the assessee was following the mercantile system of accounting, the explanation furnished by the assessee was that the expenses were not booked due to non-receipt of details, information thereof on time, which was beyond the control of the assessee. It was also explained that these expenses to the tune of ₹ 41.95 lakhs were marginal as compared to the enormous size of the assessee-company. It was also explained that as per the accounting policy followed by the assessee, such expenses were booked in the year in which they were settled for payment. The Tribunal went into the details of each and every such expense and recorded the finding of fact that all these expenses were settled during this year. It was also recorded that more than 50 per cent. of expenses could be claimed only on actual payment, as they were covered under section 43B(d) of the Income-tax Act, 1961. The assessee also informed that even in the earlier year, the assessee had shown positive income and paid tax thereon. Therefore there was no loss of revenue. Had this expense been allowed in the previous year, the assessee would have paid less tax. There was no necessity to interfere with the order of the Tribunal.” The Facts of the above cited judicial pronouncement are identical with the facts of appellant‟s case. Therefore, ratio of the said judgments is squarely applicable to the appellant‟s case. Hence, the addition of ₹ 3,39,77,973/- based on pre-ponement of certain expenses is deleted. As a result, the appellant gets a relief of ₹ 42,92,17,870/ (₹ 39,52,39,897/- + ₹ 3,39,77,973/-)”

86. We find that the similar issue was also involved before this Tribunal in the appeal for the Assessment Year 2006-07, wherein the Tribunal has decided this issue in favour the assessee in the following manner:

“42. We have carefully considered the rival contentions and also given a careful thought to the offer of ld. DR for setting aside this ground of appeal to the file of the AO for determination of threshold limit of 30% of the total project cost incurred up to this year or not. Before that we would like to address the issue of threshold percentages determined by the assessee of 30% instead of 25 % provided in the guidance note on accounting for real estate transactions issued by ICAI in 2012. Firstly assessee has submitted the instances where in the identical facts and circumstances there is trade practice of adopting threshold of 30 % of the achievement of total project cost for commencement of recognising of revenue. According to that guidance note it is provided that “5.3 Further to the conditions in paragraph 5.2 there is a rebuttable presumption that the outcome of a real estate project can be estimated reliably and that revenue should be recognised under the percentage completion method only when the events in (a) to (d) below are completed. (a) All critical approvals necessary for commencement of the project have been obtained. These include, wherever applicable: (i) Environmental and other clearances. (ii) Approval of plans, designs, etc. (iii) Title to land or other rights to development/ construction. (iv) Change in land use (b) When the stage of completion of the project reaches a reasonable level of development. A reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. (c) At least 25% of the saleable project area is secured by contracts or agreements with buyers. (d) At least 10 % of the total revenue as per the agreements of sale or any other legally enforceable documents are realised at the reporting date in respect of each of the contracts and it is reasonable to expect that the parties to such contracts will comply with the payment terms as defined in the contracts. To illustrate - If there are 10. Agreements of sale and 10 % of gross amount is realised in case of 8 agreements, revenue can be recognised with respect to these 8 agreements.” According to the above guidance note the revenue of the project can be recognised only when the above conditions specified therein. According to one of the conditions specified there in is reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. Therefore the threshold suggested by ICAI is the minimum threshold and it is not prohibited that looking to the business conditions assessee cannot fix up higher threshold. More so when the assessee has stated that many identical companies are also following similar threshold of 30 % of the total project cost, no fault can be found with the estimate made by the assessee. It is also undisputed that in subsequent years the special auditor appointed by revenue has accepted the threshold of 30 % adopted by assessee and AO has accepted the same. In view of above we are of the opinion that assessee has rightly accepted the threshold of 30 % of achievement of total project cost for commencement of revenue recognition. Further the working of the total project should also include all types of development charges required to be included in the same. Ld. AR has stated that the details of percentage of completion of project are available in the assessment order itself. However after careful consideration and agreed by both the parties, we set aside this issue to the file of the AO to determine with respect to Magnolia Project and Summit Project following :- (i) To determine the total project cost of both these projects including the cost of internal and external development charges of the project (ii) To determine whether the actual cost of expenditure incurred up to 31.03.2006 is less than 30% of the total project cost estimated by the assessee; (iii) If the threshold limit of 30% is crossed then to determine the income of both these projects on percentage completion method in this year; (iv) To give appropriate relief in subsequent years, if any income is taxed on these projects in those years; (v) If the project cost incurred up to this year has not crossed threshold of 30% limit of the total project cost estimated then to delete the addition of ₹ 1,02,84,93,509/-. While deciding this issue AO may however keep in mind the principle laid down by honorable Supreme court in case of CIT v. Excel Industries Ltd. [2013] 358 ITR 295, if AO is satisfied that issue is revenue neutral the matter may be set at rest. Therefore, ground no.8 of the appeal is allowed with above direction.”

87. Thus, following the earlier year precedence, we decide the issue in favour of the assessee and revenue‟s appeal is consequently, dismissed.”

18. Therefore, respectfully following the decision of the coordinate bench in assessee‟s own case for earlier years, we dismiss ground number 3 of the appeal of the learned assessing officer and confirm the order of the learned CIT – A in deleting the disallowance on account of estimated IDC charges and commencement of construction cost.

19. Ground number 4 is on account of disallowance of brokerage and commission expenditure of ₹ 40,044,936/–. The learned authorised representative submitted that this issue is covered in favour of the assessee company by the order of the coordinate bench for assessment year 2006 – 07. Further it was also stated that the revenue has not preferring the appeal before the honourable High Court on this issue and in subsequent year i.e. in assessment year 2016 – 17 the learned assessing officer himself has not made any addition/disallowance on this issue. It was further stated that in assessment year 2008 – 09 also this issue was considered and the order of the learned CIT – A was upheld. Therefore it was submitted that the issue is squarely covered in favour of the assessee.

100. Ld. Assessing Officer on the basis of comments of Special Auditors observed that certain expenses such as brokerage and commission are being claimed in the P&L account while the matching revenues are not credited to the P&L account. He has discussed in detail various observations and note of the Special Auditors and observed that assessee‟s reliance on accounting standard-7 is not misplaced as it applies to construction contract and not to development project undertaken by the assessee himself. Further, the reliance placed by the assessee upon the order of the ld. CIT(A) for the Assessment Year 1983-84 is also misplaced as accounting policy is followed for recognition of revenue in Assessment Year 1983-84 is to be from the accounting policy followed for the year under assessment. The assessee has not paid this brokerage as a selling cost for procuring any construction contract. He has paid this money for selling of this various project even before the construction project was started. He further held liability of expenditure for the purpose of determining the taxable income is determined by the Income Tax Act and not by the accounting standard. He also made reference to the judgment of Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT, (1997) 225 ITR 0802 (SC) and out of total claim of ₹ 10,63,46,742/-, he made disallowance of ₹ 3,64,25,771/-.

