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Facts
The assessee company filed appeals against orders for AY 2016-17 and 2018-19, concerning additions made under Section 43CA for differences between sale consideration and Stamp Duty Valuation, and disallowances under Section 14A. The core dispute in Section 43CA additions revolves around whether allotment letters constitute an 'agreement' for fixing consideration, and if Section 43CA is applicable to transactions prior to its introduction.
Held
The Tribunal held that allotment letters, along with earnest money, create a specific right and can be considered an 'agreement' for Section 43CA purposes, provided consideration was received through banking channels. The Tribunal also noted that amendments to Section 43CA regarding tolerance limits were curative. For Section 14A disallowances, the Tribunal followed the High Court's precedent, stating that no disallowance is warranted in the absence of exempt income.
Key Issues
Whether allotment letters constitute an 'agreement' for Section 43CA, and whether Section 43CA applies to transactions predating its enactment. Whether disallowance under Section 14A is permissible when no exempt income is earned.
Sections Cited
43CA, 14A, 115JB, 2(47), 8D, 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
ORDER PER OM PRAKASH KANT, AM
These two appeals by the assessee are directed against two separate orders, both dated 16.06.2025, passed by the Learned Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for Assessment Year (in short A.Y) 2016 -17 and 2018 -19 respectively. As common issue in dispute
Bajaj International Reality Bajaj International Reality 2 Private Limited and 5319 5321 and 5319/MUM/2025 is involved in these appeals and therefore sa n these appeals and therefore same were heard me were heard together and disposed of by way of this consolidated order for sake of and disposed of by way of this consolidated order for sake of and disposed of by way of this consolidated order for sake of convenience
2. Firstly, we take up the appeal of the ass Firstly, we take up the appeal of the assesse essee for assessment year 2016 -17.
2.1 The grounds raised by assessee are reproduced as under: The grounds raised by assessee are reproduced as under: The grounds raised by assessee are reproduced as under:
Addition made under section 4 Addition made under section 43CA of the Act [Rs.63,37,500/ 3CA of the Act [Rs.63,37,500/-] 1. On the facts and in the circumstances of the case and in law, the Commissioner 1. On the facts and in the circumstances of the case and in law, the Commissioner 1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as Ld. CIT(A)'] erred in upholding the addition of Rs. in upholding the addition of Rs.63,37,500 made by the Assessing 63,37,500 made by the Assessing Officer under the provisions of section 43CA of the Act. er under the provisions of section 43CA of the Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the allotment letters issued as "an agreement" as envisaged in in not considering the allotment letters issued as "an agreement" as envisaged in in not considering the allotment letters issued as "an agreement" as envisaged in section 43CA(3).
3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) failed in the circumstances of the case and in law, the Id. CIT(A) failed in the circumstances of the case and in law, the Id. CIT(A) failed to appreciate that the value of the consideration was fixed between the appellant to appreciate that the value of the consideration was fixed between the appellant to appreciate that the value of the consideration was fixed between the appellant and the buyers while issuing the allotment letters, which were issued even prior to and the buyers while issuing the allotment letters, which were issued even prior to and the buyers while issuing the allotment letters, which were issued even prior to the date of insertion the date of insertion of section 43CA in the Act, and the value of the consideration of section 43CA in the Act, and the value of the consideration was agreed on the date of booking itself. was agreed on the date of booking itself.
4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in ignoring that the provisions of section 43CA are not applicable in the instant case, ignoring that the provisions of section 43CA are not applicable in th ignoring that the provisions of section 43CA are not applicable in th since the said section was introduced by the Finance Act, 2013 w.e.f. 01-04-2014, since the said section was introduced by the Finance Act, 2013 w.e.f. 01 since the said section was introduced by the Finance Act, 2013 w.e.f. 01 whereas the booking and allotment to the whereas the booking and allotment to the buyer with respect to Flat No. buyer with respect to Flat No.1304, 1303, 1204 and 1004 was already made in the FY 2012 1204 and 1004 was already made in the FY 2012-13, i.e., much prior to the 13, i.e., much prior to the insertion of provision in the Act. nsertion of provision in the Act.
5. Non-applicability of section 43CA when the appellant applies Percentage of applicability of section 43CA when the appellant applies Percentage of applicability of section 43CA when the appellant applies Percentage of Completion Method (POCM) for revenue recognition Completion Method (POCM) for revenue recognition (a) Without prejudice to Ground No. 1, on the facts and in the circumstances (a) Without prejudice to Ground No. 1, on the facts and in the circumstances (a) Without prejudice to Ground No. 1, on the facts and in the circumstances of the case and in of the case and in law, the Ld. CIT(A) erred in not appreciating that the law, the Ld. CIT(A) erred in not appreciating that the revenue was required to be revenue was required to be recognized under the Percentage of Completion recognized under the Percentage of Completion Method ["POCM") as per the Guidance Note and Accounting Standards issued Method ["POCM") as per the Guidance Note and Accounting Standards issued Method ["POCM") as per the Guidance Note and Accounting Standards issued by the ICAI.
