ACIT, CIRCLE - 2(1), , KOLKATA vs. TCG URBAN INFRASTRUCTURE HOLDINGS PVT LTD.,, KOLKATA

आदेश /O R D E R Per Bench : The captioned are filed appeals by the department relevant to the assessment years 2004-05 to 2007-08 and 2009-10 and one appeal is by the assessee relevant to the assessment year 2007-08. 2. Since common issues are involved in all the appeals, hence, the same have been heard together and they are being disposed off by this common order. 3. First we take up the department’s appeal-ITA No. 2584/Kol/2019 for the A.Y 2004-05. ITA No. 2584/Kol/20198 for the A.Y 2004-05. 4. In this appeal the department has taken following grounds of appeal:- 1 That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Various Expenses" of Rs. 34,17,636/­considering such expenses being incurred for the purpose of Business. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Interest on delayed deposit of TDS" of Rs.45,319/­ and "TDS written off' of Rs.73,143/­ considering both as admissible. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in Rs.1,06,63,457/­ granting relief to the assessee on account of "Interest u/s.36( 1 )(iii)" of Rs..2,97 ,23,922/­ against interest free loans and advances given to its subsidiaries without any business purpose. 4 The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. Ground no. 1 :

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 3 5. The department vide ground no. 1 has agitated against the action of the Ld. CIT(A) in deleting various disallowances of expenses amounting to Rs. 34,17,636/- made by the Learned Assessing Officer ( in short, the Ld. AO’) holding that the same were incurred for non-business purposes. 6. The Ld. AO during the assessment proceedings made the following disallowances out of various expenses/incurred/claimed by the assessee:- A. Payment to DSK Legal Rs. 2,85,000/­ B. Payment to Niharika Bissaria for research work Rs. 2,25,000/­ C. Rent paid for Mumbai Office Rs. 12,06,482/­ D. Payment to studio Praxis for Architectural Consultancy fees Rs. 43,200/­ E. Brokerage paid to Knight Frank India Pvt. Ltd Rs. 3,24,000/­ F. Depreciation on fixed assets installed at Mumbai Office Rs. 3,97,821/­ G. Repairs & Maintenance of building Rs. 3,73,126/­ H. Tenants Service charges Rs. 6,48,000/­ I. Preparation of site plan Rs. 10,000/­ J. Registration of Lease Deed Rs. 30,500/­ K. Interest on TDS ` Rs. 45,319/­ L. TDS Written off Rs. 73,143/­ M. Travelling & Conveyance Rs. 13,33,954/­ N. Personal expenses for Mumbai Office Rs. 56,000/­ O. Interest expenses u/s 36(1)(iii) Rs.2,97,23,922/­ Rs. 3,47,75,467/­ 7. Though the Ld. AO had made various disallowances of expenditure as noted above, but the Deptt. through this ground has contested the action of the Ld. CIT(A) in deleting the disallowance of expenses aggregating of Rs. 3,47,75,467/- only. It is not coming out from ground no. 1 as to which items of deletion of disallowance of expenses by the Ld. CIT(A) has been contested. However, we find that the Ld. CIT(A) has given his categorical findings about each head of expenditure. The relevant part of the order of Ld. CIT(A) in this respect is reproduced here under:- “06. FINDINGS & DECISION: 1. I have carefully considered the action of the Ld. A.O in making various disallowances as have been listed in the grounds taken by the appellant­

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 4 company. These grounds raised by the appellant­company are regarding disallowance of expenses such as 'DSK Legal' Rs.2,85,000/­, 'Research work' of Rs.2,25,000/­, 'Rent for Mumbai office' of Rs.12,06,482/­, payments to 'Studio Praxis' of Rs.43,200/­, Brokerage' of Rs. 3,24,000/­, 'Deprecation' of Rs.3,97,821/­, 'Repair & Maintenance' of Rs. 3,73,126/­, 'Tenants Service charges' of Rs. 6,48,000/­, 'Preparation of Site plan' of Rs. 10,000/­, 'Registration of Lease Deed' of Rs. 30,500/­, 'Interest on TDS' of Rs. 45,319/­, 'TDS written off' of Rs. 73,143/­, 'Travelling & Conveyance' of Rs, 13,33,954/­ and 'Personal expenses' of Rs. 56,000/­. I observe that the Ld. A.O has specifically discussed the items of disallowance, and has generally been persuaded to make the disallowances on grounds that these expenses have been claimed by the appellant even when the business has not commenced in the case of the appellant. Further, I observe that the Ld. A,O has observed that several of the claims of expenses were capital in nature and cannot be allowed as revenue expenses. 2. The first two items of disallowance [A] & [ B] relate to the impugned sum of Rs.2,85,000/­ paid to M/s DSK Legal for consultancy work and Rs.2,25,000/­ paid to Ms Niharika Bisaria for certain research work. The Ld. A.O has disallowed these expenses by holding that these were not directly or intimately connected with business, and in any case the appellant­company had not earned any income under the head of business as the same said business had not commenced. The same has been countered by the appellant on grounds that the appellant is in real estate business, and that the business had been set up and had commenced long back before the impugned assessment year. On facts it has been brought on record that it is an admitted fact that the Appellant Company had taken new project at Hinjawadi, Maharashtra jointly with MIDC [ Maharashtra Industrial Development Corporation, a Govt .of Maharashtra undertaking]. In the previous year 2003­04 relevant to the impugned assessment year 2004­05, and this fact has also been recorded by the Ld. AO at the 2nd paragraph of page­3 of the impugned assessment order. It has been submitted by the appellant that the company is in real estate business, and that the business had already been set up and commenced long back. In furtherance of its object of real estate, as submitted by the appellant, the Appellant Company entered into a Joint Venture Agreement with Maharashtra Development Corporation (MIDC) on 12th May, 2003. On further facts, it has been submitted that for better management of the Joint Venture Business, the Appellant Company took on rent an office at Mumbai and employed various staff, and that several expenditures were incurred in the upkeep and maintenance of such Office at Mumbai. The Appellant Company claimed all those revenue expenses incurred at Mumbai Office as its business expenditure, and that the Ld. AO disallowed them only on the

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 5 ground that during the previous year there were no revenue from any activities other than rental income from property situated at Gurgaon, Delhi. Drawing attention to the details of rent received by the Assessee Company, it was submitted by the appellant that it is an admitted position that the revenue expenses incurred by the Appellant Company at Mumbai Office and claimed by it as Business Expenditure were not related to the foresaid rental income. It was submitted that however, the impugned expenses were incurred for furtherance of its business which had been set up long back and that such expenditure were incurred for furtherance of its existing business commercial expediency, and that there was no dispute that the assessee company entered into a Joint Venture with MIDC, Mumbai, to develop Bio­technology Park at Hinjawadi near Mumbai. It was argued accordingly, that as a corollary, hiring an office and employing staff at Mumbai was a required and compulsory business expediency. It was submitted that the expenses incurred there at were all business expenditure and not personal nor capital in nature. It was argued that such revenue expenses incurred for the period from setting up of the business and commencement of business is to be allowed as business expenditure. The appellant relied upon judgments as have been recorded in support of its contentions. 3. It was argued by the appellant that the admitted fact is that is no dispute that a Joint Venture has been entered into between the Appellant Company and MIDC on 12th May 2003. The appellant also placed a copy of the agreement in the Paper Book at Page Nos. 118 to 163 of the Paper Book which was submitted in appeal. It was argued that as the new business was set up at least on 12th May 2003, the appellant had admittedly had taken a rented office at Mumbai since September 2003, and that therefore in such factual Circumstances, the following revenue, expenses incurred by the Appellant Company at its Mumbai Office in regard to new project including depreciation on Fixed Assets admittedly installed at Mumbai Office, were wholly allowable as business expenditure. a, Payments to DSK Legal Rs. 2,85,000 b. Payment to Niharika Bisserte for research work Rs. 2,25,000 c. Rent paid {or Mumbai Office Rs.12,06,482 d. Payment to studio Praxis for Architectural Consultancy fee Rs. 43,200 e. Brokerage paid to Knight Frank India Pvt. Ltd Rs. 3,24,000 f. Depreciation on fixed assets installed at Mumbai Office Rs. 3,97,821 g. Preparation of site plan Rs. 10,000 h. Interest on delayed payment of TDS Rs. 45,319 i. Travelling & Conveyance Rs. 13,33,954 j, Personnel Expenses at Mumbai Office Rs. 56,000