“13.20 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, accounting standard AS-2 & AS-7 and judgment of ITAT in earlier years and CIT (Appeals) in appellant‟s own case for A.Y₹ 2006-07 and 2007-08. It is seen that as per para-19 of AS-7, it is mentioned that the selling cost cannot be attributed to contract activity or cannot be allocated to a contract under construction. Even as per AS-2 “Valuation of Inventory” issued by ICAI, it is seen that selling and distribution cost cannot be considered as part of the cost of inventory and such expense has to recognized in the period in which they are incurred. The cost which can be attributed /allocated over the inventory should comprise all the cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. In the case of construction activities the cost of purchase of land and construction cost can only be attributed over the project. The brokerage expenses are purely a selling cost and cannot form a part of inventory. In view of the accounting standard, the brokerage expenses being a selling cost cannot be capitalized with the cost of inventory and cannot be allocated to the construction activity. During the year the appellant has paid brokerage of ₹ 10,63,46,742/- for selling of the flats and other properties and properties given on lease to various brokers. The brokerage expenses to the extent of ₹ 9,98,95,581/- pertains to selling of flats and other property. Therefore, such expenses has to be allowed as selling cost in the year in which such expenditure is incurred. The selling cost cannot be capitalized with the inventory as per AS-2 and AS-7 issued by ICAI. Hence, the brokerage paid for selling of flats and property to the extent of ₹ 9,98,95,581/- is an allowable expenditure during the year and disallowance to that extent of ₹ 2,99,74,644/- is deleted. It is also seen that this issue has been decided in favour of the appellant by Hon‟ble ITAT in its order for A.Y. 1984-85. However, the ASSESSING OFFICER has observed that the accounting policy followed by the appellant company for recognition of revenue in the A.Y. 1983-84 were different from the accounting policy followed during the year under consideration. It is seen that in A.Y. 1983-84 also the selling cost i.e. brokerage and commission were claimed in the year in which they are incurred and same were not recognized on the basis of revenue recognition. Therefore, the ratio of the said judgment is still applicable in the case of appellant and the brokerage and commission has to be allowed in the year in which they are incurred and cannot be associated with construction cost. The contention of the ASSESSING OFFICER that the brokerage expenditure to be postponed to subsequent year as per AS-9 cannot be accepted, as brokerage and commission are related to the sale of flats and properties. By incurring the same the appellant has not derived any enduring advantage in subsequent years. The ASSESSING OFFICER has relied upon the Supreme Court judgment in the case of Madras Industrial Investment Corp. 225 ITR 802. (SC), and has held that the expenses have to be spread over in several years if the benefit of such expenditure is continued in the ensuing years. The facts of this judgment cannot be applied to the appellant‟s case as Brokerage and Commission linked with the services rendered by the brokers to the appellant for selling the flats and other properties. There is a nexus between the expenses and services rendered which cannot be spread to several years. The benefit of the brokerage and commission is related to a particular property or flat sold and it cannot be extended to other properties. Therefore, brokerage expenses cannot be postponed for the future years. Therefore, ratio of the said judgment is not applicable in the case of appellant. 13.21 The appellant has placed reliance on the decision of the jurisdictional High Court in the case of Nokia Corporation vs. DIT, Delhi, 2007, 162 Taxman 369 (Delhi), wherein it is held that even if the Department has filed further appeal against the last order, which is in favour of the appellant, the last order is judicially binding on the subordinate authority. Hence, respectfully following the order of the Hon‟ble Income Tax appellate Tribunal for AY 1984-85 and the order of CIT(Appeals) for the immediately preceding years relevant to the Assessment Yea₹ 2006-07 and 2007-08 in appellant‟s own case. In view of the above, the addition to the extent of ₹ 2,99,74,600/-(₹ 2,82,93,983 + ₹ 16,80,717) pertaining to payment of brokerage and commission is deleted. 13.22 However, expenses of ₹ 64,51,161/- pertains to brokerage paid for giving property on lease. These brokerage expenses have been incurred for giving the Grand Mall and Town Square Mall on rent. This expenditure does not pertain to selling of the inventory or stock in trade, therefore, such expenses cannot be covered under AS-2 and AS-7. This brokerage expenditure of ₹ 64,51,161/-is inextricably linked with the giving Grand Mall and Town Square Mall on rent. The income of the Grand Mall and Town Square Mall received or receivable from rent is assessable under the head “house property”. As per the provisions of IT Act no expenditure is allowable against the income from house property except deduction @30% and interest payment on the loan for construction of house u/s 24 of the IT Act. There is no provision of deduction of brokerage paid for giving the property on rent, therefore, the expenditure incurred by the appellant of ₹ 64,51,161/-( for Grand Mall ₹ 3,65,378/- + town square mall ₹ 60,85,783/-) is not an allowable expenditure. In the result, this ground of appeal is partly allowed and appellant gets a relief of ₹ 2,99,74,600/-.” 102. Again, this issue has been decided in favour of the assessee by the Tribunal in assessee‟s own case for Assessment Year 2006- 07 in the following manner:

69. We have carefully considered the rival contentions. We have also perused the order of ITAT in assessee‟s own case for AY 1984- 85 submitted before us by the ld. AR. This decision has also been considered by the AO at page 188 of the assessment order. The AO has not followed this decision as it could not be verified whether the issue has been taken up by the department before the Hon‟ble Delhi High Court or not. Before us, ld. DR also could not point out that why this decision cannot be followed nor we could find any reason for not following the same by AO except that whether it is accepted by the department or not is not verified. Ld. CIT (A) has also deleted the addition following the order of coordinate Bench of ITAT for AY 1984- 85 in the case of the assessee. Merely because the decision is not accepted by revenue disallowance has been made. As observed by the CIT (A), these expenses related to brokerage of flats as part of selling expenses and, therefore, cannot be included in the cost of construction for the purpose of value of closing stock of WIP and in view of Accounting Standards issued by the ICAI. Respectfully following the decision of Honourable high court in case of CIT V DLF universal Limited in dated 16.04.2015 while deciding ground no 4 of the appeal of the revenue honourable high court has held that expenditure towards brokerage and commission paid to brokers for booking and sale of certain properties is allowable firstly in view f the facts that assessee‟s treatment of such expenditure has been decided in favour of the assessee and revenue has not challenged it and secondly such expenditure are allowable. In view of the above facts and following the decision of coordinate Bench as facts are not distinguished by revenue, we confirm the order of CIT (A) in deleting the addition of ₹ 20,87,70,567/- on account of brokerage expenses for sale of various properties. Therefore, ground no.14 is dismissed.”

22. Therefore, respectfully following the decision of the coordinate benches we confirm the order of the learned CIT – A and deleting the disallowance of brokerage and commission expenditure, thus, ground number 4 is dismissed.

