DCIT CENT. CIR. -7(3), MUMBAI vs. PALAVA DWELLERS PVT. LTD. , MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON'BLE ACCOUNTANT MEMBER

ITA No. 2147/MUM/2018 (A.Y: 2014-15) Dy. Commissioner of Income-tax v. M/s. Palava Dwellers Pvt. Ltd., Central Circle – 7(3) 412, 71-G, Vardhman Chamber Room No. 655, 6th Floor C.P. Road, Horniman Circle Aayakar Bhavan, M.K. Road Fort, Mumbai Mumbai – 400 020 PAN: AABCL1117D (Appellant) (Respondent)

ITA No. 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited Dy. Commissioner of Income-tax v. {since merged M/s. Palava Dwellers Pvt. Ltd.,} Central circle – 7(3) 412, 4th Floor, 17G, Vardhman Chamber Room No. 655, 6th Floor Cawasji Patel Road, Horniman Circle Aayakar Bhavan, M.K. Road Fort, Mumbai - 400 001 Mumbai – 400 020 PAN: AABCL1117D (Appellant) (Respondent)

Assessee by : Shri Rajan R. Vora Shri Heman Chandaria Department by : Shri Awungshi Gimson

Date of Hearing : 27.11.2019 Date of Pronouncement : 20.02.2020

2 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the revenue and assessee against the order of the Ld. Commissioner of Income-tax (Appeals)–49, Mumbai [hereinafter for short “Ld. CIT(A)”] dated 30.01.2018 for the A.Y. 2014-15.

3 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} income of ₹.42.57 Crores and net interest expenses were shown at ₹.122.15 crores. Assessing Officer noticed that out of this ₹.122.15 crores the assessee capitalized an interest of ₹.105.13 crores and shown as work in progress. He further noticed that in the return of income interest of ₹.89.12 crores have been claimed as deduction out of this ₹.105.13 Crores which were capitalised in the Books of Accounts. The assessee was required to explain as to why interest expenses claimed in the return of income shall not be disallowed. The assessee submitted that interest expenses have been claimed as deduction in the year of incurrence as the interest is periodic cost and pertains to the year for which it belongs to. It was further submitted that the said interest is allowable as deduction u/s. 36(1)(iii) of the Act being interest pertaining to stock in trade of the assessee. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Taparia Tools Pvt. Ltd., v. JCIT in Civil Appeal No. 6366/2003 dated 23.03.2015 and the decision of the Hon'ble Bombay High Court in the case of CIT v. Lokandwala Construction Industries Ltd., [260 ITR 579].

4 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} progress and allowed to be claimed as deduction only in the year in which corresponding income offered to tax, Assessing Officer denied the claim of the assessee. On appeal the Ld.CIT(A) following the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Lokandwala Construction Industries Ltd., [260 ITR 579] and various other decisions of the Coordinate Benches allowed the claim for deduction of interest. Against this order the revenue is in appeal before us.

5 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} the apex court in the case of the Taparia tools Ltd vs. DCIT (2015) 272 ITR 605 wherein the Supreme Court held that the only aspect which needed examination was as to whether the provisions of section 36 (1) (iii) read with section 43 (2) of the act was satisfied or not. Once these are satisfied there is no question of denying the benefit of deduction in the year in which such an amount was actually paid or incurred. Further, the proviso introduced by the Finance Act 2003 prohibits the allowance of interest cost only if the borrowed funds have been utilized for acquisition of a capital asset even for existing business. In this case the borrowed funds have been utilized for stock in trade which is not a capital asset. The jurisdictional Bombay High Court in the case of Lokhandwala constructions Inds Ltd 260 ITR 579 held as under: "in the instant case, it was dear that the assessee undertook two-fold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from both the activities were assessed under section 28. The assessee had undertaken the project of construction of flats. Therefore, the loan was obtained for obtaining stock-in-trade. The project constituted the stock-in- trade of the assessee. The project did not constitute a fixed asset of the assessee. Since the assessee had received loan for obtaining stock-in-trade, it was entitled to deduction under section 36(1)(iii). While adjudicating the claim for deduction u/s 36(l)(iii), the nature of expenses, whether the expenses are on capital account or revenue account is irrelevant as the section itself says that interest paid by the assessee on the capita! borrowed by the assessee is an item of deduction. The utilization of the capital is irrelevant for the purpose of adjudicating the claim for deduction u/s 36(l)(iii)." The SLP filed by the Department against the Bombay High Court judgment has been rejected by the Supreme Court. The Hon'ble ITAT Mumbai in the case of M/S Ashish Builders Private Ltd vs. ACIT ITA number 310/M/2012 held as under: "A) Interest on unsecured loans and fixed deposits: It is the claim of the assessee that the entire interest expenditure is allowable as it is a time related fixed finance cost on the borrowed capital. The claim of the assessee should be allowed in full in view of the various decisions on this issue. To start with, we perused the order of the Tribunal in the case of Rohan Estates Pvt. Ltd. (supra) which is one of the sister concerns of the assessee. We perused the para 3.2 of the said order of the Tribunal and find it is a self explanatory and the decision of the Tribunal supports the case of the