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 6 Total Rs. 39,26,776/­ 4. Having carefully examined the issue and the various observations and findings made by the Ld. A.O when disallowing each expenditure, I observe that most of the disallowances have been made by the Ld. A.O on grounds that these amounts represent expenditure claimed when business has not commenced, and / or that they are capital in nature and therefore cannot be allowed as revenue expenses. The Ld. A.O has considered the following payments to be of capital nature, as they were incurred before the commencement of business. (1) Payments to DSK Legal­ Rs.2,85,000/­ (2) Payment to Nilharika Bissaria for research work­ Rs.2,25,000/­ (3) Rent paid for Mumbai Office ­ Rs.12,06,482/­ .(4) Payment to studio Praxis for Architectural Consultancy fees and (5) Rs.43,200/­ Brokerage paid to Knight Frank India Pvt. Ltd Rs.3,24,000/­. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office, and they cannot be rejected merely as the business was not bringing positive incomes. Here I observe that the Ld. AO has admitted to the fact of the date of agreement and the commencement of business, and therefore in my considered view of the matter, there is an inherent contradiction in the view of the Ld.AO that the business had not commenced and therefore the expenses ought to be capitalized. 5. I also observe that the Ld. A,O has disallowed a sum of Rs.3,97,821/ ­ from the claim of depreciation of Rs. 4,37,010/­ as depreciation on grounds that these have been claimed some of these claims were on fixed assets which were a part of the building fetching rent, and cannot be allowed as a business expense, The Ld. A.O has also disallowed an amount of Rs.3,73,126/­ claimed by the appellant towards repairs and maintenance of the building, Similarly, the Ld. A.O also disallowed a sum of Rs.6,48,000/­ as Tenant Service Charges, and the Ld, A,O took a view that such charges cannot be a part of business income and there was no scope of deduction under the head of house property u/s 24 of the Act, and accordingly he disallowed the same. The Ld. A.O made further from heads of 'Preparation of Site plan' of Rs.10,000/­, 'Registration of Lease Deed' of Rs.30,500/­, 'Interest on TDS' of Rs.45,319/­, 'TDS written off' of Rs. 73,143/­, 'Travelling & Conveyance' of Rs.13,33,954/­ and 'Personal expenses' of Rs.56,000/­. 6. Having carefully considered the matter, I find that the Ld. A.O was unjustified in taking a view that the business of the assessee had not commenced, when he himself has recorded about the agreement entered by the appellant with the MIDC about a housing project at Mumbai. The assessee has justified the expenses in so far that they were legitimate business expenses, and that the genuineness of the claims had not been questioned by the ld. A.O. There would undoubtedly be certain expenditure

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 7 in the setting up and­maintenance of any office, and a definite period of gestation before any activity from such Office would yield income. The Hon'ble Delhi High Courts in the case of CIT Vs. Samsung India Electronics Ltd [ 2013] 37 taxmann.com 239 (Delhi)/(2013) 356 ITR 354 (Delhi) has adjudicated that any running expenses for the period between setting up and the commencement of business would be allowable as a business expenditure. IT: Running expenses incurred for period between setting up and commencement of business, is to be allowed as business expenditure ••••• [2013] 37 taxmann.com 239 (Delhi) HIGH' COURT OF DELHI Commissioner or Income­tax v. Samsung India Electronics Ltd.~ SANJlV KHANNA AND SANJEEV SACHDEVA, JJ. IT APPEAL NO. 131 OF 20101 JULY 9,2013

Section 37, read with section 35D, of the Income­tax Act, 1961 ­ Business expenditure ­ Allowability of [Set up of business/Commencement of business] ­ Whether running expenses from date of setting up of business till date of commencement of business/commercial operation cannot be said to be capital in nature, said expenses are to be allowed as revenue expenditure ­ Held, yes [Paras 6 &7) [In favour of assessee] FACTS The assessee­company was a joint venture of a Korean and an Indian company incorporated on 3­8­1995. The certificate of setting up the business was issued on 3­ 9­1995. The commercial operations commenced on 1­10­1995. The assessee claimed deduction of various expenditures under section 37 incurred for the period from 3­8­1995 till 30­9­1995. The Assessing Officer held that these expenses were Incurred before actual business operation started on J­1 0­1995 and, hence, they were pre set up expenses and they were capital in nature, therefore, they should not be allowed under section 37. On appeal, the Commissioner (Appeals) confirmed the order of Assessing Officer on ground that date of incorporation cannot ipso facto be treated as date of setting up of operation as incorporation results in registration of the company but does not necessarily enable it to commence business, On appeal, the Tribunal allowed the claim from date of setting up of the business, i.e., 3­9­1995, The and further Tribunal found that the business of

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 8 the assessee could be said to have been set up on 3­9­1995 as prior to this necessary agreements had been entered into, key personnel had been recruited and the assessee­company had started working necessary infra­ structure like office premises, office equipments etc. and the assessee­ company was ready to commence trading operation as on the date of incorporation viz., 3­8­1995 notwithstanding the fact that commercial operations started with effect from 1­10­1995. On revenue's appeal: HELD The factual findings recorded by the Tribunal cannot be categorized as perverse. The date of commencement of business was certified as 9­8­1995, though the date of incorporation was 3­8­1995. The Tribunal has referred to various facts as to what was required to be done before the first actual sale invoice to a customer was issued. It included recruitment of employees, their training and establishment of showrooms by taking places on rent etc. Advertisements had also been issued and in fact the Indian joint venture partner on 25­7­1995 had appointed their Public Relations Consultant for the period 15­8­1995 onwards. [Para 5] In the case. of CIT v. L.G. Electronics (India) Ltd. [2006] 282 ITR 545/[2005] 149 Taxman 166 (Delhi), it has been observed that the date of setting up of business and date of commencement of business may be two separate dates. In CIT v. ESPN Software India (P.) Ltd. [2008] 301 ITR 368/[2009]184 Taxman 452 (Delhi) wherein it has been held that a business will 'commence' with the first purchase of stock­in­ trade and the date on which the first sale is . made is immaterial, Similarly, for manufacturing, several activities in order to bring or produce finished products have to be undertaken, but business commences when tile first of such activities is taken. (Para 7] Thus, the claim of assessee was to be allowed as business expenditure.

CASES REFERRED TO Western India Vegetables Products Ltd. v. CIT [1954] 26 ITR 151(Bom.) (para 4), CWT v. Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478(SC) (para) 4, Sarabhai Management Corpn. Ltd. v. CIT [1991] 192 ITR 151 (SC) (para 4), CIT v. L.G. Electronics (India) Ltd. [2006] 282 ITR 545/[2005] 149 Taxman 166 (Delhi) (para 7) and CIT v, ESPN Software India (P.) Ltd. [2008] 301 !TR 368/[2009] 184 Taxman 452 (Delhi) (para 7). 7. I also find useful reference to the judgment of the Hon'ble Madras High Court in the case Daimler India Commercial Vehicles (P.) Ltd. v. Deputy Commissioner of Income Tax [2019] 107 taxmann.com 243 [Mad) wherein the Hon'ble Court has made certain pertinent observations which

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 9 deal with the issue as to when the business is stated to be set up and as to the allowability of the business expenses incurred before commencement of the business. [2019] 107 taxrnann.com 243 (Madras) ­HIGH COURT OF MADRAS Daimler India Commercial Vehicles (P.) Ltd. v. Deputy Commissioner of Income Tax T.S. SIVAGNAM AND MRS. V. BHAVANI SUBBAROYAN, JJ TAX CASE NO. 958 OF 2018 JULY 5, 2019 INCOME TAX: There being a unity of control and management and common fund apart from other features, assessee on showing that it has commenced several of its activities in bunch of activities for which it was incorporated by it under head operating expenses, financial expenses and depreciation. Where assessee was incorporated for a bundle of activities, viz., designing, manufacturing, distributing, selling, source of after sales engineering services and research and development of commercial vehicles and related products and components for domestic Indian and Overseas Market and, it commenced/performed activities relating to designing of commercial vehicles and related products, R&D, buying and selling of parts and it was in process of construction of factory building for manufacture of commercial vehicles, merely because manufacturing and sale of vehicle did not take place, it could not be said that business of assessee had not been set up as manufacturing activity of assessee was a part of composite business activities. *** 8. I also observe that where necessary permissions have been obtained and agreements have been entered into by the taxpayer with the Competent Authorities, Hon’ble Courts have opined that where such approval/ permissions have been obtained as on date the assessee set up its business and was ready to commence said business and, therefore, expenses incurred for purpose of business after said date of approval were eligible for deduction under section 37(1). The Hon’ble ITAT, Mumbai­C Bench in the case of Deputy Commissioner of Income­tax, Mumbai v. PPFAS Asset Management (P) Ltd. {2019] 105 taxmann. Com 103 (Mumbai­ Trib) has observed so. The head notes for such decision are as under: IT: In case of assessee, an asset management company, dateof approval given by SEBI was to be regarded as date on which assessee set up its business and was ready to commence said business and, therefore, expenses

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 10 incurred for purpose of business after said date of approval were eligible for deduction under section 37(1) ••••• [2019] 105 taxmann.com 103 (Mumbai­Trib) IN THE ITAT MUMBAI BENCH ‘ C ‘ Deputy Commissioner of Income­tax, Mumbai v. PPFAS Asset Management (P) Ltd. PAWAN SINGH, JUDICIAL MEMBER AND RAMIT KOCHAR, ACCOUNTANT MEMBER IT APPEAL NO. 6687 (MUM)OF 2017 {ASSESSMENT YEAR 2013­14] MARCH 13, 2019 Section 37(1), read with section 3 of the Income­tax Act, 1961 and Regulation 21 of the SEBI (Mutual Fund) Regulations, 1996­ Business expenditure ­ Allowability of (Commencement of business] – Assessee was an asset management company incorporated on 8­8­2011­ It was required to obtain SEBI approval for undertaking such business­SEBI approved assessee to act as an asset management company on 17­10­2012­ Thereafter on 19­12­2012, assessee­company made an application to SEBI for approval of mutual fund scheme of PPFAS Mutual fund­ It received certificate from SEBI granting registration for mutual fund scheme of PPFAS Mutual Fund on 8­4­2013 – For relevant year, assessee filed its return claiming deduction of certain business expenses­ Assessing Officer took a view that assessee had received certificate granting registration from SEBI approving scheme of Mutual Fund, from 8­4­2013 which enabled it to commence business and since said approval was granted after end of financial year under cons2ideration, expenses claimed by assessee could not be allowed as deduction – Commissioner (Appeals), however, allowed assessee’s claim­Whether on facts, business of assessee was set up and assessee was ready to commence its business once it was approved by SEBI to act as an asset management company in accordance with sub­regulation (2) of Regulation 21 of the 1996 Regulations which approval was granted by SEBI in favour of assessee on 17­10­2012 ­ Held, yes­Whether, therefore, assessee was entitled to deduction of admissible business expenses incurred by it on or after 17­ 10­2012 when business could be said to have been set up by assessee­ Held, yes [Paras 6.7 and 6.12] [ Partly in favour of assessee] 9. From the factual matrix emanating in the case at hand, I observe that the Ld. AO himself has recorded that by entering into an agreement with the MIDC, the necessary assumption would be that the project had begun, and,