“94. The next issue pertains to deletion of addition on account of disallowance of capitalization of interest of ₹ 7,93,00,000/-. Ld. Assessing Officer on the basis of Special Auditor‟s comment observed that interest capitalization is also required on interest paid on loan taken for M/s. Edward Keventer Project, and therefore, net interest eligible for capitalization is to be bifurcated into interest capitalization on Keventer loan and interest capitalization on project under execution. The Special Auditor has recommended that out of net interest of ₹ 34.86 crore requiring capitalization, ₹ 1.10 crore is to be capitalized towards interest paid on loan taken for M/s. Edward Keventer project and ₹ 33.76 crore of interest is eligible for capitalization on account of projects under execution on the level of completion achieved till 31st March, 2008 and accordingly, the interest to be capitalized on projects under execution is to be completed in the following manner:

Particulars Cost of Total % value Net Interest % of Interest Interest Project as on of Expenditure Revenue Expenditure expenditure to be 31.03.2008 projects recognised allowable in capitalized for A.Y. the proportion towards non- 0809 of revenue recognition of recognised proportionate revenue from projects Phase - V 1,529.55 100.00 33.76 76.50 25.83 7.93 Gurgaon Project

96. Ld. CIT(A) has deleted the addition after observing as under: “11.12 I have considered the submission of the appellant and observation of the Special Auditors as well as ASSESSING OFFICER and order of CIT (A)-XVIII for AY 2006-07 and my own order for AY 2007-08 in appellant‟s own case wherein this issue was decided in favour of appellant. It is seen that ASSESSING OFFICER has further capitalized an amount of ₹ 7,93,00,000/- towards ongoing projects. This capitalization is over and above the amount already capitalized by the appellant to the extent of ₹ 354.43 crores which relates to the loan taken for fixed period term loan. It is seen that appellant has claimed total interest expenditure of ₹ 604.43 crores on fixed period term loan, out of which it has capitalized ₹ 354.43 crores over the ongoing projects and has claimed interest of ₹ 249.54 crores on fixed period term loan. The appellant has also claimed ₹ 176.06 crores as interest on bank overdraft. Thus, the total interest payment claimed in the P&L A/c comes to ₹ 425.60 crores. As against this appellant has offered interest received from banks, customers, loans to subsidiaries and associates to the tune of ₹ 411.99 crore in the profit and loss account. If the interest pertaining to bank overdraft and interest paid to others is excluded from the total interest charged to the profit and loss account, then the remaining interest debited to P&L A/c comes to ₹ 249.54 crores, which is less than the interest income of ₹ 411.99 crores as offered in the P&L A/c. Since, the interest payable is less than the interest received from different sources. No further notional interest can be capitalized over the projects. The interest pertaining to projects has already been capitalized by the appellant to the extent to ₹ 354.89 crores, which is specific to the projects under execution. The further capitalization of ₹ 7.93 crores is based on presumptions, there is no scientific method worked out by the ASSESSING OFFICER for capitalizing the further interest of ₹ 7.93 crores. The net impact of the interest in Profit & Loss A/c is positive income after excluding the overdraft interest expenses. Once the interest income is positive in the P&L a/c, the further capitalization of interest cannot be estimated on presumption basis as done by the ASSESSING OFFICER. It is also seen that ASSESSING OFFICER has not pointed out any diversion of funds which was not utilized for business purposes. The funds taken by the appellant from banks or otherwise generated from own sources have either been utilized in construction business or advanced to the subsidiaries and associate companies at an appropriate interest rates. It is also observed that:- • There is no diversion of money for non-business purpose. • Loans to subsidiaries are on interest at rates more than the rate of interest paid on borrowings. • The proviso to section 36(1)(iii) is not applicable as: 1. The building under construction are not capital asset 2. These are stock in trade 3. Any borrowing for stock in trade can never be capitalized. • Accounting standard AS-(16) has no application. • Accounting Standards cannot override the provisions of Income Tax Act. In view of the above, it is held that capitalization of interest of ₹ 7,93,00,000/- on notional basis done by the assessing officer based on various permutation and computation was not justified and same is deleted.”

97. This issue too has been decided in favour of the assessee after detailed discussion by the Tribunal and the relevant observation of the Tribunal reads as under: “49. We have carefully considered the rival contentions. It appears that the AO has made this addition mainly because of note mentioned by assessee in its accounting policies with respect to borrowing costs according to Accounting Standard 16 issues by ICAI. We have perused notes attached to financial statements and we are of opinion that these notes have arisen in the financial statement of the assessee because of the issue of applicability of Accounting Standard 16 issued by the ICAI. According to Accounting Standard 1 i.e. disclosure of accounting policies, each and every company is required to disclose the accounting policy with respect to various significant income, expenditure and assets and liabilities etc. applicable to it. Borrowing cost is also one of them. ICAI has issued Accounting Standard 16 Accounting for Borrowing Cost wherein it is provided that in case of interest expenditure incurred by the company, it is required to be capitalized if the borrowing is related to the qualifying assets. In this case the inventory is a qualifying assets as it is held for more than 12 months and therefore interest attributable to it is required to be capitalized in the books of accounts as per AS -16. Therefore we do not agree with the arguments of AR that AS -16 does not apply to inventory. However, those are the provisions which are applicable for the maintenance of the accounts of the company and interest is allowable according to provisions of section 36(1) (iii) of the act. Further according to us, the provisions of Accounting Standards and provisions of the Act are two different set of regulations and while deciding this issue, it is well settled judicial precedent that is if there is a contradiction between the two, the provisions of the Act shall prevail. Provisions of section 36(1)(iii) provides that the amount of interest paid in respect of capital borrowed for the purposes of the business or profession deduction is required to be allowed. Proviso inserted w.e.f. 01.04.2004 is the only restriction if condition laid down u/s 36(1) (iii) are satisfied by the assessee. The proviso says that any amount of the interest paid in respect of capital borrowed for acquisition of an asset whether capitalized in books of accounts or not for any period beginning from the date on which the capital asset was borrowed for acquisition of the asset till the date on which such asset was put to use shall not be allowed as deduction. The deduction is to be disallowed even if the interest is capitalized in the books of accounts or not. Hon‟ble Supreme Court in the case of Core Healthcare [298 ITR 194] has held that provisions of section 36(1)(iii) is a code in itself. In the present case, the interest paid by the assessee is not for the purpose of acquisition of any capital asset but for its inventory. We do not find any restriction in provisions contained u/s 36(1)(iii) which provides that the interest can be disallowed if incurred for the purpose of inventory as provided under Accounting Standard 16. Apparently, in this case, there is no allegation that interest is not paid on capital borrowed for the purpose of the business. Hon‟ble Mumbai High Court in the case of CIT vs. Lokhandwala Constructions Industries Ltd. [ 131 taxman 810] has held as under :- “4. From the facts found by the Tribunal on record, it is clear that assessee undertook two-fold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from both the activities were assessed under section 28 of the Income-tax Act. In this case, we are concerned with the second activity (hereinafter referred to, for the sake of brevity, as “Kandivali Project”). According to the Commissioner, loan was raised for securing land/development rights from the Mandal. That, the loan was utilised for purchasing the development rights, which, according to the Commissioner, constituted a capital asset. According to the Commissioner, since the loan was raised for securing capital asset, the interest incurred thereon constituted part of capital expenditure. This finding of the Commissioner was erroneous. In the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 , it was held by the Supreme Court that in cases where the act of borrowing was incidental to carrying on of business, the loan obtained was not an asset. That, for the purposes of deciding the claim of deduction under section 10(2)(iii) of the Income-tax Act, 1922 [section 36(1)(iii) of the present Income- tax Act], it was irrelevant to consider the purpose for which the loan was obtained. In the present case, the assessee was a builder. In the present case, the assessee had undertaken the Project of construction of flats under the Kandivali Project. Therefore, the loan was for obtaining stock-in-trade. That, the Kandivali Project constituted the stock-in-trade of the assessee. That, the Project did not constitute a fixed asset of the assessee. In this case, we are concerned with deduction under section 36(1)(iii). Since the assessee had received loan for obtaining stock-intrade (Kandivali Project), the assessee was entitled to deduction under section 36(1)(iii) of the Act. That, while adjudicating the claim for deduction under section 36(1)(iii) of the Act, the nature of the expense - whether the expense was on capital account or revenue account - was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That, the utilization of the capital was irrelevant for the purposes of adjudicating the claim for deduction under section 36(1)(iii) of the Act - Calico Dyeing & Printing Works v. CIT [1958] 34 ITR 265 (Bom.). In that judgment, it has been laid down that where an assessee claims deduction of interest paid on capital borrowed, all that the assessee had to show was that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether the capital was borrowed in order to acquire a revenue asset or a capital asset. The said judgment of the Bombay High Court applies to the facts of this case.” Further, in the following decisions of various coordinate Benches, the deduction of interest has been allowed u/s 36(1)(iii) even where the assesse has followed the projection completion method :- (i) ACIT vs. Tata Housing Development Company Ltd. – 45 SOT 9 (Bom.); (ii) DCIT vs. Thakar Developers – 115 TTJ 841 (Pune); (iii) DCIT vs. K. Raheja Pvt. Ltd. – (2006) TIOL 220 ITAT-MUM.; (iv) K. Raheja Development Corporation vs. DCIT in ITA No.240/Bang./97 dated 22.09.1997 - In this case, reference application filed by the Department has also been rejected by the Hon‟ble Karnataka High Court vide its order dated 08.11.2000 in Civil Petition No.832/2000 (IT). Before us, ld. DR could not cite any decision against the claim of the assesse, therefore, respectfully following the decision of Hon‟ble Bombay High Court and as well as various coordinate Benches, cited above, we do not concur with the view of CIT (A) on disallowance of interest of ₹ 24.75 crores u/s 36(1) (iii) of the Act. The alternative argument of the assesse regarding adoption of any artificial formula for the purpose of computing interest disallowance. Ld. CIT (A) has presumed proportion of utilisation of funds in absence of the nexus holding that assesse has used mixed funds. Honourable Bombay High court in case of CIT V Reliance Utilities & Power limited 313 ITR 340 has held that “The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments.” Therefore we are of the view that presumption is to be assumed in favour of the assesse and not against assesse. Hence, we reject the formulae adopted by CIT (A) of working out proportionate disallowance by adopting artificial formulae. Therefore respectfully following decisions of Honourable Bombay High court in CIT vs. Lokhandwala Constructions Industries Ltd. [ 131 taxman 810] and CIT V Reliance Utilities & Power limited [313 ITR 340] We reverse the order of the CIT (A) confirming the disallowance of expenditure of ₹ 27.40 crores and direct the AO to allow this interest expenditure u/s 36(1) (iii) of the Act.”