6 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} assessee. Under comparable facts of the assessee, interest cost was allowed in favor of the assessee relying on binding jurisdictional High Court judgment in the case of M/s Lokhandwala Construction Industries Ltd. (supra). For the sake of completeness of this order we extract relevant para 3.2 of the order which is reproduced as under: "3.2 With regard to the interest expenditure,...........The interest cost on the corresponding capital borrowed would nevertheless continue to be incurred, without any corresponding increase in the value of the inventory or the project. Similarly, a project, or part thereof, may be partly sold or even remain unsold for quite some time after its completion. While revenue would stand to be booked only on the part, if any, sold, the interest cost would continue to be incurred on the entire capital, even as no corresponding gain inures I terms of value addition to the project, which stands in fact completed, so as to increase its cost by loading the said cost thereon. It is for these reasons that interest (financing) cost is normally considered as only a period (fixed) cost, and charged to the operating statement for the year in which the same is incurred. As such, what in our view would prevail is the method of accounting being regularly followed by the assessee, i.e. on a year basis. The same also has the sanction of law inasmuch as sec. 145 clearly provides for determination of the business income on the basis of the method of accounting being regularly followed, with the mandate of sec 36(l)(iii) being also satisfied, and toward which the assessee relies on the decision in the case of CIT vs Lokhandwala Construction Inds. Ltd(supra). The same also clarifies that the interest cost is to allowed u/s 36(l)(iii), irrespective of whether it stands incurred in relation to stock- in-trade or on capital account, as the said section draws no such distinction. The issue, though, we may clarify, is not as to whether the borrowed capital stands utilized toward trading operations or on capital account; the instant case being decidedly of the former, but whether the said cost, having been incurred, is to be capitalized as a part of the project cost and, thus, taken into account for the purpose of valuation of inventory (stock-in-trade) as at the year-end and, consequently, the determination of gross profit for the year. It is only the cost that is incurred and otherwise allowable, which, it may be appreciated, would stand to be considered thus, where it otherwise qualifies for being rekoned as a part of the cost of production/construction, and thus of the inventory or the project cost a sat the year-end. The deducibility of the said cost u/s 36(l)(iii) is thus neither in doubt nor in dispute, Further, it may also be in place to state that section 36(l)(iii) stands since amended by Finance Act, 2003

7 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} w.e.f, 01/04/2004, by way of insertion of a proviso thereto, so that any interest cost on capital account is to be necessarily capitalized. Accordingly, it is only the interest cost computing the business income qua the business of which the relevant asset is a or is to constitute a part (also refer Explanation 8 to s.43(l)). The said decision may, thus, in the given facts and circumstances of the case as, well as the amended law, not be of much assistance." We have also perused the said binding High Court judgment in the case of M/s Lokhandwala Construction inds. Ltd. (supra) and find the same is relevant for the following conclusion - "construction project undertaken by the assessee builder constituted its stock in trade and the assessee was entitled to deduction under section 36(l)(iii) of the Act in respect of the interest on the loan obtained for execution of said project." Relying on the another judgment of Hon'ble Bombay High Court in the case of Calico Dying and Printing Works 34 ITR 265 Bombay, Hon'ble Bombay High Court concluded that the interest expenditure relating to the borrowed capital is allowable u/s 36(l)(iii) of the Act. The relevant lines from the para 4 reads as under; "that, while adjudicating the claim for deduction under section 36(l)(iii) of the Act the nature of expense 0- whether the expenditure was on capital account or revenue account - was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That the utilization of capital was the relevant for the purpose of adjudicating the claim of deduction under section 36(l)(iii) of the Act. (referring to the judgment in the case of Calico) It was laid down that where an assessee claims deduction of interest paid on the capital borrowed all that the assessee was to show that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether capital was borrowed in order to acquire the revenue asset or a capital asset......." Considering the above settled position in the matter we are of the opinion that the assessee is entitled to claim entire interest deduction relatable to the capital borrowed and utilized for business purposes in the year under consideration. Resultantly, we disapprove the decision of the Assessing Officer/CIT(Appeals) in transferring the interest expenditure to WIP account. Therefore, assessee is justified in debiting the same to the P&L accounts of the respective assessment years. Thus, we order the Assessing Officer to accept the claim as made in the

8 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} return of income. Accordingly, this part of the ground No. 1 is allowed in favour of the assessee” The Hon'ble ITAT in the case of ITO vs Rohan states ITA number 7200/MUM/2010 held as under: “3.2 With regard to the interest expenditure, though the Accounting Standard -2 (AS-2) on the valuation of inventories issued by the Institute of Chartered Accountant of India (ICAI) would suggest that the interest expenditure ought to be taken into account in the valuation of inventories where and to the extent there is a direct nexus, the said standard is not mandatory under the Act. In fact, even following AS-2 a direct nexus has to be established for the interest cost to form part of the cost of production or construction, as the case may be, and, thus, a part of the valuation of the unsold inventory or work-in-progress as at the year-end. This is as, to cite by way of an example from the civil construction itself, the work on a project may not be underway at all for the whole or a part of the year, or say as its optimum or normative level, on account of various business exigencies. The interest cost on the corresponding capital borrowed would nevertheless continue to be incurred, without any corresponding increase in the value of the inventory or the project. Similarly, a project, or part thereof, may be partly sold or even remain unsold for quite some time after its completion. While revenue would stand to be booked only on the part, if any, sold, the interest cost would continue to be incurred on the entire capital, even as no corresponding gain inures I terms of value addition to the project, which stands in fact completed, so as to increase its cost by loading the said cost thereon. It is for these reasons that interest (financing) cost is normally considered as only a period (fixed) cost, and charged to the operating statement for the year in which the same is incurred. As such, what in our view would prevail is the method of accounting being regularly followed by the assessee, i.e. on a year basis. The same also has the sanction of law inasmuch as sec. 145 clearly provides for determination of the business income on the basis of the method of accounting being regularly followed, with the mandate of sec 36(l)(iii) being also satisfied, and toward which the assessee relies on the decision in the case of CIT vs Lokhandwala Construction Inds. Ltd(supra). The same also clarifies that the interest cost is to allowed u/s 36(l)(iii), irrespective of whether it stands incurred in relation to stock- in-trade or on capital account, as the said section draws no such distinction. The issue, though, we may clarify, is not as to whether the borrowed capital stands utilized toward trading operations or on capital account; the Instant case being decidedly of the former, but whether the said cost, having