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 11 therefore the assessee was to undertake expenses towards the project, even if for the preliminary work related to the project, and the Office/business establishment had been started for the said purpose of the project. I therefore hold that the following payments/expenses were towards the commencement of business. (1) Payments to DSK Legal­ Rs.2,85,000/­ (2) Payment to Niharika Bissaria for research work­ Rs.2,25,000/­ (3) Rent paid for Mumbai Office ­ Rs.12,06,482/­ .(4) Payment to studio Praxis for Architectural Consultancy fees and (5) Rs.43,200/­ Brokerage paid to Knight Frank India Pvt. Ltd Rs.3,24,000/­. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office, and they cannot be rejected merely as the business was not bringing positive incomes. As such I am inclined to accept the arguments of the appellant and direct the Ld. AO to treat the said expenses as revenue expenses, and allow the same. 10. As regards, the matter of expenses incurred for repairs for the maintenance of the building taken on rent for the Mumbai Office, the impugned amount being Rs. 3,73,126/­, I observe that the Ld. AO has made the disallowance on grounds that the same entails repairs for let out building, and the same were not allowable u/s. 24 of the Income Tax Act. In appeal, it was pointed out by the appellant that the said disallowances tantamount to double disallowances. The appellant has referred to Schedule 12 of the Audited financials [ placed at Page No. 17 of the Paper Book] and stated that in such Schedule, and an aggregate sum of Rs. 11,78,195 has been charged to Profit & Loss account, and that the break­ up of the same, which had also been placed before the Ld. AO was as follows;(1) Maintenance charges for vacant period Rs. 8,05,069/­ (2) Repairs to Building Rs. 72.041/­ and Maintenance Charges of HDFC Bank (Tenant)­Rs.3,01,085/­ in all totalling the figure of Rs. 11,78,195/­. It was submitted by the appellant that the first two items (Rs.8,05,069/­ + Rs.72,041/­) was not claimed as deduction for computing the assessable income in as much as the same was disallowed by itself while computing its income declared in the return of income (as evidenced at page No. 1 of the Paper Book). It was further submitted that the third item being the sum of Rs. 3,01,085/­ could not have been disallowed by the Ld.AO, in as much as the said amount was not claimed as expenditure. It was pointed out further by the appellant that the sum of Rs. 3,01,085/­ was debited as an expenditure but was reimbursed by HDFC Bank and was declared as income included in income in Schedule 10 being reimbursement of maintenance charges (see Pae no. 17 of the Paper Book). It was pointed out by the appellant that the impugned sum of Rs. 3,01085/­ was not an expenditure of the assessee company in as much as the amount was received back from M/s. HDFC Bank (Tenant) and was shown as income in

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 12 Sch. 10. After considering the explanation of the assessee company as borne out by the Schedule of accounts, I find factual merit in the submissions. It is observed therefore that these disallowances were in the nature of double disallowances made by the Ld.AO and as such the appellant had either not claimed expenditure or had disallowance certain items suo­motu. Therefore, I am in agreement with the overall claim of the appellant that as the impugned amount had been included in the income of the Appellant the Ld.AO was not justified in disallowing the same. For the foresaid reasons, the disallowance of Rs.3,73,126/­ made by the Ld. AO was unsustainable in the bare facts of the case and the same is directed to be deleted. 11. The next item of disallowance is regarding an amount of Rs.10,000/­ made by the Ld. AO towards preparation of the site plan. The Ld.AO has disallowed the same on grounds that the same is a capital expenditure, and therefore not allowable. After examining the issue, I am in agreement with the Ld.AO and confirm such disallowance of Rs.10,000/­, as the said preparation of the plan, and the plan per se definitely confers an enduring benefit to the appellant. The action of the Ld. AO in the matter is confirmed, and the limb of the ground stands dismissed. 12. In the matter of the claim of expenses towards the registration of the sale deed, being an amount of Rs.30,500/­, I observe that the same once again tantamount to a capital expenditure with an enduring benefit conferred upon the appellant company. In any case, I observe that this item of disallowance has not been pressed by the appellant, and as such the disallowance is confirmed. The action of the Ld. AO in the matter of add back of Rs. 30,500/­ is confirmed, and the limb of the ground stands dismissed. 13. In the matter of disallowance of Rs.6,48,000/­ being the claim of deduction of Tenant Service Charges, I observe that the Ld.AO disallowed the same on grounds that there was no provision in sec 24 of the Act to allow the same, and that the assessee­company was not rendering any services to the tenants. In appeal, it has been argued by the appellant that it received the rental income of Rs. 1,34,55,170/­. And the same had been credited to the Profit & Loss Account, as placed at Page 11 of the Paper Book. The tenant wise details of such rental income were also submitted at page 164 of the Paper Book. It was submitted that moreover in addition to rent received, the t company also received hire charges of Rs.36,07,422/­ from the Tenants for providing additional services of hiring Furniture, Equipments and other services which were not the obligation of the Appellant Company as owner of the property. It was pointed out that the rental income of Rs.1,34,55,170/­ has been offered to be taxed under the head “Income from House Property” and has been assessed to tax as such,

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 13 and that the receipt of Hire Charges of Rs.36,07,422/­ was offered by the Appellant Company to be taxed under the head “ Profits and Gains from Business or Profession” and has been assessed as such. It was therefore argued that the impugned amount of expenditure of Rs.6,48,000/­ for such services against which the sum of Rs.36,07,422/­ was received from tenants and assessed to tax as “ Profits from Business or Profession” ought to be allowed. After carefully observing the matter, I find that the Ld. AO has not appreciated the facts of the different heads of income disclosed, and the deductions claimed against such disclosed income. I find that the sum of Rs.36,07,422/­ has been disclosed and assessed to tax under the head “ Profits and Gains from Business or Profession” and in such circumstances, the Ld. AO was not justified in disallowing the claim of the expenditure of Rs.6,48,000/­ being expenses incurred by it for providing such services. I find that the Ld. AO has not brought out any adverse finding in the matter regarding the claim, except stating that they cannot be allowed in computing the income from House property. However, as the same have been claimed as a deduction under the head of business income and receipts disclosed under that head, I see no good reason for the impugned disallowance. The action of the Ld. AO in the matter is therefore held to be unsustainable in the facts of the case, and is directed to be deleted. This limb of the ground stands allowed.

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 14 this is a case where a statutory audit has been carried out and necessary expenses certified. The Ld. AO has pointed out any specific item of disallowance under the heads of expenditure as claimed by the appellant­ company, or any specific voucher which was not amenable for verification. In the said matter of estimated and ad hoc disallowances, various Hon’ble Courts, including the Hon’ble Jurisdictional ITAT have observed as under:­ a. The Income Tax Appellate Tribunal of Delhi in the matter of Bharat Bhushan Sawhney vs. ACIT (ITA No. 5729/Del/2011) pronounced on 31.05.2013 held “Resultantly, we hold that the addition made by the Assessing Officer and partly confirmed by the Commissioner of Income Tax(A) is not sutainable in the light of discussions made hereinabove. We are unable to see any valid reason to make ad hoc disallowance and addition only on the basis of imaginary allegation without substantiating the fact that there was some element of inflated claim or personnel use by the assessee. Accordingly, sole ground of the assessee is allowed with the direction to the assessee that the impugned addition be deleted. b. The Income Tax Appellate Tribunal of Agra in the matter of Ramendra Singh Khushwah vs. JCIT (ITA No. 564/Agr/2012) pronounced on 08.03.2013 held “ That only adhoc additions have been made by disallowing expenses, we do not find any justification to sustain the orders of the authorities below in making o confirming the disallowance of expenses above. The orders of the authorities below are, therefore, set aside and the additions of Rs.7,46,710/­ & Rs. 50,000/­ are accordingly deleted. c. The Income Tax Appellate Tribunal of Ahmedabad in the matter of The City of Ahmedabad Spg. & Mfg. Co. Ltd vs. ITO(ITA No.2612/Ahd/2011) pronounced on 09.10.2015 held “ Assessee’ s books are audited and it is a limited company and working since 94 years. AO in his assessment order has not been able to bring any specific material on record to prove that expenses shown in the profit and loss Asst. Year 2008­ 09 a/c were in any way attributable specifically for earning rental income. But has made ad hoc disallowance of Rs. 1,50,000/­ deeming that has been some nexus of some portion of the expenses incurred by the assessee company during the year to earn rental income. Therefore, in view of the above and the lack of proper working to show that expenses specifically for earning rental income having claimed as expenditure under the head business or profession, we are of the view that AO was not justified in making such ad hoc disallowance. We delete the same. This ground is also allowed.” d. The Income Tax Appellate Tribunal of Kolkata in the matter of Ved Prakash Lohia vs. ITO (ITA No. 373/Kol/2012) pronounced on 04.12.2015 held “ Ad hoc disallowance is always made without having any concrete