14.9 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and judgment of Hon‟ble Supreme Court in this regard. It is seen that Hon‟ble Supreme Court has set aside the judgment of Hon‟ble Punjab & Haryana High Court and has accepted the appellant‟s right to collect the late construction charges from customers, if they fail to commence the construction activities within stipulated time. It may be seen that Hon‟ble Punjab & Haryana High Court had declared such levy as illegal, therefore, appellant was showing such charges as its liability instead of showing such late construction charges as its income. Because of that judgment these charges were not treated as appellant‟s income and the amount of late construction charges cannot be said to have accrued to appellant unless the appellant acquires a right to receive it. Had the Hon‟ble Supreme Court would have approved the judgment of Punjab & Haryana High Court, the appellant would have refunded such late construction charges to the respective parties. Therefore, such amount was kept in a liability account. After the Supreme Court judgment which has set aside the Punjab & Haryana high Court judgment a right to receive has been created in favour of appellant on 19.11.2010. Therefore, the entire amount has been offered as income in F.Y. 2010-11 relevant to A.Y. 2011-12. In view of the above, the appellant has rightly not offered the late construction charges as its income in the relevant year. It has further been noticed that this issue of treatment of late construction charges has been decided in favour of the appellant vide order dated 25.03.2011 passed by learned CIT(A)- XVIII, New Delhi, in appeal No.35/2010-11 for A.Y. 2006-07 (page Nos. 204-218 of the said order) and by me vide order dated 29.05.2012, in appeal No.66/2010-11 for A.Y. 2007-08 (page Nos. 146-149 of the said order) respectively in appellant‟s own case. Accordingly, the addition of ₹ 1,88,81,388/- made by the AO is not sustainable. The same is, therefore, deleted.

37. Both the parties confirm that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee‟s own case for assessment year 2006 – 07 and 2008 – 09. However it was also stated that revenue has not preferred any appeal before the honourable High Court on this issue and the learned assessing officer has also not made any addition on this issue in assessment year 2016 – 17 onwards.

39. In absence of any change in the facts and circumstances of the case, respectfully following the decision of the coordinate bench in assessee‟s own case for earlier years, we confirm the order of the learned CIT – A and dismiss ground number 8 of the appeal of the assessing officer.

2. Further, the department has accepted this issue as the above finding of Hon‟ble ITAT in AY 2006-07 has not been challenged before High Court. Also, the assessing officer himself has accepted this claim from AY 2012-13 onwards and no addition has been made in this regard.”

45. Ground number 10 of the appeal is with respect to deletion of addition on account of expenses towards non allocation of overheads to group companies amounting to ₹ 135,381,038/–. 46. Both the parties confirm that this issue is identical to the facts of the case for assessment year 2006 – 07 and 2008 – 09 wherein the coordinate bench deletes the identical disallowance made by the learned assessing officer. The learned authorised representative further submitted that the revenue has not challenged the same before the honourable High Court and further the learned assessing officer himself has not made these additions from assessment year 2012 – 13 onwards. 47. The learned departmental representative vehemently supported the order of the learned assessing officer however did not controvert the fact that this issue has been covered in favour of the assessee by the decision of the coordinate bench in earlier years. 48. On careful consideration of the orders of the lower authorities and the decision of the coordinate benches in earlier years in case of the assessee it is found that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench for assessment year 2008 – 09 as Under:- “125. In ground no.12, the Revenue has challenged the deletion of addition ₹ 15,02,99,365/- on account of disallowance of expenses towards non allocation of overheads.

However, in the case of the assessee the line of business of the assessee company and its associated concerns is identical and therefore the percentage of overhead expenditure incurred by the assessee and its associated concerns would be similar. The Special Auditor in their report have reported that DLF Ltd have incurred administrative overheads of 3.18% of the total turnover but in the case of DLF Info City Developers (Chennai) Ltd. the company has incurred administrative overheads of ₹ 71.58 Lacs against development income of ₹ 168686 Lacs which is just 0.042% of total turnover and DLF Cyber City Developers Ltd have incurred administrative overheads of ₹ 38.72 Lacs (after reducing brokerage and commission) against development income of ₹ 163049 Lacs which is just 0.023% of total turnover. The line of business of the assessee company and associated concern being identical, the proportion of overhead expenditure to the level of business should also be similar but as mentioned above there is substantial variance in the proportion of overhead expenditure incurred by the assessee company vis-a-vis the two associated concerns. The judgment of Nestle quoted by the assessee is not at all relevant in the present case since the assessee has not been able to prove that the overhead expenses incurred were wholly and exclusively for its benefit and had not benefitted the associated concerns. The assessee has not been able to convincingly explain the extremely low level of administrative overhead expenditure incurred by the two associated concerns as compared to the assessee company considering the similar line of business. 12.10 In view of the same it can be inferred that a part of overhead expenses relatable to the two entities stand in the books of the assessee. Since the benefit of such expenditure does not accrue to the assessee but to the two group entities also, the expenditure of ₹ 15,02,99,365/- as worked out by the special auditors is disallowed.”