9 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} been incurred, is to be capitalized as a part of the project cost and, thus, taken into account for the purpose of valuation of inventory (stock-in-trade) as at the year-end and, consequently, the determination of gross profit for the year. It is only the cost that is incurred and otherwise allowable, which, it may be appreciated, would stand to be considered thus, where it otherwise qualifies for being rekoned as a part of the cost of production/construction, and thus of the inventory or the project cost a sat the year-end. The deducibility of the said cost u/s 36(l)(iii) is thus neither in doubt nor in dispute. Further, it may also be in place to state that section 36(l)(iii) stands since amended by Finance Act, 2003 w.e.f. 01/04/2004, by way of insertion of a proviso thereto, so that any interest cost on capital account is to be necessarily capitalized. Accordingly, it is only the interest cost computing the business income qua the business of which the relevant asset is a or is to constitute a part (also refer Explanation 8 to s.43(l)). The said decision may, thus, in the given facts and circumstances of the case as, well as the amended law, not be of much assistance. In fact, even going by the Revenue’s stand, another issue would arise and, accordingly, need to be determined apriori. Considering the said cost as includable in the project cost may have a direct bearing on the gross profit rate, and which may therefore stand to decline from the reported and accepted rate of 23%, and cannot be presumed be remain as such, i.e., unchanged.” The Hon'ble ITAT Pune in the case of M/S Kolte Patil Developers Ltd erstwhile Corola reality Ltd merged with Kolte Patil Developers Ltd) also held as under: "Further, we find the Mumbai Bench of the Tribunal in the case of M/s Ashish Builders Pvt. Ltd. (supra) has decided an identical issue in favour of the assessee. Relevant Paragraphs are being reproduced hereunder for better appreciation of the issue: "6. Ground No. 1 of the appeal relates to the addition of some of the expenses to the WIP account i.e. interest on unsecured loan/fixed deposit (sic-car loan), advertisement expenses, brokerage expenses and loan processing fees. AO considered the above expenses as relatable to the WIP account and recomputed the WIP account at Rs.5,33,28,399/- . /Assessee contends that the above said expenditure is fully allowable in the year under consideration. In this regard, assessee relied on various ITA No. 80/PUN/2016 M/s Kolte Patil Developers Ltd., decisions. This issue is relevant for

10 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} AYs/appeals under consideration. We shall take up expenditure-account wise adjudication in the following paragraphs: "A) Interest on unsecured loans and fixed deposits: It is the claim of the assessee that the entire interest expenditure is allowable as it is a time related fixed finance cost on the borrowed capital. The claim of the assessee should be allowed In full in view of the various decisions on this issue. To start with, we perused the order of the Tribunal in the case of Rohan Estates Pvt. Ltd. (supra) which is one of the sister concerns of the assessee. We perused the para 3.2 of the said order of the Tribunal and find it Is a self explanatory and the decision of the Tribunal supports the case of the assessee. Under comparable facts of the assessee, interest cost was allowed in favor of the assessee relying on binding jurisdictional High Court judgment in the case of M/s Lokhandwala Construction Industries Ltd. (supra). For the sake of completeness of this order we extract relevant para 3.2 of the order which is reproduced as under: "3.2 With regard to the interest expenditure............The interest cost on the corresponding capital borrowed would nevertheless continue to be incurred, without any corresponding increase in the value of the inventory or the project. Similarly, a project, or part thereof, may be partly sold or even remain unsold for quite some time after its completion. While revenue would stand to be booked only on the part, if any, sold, the interest cost would continue to be incurred on the entire capital, even as no corresponding gain inures I terms of value addition to the project, which stands in fact completed, so as to increase its cost by loading the said cost thereon. It is for these reasons that interest (financing) cost is normally considered as only a period (fixed) cost, and charged to the operating statement for the year in which the same is incurred, As such, what in our view would prevail Is the method of accounting being regularly followed by the assessee, i.e. on a year basis, The same also has the sanction nf law Inasmuch as sec. 145 clearly provides for determination of the business income on the basis of the method of accounting being regularly followed, with the mandate of sec 36(l)(iii) being also satisfied, and toward which the assessee relies on the decision in the case of CIT vs Lokhandwala Construction Inds. Ltd(supra). The same also clarifies that the interest cost is to allowed u/s 36(l)(iii), irrespective of whether it stands incurred in relation to stock- in-trade or on capital account, as the said section draws no such distinction. The issue, though, we may clarify, is not as to whether the borrowed capital stands utilized toward trading