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 15 evidence that the assessee has incurred the expenses for personal use. We, therefore, find no reason to disallow the above expenses incurred by the assessee. Hence, we delete the same. Thus, the ground no. 2 of the assessee is allowed and against the Revenue. e. The High Court of Delhi in the matter of CIT vs. Marish Mohinini Kathuria(ITA No. 679/2011) held “ After going through the orders of the authorities below, we are of the opinion that the Tribunal rightly observed that the disallowance of a part of expenditure on account of wages as well as consumable goods was on ad hoc basis and there was no rational behind the same. The Tribunal also rightly recorded that the AO had not pointed out any specific defect in the vouchers and there was no finding that any expenditure was not found to be genuine or not relating to the business. “Similarly in the case of your appellant the addition of adhoc basis in against the provision of law and is unsustainable.” f. The High Court of Punjab & Haryana in the matter of CIT vs. S.S.P Pvt. Ltd (ITA No. 535 of 2010) pronounced on 20.07.2011 held “ The CIT(A) had concluded that the audited books of account along with vouchers were produced by the assessee and thereafter the AO had failed to show that the said expenditure was not for business purposes. Further, the disallowance was made on adhoc basis without there being any material which would justify that the amount had been spent for personal use of the directors. The aforesaid findings were confirmed by the Tribunal. The findings of the CIT(A) and the Tribunal have not been shown to be perverse or illegal in any manner, by the learned counsel for the appellant so as to persuade this Court to interfere therewith. No substantial question of law, thus, arises for the consideration of this Court. Accordingly, there is no merit in the appeal and the same is dismissed. g. The Income Tax Appellate Tribunal of Kolkata in the matter of Sushil Kumar Agarwal vs. I.T.O., Ward 44(3)/Kol (ITA No. 1531/Kol/2013 ) pronounced on 05.08.2015 held “ additions has been made only on estimated basis y the AO and the learned AO disallowed 20% of the administrative expenses and the learned CIT(A) upholding the action of the AO is totally unwarranted as the entire books of account and vouchers were duly produced by the assessee during the course of assessment proceedings. Without rejection of books, the action of learned AO as well as the learned CIT(A) erred in sustaining the addition on an estimating basis is arbitrary and unwarranted. Hence, I have no hesitation to delete the said addition made in the sum of Rs. 9372/­ being 20% of administrative expenses.” h. The Income Tax Appellate Tribunal­Delhi in the matter of ACIT, Circle­1 vs. Raj Kumar (ITA No. 4165/Del/2009) pronounced on 22.05.2015 held “ We find that the ad hoc disallowance without rejecting

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 16 the audited books of account and without pointing out any discrepancy in the books, the disallowance of expenditure of ad hoc basis is not valid in the eyes of law and the learned CIT(A) has rightly deleted the impugned additions, which does not need any interference on our part Hence, we uphold the action of the learned CIT(A) on the above sited additions.” i. The Income Tax Appellate Tribunal­Kolkata in the matter of Bhola Das, Burdwan vs. ITO Ward 2(4)/Asansol ( ITA No. 1894/Kol/2013) pronounced on 01.06.2015 held “ The AO has disallowance on account of labour charges. Sundry creditors and transport charges. In fact all the disallowance have been made out of the profit & loss account on adhoc basis but the AO has not rejected the books of account. With invoking the provisions of section 5(3) of the Act and without pointing out any defect in the labour charges, purchases and transport charges claimed, the AO cannot make any addition on adhoc basis. No estimation of profit and no disallowance on account can be made without invoking the provisions of section 145(3)and without pointing out any defect in the books of account and accordingly addition made by the AO are directed be deleted.” 18. Based on the above judicial pronouncements it appears that such action by the Ld. AO does not warrant confirmation, especially in a situation where the books are audited, and they have not been rejected by the Ld. AO. The Ld. AO has also not made any adverse comment on the books of accounts or the financial statements. I am of the considered view, that the action of the Ld.AO is not sustainable in the emergent facts and circumstances of the case, and therefore the adhoc disallowance of Rs. 13,33,954/­ is ordered to be deleted. This limb of the ground therefore, stands allowed. 19. I observe that the appellant has not seriously challenged the balance amount of Rs.56,000/­ which has been disallowed by the Ld.AO as personal expenses, and therefore, the said amount appear not to have been pressed during appeal. The action of the Ld.AO in making such addition of Rs.56,000/­ is, therefore, confirmed. Overall, these Ground No. 1 to 4 stands partly allowed, as discussed against each item of addition/disallowance. 9. A perusal of the above findings of the Ld. CIT(A), it reveals that the ld. CIT(A) separately discussed about each head of all expenses and held that the said expenditure was relating to the business activity and business purpose of the assessee. The assessee had duly explained that the assessee had undertaken a new project at Hinjawadi, Maharashtra jointly with MIDC [ Maharashtra Industrial

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 17 Development Corporation, a Govt .of Maharashtra undertaking]. It was submitted that for better management of the J.V(joint venture) business, the assessee took a land for its offices at Mumbai/Bangalore and several expenditure were incurred for upkeeping and maintenance of office located at Mumbai & Bangalore. The assessee had claimed this expenditure as business expenditure. The Ld. CIT(A) has also disallowed certain expenditure observing the same of capital nature and of enduring benefit of the assessee. The Ld. DR could not point out infirmity or defect in the above findings of the Ld. CIT(A) warranting our interference. In view of above findings, there is no merit in ground no. 1 of the appeal of the department. The same is accordingly dismissed. Ground no. 2 : 10. Vide ground no. 2 the Revenue has contested the action of the Ld. CIT(A) in deleting the disallowance made by the Ld. AO on account of interest on delayed payment and TDS written off. 11. The issue relating to delayed payment of interest incurred on TDS has been discussed in paras 14-15 of the impugned order of the Ld. CIT(A). Relevant parts of the findings of the ld. CIT(A) on this issue are reproduced as under:-

“14. The Ld. A.O has further disallowed amounts of Rs.45,319/­ on account of payment incurred for delayed payment of TDS. The Ld A.O has stated that the same is penal in nature. The Ld. A.O has further held that TDS written off, being an amount of Rs.73,143/­ cannot be claimed as an expenditure. The question therefore to be addressed is whether these items were allowable in the hands of the appellant­ company. 1 have carefully examined the action of the Ld. A.O in making the impugned disallowance of Rs.45,319/­, treating the said amounts as having been fines /penalties paid by the appellant for infarctions of law before the TDS Authority, and therefore not being eligible for deduction. I have also considered the submissions of the Ld. A.Rs and the claim that payment of TDS interest was of compensatory nature and not penal as such, as against the findings recorded by the Ld. A.O. It is to be observed that the Hon'ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT, 123 ITR 429(SC) have held that interest for delay payment of statutory dues is an allowable deduction u/s. 37( 1) of the Act. A similar view has also been

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 18 taken by Hon'ble Supreme Court In the case of Lachmandas Mathuradas vs CIT, 254 ITR 799(SC). Similarly, the Hon'ble Allahabad High Court in the case of Commissioner of Income­tax v. Ishwari Khetan Sugar Mills (Pvt.) Ltd.,272 ITR 224(All) have held that interest on delayed payment of provident fund is an allowable deduction u/s.37(1) of the Act. Hon'ble Delhi High Court In the case of Commissioner of Income­tax v. Delhi Automobiles, 272 HR 381(Del) has held that interest payments on delayed sales tax is an allowable deduction u/s.37(l) of the Act. I ·find that the Hon'ble Jurisdictional ITAT have also decided the matter in favour of the appellant in the case of M/s Narayani Ispat Pvt. Ltd. (ITAT Kolkata) : ITA No. 2127/Kol/2014 Date of Judgment/Order : 30/08/2017. The Hon'ble ITAT have held that the allowabillty of interest on delay payment of service tax and decided in favor of assessee. The operational part of the said judgment is as under: [ Quote] 7. We have heard the rival contentions of both the "parties and perused the material available on record. In the instant case, AO has disallowed the interest expenses incurred by the assesse on account of late deposit of service tax and TDS after having reliance on the judgment of Hon'ble supreme Court in the case of Bharat Commerce Industries Ltd. Vs. CIT(1998) (Supra). The relevant extract of the judgment reads as under:­ FACTS During the year under consideration, the assessee failed to pay advance tax equivalent to 75 'per cent of estimated tax. The Assessing Officer levied interest under section 215 as well as under section 139. The assessee claimed that since taxes which were payable were delayed, the assessee's financial resources increased which were available for business purposes. Hence, the interest which was paid to the Government was interest on capital that would be borrowed by 'the assessee otherwise. Hence, the amounts should be allowed as deduction. The revenue did not allow such deduction, The High Court affirmed the view.

On appeal to the Supreme Court :

HELD When Interest is paid for committing a default in respect of a statutory liability to pay advance tax, the amount paid and the expenditure incurred in that connection is in no way connected with preserving or promoting the business of the assessee. This is not expenditure which is incurred and which has to be taken into account before the profits of the business are calculated. The liability in the case of payment of income­tax and interest

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 19 for delayed payment of income­tax or advance tax arises on the computation of tile profits and gains of business. The tax which is. payable is on the assessee's income after the income is determined. This cannot, therefore, be considered as an expenditure for the purpose of earning any income or profits. Interest which is paid for delayed payment of advance. tax on such income cannot be considered as expenditure wholly and exclusively for the purpose of business. Under the Act, the payment of such interest is inextricably connected with the assessee's tax liability. If income­ tax Itself is not permissible deduction under section 37, any interest payable for default committed by the assessee in discharging his statutory objection under the Act, which is calculated with reference to the tax on income, cannot be allowed as a deduction, Therefore, It was to be held that deduction of interest levied under sections 139 and 215 would not be allowable under section 37.