128. Ld. CIT(A) has deleted the addition in the following manner: “19.22 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, order of the CIT (A)-XVIII for the A.Y. 2006-07 and my own order for A.Y. 2007-08 wherein this issue has been decided in favour of the appellant, and various case laws relied upon by the appellant on this issue. It is seen that appellant company was allocating over head expenses to its associate companies till October 2006. However, after October 2006, the appellant company stopped allocating overhead expenses to its group companies and transferred the concerned staff, who were previously looking after the affairs of group entities, to the respective entities. After October 2006, the group entities started incurring their own expenses themselves and this fact has been verified by the Special Auditors during the course of Special Audit. It is seen that there are certain heads of expenses which were exclusively pertaining to the appellant company and could not have been allocated to the other group entities. It is also seen from the Special Audit report that the Special Auditors have not brought out any instance of expenditure specifically pertaining to other group companies but has been claimed in the profit and loss account of appellant company during the year. The allocation made out by the Special Auditors was based on the presumption without bringing any material on record. No allocation of overheads is needed in the case of M/s. DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd. because these subsidiaries have their own resources and are meeting out their expenses own their own. In the case of M/s DLF Info City Developers (Chennai) Ltd. it is seen that this company has only one project that is the development of SEZ at Chennai. The only activity in this company is the development of SEZ building and the administrative activity is bare minimum and hence there was no requirement of the allocation of further expenses. Apart from the above the company had incurred overhead expenditure which formed part of the development cost which has been considered for POCM. The details of such expenditure was furnished to the Assessing Officer at page No.1 of appellant‟s letter dated 31.3.2011. The amount of overhead expenditure forming part of development cost comes to ₹ 13,12,65,162/-. This expenditure includes the overhead expenses incurred by the DLF Infocity Developer (Chennai) Ltd. In the case of M/s. DLF Cyber City Developers Ltd, it is noted that the main project was only development of SEZ project at Sector 25 Gurgaon. Besides, the above project this company has only rental income. The administrative activity in this company is also minimal and hence there is no need of allocation of any further overheads. This Company is again self sufficient and has its own resources to carry out the activity and hence no further allocation is required. Apart from the above, the company had incurred overhead expenditure which formed part of the development cost which has been considered for POCM. The details of such expenditure was furnished to the Assessing Officer at page No.2 of appellant‟s letter dated 31.3.2011. The total cost of the overhead expenditure forming part of development cost is ₹ 9,73,06,213/-. This expenditure includes the overhead expenses incurred by the DLF Cybercity Developer Ltd. 19.23 Hence, it is clear that no benefit has accrued to group companies namely DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd from the expenses of ₹ 150,299,365/-, as these expenses were exclusively for the business of the appellant company. There was no justification for disallowing these expenses. The ASSESSING OFFICER as well as Special Auditors have not brought any material on record which can prove that expenditure debited in the P&L account of the appellant company was not incurred for the bonafide business needs of the appellant company. The appellant company is main group company and expenditure incurred in this company are bound to be higher and in the process of incurring such expenditure if other group companies derived some benefit from such expenses, the expenditure cannot be allocated to the companies who have also derived some benefit. The genuineness of the impugned expenditure for the purpose of business has not been disputed by the AO. Further, under the facts and circumstances as discussed above, it cannot be denied that the said expenditure was not incurred wholly and exclusively for the purpose of the appellant‟s business. Further, as argued by the learned AR that all the above group companies of the appellant are subject to tax at the same rate and hence shifting of such expenditure from appellant company to other group companies would be futile and revenue neutral exercise. Considering the above, the impugned disallowance of ₹ 15,02,99,365/- made by the Assessing Officer cannot be sustained. The same is, therefore, deleted.”

Average investment in Partnership Firms and Mutual Funds Opening as on 01/04/2008 = Rs. 31cr Closing as on 31/03/2009 = Rs. 31cr Total Rs. 62cr Average investment = Rs. 31cr Disallowance being 0.5% of Rs. 31cr = Rs.15.50 lakhs

4. Ld. CIT (A) after analyzing the investment made interest income on an interest expenditure incurred and the position of availability of surplus funds with assessee held that no disallowance of interest can be made. However, he has confirmed the part of the disallowance after observing and holding as under: 20.10 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, orders of CIT (A)-XVIII for AY 2006-07 and my own order for AY 2007-08 in appellant's own case and various judicial pronouncements relied upon by the appellant on this issue. It is seen that during the year, the appellant has earned exempt income of ₹ 87,20,11,847/- as share of profit from partnership firms and dividend income on mutual funds. It is also seen that appellant has made average investment of ₹ 1197.30 crore in various partnership firms and in the shares of various group companies and mutual funds. The appellant has shown total average assets during the year of 17319.40 crore in the balance sheet. Vide my decision on ground No. 6 and 7,1 have held that appellant has shown interest incurred on fixed period loan of ₹ 604.43 crore. Out of this, an amount of ₹ 354.89 crore has been capitalized over the project. The appellant has also paid interest on over draft etc. to the tune of ₹ 176.06 crore. As such the total interest payment during the year comes to ₹ 425.60 crore. As against this, the appellant has shown interest receipts of ₹ 411.99 crore in the P&L account. If the interest paid on bank overdraft facilities of ₹ 176.06 crore is reduced then balance interest paid comes to ₹ 249.54 crore which is less than the interest receipt from subsidiary companies and banks. On the basis of above working it can be said that investment made by the appellant company was interest neutral. Therefore, on this basis the disallowance of interest for earning exempt income will be nominal or nil. At the same time the appellant has been sanctioned loan of ₹ 370 crores by ICICI Bank and has invested in the shares of M/s Edward Keventor (Successors) Pvt. Ltd. for acquiring shares of said company. The appellant had paid ₹ 7.93 crore as interest on the loan taken from ICICI Bank which has been specifically taken for making investment in shares of M/s Edward Keventor (Successors) Pvt. Ltd. (page 203 of AO‟s Order). The other loans taken by the appellant company on which interest is paid were related to the construction projects being undertaken by the appellant company and advanced to other group, entities. Therefore, interest on such loan cannot be considered for disallowance u/s 14A. The loan taken in making investments in the shares of M/s Edward Keventor (Successor) Pvt. Ltd can be considered for making disallowance u/s 14A of the IT Act which worked out as under:- Amount 1 Expenditure - directly relating to the exempted income 2 Amount of 0.54 expenditure by way of interest other than the amount of interest included in point No.l. (directly related to exempted income) (A x B / C) Disallowance 0.54 u/s 14A ( 1 + 2 ) A Amount of 7.93 expenditure by way of interest other than the amount of interest included in point No. 1. (directly related to exempt income) B Average of 1197.30 value of investment, income from which does not form part of total income. C The average 17,419.40 of total assets as appearing in the balance sheet 5. Before us, the learned counsel for the assessee, Mr. R.S. Singhvi submitted that, the ld. CIT (A) has allowed the relief to the extent of ₹ 28,87,91,000/- by observing that the entire investment is out of assessee‟s own fund, however has confirmed the disallowance of ₹ 6.53 crore consisting of proportionate interest of ₹ 54 lac on loan taken for purchase of shares of M/s. Edward Keventor Pvt. Ltd. and ₹ 5.99 crores under Rule 8D(2)(iii). He submitted that investment in the share of M/s. Edward Keventor Pvt. Ltd. was purely a strategic investment, and therefore, no disallowance can be made u/s.14A. Apart from that, he submitted that assessee has substantial amount of own funds in the form of share capital and reserves and entire investments are fully made out of non interest bearing free funds. The details of share capital and reserves as on 31.03.2008 and corresponding investment appearing in the balance sheet were as under: Amount (Rs. in Lacs) a. Share Capital 34,095.95 b. Reserve and Surplus 1,092,818.68 Own funds 1,126,914.63 Total investment in shares/partnership firms As per Balance sheet 175,349.69