11 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} operations or on capital account; the instant case being decidedly of the former, but whether the said cost, having been incurred, is to be capitalized as a part of the project cost and, thus, taken into account for the purpose of valuation of inventory (stock-in-trade) as at the year-end and, consequently, the determination of gross profit for the year. It is only the cost that is incurred and otherwise allowable, which, it may be appreciated, would stand to be considered thus, where it otherwise qualifies for being reckoned as a part of the cost of production/construction, and thus of the inventory or the project cost a sat the year-end. The deducibility of the said cost u/s 36(l)(iii) is thus nether in doubt nor in dispute. Further, it may also be in place to state that section 36(l)(iii) stands since amended by Finance Act, 2003 w.e.f. 01/04/2004, by way of insertion of a proviso thereto, so that any interest cost on capital account is to be necessarily capitalized. Accordingly, it is only the interest cost computing the business income qua the business of which the relevant asset is a or is to constitute a part (also refer Explanation 8 to s.43(l)). The said decision may, thus, in the given facts and circumstances of the case as, well as the amended law, not be of much assistance." We have also perused the said binding High Court judgment in the case of M/s Lokhandwala Construction inds. Ltd. (supra) and find the same is relevant for the following conclusion - "construction project undertaken by the assessee builder constituted its stock in trade and the assessee was entitled to deduction under section 36(l)(iii) of the Act in respect of the interest on the loan obtained for execution of said project/' Relying on the another judgment of Hon'ble Bombay High Court in the case of Calico Dying and Printing Works 34 ITR 265 Bombay, Hon'ble Bombay High Court concluded that the interest expenditure relating to the borrowed capital is allowable u/s 36(l)(iii) of the Act. The relevant lines from the para 4 reads as under; "that, while adjudicating the claim for deduction under section 36(l)(iii) of the Act the nature of expense 0- whether the expenditure was on capital account or revenue account was irrelevant as the section itself says that interest paid by the assessee on the capital borrowed by the assessee was an item of deduction. That the utilization of capital was the relevant for the purpose of adjudicating the claim of deduction under section 36(l)(iii) of the Act. (referring to the judgment in the case of Calico) It was laid down that where an assessee claims deduction of interest paid on the capital borrowed all that the assessee was to show that the capital which was borrowed was used for business purpose in the relevant year

12 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} of account and it did not matter whether capital was borrowed in order to acquire the revenue asset or a capital asset....../' Considering the above settled position In the matter we are of the opinion that the assessee is entitled to claim entire interest deduction relatable to the capital borrowed and utilized for business purposes in the year under consideration, Resultantly, we disapprove f decision of the Assessing Officer/CIT(Appeals) in transferring the interest expenditure to WIP account. Therefore, assessee is justified in debiting the same to the P&L accounts of the respective assessment years. Thus, we order the Assessing Officer to accept the claim as made in the return of income. Accordingly, this part of the ground No. 1 is allowed in favour of the assessee." 14. From the above, it is evident that any amount of the interest paid in respect of capital borrowed for the business purposes constitutes an allowable deduction. The said clause (Hi) of section 36(1) of the Act supports the assessee's claim in the present case. This view is upheld in the case of CIT vs Lokhandwala Construction Industries Ltd. (supra) as well as the decision of the Tribunal in the case of M/s. Ashish Builders Pvt. Ltd. (supra) irrespective of the method of accounting of recognizing the income followed by the assessee. The present case involves the payment of interest of Rs.8,19,23,638/-, the interest paid to debenture holders, Financial institutions, Unsecured loan etc. It is not the case of the Revenue that the interest claim of Rs.3,00,57,566/- and related capital borrowed was not utilized by the assessee for business purposes of the assessee." However, the case of Wall Street construction is one where the assessee was following project completion method and therefore the ITAT held that the interest cost shall be debited to work in progress and allowed to be claimed as deduction only in the year in which the corresponding income is offered to tax. In the instant case, the assessee is following percentage completion method (POCM) of therefore the judgment of Wall Street construction is not applicable to this case. The assessee is following percentage completion and offers a part of the revenue every year depending upon the percentage of completion. The funds have been borrowed for the purpose of construction and have gone into the projects of the assessee which are stock in trade and not capital asset of the assessee. Therefore, the amendment brought in the Act with effect from 2003 by way of introducing the proviso to section 36 (1) (iii) also does not affect the facts of the case of the assessee. In view of the binding judgment of the jurisdictional High Court in the case of

13 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} Lokhandwala constructions and also of the jurisdictional ITAT in the cases of Ashish Builders Private Ltd and Rohan Estate Private Ltd and also the various judicial pronouncements relied upon by the assessee the interest expenditure claimed by the assessee is held to be allowable, It is also to be mentioned here that during the proceedings before the Income Tax Settlement Commission, the AO had raised specific question in relation to claim on interest expenditure made by the appellant and reply was filed by the appellant explaining the same. Wherein the assessee explained that disallowance cannot be made u/s 36(l)(iii) of the Act, in view of the jurisdictional High Court's decision in the case of Lokhandwala Construction (supra). After considering the assessee's submissions, the AO accepted the same and did not raise objection in relation to interest claimed in the report u/s 245D (3) report filed before the ITSC. Further no disallowance/ adjustment was made by ITSC in relation to such interest claimed while passing the order. The addition made by the AO is directed to be deleted. These grounds of appeal are ALLOWED.”

14 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} section 36(1)(iii) of the Act. It was further informed that the said amount of interest paid was in respect of capital borrowed for the purpose of business or profession. It was further submitted that the construction and development having commenced, the business is in operation, therefore, interest is allowable u/s. 36(1)(iii) of the Act. It was also further brought to the notice of the Assessing Officer that in the case of CIT v. Lokandwala constructions Industries Ltd., [131 Taxman 810] the assessee’s claim for deduction of interest, although the revenue was recognized only on project completion basis in subsequent year, was allowed in the year in which the claim of interest was made. Thus, it was contended that the interest expenditure incurred during the year is claimed and allowable as expenses even though the same has been inventorised in the Books of Accounts. These contentions were accepted by the revenue and no objection has been raised by the Assessing Officer and the settlement commission has accepted these contentions of the assessee. This fact was also taken note by the Ld.CIT(A) in allowing the claim of the assessee. Therefore, since the revenue could not controvert the findings of the Ld.CIT(A) that the project constructed by the assessee for which the loans have been taken is not a stock in trade and also the other findings of the Ld.CIT(A), we do not find any valid reason to interfere with

15 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} the findings of the Ld.CIT(A) and accordingly we sustain the order of the Ld.CIT(A) on this issue. Grounds raised by the revenue are rejected.