In the above judgment, the claim of the assessee for interest expenses was denied as it defaulted to make the payment of advance tax as per the provisions of the Act. The advance tax is nothing but Income tax only which the assessee has to pay on his income. In the instant case the default relates to the delay in the payment of advance tax and consequently interest was charged on rile delayed payment of advance tax. In the above judgment the Hon'ble Apex Court held that as income Tax paid by the assessee is not allowable deduction and therefore interest emanating from the delayed payment of income tax (advance tax) is also not allowable deduction .

However the facts of the instant case before us are distinguishable as in the case before us the interest was paid for delayed payment of service tax & TDS. The interest for the delay in making the payment of service tax & TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand.

The issue of delay in the payment of service tax is directly covered by the judgment of Hon’ble Apex Court in the case of Lachmandas Mathura Vs. CIT reported in 254 ITR 799 in favour of assessee. The relevant extract of the judgment is reproduced below:

“The High Court has proceeded on the basis that the interest on arrears of sales tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on Its Full 8.ench’s decision in Saraya Sugar Mills (P.) Ltd. V. CIT [1979] 116 JTR 387 (All,) The learned counsel appearing tor the appellant­ assessee states that the seta judgment of the Full Bench has

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 20 been reversed by the larger Bench of the High Court in Triveni Engg. Works Ltd. V. CIT’ [1983]144 ITR 732 (All.) (FB), wherein it has been held that interest on arrears of tax is compensatory in nature and not penal. This question has also been considered by this Court in Civil Appeal No. 830 of 1979 titled Sarya Sugar Mills (P.) i.t d. v. CIT decided on 29­2­ 1996, Ln that view of the matter; the appeal is allowed and question Nos. 1 and 2 are answered in favour of the assessee and against the revenue.

In view of the above judgment, there remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction.

The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions. The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus ally delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down by the Hon’ble Apex Court in the case of Bhart Commerce Industries Ltd. Vs. CIT (1998) reported in 230. ITR 733 cannot be applied to the case on hand. Thus, in our considered view, the principle laid down by the Hon’b!e Supreme Court in the case of Bharat Commerce industries Ltd. (supra) is not applicable in the instant facts of the case. Thus, we hold that the Assessing Officer in the instant case has wrongly applied the principle laid down by the Hon‘ble Supreme Court in the case of Bharat Commerce Industries Ltd. (supra). We also find that the Hon’ble Supreme Court in the case of Lachmandas Mathura (Supra) has allowed the deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s 37(1) of the Act. In this view the matter, we find no reason to interfere in the order of Ld. CIT(A) and we uphold the same. Hence, this. Ground of Revenue is dismissed. [Unquote]

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 21 15. I have carefully considered the submissions of the appellant and the observations made by the Ld. AO in the impugned order. I have also perused the various judicial decisions relevant in the matter. In the appellate proceedings, the Ld. AR of the appellant argued that the interest paid on delayed payment of TDS did not qualify for disallowance under Section 40(a(ii) as it did not represent tax on the profits of the business or profession. In this, matter respectfully following the decision of the Hon'ble ITAT, Kolkata as stated hereinabove, I hereby direct the AO to delete the disallowance of Rs. 45,319/­ made on account of delayed payment of TDS. This limb of the ground is therefore allowed. 12. A perusal of the above findings of the ld. CIT(A) reveals that the ld. CIT(A) while deleting the said disallowance made by the Ld. AO has relied upon various case laws. The Ld. DR, on the other hand, could not point out any contrary finding or law to this effect on this issue. 13. As regards deletion of disallowance made by the Ld. AO on account of TDS written off, the relevant findings of the Ld. CIT(A) on this issue has been given in para 16 of the impugned order, which for the sake of ready reference is reproduced here under:- “16 As regards the amount of Rs.73,143/­, the Ld. AO has stated that TDS written off is not an expenditure, and therefore ought to be disallowed. I find that no specific submissions have been made by the appellant in the matter except stating that the written off of the impugned TDS amounts were on account of the claims of TDS not being pressed !n time. To me it appears that the amounts have been written off by the appellant on account of the fact that the TDS certificates were not received by it in time leading to an apparent forfeiture of claim of TDS in the matter. Having we1ghed all aspects in the matter, I observe that the impugned disallowance in question has been made by the Ld. AO on account of the fact that, in his opinion, any loss arising on account of tax payable/tax refundable was not an admissible deduction. However, I observe that the Ld. A.O has not disputed the fact that the TDS of Rs.73,143/­ was made out of the revenues offered to tax by the appellant company in earlier years. Therefore, the limited issue to be decided is whether the loss arising on account of non­availability of TDS certificates is to be allowed as deduction in the year of write off or not. After examining the matter, I take a considered view that once the appellant had made a decision about the non­ recoverability of the impugned TDS, the said matter amounted to a business loss, wand therefore eligible for a

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 22 deduction. In the case of Sutlej Cotton Mills Ltd. v, CIT, the Hon'ble Supreme Court has held that what is material is the factors or the circumstances which cause loss and the nature and character of loss. The Hon'ble Apex Court also opined that if the loss occurred during the course of carrying on the business, it is incidental to and, hence, allowable. Admittedly, in my carefully considered view, the assessee­company suffered loss during the course of carrying on its business. Therefore, same is allowable. In the circumstances, I hold that the disallowance made by the Ld. AO of the impugned amount of Rs. 73,173/­ was unsustainable, and, therefore, the same is deleted. This limb of the ground accordingly stands allowed.”

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 23 subsidiaries for business purpose. The assessee explained before the Ld. CIT(A) as under:- “ 9. The next issue relate to disallowance of Rs. 2,97,23,922 paid to HDFC Bank Ltd. on account of Interest on borrowings from the said bank. The Assessing Officer alleged that the Assessee Company claimed Interest of Rs.3,00,65,071/­ out of which Rs.2,97,23,922 related to interest paid to HDFC Ltd from whom the assessee took a loan of Rs.11,00,00,000 on 31.03.2003 and the limit was extended to Rs.37,00,00,000 during the previous year relevant to the Assessment Year. The amount of Loan from HOFC Ltd was Rs.35.33 crores as on 31st March, 2004 as against Rs.11.00 crores as on 31st March, 2003. The Loan from HDFC Ltd. was secured by mortgage of Immoveable Properties being Tower A of First India Place, Gurgaon, owned by the assessee company from which the rental income is received and assessed to tax and Building and Building B at Bengal Intelligent Park, Kolkata owned by Bengal Intelligent Parks, Kolkata owned by Bengal Intelligent Parks Pvt. Ltd., a subsidiary of the assessee company and its subsidiary companies. 10. On a perusal of the audited Balance Sheet it would be found that the Loans advanced to various parties mainly subsidiary companies (Schedule 7 of the audited Balance Sheet) as on 31st March 2003 and 2004 are as under:­

Name of the Subsidiary Op. Balance Cl. Balance Interest Recd Bengal Intelligent Parks(P)Ltd 1,93,39,426 15,79,48,315 1,09,03,286 Boulevard Services (P) Ltd 2,41,99,194 7,59,35,078 71,01,080 BIP Developers (P) Ltd 2,22,00,632 8,28,43,920 63,37,109 BIP Estate Services (P) Ltd 31,81,111 8,86,122 3,39,930 UIH Real Estate Investment ­ 8,95,000 ­ Management Co. (P) Ltd International Biotech Park (P) ­ 1,92,17,107 ­ Ltd Total (A) 6,89,20,363 37,77,25,542 2,46,81,405 Merlin Resources (P) Ltd ­ 46,98,263 18,84,607 TCG Advisory Services (P) Ltd ­ ­ 2,53,150 Total (B) ­ 46,98,263 21,37,757 Grand Total 6,89,20,363 34,24,23,605 2,68,19,162 . 10.1 On a perusal of the aforesaid chart showing details of Loans and Advances given to the subsidiary of the Assessee Company and/or other

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 24 income earning investments it would be clear that the secured Loans from HDFC Ltd. was used for income earning investments or investments for business purposes. The sum of Rs.1,92,17,107 was given to International Biotech Park (P) Ltd. a subsidiary company incorporated for the purposes of construction of Biotech Park in pursuance to the Joint Venture entered with MIDC (See Page NO. 165 to 211). The Appellant Company is furnishing the copy of the lease agreement dated 26th March, 2004 entered into by MIDC with International Biotech Park (P) Ltd. Any payments made to International Biotech (P) Ltd would be treated as assessee’s capital contribution and for acquiring shares in that company. 10.2 The Ld. AO has also mentioned that the Assessee Company had advanced a sum of Rs. 19,85,04,846 to M/s. Energetic Construction Pvt. Ltd in the year under consideration and that the said sum did not generate any income and was not used for the purpose of assessee’s business. In this connection the appellant company submits that in the financial year relevant to assessment year 2004­05 it had acquired 25000 shares (i.e1/3rd share) of the said M/s. Energetic Construction Pvt. Ltd. The said investment was wholly commercially expedient in as much as the said company was also in the same line of business of developing real estate projects as is evidence from the memorandum and articles of association enclosed in the Paper book at page nos. 334 to 374. The appellant company had made the said investment to gain from the business prospects of the said M/s. Energetic Construction Pvt. Ltd as the said company had entered into a joint venture with its subsidiary companies for the development of a commercial centre namely “World Trade Centre” on the land measuring 11.47 acres. The said M/s. Energetic Construction Pvt. Ltd had already made a investment of Rs. 46.57 crores in the said project. The said company along with its subsidiaries were also granted a license by the Director Town & Country Planning, Haryana to develop a commercial centre. Seeing the huge potential for development of the said company, the appellant also invested in the said company and made advances for furtherance of its business. The appellant company ultimately acquired the said company M/s. Energetic Construction Pvt. Ltd in the FY 2007­08, when it became a fully owned subsidiary of the Appellant Company. The financials of the of the said M/s. Energetic Construction Pvt. Ltd for the AY 2004­05 and onwards are enclosed at Page Nos. 212 to 332. In these facts and circumstances the sums advanced to M/s. Energetic Construction Pvt. Ltd were for the purpose of business. 10.3 Therefore the proviso to sec. 36(1)(iii) is not applicable to the facts of this case and the Assessing Officer was not justified in disallowing interest of Rs. 2,97,23,922/­ paid to HDFC Ltd.”