6. He further provided us the details of investment and the details of exempt income in the following manner: (a) Details of investment are given hereunder: (Rs. in crores)

31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 - Quoted 31 1 - - - Mutual 0 Funds - Quoted Shares - 16 5 5 1 1 Unquote 33 8 6 3 3 d Shares 8 5 3 3 90 8 4 4 4 - Partners 4 9 1 5 hip Firm (b) Details of exempt income: Particulars Assessment Year 2008-09 2007-08 2006-07 Share of Profit from 1,87,02,005 5,66,24,572 4,88,69,429 Partnership Firms (net)

Exempt income from subsidiary Companies Other Exempt Income 85,33,09,842 (Mutual (Dividend) funds)

Total 87,20,11,847 87,20,11,847 5,66,24,572 4,88,69,429

7. He further submitted that the same was also come up for consideration before this Tribunal for the Assessment Yea₹ 2006- 07 and 2007-08, wherein the Tribunal after detailed discussion has deleted the disallowance on the grounds. • firstly, there is no satisfaction recorded by the Assessing Officer u/s.14A(2). • secondly, interest free funds available in excess of investments in earning tax free securities, • thirdly, investments in partnership firms and companies are for the business purposes of the assessee and; • lastly, no dividend was earned by the assessee on investments in unquoted share of the private limited companies.

8. He further strongly relied upon the judgment of Hon'ble Delhi High Court in the case of ACB India Ltd. vs. ACIT reported in (2015) 374 ITR 108, wherein it has been upheld that while calculating the disallowance under Rule 8D(2)(ii) Assessing Officer has to adopt average value of the investment the income from which does not form part of the total income and disallowance can only be computed in respect to investment which has yielded exempt income during the year. The assessee has earned exempt income from the investments made in partnership firm and mutual fund and not from other investments, and therefore, disallowance if any should be restricted to the extent of ₹ 53.75 lac, the working of which was given in the following manner: Average investment in Partnership Firms and Mutual Funds Opening as on = ₹ 84+10 cr. 01/04/2007 Closing as on = ₹ 90+31 cr 31/03/2008 Total ₹ 215 cr Average = ₹ 107.50 cr. investment Disallowance = 53.75 lakhs. being 0.5% of ₹ 107.50 cr.

9. Before us, ld. Special Counsel appearing on behalf of the Revenue strongly relied upon the order of the Assessing Officer and further submitted that in so far as strategic investments are concerned, the same cannot be removed for the purpose of calculating the disallowance in view of the judgment of Hon'ble Supreme Court in the case of Maxopp Investment Ltd v/s CIT, 402 ITR 640 (SC). He further submitted that the assessee has to establish the nexus and the link between the borrowed funds and its utilization so as to prove that all the investments yielding investment income has been made out of surplus funds and interest bearing fund has been used purely for the business purposes. 10. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material referred to before us. The undisputed fact is that assessee has earned exempt income of ₹ 87,20,11,847/- as share of profit from partnership firm and dividend income on mutual funds. The average investment as on 31st March, 2008 stood at ₹ 1197.30 crore in various partnership firm and the shares of various group and mutual funds. The total average assets during the year in the balance-sheet were ₹ 1,754 crores. The assessee‟s case has been that it has huge surplus fund in the form of reserves and surplus and share capital at ₹ 1126.91 crore out of which investments in shares and in partnership firm was only 175.30 crore. From a perusal of the impugned appellate order which is based on perusal of material placed on record, it is seen that ld. CIT (A) has taken note to the fact that assessee has paid ₹ 176.06 crores interest on bank overdraft facilities and the balance interest of ₹ 249.5 crore is much less than total interest received from subsidiary companies and banks which was more than 411.99 crore. On these facts, he has held that on investment made by the assessee-company no disallowance of interest can be made. Apart from that, he has noted that assessee has been sanctioned loan of ₹ 370 crores by ICICI bank which was invested in shares of M/s. Edwart Keventor P. Ltd. for acquiring the shares of a said company for which assessee has paid ₹ 7.39 crore interest. The other loans taken from the assessee-company on which interest has been paid, purely related to business undertaken by the assessee and business advance to the group companies. Based on such findings he has held that interest of such loan cannot be considered for disallowance u/s.14A. However, he has confirmed the disallowance of ₹ 653 lacs mostly arising out of disallowance of administrative expenditure under Rule 8D(2)(iii) and disallowance of interest on the investment made in the shares of M/s. Edward Keventor P. Ltd. which has been stated to be strategic investment.

11. In so far as disallowance of interest is concerned, we find that, not only the ld. CIT (A) has properly examined the utilization of interest bearing funds for the assessee which was purely for the purpose of business but also from the bare perusal of the balance sheet, it is seen that the interest free funds available with the assessee in the form of reserves and surplus far exceeds the total investment made in shares/partnership firms including the investment made in the shares of M/s. Edward Keventor P. Ltd. which has been stated to be strategic investment. If that is so, then no disallowance u/s.14A can be made. This proposition has now been confirmed by the Hon'ble Supreme Court in the case of CIT vs. Reliance Industries Ltd. in civil appeal no.10 to 13 of 2019 judgment and order dated 23rd March, 2019, wherein the Hon'ble Supreme Court has upheld the proposition that if assessee has interest free funds available sufficient to meet its investment, then it can be presumed that the investment have been made from interest free fund available with the assessee and not from the borrowed funds. Thus, no disallowance of interest can be made. 11.1 In so far as disallowance made under Rule 8D2(iii), one of the plea raised by the learned counsel before us is that, for the computation of average investment which had not yielded exempt income should be removed for which, reliance has been placed in the judgment of Hon'ble Delhi Court in the case of ACB India Ltd vs. ACIT (supra). In view of such a binding precedent, we direct the Assessing Officer only to include those investments while computing the average investments which have yielded exempt income, i.e., investment made in the partnership firm and mutual fund only, because investment made on unquoted shares have not yielded any exempt income. The calculation of average investment in partnership firm and mutual fund has been given by the learned counsel as has been incorporated above and accordingly we direct the Assessing Officer to verify the same and work out the disallowance of 0.5%. Accordingly, appeal of the assessee is partly allowed.”

of the learned assessing officer i.e. ground number 12 of the appeal is with respect to the deletion of addition/disallowance on account of expenses on commercial projects which are not commenced amounting to Rs.1 05,19,606/–.