16 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} the AO is directed to restrict the disallowance to the exempt income earned i.e. Rs.54,01,967/-. This ground of appeal is ALLOWED.”

ITA.No. 2348/MUM/2018 (A.Y: 2014-15)

17 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} The learned CIT(A) erred in appreciating the fact the original return was delayed by few minutes due to technical glitches in the Income Tax Website. (b) On the facts and circumstances of the case and in law the learned Commissioner of Income Tax - Appeal ignored the fact that income tax return was revised to give effect to the order of Hon'ble Bombay High Court for merger of two companies with appellant Company. (c) On the facts and circumstances of the case and in law the learned Commissioner of Income Tax - Appeal ignored the fact that learned assessing officer considered only additional income and disallowances disclosed in the revised return and ignored additional expenses / allowances claimed in the revised return. 2(a) On the facts and circumstances of the case and in law the learned Commissioner of Income Tax — Appeal erred in confirming the disallowance of deduction claimed u/s 80IB of Rs. 7,32,04,923 on the ground that filing of original return was delayed by few minutes. (b) On the facts and circumstances of the case and in law the leaned AO erred in reducing the claim u/s 80-IB(10) by Rs. 38,18,880 in respect of amount received on cancellation of flats booked by the customers and the learned Commissioner of Income Tax - Appeal erred in not adjudicating the same. (c) On the facts and circumstances of the case and in law the leaned AO erred in not allowing enhancement of claim u/s 80-IB(10) due to disallowance of expenses in assessment and the learned Commissioner of Income-tax – Appeals erred in not adjudicating the same. 3) On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the disallowance of the business promotion expenses of ₹.2,04,51,610/-.

18 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 14. Briefly stated the facts are that, the assessee is a Builder and engaged in the business of construction and development of real estate projects. During the assessment year under consideration assessee executed various projects and many of them were still under construction. The assessee filed its return of income electronically on 30.11.2014 midnight. However due to technical glitch and rush hours there was a delay of two minutes in return getting uploaded and due to which the date of filing of return appeared on the acknowledgment as 01st December 2014. In its return of income, the assessee declared income of ₹.206,93,75,430/- under normal provisions of the Act and book profits at ₹.290,37,59,620/- u/s. 115JB of the Act. Subsequently, the assessee filed revised return of income on 31.03.2016 declaring income at ₹.196,14,10,368/- under normal provisions of the Act for giving effect to the order of the Hon'ble Bombay High Court which approved the merger of Mahavir Build Estate Limited and Galaxy Premises Private Limited with the assessee w.e.f. 01st April, 2013 and also to rectify certain clerical errors.

19 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} Assessing Officer ignored the revised return of income filed by the assessee on the ground that assessee has not filed its original return within time prescribed as per the provisions of section 139(1) of the Act. The submission of the assessee that due to technical error in uploading the return on the last date because of which the return got uploaded just after midnight with a delay of two minutes but for that the delay of filing is not intentional, has been rejected by the Assessing Officer observing that as per the provisions of Act the delay cannot be condoned. With these observations the Assessing Officer did not take cognizance of the revised return filed and the total income was assessed as per the original return filed for the purpose of computation of income for the year under consideration. Accordingly, the Assessing Officer made computation of income determining the total income at ₹.306,02,55,260/-. While arriving at this total income the Assessing Officer also considered ₹.4,05,74,337/- which are the suomoto additions/disallowance made by the assessee in its revised return of income, even though the revised return was ignored. This amount of ₹.4,05,74,337/- represents reduction in depreciation as per I.T. Act, disallowance u/s. 43C, interest on disallowed payments of TDS, interest on income tax. Apart from this the Assessing Officer made disallowance of interest u/s. 36(1)(iii) of the Act at ₹.89,11,71,622/-, disallowance u/s. 14A of the Act at ₹.80,75,718/-, disallowance of

20 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} business promotion expenses at ₹.2,21,81,610/- and the claim for deduction u/s. 80IB(10) has been denied completely.

21 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} return filed by the assessee on the ground that the original return was not filed within the due date prescribed under section 139(1) of the Act. However, Assessing Officer while making assessment, has considered the additional disallowances made by the Assessee in the revise return at ₹.4.05 crores and has rejected/ignored the additional deduction/expenses of ₹.8.17 crores claimed by the Assessee. Referring to Page No. 57 of the Paper book which is the copy of acknowledgment received from the Income-tax Department, Ld. Counsel for the assessee further submits that assessee could not upload the return of income till late on the night of 30.11.2014 i.e. the due date for filing return of income for the subject A.Y. 2014-15, and the return got uploaded at 00.02 AM on 01.12.2014 due to which the acknowledgement in the system of Tax Authorities was reflecting date of filing of the return of income as 01.12.2014 instead of 30.11.2014. Ld. Counsel for the assessee further submitted that the delay in filing of original return by two minutes cannot be considered as malafide considering the fact that delay was on account of technical glitches and delay was by only two minutes. In this regard reliance was placed on the following decisions: • ITO vs Mantangi Rubber Pvt Ltd (Delhi ITAT) (ITA No. 4498/Del/2013) dated 29 May 2015. • Bombay Mercantile Co-op Bank [322 ITR 87] (Bombay High Court) • Cosme Matias Menezes Pvt. Ltd., [379 ITR 31] (Bombay High Court) • Lodhi Property Co. Ltd [323 ITR 441] (Delhi High Court) • CBDT vs Regen Infrastructure (Writ Appeal No. 1314 of 2016) dated 01.11.2016. • Himuda v. ACIT in ITA.No. 480, 481 & 972/CHD/2012 dated 10.05.2019