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 25 17. Considering the above submissions of the assessee, the ld. CIT(A) deleted the disallowance so made by the Ld. AO on this issue observing as under:- “09. FINDINGS & DECISION: 1. I have carefully considered the action of the Ld. AO in making the impugned disallowance of Rs. 2,97,23,922/­ being out of the claim of interest paid to M/s. HDFC Bank Ltd from whom the assessee had taken a loan in earlier years, and the same had been extended and enlarged in the subject assessment year. The main reason for making the disallowance as have been recorded by the Ld. AO are that the loan had been advanced to the appellant from the Bank and the assessee had in turn advanced/invested the same in subsidiary entities and there were no incomes from advances/investments. The Ld. AO also mentioned that the appellant did not have any real estate business. The Ld. AO also reckoned that the impugned interest paid was to be disallowed as per the proviso to Section 36(1)(iii) which was inserted by Finance Act, 2003 w.e.f 01.04.2004 relating to A.Y 2004­05 and subsequent years, so as to disallow interest on moneys borrowed for acquiring a capital asset till the date on which the asset was brought to use even if it is for extension of existing business. 2. In appeal, it has been contended by the Ld. AR for the appellant that the interest paid was allowable and was not hit by the proviso to Sec 36(1)(iii) of the Income Tax Act. The Ld. AR for the appellant­company has argued along the following lines:­ a. The disallowance of Rs. 2,97,23,922 paid to HDFC Bank Ltd on account of Interest on borrowings from the said bank has been disallowed by the Ld. AO on the allegation that the assessee­company claimed Interest of Rs. 3,00,65,071/­ out of which Rs.2,97,23,922/­ related to interest paid HDFC Ltd from the assessee took a loan of Rs. 11,00,00,000 on 31.03.2003 and the limit was extended to Rs. 37,00,00,000/­ during the previous year relevant to the Assessment Year. b. On facts, it was submitted that the amount of Loan from HDFC Ltd. was Rs.35.33 crores as on 31st March, 2004 as against Rs 11.00 crores as on 31st March, 2003, and that the loan from HDFC Ltd. was secured by mortgage of Immoveable Properties, being Tower A of First India Place, Gurgaon, owned by the assessee company from which the rental income is received and assessed to tax and Building A and building B at Bengal Intelligent Park, Kolkata owned by Bengal Intelligent Parks Pvt. Ltd., a subsidiary of the assessee company and also assignment of receivables from the aforesaid properties owned by the assessee­company and its subsidiary companies. c. Drawing attention to the Audited Balance Sheet it would contended by the appellant that the Loans advanced to various parties mainly subsidiary

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 26 companies (Schedule 7 oft the audited Balance Sheet) as on 31st March 2003 and 2004 are as under:­

Name of the Subsidiary Op. Balance Cl. Balance Interest Recd Bengal Intelligent Parks(P)Ltd 1,93,39,426 15,79,48,315 1,09,03,286 Boulevard Services (P) Ltd 2,41,99,194 7,59,35,078 71,01,080 BIP Developers (P) Ltd 2,22,00,632 8,28,43,920 63,37,109 BIP Estate Services (P) Ltd 31,81,111 8,86,122 3,39,930 UIH Real Estate Investment ­ 8,95,000 ­ Management Co. (P) Ltd International Biotech Park (P) ­ 1,92,17,107 ­ Ltd Total (A) 6,89,20,363 37,77,25,542 2,46,81,405 Merlin Resources (P) Ltd ­ 46,98,263 18,84,607 TCG Advisory Services (P) Ltd ­ ­ 2,53,150 Total (B) ­ 46,98,263 21,37,757 Grand Total 6,89,20,363 34,24,23,605 2,68,19,162 . d. It was contended that a perusal of the aforesaid chart showing details of Loans and Advances given to the subsidiary of the Assessee Company and/or other income earning investments it would be clear that the secured Loans from HDFC Ltd. was used for income earning investments or investments for business purposes. e. It was contended on facts that the sum of Rs. 1,92,17,107 was given to International Biotech Park (P) Ltd is a subsidiary company incorporated for the purposes of construction of Biotech Park in pursuance to the Joint Venture entered with MIDC ( as per Paper Book­Page No. 165 to 211). The Appellant Company also furnished the copy of the lease agreement dated 26th March, 2004 entered into by MIDC with International Biotech Park (P) Ltd. Any payments made to International Biotech (P) Ltd would be treated as assessee’s capital contribution and for acquiring shares in that company. f. It was also argued that the Ld. AO has also mentioned that the Assessee Company had advanced a sum of Rs. 19,85,04,846/­ to M/s. Energetic Construction Pvt. Ltd in the year under consideration and that the said sum did not generate any income and was not used for the purpose of assessee’s business. In this connection the appellant company submits that in the financial year relevant to assessment year 2004­05 it had acquired 25000 shares ( i.e 1/3rd share) of the said M/s. Energetic Construction Pvt. Ltd. The said investment was wholly commercially expedient in as much as the

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 27 said company was also in the same line of business of developing real estate projects as is evident from the memorandum and articles of association enclosed in the Paper Book at page nos. 334 to 374. The appellant company made the said investment to gain from the business prospects of the said M/s. Energetic Construction Pvt. Ltd as the said company had entered into a joint venture with its subsidiary companies for the development of a commercial centre namely “World Trade Centre” on the land measuring 11.47 acres. The said M/s. Energetic Construction Pvt. Ltd had already made an investment of Rs. 46.57 crores in the said project. The said company along with its subsidiaries were also granted a license by the Director Town & Country Planning, Haryana to develop a commercial centre. Seeing the huge potential for development of the said company, the appellant also invested in the said company and made advances for furtherance of its business. The appellant company ultimately acquired the said company M/s. Energetic Construction Pvt. Ltd in the FY 2007­08, when it became a fully owned subsidiary of the Appellant Company. The financials of the of the said M/s. Energetic Construction Pvt. Ltd for the AY 2004­05 and onwards are enclosed at Page Nos. 212 to 332. In these facts and circumstances the sums advanced to M/s. M/s. Energetic Construction Pvt. Ltd were for the purpose of business. g. Placing the above facts, it was argued by the appellant that the proviso to sec. 36(1)(iii) is not applicable to the facts of this case and the assessing Officer was not justified in disallowing interest of Rs. 2,97,23,922/­ paid to HDFC Ltd. 3. Having examined the action of the Ld. AO as well as the factual contentions raised by the appellant, I observe that the Ld. AR for the appellant has countered the observations made by the Ld. AO in the impugned assessment order while making the disallowance of Rs. 2,97,23,922/­. I find from the information available in the Audited Balance Sheet filed by the appellant that there is merit in the submissions that the Loans advanced to various parties which were mainly subsidiary companies (as on 31st March 2003 and 2004 c1early bring forth the information that the Loans and Advances given to the subsidiary of the Assessee Company and/or other income earning investments testify that the secured Loans from HDFC Ltd. was used for income earning investments or investments for business purposes, and as such the unilateral observations made by the Ld. A.O appear to have overlooked certain vital figures and facts relevant in determining the issue at hand. The loans and advances given by the appellant to its subsidiary companies and entities were therefore in the nature of capital or investments, and were relevant for the business decisions or commercial expediency.

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 28 4. I observe that the law on this issue is settled after the Hon'ble Supreme Court judgment in the case of S. A. Builders Ltd v. CIT(Appeals) [2007] 288 ITR 1 (SC), in which the concept of "commercial expediency" was used. Thus, where the funds of the business a diverted for interest free loans the main criteria for permissibility of interest on those funds are based on whether it was for commercial expediency or not. The phrase "commercial expediency" has following important traits as established by case laws cited supra: a. Such purpose as is expected by the assessee to advance its business interest. b. May include measures taken for preservation, protection or advancement of its business interests. c. To be distinguished from the personal interest of its directors or partners, as the case may be. There has to· be a nexus. between the advancing of funds and business interest of the assessee. Some business objective should be sought to have been achieved by extending such interest free advances when the assessee firm/company itself is borrowing funds for running its business. 5. The Hon'ble Supreme Court has also delved into the case where there would be mixed fund at the disposal of the assessee. It further clarifies that under Section 36(1)(iii) the ultimate use of the fund is important. It may not be relevant as to whether the advances have been extended out of the borrowed funds or out of mixed funds which include borrowed funds. The test to be applied in such cases is not the source of the funds but the purpose for which the advances are extended.