58. The parties confirm that this issue is identical to the issue decided by the coordinate bench in assessee‟s own case for assessment year 2006 – 07 and 2008 –

09. It was further submitted that this issue has not been preferred by the revenue before the honourable High Court in appeal of the revenue. Therefore the learned authorized representative price to that this issue is now concluded in favour of the assessee by the decision of the coordinate bench. The learned departmental representative vehemently supported the order of the learned assessing officer.

59. We have carefully considered rival contention and perused the orders of the lower authorities as well as the orders of the coordinate bench. The issue has already been decided by the coordinate bench in assessee‟s favour by the decision dated 27 May 2019 four assessment year 2008 – 09 is per paragraph number 139 – 143 of that order as Under:-

139. In ground no.15, the Revenue has challenged the deletion of addition of ₹ 1,30,38,853/- on account of disallowance of expenses on projects not commenced.

of Corporation with Fraport AG Frankfurt Airport services worldwide for joint colaboration relating to Airport projects. Legal & 505,620.00 FEES FOR Professional VALUATION OF GUJRAL DESIGN PLUS OVERSEAS PVT LTD. For buying stake in company. Legal & 1,966,300.00 PROF. FEES IN Professional CONNECTION WITH IMPLEMENTATIO N AND ACQUISITION OF CYPRUS HOLDING COMPANY, INCLUDING ASSISTANCE IN ACQUISITION & IMPLEMENTATIO N OF CYPRUS HOLDING COMPANY. Legal & 161,236.60 OUT OF POCKET Professional EXPENSES FOR TRAVEL TO CYPRUS Legal & 1,067,420.00 PROF. FEES IN Professional RESPECT OF CROSS BORDER INVESTMENT STRUCTURING FOR HOSPITALITY BUSINESS EVALUATION FOR SETTING UP AN OFFSHORE COMPANY FOR ACQUIRING 141. Ld. CIT (A) has deleted the addition in the following manner: “23.11 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, and various judicial pronouncements relied upon by the appellant and my own order for AY 2007-08 in the case of the appellant company wherein the issue was decided in favour of the appellant. It is seen that the appellant is engaged in the business of developing real estate like development of plots, multi storey buildings, commercial complexes etc. During the year, the appellant has incurred certain expenditure on legal and professional fees paid for drafting the joint venture agreements, preparing draft report for Gujral Design Plus Valuation, Purchase of preferential shares by DAL Singapore from Lehmen Brothers, drafting of memorandum corporation with Fraport AG for joint venture and airport projects, acquisition of companies, advice taken for cross border investments etc and other expenses on feasibility and viability of the various projects. It is seen that the appellant has paid these expenses for taking legal and professional advice on the issues mentioned above and have paid ₹ 1,30,38,853/- to the various parties for services rendered by them. In the assessment proceedings these expenses have been treated as capital expenditure by the ASSESSING OFFICER. It is claimed by the appellant that expenses incurred on legal and professional fees paid for drafting the joint venture agreements, preparing draft report for Gujral Design Plus Valuation, Purchase of preferencial shares by DAL Singapore from Lehmen Brothers, drafting of memorandum corporation with Fraport AG for joint venture in airport projects, acquisition of companies, advice taken for cross border investments etc was not new line of business but it was incurred to expand the business in same line. Out of the above proposals most of the study or legal advice or joint venture agreements did not fructified, therefore, the same were abandoned. Most of these projects were only with consultancy stage, therefore, treating such expenses as capital nature cannot be justified. The expansion of the appellant‟s business by entering into joint ventures and acquisition of shares and company which are engaged in the business of real estate was in the same line of business and such expenses are in the revenue field. The expenses like planning, identification of sites, consultation charges, lay out etc. and other expenses on feasibility and viability of the commercial projects etc, are the expenses incurred for bonafide business requirement of the appellant and such expenses falls within the objectives of the MOA of the appellant company. Any expenditure incurred for the projects to be undertaken in future and viability of such projects are business expenditure and same has to be allowed as revenue expenditure. The question of capitalization of such expenses arises only when such projects actually commence & are in existence, but there are certain projects for which various expenses were incurred before their intended commencement but due to some reasons, such projects could not be commenced. Therefore, expenses relating to such projects cannot be capitalized and has to be allowed as revenue expenditure as these expenses have been incurred wholly and exclusively for the business requirement of the appellant company. The Assessing Officer was not justified in treating these expenses as pre-operative expenses and same is to be capitalized. The question of capitalization does not arise as these expenses were incurred on legal and professional advice and preparing joint venture agreements. However, after the feasibility and viability study these proposed joint ventures or valuation reports were not found suitable for carrying out further investments and same were abandoned. The expenses were incurred for extension of same line business and such expenses has to be allowed as revenue expenditure. In view of the above, the disallowance made by the ASSESSING OFFICER on account of capitalisation of such expenses cannot be sustained. Therefore, respectfully following the decisions of jurisdictional High Court and my own order for AY 2007-08 in appellant‟s case (Page 229-237), the disallowance of ₹ 1,30,38,853/- made by the Assessing Officer on this account is deleted.”

“161. In ground no.19, the Revenue has challenged the deletion of addition of ₹ 12,28,340/- on account of disallowance of notional rent/additional annual letting value in respect of the vacant property.

- DLF City Centre ₹ 2,36,01,310/- - DLF Commercial ₹ 27,21,360/- Shopping Complex DLF Corporate Park ₹ 1,69,07,688/- ₹ 4,32,30,358/- Less: Standard ₹ 1,29,69,107/- Deduction u/s 24(1) ₹ 3,02,61,250/- 17. The Ld. CIT (A) has deleted the addition after discussing the case of the assessee in detail and following the decision cited before him in this regard including decision of „D‟ Bench of the Tribunal on an identical issue in the assessee‟s group concern M/s DLF Office Developers vs. ACIT reported in 23 SOT 19 (Del) and first appellate orders in the assessee‟s own case for the assessment yea₹ 2006-07, 2007-08 and 2008-09.

20. Considering the above submission, we find that the Ld. CIT (A) has decided the issue in favour of the assessee narrating the observation made in the cited decisions in case of M/s DLF Office Developers vs. ACIT (Supra) and other that where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value have to be worked out u/s 23(1) (c) of the IT Act and according to this clause if the actual rent received/ receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property. He has accordingly held that in case of the assessee where the property remained vacant then the ALV of such property will be Nil. Hence, no notional rent can be estimated in the case of vacant properties.