22 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 18. Ld. Counsel for the assessee further without prejudice to the above submits that, though the Assessing Officer has stated that revised return has not been considered for the purpose of computation of income, however the following disallowances which were made by the assessee in the revised return filed on 31.03.2016 were picked up and disallowed while computing total income while passing Assessment Order: - Reductions in depreciation as per the Act 3.9161 Crores Additions under section 43C 0.0058 Crores Interest on delayed payment of TDS 0.1284 Crores Interest on Income Tax 0.0069 Crores Total 4.0572 Crores

23 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} due date is 30.11.2014. Therefore, the Assessing Officer has strictly gone by the date and the Assessing Officer has no power to condone the delay. Referring to the provisions of section 119(2)(b) of the Act, Ld. DR submits that only the CBDT has the power to condone the delay and the assessee should have made an application to the Board for condonation of delay. Therefore, since the return filed was delayed the Assessing Officer has rightly ignored the revised return of income as the original return was not filed in time.

24 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} of the Act even though the Assessing Officer has quantified allowable deduction u/s. 80IB(10) of the Act, made disallowance u/s. 36(1)(iii) of the Act, disallowance u/s. 14A of the Act, disallowance of business promotion expenses. Apart from these disallowances the Assessing Officer considered even the suomoto adjustments i.e., the disallowance of ₹.4.0572 crores as made by the assessee in its revised return of income for disallowance while computing the income by the Assessing Officer. This shows the Assessing Officer in fact partly acted upon the revised return filed by considering the adjustments as made by the assessee for disallowance in the revised return. The Assessing Officer further conveniently ignored the deductions of ₹.8.165 crores claimed by the assessee in the revised return of income.

25 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 24. The Hon'ble Bombay High Court in the case of Cosme Matias Menezes (P.) Ltd. v. CIT [379 ITR 31] observed as under: - “9. Reading the said provisions, we find that Section 139 and 239 of the said Act itself allows for filing of the returns and claim of refund within a period of one year from the end of the assessment year i.e. on or before 31.03.2008. The provisions of Section 119(2)(b) of the Act allow the CBDT to admit an application beyond the time prescribed under Section 139 and Section 239 of the said Act. In the present case we find that the Respondents have failed to exercise such powers to condone the delay in filing returns and consequent refund by the Petitioners on irrelevant and extraneous reasons. 10. This Court in the Judgment in the case of M/s. Bombay Mercantile Co-op Bank Ltd vs. The Central Board of Direct Taxes & Others (supra), has observed at para 8 thus: "8. It is well settled that in matters of condonation of delay a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities." 11. Taking note of the said observations and considering that the delay in the present case is only of one day, we find that the approach of the Respondents in refusing to condone the delay is a pedantic which, if allowed to stand, would result in great hardship to the Petitioners for no fault of the Petitioners. The Petitioners have also produced the hard copy to show that in fact such return in Form - 1 were filed on 31.03.2008 which was admittedly the last date for filing such returns. This factual aspects have not been disputed by the Respondents. Needless to say, we have not examined the merits of the claim of the Petitioners based on the returns filed by the Petitioners but only considered whether the delay in filing such returns deserves to be condoned. Such returns and the claim of the Petitioners have to be examined by the Respondents on its own merits.”

26 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} for the respondent have specifically and categorically been rejected by the Karnataka High Court and the same have been accepted not only by the Board, but also by the Ministry of Law. We notice that a similar view has also been taken by the Bombay High Court in the case of Sitaldas K. Motwani v. Director General of Income-tax (International Taxation): 187 Taxman 44 (Bom). Consequently, agreeing with the Karnataka High Court, we are of the view that the Board has the power under Section 119 (2) to condone the delay in the case of a return which is filed late and where a claim for carry forward of losses is made. 8. Coming back to the facts of the present case, we find that the impugned order under Section 119 passed by the Board is a non- speaking one. Normally, we would have remanded the matter to the Board to consider the application of the petitioner afresh. However, we find that in the present case, the delay is only of one day and the circumstances have been explained and have not been controverted by the respondents. The fact of the matter is that the petitioner did reach the Central Revenue Building before the closure of the counter on 01.11.2004. It is only because he was sent from one room to the other and had to wait in long queues that he could not present the return at the counter which was receiving the returns prior to 6.00 p.m. on that date. We feel that sufficient cause has been shown by the petitioner for the delay of one day in filing the return. If the delay is not condoned, it would cause genuine hardship to the petitioner. Thus, in the circumstances of this case, instead of remanding the matter back to the CBDT, we direct that the delay of one day in filing of the return be condoned.”

27 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} come to the conclusion that the ends of justice would be served better by setting aside the order of the CBDT and directed the Assessing Officer to consider the return of income filed by the assessee on merits. On these facts the Hon'ble Division Bench of the Madras High Court on a writ appeal held as under: “6. It is appropriate to notice that under Section 119(2)(b) of the Income Tax Act, the Central Board Direct Taxes has been empowered "to admit an application or claim for exemption, deduction, refund * any other relief under the Act, after the expiry of the period specified by or under the Act by making such an application or claim and deal with the same on merits in accordance with law." In other words, the statute has conferred discretion in the hands of the Board to admit of any claim which is made beyond the period specified for doing so and when once the discretion is conferred by a statute upon an authority, such a discretion is required to be exercised on sound lines. It is one of the important factors to be considered while dealing with an application seeking condonation of delay as to whether grave and irreparable injury or hardship will be caused to the person concerned and as to whether or not the interests of justice would be served better, in condoning the delay. In the instant case, there is no dispute or denial of the fact that the Return of Income filed by the Respondent/Assessee for the Assessment Year 2010-11, has been uploaded sometime past 00.00 hours on 15.10.2010. One can take judicial notice of the fact that uploading of Return requires not only an effort but also consumes sometime. If the Assessee has encountered certain hardship or difficulty in uploading his return, as alleged by him due to a technical snags in the website of the Income Tax Department due to the last hour rush of filing of Returns, the delay deserves to be condoned.”