Having analyzed the facts emerging in the case at hand, 1 observe that the appellant­company was eligible to claim the interest paid of Rs.2,97,23,922/­ to the concerned bank as a eligible business expense, and the action of the td, A.O in disallowing the same cannot be sustained. Such addition by the Ld. A.O is therefore deleted, and the ground of appeal stands allowed.” Being aggrieved by the above action of the Ld. CIT(A), the Revenue is in appeal before us. 18. The Ld. Counsel for the assessee has explained that the assessee during the year has earned interest of Rs. 2.66 crores on the advances given by it. So far as interest free advances made to its subsidiaries is concerned, the Ld. CIT(A) has observed in this respect that the assessee has been in real estate business and that

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 29 a sum of Rs. 1,92,1707/- was given to M/s. International Biotech Parks Pvt. Ltd., a subsidiary company of assessee, incorporated for the purpose of construction of bio-tech parks in pursuance to the Joint Venture (J.V) entered with the MIDC. A copy of lease agreement dt. 26-03-2004 entered into by the MIDC with International Bio-tech Parks P.Ltd. was also produced. Another sum of Rs. 19,85,04,846/- was advanced to M/s. Energetic Construction P.Ltd. It was explained that in the F.Y relevant to A.Y 2004-05 i.e year under consideration, the assessee had acquired 25,000 shares of said company out of commercial exigency as the said company was also in the line of real estate projects and the said company had entered into J.V(Joint Venture) with its subsidiary for the development of a commercial center namely ‘ World Trade Center’ . Since the said company had made investments in the said project and considering huge potential for the development of the said company, the assessee company invested in the said company and the assessee ultimately acquired the said company in F.Y 2007-08. It was explained that the said advances were made/invested for business purpose of the assessee. Moreover, the assessee has used loans for income on investments. The assessee had shown an interest income of Rs. 2.68 crores. 19. The Ld. CIT(A) considering the overall facts and circumstances of the case deleted the disallowance so made by the Ld. AO. 20. After hearing the Ld.DR, we do not find any reason to interfere in the above well-reasoned order of the Ld. CIT(A) on this issue. There is no merit in this appeal of the department (ITA No. 2584/Kol/2019 for A.Y 2004-05) and the same is accordingly dismissed. Now coming to Revenue’s appeal-ITA No. 2585/Kol/2019 for the A.Y 2005-06. ITA No. 2585/Kol/2019 for the A.Y 2005-06. 21. In this appeal, the department has taken following grounds of appeal:-

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 30 1. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of expenses incurred on "Travelling Expenses"(11,22,040/­), car Hiring Charges (5,56,674/­), Salary to Mumbai Staff (54,23,326/­), Rent of Mumbai Office of (20,58,7681­), Staff Welfare (Mumbai)(4,19,535/­), Niharika Bisaria Research (3,50,000/­) and Praveen P.Shah (3,35,000/­)" accumulating Rs.1,02,65,343/­ for setting up and maintenance of Mumbai office, disallowed during assessment considering it to be Capital in nature. 2. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of expenses incurred on "Energetic Construction (2,00,000/­), MR Vomado (7,50,000/­). Bangalore Property (40,0001­), Allianze Bajaj (35,0001­) and Medicas & Investor relation (55,559/­accumulating Rs.10,80,559/­ for setting up and maintenance of Bangalore office, disallowed during assessment considering it to be Capital in nature. 3. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Fin Management & Advisory" of Rs.1,65,300/­ and "MOU" of Rs. 12,500/­ disallowed during the course of assessment considering it as capital in nature. 4. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Loan Processing Fee" of Rs.45,37,560/­ and "Interest Expenses" of Rs.3,61,87,363/­ against interest free loans and advances given to its subsidiaries without any business expediency or invested for earning exempt income. 5. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Undisclosed Income" of Rs.13,70,962/­ added during assessment on the basis of information available in AIR database. 6. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Depreciation" of Rs.26,15,499/­considering the same as admissible against Business receipt of Tenant Service Charges. 7 The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings. or in the course of appellate proceedings.

Ground nos. 1 to 3 : 22. Vide ground nos. 1 to 3 the Revenue has contested the action of the ld. CIT(A) in deleting various expenses made by the Ld. AO on account of

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 31 expenditure incurred in setting up and maintenance of Mumbai & Bangalore office. 23. As discussed while deciding the department’s appeal for the A.Y 2004-05, the assessee had duly explained that the assessee had undertaken a new project at Hinjawadi, Maharashtra jointly with MIDC [ Maharashtra Industrial Development Corporation, a Govt. of Maharashtra undertaking]. It was submitted that for better management of the J.V(joint venture) business, the assessee took a land for its offices at Mumbai/Bangalore and several expenditure were incurred for up keeping and maintenance of office located at Mumbai & Bangalore. The assessee had claimed this expenditure as business expenditure. The Ld. CIT(A) has separately discussed each claim of expenditure made by the assessee. The Ld. CIT(A) discussed this issue in para 6 of his order. Relevant part of findings of the Ld. CIT(A) is reproduced as under:-

“06. FINDINGS & DECISION: 1. I have carefully considered the action of the Ld. A.O in making the various impugned disallowances which have been agitated by the appellant in this ground of appeal. I observe that the appellant­company has agitated the various disallowances/ additions totaling Rs. 5,42,39,750/­ made under different heads as follows: (1) 'Travelling expenses' of Rs.l1,22,040/­, (2) "Car Hire' of Rs.5,56,674/­, (3) 'Salary of Staff of Rs.54,23,326/­; (4) 'Rent on rv1umbai office' of Rs.20,58,768/­, (5) 'Staff Welfare: of Rs.4,19,535/­ ,'(6) Niharika Bisaria for real estate research' of Rs.3,50,000/­ (7) 'Paid to. Praveen P. Shah for CIS work' of Rs.3,35,000/­, (8) BIP brochure of Rs.30,000/­ (9) 'Energetic Construction' of Rs.2,00,000/­, (10),Legal Fees' of Rs.7,50,000/­ (11) 'Construction & Design' of Rs.40,000/­, (12) 'Lease & Hire charges of Rs.35,OOO/­, (13) 'Professional charges' of Rs.55,559/­ .(l4) 'Consultancy fees of Rs. 1,65,300/­, '(15) Universal Legal' of Rs.12,500/­, (16) 'Rate & Taxes' of Rs. 25,124/­,(17) 'Repair of Mumbai office' of Rs.l,28,421/­, (18) Misc. expenses of Rs.11,42,480 & Rs. 10,500/­, (19) 'Loan Processing Fees' of Rs. 45,37,560/­, (20) 'Tenant service charges' of Rs.6,54,600/­ and (21) 'Interest on borrowed loans from HDFC' of Rs.3,61,87,363/­. 2. I observe that the various items of disallowance made been made by the Ld. A.O along similar lines of disallowance as in the immediate earlier A.Y

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 32 20014­15, which has been disposed simultaneously In Appeal No. 228/CIT(A)­10/Cir.­8/2004­05/2017­18/KoI. As there are several factual and legal similarities for the issues which have been decided by adjudicating in detail in that A.Y 2004­05, useful reference to made to those decisions while adjudicating the issues in this instant appeal. a. Disallowances of Traveling expenses and Car hire Charges of Rs.11,22,040/­ and Rs.5,56,674/­ respectively: The Ld. A.O has disallowed these impugned expenses and recorded that all the office was at Mumbai, there was no real need to travel outside as frequently as the assessee has claimed. The Ld. A.O has held that the expenses were directly attributable to the business of the assessee, and the appellant has not been able to place material on record showing the essentiality of the expenses. It has been submitted by the appellant that all the necessary vouchers and details of expenses had been submitted before the Ld. A.O and that there was no justification to disallow any portion of the same. After examining the matter, I observe that the Ld. A.O has made the disallowances mostly on his own surmises, without examining the submissions or the appellant­company in a comprehensive method. I observe that the Ld. A.O has not anything on record to suggest that the claims were patently false or were not supported by necessary vouchers and meterials. The observations made by the Ld. A,O are that there was no requirement for the appellant / it's members of staff to travel beyond Mumbai as most of the head office and subsidiary companies were at Mumbai. However, I observe that the expenses for hiring of car / transport and for travelling were justified as the appellant / its representatives were to travel outside to other cities like Ahmadabad, Poona and Hyderabad for pursuing official work and obtaining permissions, finalization of plans etc. As such I am unable to sustain any portion of the disallowances made by the Ld. A.O on these impugned counts, and the same are therefore directed to be deleted. These specific limbs of the Ground of appeal stand allowed. b. Disallowance of Salary to Staff at Mumbai & Rent charges paid at Mumbai Office of Rs.54,23,326/­ and Rs. 20,58,768/­ respectively: I this matter also, the Ld. A.O, I observe has made the impugned disallowances on grounds that there' were no incomes from the Mumbai Office, and the payments of salary and rent for the Mumbai Office was not justified. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office and they cannot be rejected merely as the business was not bringing positive incomes. Here I observe that the Ld. A.O has admitted to the fact of the date of agreement and the commencement of business, and therefore in my

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 33 considered view of the matter, there is an inherent contradiction in. the view of the Ld. A.O that the business had not commenced and therefore the expenses ought to be capitalized. As this matter has been dealt extensively and adjudicated in favour of the appellant for the A.Y 2004­ 05 being decided simultaneously, herein I only record that along similar lines, the claims of­expenditure in this year are to be allowed. As such I am unable to sustain any portion of the disallowances made by the Ld. A.O on these impugned counts, and the same are therefore directed to be deleted. These specific limbs of the Ground of appeal stand allowed. c. Disallowance of Staff welfare charges at Mumbai Office of Rs.4,19,535/­: The Ld. A.O has once again disallowed he claim of staff welfare expenses for the Mumbai Office on alleged grounds that no revenue was generated from the Office located at Mumbai. The Ld. AO I find has not questioned the genuineness of the said expenses. In this ground also I find that the Ld. A.O has admitted to the fact of the date of agreement and the commencement of business, and therefore in my considered view of the matter, there is an inherent contradiction in the view of the Ld. A.O that the business had not commenced and therefore the expenses ought to be capitalized. As this natter has been dealt extensively and adjudicated in favour of the appellant for the A. Y 2004­ 05 being decided simultaneously, herein also I only record that along similar ,lines, the claims of expenditure in this year are to be allowed. As such lam unable to sustain any portion of the disallowances made by the Ld. A.O on these impugned counts, and the same are therefore directed to be deleted. These specific limbs of the Ground of appeal stand allowed. d. Disallowance of amount paid to Niharika Bissaria for Real Estate research, an amount of Rs.3,50,000/­. In this matter, my adjudication for the A.Y 2004­ 05 has been made at point No. 09 of the Decisions at page 21 of the appellate order for the A.Y 2004­05. Along similar lines. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office, and they cannot be rejected merely as the business was not bringing positive incomes. As such I am inclined to accept the arguments of the appellant and direct the Ld. AO to treat the said expenses as revenue expenses, and allow the same. This limb of the ground therefore stands allowed.