21. In absence of rebuttal of above aspect of the facts in the case of present assessee, we are of the view, that the Ld. CIT (A) has rightly decided the issue in favour of the assessee taking assistance of the cited decisions before him. We find that the Ld. CIT (A) has discussed the issue in appeal and has passed a speaking order, which is being reproduced hereunder: 7.15 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various judicial pronouncements available on the issue and order of Commissioner of Income Tax (Appeals)-XVIII for AY 2006-07 and my own orders for A Y 2007-08 & 2008-09 in the case of appellant wherein this issue was decided in favour of appellant. It is seen that impugned addition made on account of notional rent on properties that remained vacant for part of the previous year, the AR reiterated submissions made before the AO and emphasized that the matter is covered in favour of the appellant by judgment in the case of one of the appellant's group concerns M/s DLF Office Developers Vs. ACIT reported in 23 SOT 19 (Del) and orders of CIT(Appeals) in appellant's own case for the Assessment yea₹ 2006-07, 2007-08 & 2008-09. It is observed that “where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value will have to be worked out under section 23(l)(c) of the IT Act and according to this clause, if the actual rent received / receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property. “ In the case of appellant, the appellant had intention to let such properties but could not get suitable tenant. In such a situation, the AL V will be Nil as per provision of section 23(1)(c) of the IT Act. Section 23(1)(a) r.w.s 23(1)(c) clearly provides that if the property remain vacant wholly or partly during the year, then actual rent received or receivable will be taken as the ALV of such properties. In the case of appellant the property is remained vacant, therefore, the ALV of such properties will be Nil. Hence, no notional rent can be estimated in the case of vacant properties. The decision of the Assessing Officer was not justified. As regards, the Assessing Officer‟s decision of computing the notional rent based on highest rent in respect of each building, it is seen that the properties have been given to various parties which are not related to the appellant and some of them are of International repute like GE Capital, KPMG. The rent has been charged based on the location of the property, area of lease property and timing of lease agreement. It is seen that appellant has filed copies of the all lease agreement before Assessing Officer for verification and no discrepancy in the rental income in the books of accounts, as compared to the lease agreement was pointed out by the Assessing Officer. It is not the case that appellant has received some under hand rent from the tenants. In this regard the Assessing Officer has not brought any evidence on record and no enquiry in this direction was conducted by him. Therefore, assuming the rent for all properties based on the highest lease agreement was not justifiable. As regards Assessing Officer‟s reliance on various judgments in the assessment order, it is seen that the facts of the said judgments are squarely different with that of the appellant‟s case. In the case of appellant, none of the properties have been rented out/leased to the related parties. Therefore, the ratio of the said judgment cannot be applied in the appellant case. In view of the above, the bonafide lease agreement between the appellant and third parties cannot be disregarded without having any adverse information in this regard and based on conjectures and surmises. Hence, the addition made by the Assessing Officer on this issued is deleted. Facts of the above cited judicial pronouncements are identical with the facts of the appellant‟s case. Therefore, ratio of the said judgment is squarely applicable to the facts of the appellant‟s case. Hence, the notional addition made by the Assessing Officer of ₹ 3,02,61,251/- under the head “income from house property” on account of notional income u/s 23(1) (a) of the Income Tax Act is deleted.”

22. We find that the first appellate order on the issue as discussed above is reasonable and view supported with this decision. Hence, we are not inclined to interfere with the order, the same is upheld. Ground no.3 is accordingly rejected.”

23. This precise issue had come up for consideration before the Tribunal in assessee‟s own case in the earlier year, wherein it has been observed and held as under: „42. We have heard the rival submissions and perused the material on record. The ground is regarding addition of ₹ 12,60,000/- as rental income. The Assessing Officer observed that the assessee was owner of Kiosks installed at Malls which were leased to various parties at the lease rent of ₹ 18,00,000/- per annum. The Assessing Officer after accepting statutory deduction of 30%, considered the net rental income at ₹ 12,60,000/-. The CIT(A) confirmed the finding of the Assessing Officer.

43. The appellant contended that M/s. DLF Services Ltd. was appointed as maintenance agency for upkeep and maintenance of Mall, owned and run by appellant. For maintenance services being rendered by DLF Services Ltd., the appellant assigned the lease rental to DLF Services Ltd. as part of maintenance cost. The appellant contended that the diversion of lease rent was towards reimbursement of maintenance services rendered by M/s. DLF Services Ltd. and as such diversion was towards provisions of maintenance services. It was further contended that the rental income as diverted to DLF Services Ltd. has being subjected to tax in the case of M/s. DLF Services Ltd. and there is no case of subjecting the same income again in the case of appellant. In this connection, the appellant made reference to decision of Supreme Court in the case of M/s. Ashish Plastic Industries Vs. ACIT 373 ITR 45, as per which same income cannot be subjected to tax again in the case of the appellant.

44. The Ld. CIT DR supported the order of the Assessing Officer and CIT(A).

38. Learned counsel for the assessee had contended that the TDS amount is in the nature of tax for the deductee and not that of the assessee and such interest on late deposit of TDS is allowable expenses u/s. 37 because it has been incurred during the course of business. Under the provision of the Act, levy of interest for delay in remittance of the TDS has been envisaged u/s. 201(1A) which is not in the nature of penalty albeit it is more on account of delayed tax, deposited by the assessee on behalf of the deductee, i.e., other party for which the interest is charged. The amount of TDS represents the amount of income tax which is payable by the party on whose behalf the deductor has deducted the tax and pays to the Government Exchequer. The TDS amount does not represent tax liability of the assessee albeit it is the tax of the other party, but it has to be paid by the assessee. In case there is any delay in payment of tax deducted by the assessee on behalf of the deductee, then it cannot be linked or reckoned as income tax of the assessee payable by the assessee, and moreover the interest herein is more of compensatory in nature. Though, Co-ordinate Bench of ITAT Kolkata in the case of DCIT vs. M/s. Narayani Ispat Pvt. Ltd. (supra) has allowed the said expenditure. Even though, we may be persuaded by such a reasoning, however, we find that Hon'ble Madras High Court as pointed out by the ld. Special Counsel for the revenue, in the context of interest u/s. 201(1A) only, has held that the TDS partakes the character of income tax and is not allowable as business expenditure. The relevant observation of the Hon'ble Court reads as under: “The liability for deduction of tax arises by reason of the provisions of the Act. Under s. 201, the consequence of failure to comply with the same renders that person liable to be deemed as an assessee in default with all the consequences attached thereto. The liability to pay interest on the amount not deducted or deducted but not paid is directly related to the failure to deduct or remit the amount. The amount required to be deducted is the amount payable as income-tax. The interest paid for the period of delay takes colour from the nature of the principal amount required to be paid, but not paid within time. The principal amount here would be the income- tax and the interest payable for delayed payment is the consequence of failure to pay the tax and in the circumstances, in the nature of a penalty though not described as such in sub-s. (1A) of s. 201 of the Act. The fact that the income-tax required to be remitted was not income-tax payable by the assessee, but is ultimately for the benefit of and to the credit of the recipient of the income on whose behalf that tax is payable does not in any manner alter the character of the payment, namely, its character as income tax.

389 : (1993) 201 ITR 684 (SC) : TC 17R.746, Malwa Vanaspati & Chemical Co. vs. CIT (1997) 42 CTR (SC) 137 : (1997) 225 ITR 383 (SC) : S17.1860 and CIT vs. Ahmedabad Cotton Manufacturing Co. Ltd. (1993) 115 CTR (SC) 401 (1994) 205 ITR 163 (SC) : TC 17R.848. In all these cases, the Court was concerned with an indirect tax payable by the assessee in the course of its business and admissible as business expenditure. Further liability for interest which had been incurred by the assessee therein was regarded as compensatory in nature and allowable as business expenditure.

98. Learned AR has submitted before us that the assessee has not paid dividend distribution tax on the amount of profit derived by the assessee from a special economic zone unit. He also submitted that there is no provision in the act that if the dividend distribution tax paid is short it can be taxed as an income of the assessee. He extensively referred the provisions of Section 115 O, 115 P and Section 115 Q. He therefore submitted that the addition made by the learned assessing officer and confirmed by the learned CIT – A is devoid of any merit and is not in accordance with the law.