28 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} “2. Brief facts of the care are that as per AO, e-return of income, declaring Nil income, was filed with acknowledgement no. 982454810111009 on 1-10-2009, after claiming deduction u/s 80IC of Rs. 2,34,41,162/-. The AO denied deduction u/s 80IC on the ground that assessee had not filed the return within specified time u/s 139(1), because as per records the return was filed on 1-10-2009 and not on 30- 9-2009. He did not accept the assessee’s contention that the return was actually uploaded and filed on the site of the Income-tax department at 12.46AM on 1-10- 2009 and thus there was only a technical delay of 46 minutes in filing of return which, in any case, was filed before the commencement of the next working day. 3. Ld. CIT(A) directed the AO to verify the date when the return was uploaded and sent into transmission observing as under: “The AO is directed to verify the contention of the appellant with the information available with the Directorate of systems regarding this electronic trail of the e-return filed. In case it is found that the return was indeed unloaded with the electronic signature on 30-09-2009, the stipulated date of filing of the return, then it shall be held as per the principles of Law of Contract that the return was irrevocably set into transmission, the act as per law, on the part of the appellant being complete. In such a case the delay in the acknowledgement being sent, and it being dated 01-10-2009 shall not have any bearing on the case. In the event of being uploading and submission being completed by 30-09-2009 it shall be held that the return was filed on time and all the related benefits shall then be made available to the appellant. The AO is thus directed to obtain the electronic trail of filing of the return from DIT(Systems). If the return was duly uploaded and set into transmission by 30-09- 2009 then the AO is directed to give the benefits of Section 80IC. In case it is seen that the return was duly uploaded and set into transmission sonly by 01-10- 2009 then the benefit of section 80IC shall not be available as the mandatory requirement of section 80AC would not have been met.” 4. Being aggrieved with the direction of ld. CIT(A), the department is in appeal before us and has taken following grounds of appeal: “1. The order of the learned CIT(Appeals) is erroneous and contrary to facts & law. 2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in holding that if the

29 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} uploading and submission of e-filed return by the assessee was completed by 30.09.2009 then the assessee will be get the benefit of deduction u/s 801e. 3. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) erred in deleting the addition the addition without giving AO opportunity for rebut as per rule 46A, as no remand report was called for in respect of verifying the electronic trial of filling the return from DIT (Systems). 4. That the order of the Ld. CIT(A) is erroneous and is not tenable on the facts and in law. 5. That the grounds of Appeal are without prejudice to each other. 6. The appellant craves leave to add, to alter, or amend on the ground of at the appeal raised above at the time of hearing. 5. The assessee has filed cross-objection, taking following grounds: (1) That the order dated 06-06-2013 passed u/s 250(6) of the Income-tax Act, 1961 by the Learned Commissioner of IncomeTax (Appeals) IX, New Delhi is against law and facts on the file in as much as she was not justified to set aside the assessment and restore the matter back to the file of Ld Assessing Officer. (2) That the order dated 06-06-2013 passed u/s 250(6) of the Income-tax Act, 1961 by the Learned Commissioner of Income- Tax (Appeals) IX, New Delhi is against law and facts on the file in as much as she was not justified to hold that the benefit of Section 80-IC of the Income-tax Act, 1961 shall not be available as the requirements of Section 80-AC are mandatory whereas the provisions of Section 80-AC are not mandatory but only directory in nature. 6. We have considered the submissions of both the parties and have perused the record of the case. Admittedly, at best the delay is of 46 minutes in filing the e-return. On account of this delay, the acknowledgement bears the date 1-10-2009. There can be several reasons for this small delay including technical reasons. But considering the fact that the return was filed in the intervening night of 30-9-2009 and 1-10-2009, the assessee’s claim, if otherwise admissible, cannot be denied on account of this technical delay. In our opinion, it would be travesty of justice if for a technical delay of 46 minutes in filing the return of income, a deduction of Rs. 2,34,41,162/- is denied to assessee.

30 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 7. Section 80AC provides that deduction u/s 80IC shall be allowed to assessee if the return is filed on or before the due date specified under sub-section (1) of section 139. However, section 139(4) carves out an exception to the time limit u/s 139(1) for filing the return of income. Therefore, time limit for filing the return of income is neither inflexible nor inelastic. Thus, the provisions of section 80AC are directory and even the Board may, under the provision of section 119, condone the delay in order to avoid undue hardship. 8. In the present case it cannot be said that the delay was, in any manner, mala fide. On the contrary, the assessee was vigilant enough to file the return at the midnight. We, therefore, condone the delay in filing the return. 9. As far as ld. CIT(A)’s direction to the AO is concerned, we find that the assessee itself has clearly stated in its reply reproduced by AO in the assessment order, that the return was uploaded at 12.46 AM on 1-10-2009. Therefore, there was no necessity for restoring the matter to the file of AO for any verification. 10. In view of above discussion, the cross-objection filed by the assessee is allowed and, therefore, the department’s appeal has become infructuous. However, since the AO has not examined the assessee’s claim u/s 80IC in detail and has rejected the same only on the ground of delay in filing of the return, we restore the matter to the file of AO for examining the assessee’s claim u/s 80IC.”

31 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 29. Coming to Ground No. 2(a) of grounds of appeal, assessee challenged the order of the Ld.CIT(A) in confirming the disallowance of deduction claimed u/s. 80IB of the Act.