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 34 disallowed certain expenditure, which was found to be capital in nature. We do not find any infirmity in the order of the Ld. CIT(A) on these issues and the same (gr. 1 to 3) of revenue’s appeal are dismissed. Ground no. 4: : 25. Vide ground no. 4 the revenue has contested the action of the Ld. CIT(A) in respect of deletion of disallowance made by the Ld. AO out of ‘interest expenditure’ and ‘loan processing fees’ on account of interest free loans and advances given to its subsidiaries. 26. Both the learned representatives before us submitted that this issue is identical as discussed in ground no. 3 of the revenue’s appeal (ITA No. 2584/Kol/2019 ) for the A.Y 2004-05:

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 35 evidences in this respect was also submitted such as the name of the party with whom said transactions were made by the concerned deductor. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) on this issue and the finding of the Ld. CIT(A) on this issue is hereby upheld. This ground (no. 5) of revenue’s appeal (ITA No. 2585/Kol/2019 for the AY 2005-06) is dismissed. Ground no. 6: 29. Vide ground no. 6 the revenue has contested the action of the Ld. CIT(A) in granting relief to the assessee on account of depreciation of Rs. 26,15,499/-. The assessee offered certain income as business income earned from lease of certain fixed assets and claimed depreciation on such items. The Ld. CIT(A) considered the above factual position and allowed the claim of depreciation. The Ld. DR could not point out any infirmity in the said findings of the Ld. CIT(A) and the same is accordingly upheld. Ground no. 6 of revenue’s appeal (ITA No. 2585/Kol/2019 for the A.Y 2005-06) is dismissed. Ground no.7 is general in nature. In view of our observations, there is no merit in this revenue’s appeal (ITA No. 2585/Kol/2019 for the A.Y 2005-06). The same is accordingly dismissed. ITA No. 2586/Kol/2019 for the A.Y 2006-07 30. In this appeal, the department has taken following grounds of appeal:- “1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "various expenses" of Rs.3,76,06,014/­ considering such expenses being incurred for the purpose of business. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "interest" of Rs.50,90,010/­ considering the same as admissible. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Contractual payment" of Rs.26,68,993/­ disallowed by the A.O. u/s.40(a)(ia) following the observation made by the Auditor.

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 36 4.The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. Ground nos. 1 & 2: 31. Both the learned representatives submitted before us that this issue raised vide ground no. 1 & 2 is relating to claim of various expenditure incurred by the assessee for business purposes and relating to disallowance of interest expenditure. This issue has already been discussed by us in earlier paras of this order while adjudicating the identical issue for the AYs. 2004-05 and 2005- 06(supra). Since the facts and issues are identical our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 & 2 of revenue’s appeal are dismissed. Ground no. 3

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 37 36. In this appeal, the department has taken following grounds of appeal:- “1. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Various Expenses" of Rs. 6,42,34,227/­considering such expenses being incurred for the purpose of Business. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Interest" of Rs.34,73,51.3/­. 3. The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. 37. Both the learned representatives submitted before us that the issues raised vide ground nos. 1 & 2 are relating to claim of various expenditure incurred by the assessee for business purposes and relating to disallowance of interest expenditure. These issues have already been discussed in earlier paras of this order while adjudicating the identical issue for the AYs. 2004-05, 2005-06 & 2006-07 (supra). Since the facts and issues are identical, our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 & 2 of revenue’s appeal are dismissed. Ground no. 3 is general in nature. In view of our observations made above, there is no merit in this appeal of the revenue and the same (ITA No. 2587 for the A.Y 2007-08) is accordingly dismissed. 38. Now coming to assessee’s appeal-ITA No.2506/Kol/2019 for the A.Y 2007-08 ITA No. 2506/Kol/2019 for the A.Y 2007-08 39. In this appeal, the assessee has taken following grounds of appeal:- “1. That, on the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.2,00,00,000/­arbitrarily made by the Assessing Officer under section 2(22)(e) of the Income Tax Act, 1961 on mere suspicion and surmises. 2. That, the Ld. Commissioner of Income Tax (Appeals) having admitted the additional ground raised by the Appellant Company erred in confirming the addition of Rs.4,92,76,605 made by the

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 38 Assessing Officer which was voluntarily offered to tax by the assessee under misconception of law relating to the provisions of section 2(22)(e) of the Act.”

Ground no.1 40. The issue taken by the assessee in this appeal is relating to addition made by the Ld. AO u/s. 2(22) ( e ) of the Income Tax Act on account of deemed dividend. 41. At the outset, the ld. Counsel for the assessee has invited our attention to para 13(3) of the impugned order of the Ld. CIT(A), wherein the Ld. CIT(A) has observed that the action of the ld. AO appears to be an adhoc estimate and further that the facts of the case were not clear. 42. The Ld. Counsel for the assessee has submitted that the assessee erroneously added an amount of Rs.4,92,76,605/- in the return of income under wrong presumption of facts. The matter was duly clarified to the ld. AO and that the necessary evidences such as details of unsecured loans advanced and ledger accounts of the parties etc. were duly furnished before the AO. It has been contended that the Ld. AO failed to properly appreciate the evidence furnished by the assessee. That, even the Ld. CIT(A) has observed that the ld. AO did not have an occasion to examine the matter.

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 39 ITA No. 2588/Kol/2019 for the A.Y 2009-10 44. In this appeal, the revenue has taken following grounds:- “1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Interest Expenses" of Rs.2,04,90,695/­ against interest free loans and advances to subsidiaries. . 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "interest Expenses" of Rs.53,63,543/­ against share application. 3.That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Disallowance u/s. 14A”of Rs. 74,74,227/­ 4 The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings.”

Ground nos. 1 & 2: 45. Both the learned representatives of the parties have submitted that this issue is relating to claim of “interest expenses” incurred by the assessee for business purposes. This issue has already been discussed in earlier paras of this order while adjudicating the identical issue for the AYs. 2005-06, 2006-07, “07-08 and “08-09 respectively (supra). Since the facts and issues are identical our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 & 2 of revenue’s appeal are dismissed. Ground No. 3 46. The revenue is aggrieved by the action of the ld. CIT(A) in deleting the disallowance made by the Ld. AO u/s. 14A of the Income Tax Act, 1961 on account of expenditure incurred for earning of tax exempt income. 47. The Ld. CIT(A) while decided this issue has observed that own funds of the assessee were much more than the investments made, therefore, the presumption would be that the assessee used its own funds for making this investments.. Relevant part of findings of the Ld. CIT(A) is reproduced as under:-

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 40 “3.Afer examining the matter, I observe that he Ld. A.O made this impugned disallowance on similar grounds as the earlier ground No 2 relating to interest disallowance on account of interest free advances from borrowed finds, and not accepting the sold expenditure as business expenditure. However, as has been rightly pointed out by the appellant­company, the Audited Balance Sheet and the statement of accounts reveals that the appellant­company had substantial amount of interest free funds in the nature of Share Capital, reserves & surplus and cash and bank 'Balances of Rs.282.98 crores out of which the assessee has advanced only 3.25 crores as interest free advances for its subsidiaries. I hold that my findings in respect of these impugned grounds are identical to Ground No 2, wherein I have held that in view of the facts and circumstances, as emanating from the case and the judicial references relied upon, the action of the Ld. A.O was without any support. For these grounds also therefore I hold that the action of the Ld AO in disallowing a sum of Rs.53,63,543/ ­ on account o­ disallowance of proportionate interest was not justified, and I find that the same cannot be sustained. These grounds 4 and 5 are, therefore, allowed.”

Sd/- Sd/- (Dr. M.L.Meena) (Sanjay Garg) Accountant Member Judicial Member Dated 26-10-2021

ITA Nos. 2584 to 2588 & A.Ys. 2004­05 to 2007­08 & 2009­10 ACIT, C­2 (1), Kol Vs. TCG Urban Infras. Holding P.Ltd ITA No. 2506/Kol/2019 A.Y 2007­08 TCG Urban Infras. Holding P.Ltd Vs. ACIT, C­2 (1), Kol Page 41 **PP/SPS आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- अपीलाथ�/Appellant/Department: 1. ACIT,Cir-2(1), Kolkata Circle-2(1), Aaykar Bhawan, P-7 Chowringhee Square, Kolkata-700 069. 2. ��यथ�/Respondent/Assessee- M/s. TCG Urban Infrastructure Holdings Pvt. Ltd. (Earlier known as TCG Infrastructure Holdings Ltd.) Ground Fl., Bldg Beta, Bengal Intelligent Park, Salt Lake Electronics Complex, Block EP & GP, Sector V, Salt Lake, Kolkata-700 091. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ Senior Private Secretary/D.D.O