32 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} computation instead of ₹.7,32,04,923/-. Considering the submissions of the assessee the Assessing Officer computed the excess claim of deduction u/s. 80IB of the Act at ₹.80,73,660/- at Para No. 8 of the assessment order. Further, the Assessing Officer noticed that assessee offered income of ₹.38,18,880/- towards cancellation charges of the apartments in its two projects namely Casabella Gold & Casa Rio. He also noticed that deduction u/s. 80IB of the Act was claimed on these cancellation charges by the assessee. The assessee was asked to explain as to why the said receipts should be considered as profits not eligible for deduction u/s. 80IB of the Act, to which assessee has replied that the said income is directly relating to its eligible projects. Not convinced with the submissions of the assessee the Assessing Officer placing reliance on the decision of the Hon'ble Apex court in the case of Pandian Chemicals Ltd and CIT v. Sterling Foods [104 Taxman 204] treated these charges received on cancellation of flats as miscellaneous income and denied deduction u/s. 80IB(10) of the Act observing that these charges cannot be said to be having direct nexus with the development of housing projects since it is neither part of the cost nor part of the sale receipts. He also observed that once the flat booking is cancelled the said flat is open for sale to some other buyer and sale receipts in respect of that flat would be accounted separately. Thus, the Assessing Officer

33 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} restricted the claim for deduction allowable u/s. 80IB(10) of the Act to ₹.6,93,86,043/- by reducing the excess claim of ₹.80,73,660/- which is due to inadvertence of the assessee as admitted and also the cancellation Charges of ₹.38,18,880/- from the total claim made at ₹.8,12,78,353/-. In effect the Assessing Officer allowed the claim for deduction u/s. 80IB(10) of the Act by restricting the same to ₹.6,93,86,043/-. However, this was not allowed as deduction while computing the income as the original return was not filed within time. Since, we have directed the Assessing Officer to consider the original return filed with a delay of two minutes due to technical glitch as the return filed in time, we direct the Assessing Officer to allow the deduction as quantified by him in the Assessment Order at ₹.6,93,86,043/. Thus, Ground No.2(a) is allowed.

34 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 34. On the other hand, Ld. DR vehemently supported the orders of the authorities below.

35 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} cancelled by the buyers in earlier years the amounts forfeited/retained by the assessee on account of cancellations shall have to be reduced from the sale price and only on the balance sale consideration/income, the assessee is entitled for deduction u/s.80IB of the Act. With these observations, we allow the claim of the assessee for deduction u/s.80IB(10) of the Act on the amounts received on cancellation of flats of ₹.38,18,880/-. Thus, Ground No. 2(b) is allowed.

36 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} that the said expenses were incurred for the purpose of business and no proper explanations/evidences were provided by the assessee.

37 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} crores. In view of the fact that this is legitimate business promotion expenditure the same was claimed as deductible while computing taxable income for the AY 2014-15. During the assessment proceedings, the assessee had furnished invoices in relation to purchase of the said gold coins and gold certificates. The learned Assessing Officer disallowed expenditure amounting to ₹.2.21 crores in relation to purchase of gold while completing assessment. Ld. Counsel for the assessee further referring to Page Nos. 58 to 65 of the Paper Book submitted that assessee had made advertisement for gold festival scheme to attract customers. Further, the management had prepared one internal presentation to lay down plan how this scheme will run and what all offers should be made to the customers and the copy of advertisement broacher and internal presentation were placed in Paper Book. It is further submitted that the expenses were incurred for marketing and exhibition of various projects of the assessee overseas and as a result of their marketing efforts, the assessee has been able to sell around 70 flats to various overseas customers. It is further submitted that as a result of the festival offer marketing drive, the assessee was able to book higher sales of units/flats in the projects which were under construction. Therefore, it is submitted that the expenses incurred on gifts to customers is wholly and exclusively

38 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} for the purpose of business of the assessee and the same is allowable deduction.

39 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} for the “Akshaya Trithiya Festival” during the 04th May, 2013 to 26th May, 2013. The scheme promoted by the assessee is as Under: -

40 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} Bench of the Tribunal in the case of Agfa India (P) Ltd., v. ACIT [81 taxmann.com 453 (Mum)] held as under: - “8. We have considered the rival contention and found that incurring of expenditure on promotion of business was not in dispute. Actual payment was also not disputed by the A.O. merely because the confirmation from third party to whom such services were rendered, could not be furnished, the A.O. has made the disallowance. We found that in normal business parlance on Diwali and other festive occasions, gifts are distributed to various customers and clients, however, no receipt for such gifts are taken. The A.O. declined the claim of deduction merely on the plea that no third party evidence had been obtained, is not a valid reason for disallowance. Keeping in view the fact that assessee had furnished full details of expenses along with supporting bills, vouchers, there is no reason for making such adhoc disallowance. The A.O. is directed to allow the expenses of Rs. 1,64,792/-.”

41 ITA No. 2147 & 2348/MUM/2018 (A.Y: 2014-15) Lodha Developers Limited {since merged M/s. Palava Dwellers Pvt. Ltd.,} 44. Therefore, taking totality of facts and circumstances into considerations, we are of the view that the expenses incurred by the assessee towards distribution of gold coins/certificates etc., for promoting its business through a promotional scheme is nothing but expenses incurred wholly and exclusively for the purpose of business. Thus, we direct the Assessing Officer to delete the disallowance of ₹.2,04,51,610/- as confirmed by the Ld.CIT(A). This ground is allowed.

Order pronounced in the open court on the 20th February, 2020

Sd/- Sd/- (G. MANJUNATHA) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai / Dated 20/02/2020 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER

(Asstt. Registrar) ITAT, Mum