Bajaj International Reality Bajaj International Reality 3 Private Limited and 5319 5321 and 5319/MUM/2025 (b) Without prejudice to Ground No. 1. on (b) Without prejudice to Ground No. 1. on the facts and in the circumstances the facts and in the circumstances of the case and of the case and in law. The Ld. CIT(A) erred in not appreciating that for the in law. The Ld. CIT(A) erred in not appreciating that for the purpose of section 43CA, the definition of transfer as per section 2(47) of the section 43CA, the definition of transfer as per section 2(47) of the section 43CA, the definition of transfer as per section 2(47) of the Act cannot be applied and the date of transfer of property has Act cannot be applied and the date of transfer of property has Act cannot be applied and the date of transfer of property has to be construed in accordance with the provisions construed in accordance with the provisions of the Transfer of Property Act, of the Transfer of Property Act, 1882. (c) Without prejudice to G (c) Without prejudice to Ground No. 1, on the facts and in the circumstances round No. 1, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition without of the case and in law, the Ld. CIT(A) erred in confirming the addition without of the case and in law, the Ld. CIT(A) erred in confirming the addition without appreciating the fact that no 'transfer' of asset had taken place in the current ing the fact that no 'transfer' of asset had taken place in the current ing the fact that no 'transfer' of asset had taken place in the current assessment year, as the flats were non assessment year, as the flats were non-existent at that point in time and no existent at that point in time and no right of ownership and possession was given to the buyers pursuant to right of ownership and possession was given to the buyers pursuant to right of ownership and possession was given to the buyers pursuant to registration of agreement with the st registration of agreement with the stamp duty valuation authorities, and the amp duty valuation authorities, and the Ld. CIT(A) also erred in considering the building as 'stock in trade' while the Ld. CIT(A) also erred in considering the building as 'stock in trade' while the Ld. CIT(A) also erred in considering the building as 'stock in trade' while the same is appearing as 'Work in progress' under Inventories in the financials of same is appearing as 'Work in progress' under Inventories in the financials of same is appearing as 'Work in progress' under Inventories in the financials of the relevant assessment year. the relevant assessment year. (d) Without prejudice to Gr (d) Without prejudice to Ground No. 1, on the facts and in the circumstances ound No. 1, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that even if section of the case and in law, the Ld. CIT(A) failed to appreciate that even if section of the case and in law, the Ld. CIT(A) failed to appreciate that even if section 43CA gets attracted, it is not applicable for the relevant assessment year. 43CA gets attracted, it is not applicable for the relevant assessment year. 43CA gets attracted, it is not applicable for the relevant assessment year.
6. Without prejudice to Ground No. 1,2 and 3 abov 6. Without prejudice to Ground No. 1,2 and 3 above and on the facts and e and on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs.8,18,500/- in respect of Flat No. in respect of Flat No.1204 whose agreement value was only 8.39% 1204 whose agreement value was only 8.39% less than the value fixed for stamp duty purposes and ignoring the fact that the less than the value fixed for stamp duty purposes and ignoring the less than the value fixed for stamp duty purposes and ignoring the amendment to section 43CA by Finance Acts of 2018 and 2020 for the tolerance amendment to section 43CA by Finance Acts of 2018 and 2020 for the tolerance amendment to section 43CA by Finance Acts of 2018 and 2020 for the tolerance limit of 10%, being curative in nature had retrospective effect from the day 43CA limit of 10%, being curative in nature had retrospective effect from the day 43CA limit of 10%, being curative in nature had retrospective effect from the day 43CA was introduced in the Act. was introduced in the Act. Disallowance under secti Disallowance under section 14A [Rs.1,19,32,795/-] 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. confirming the addition of Rs.1,19,32,795 made under section 14A of the Act. 1,19,32,795 made under section 14A of the Act.
8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the appellant had not earned any exempt income during the year that the appellant had not earned any exempt income during the year that the appellant had not earned any exempt income during the year under consideration and hence the question of any disallowance under section 14A under consideration and hence the question of any disallowance under section 14A under consideration and hence the question of any disallowance under section 14A does not arise.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred 9. On the facts and in the circumstances of the case and in law, the Ld. CIT 9. On the facts and in the circumstances of the case and in law, the Ld. CIT in confirming the application of Rule 8 irming the application of Rule 8D while computing th D while computing the disallowance under section 14A. 10.On the facts and in the circumstances of the cas 10.On the facts and in the circumstances of the case and in law, the Ld e and in law, the Ld. CIT(A) erred in not considering the fact that the investments were made for strategic erred in not considering the fact that the investments were made for strategic erred in not considering the fact that the investments were made for strategic reasons in group concerns and not for earning exempt dividend income. sons in group concerns and not for earning exempt dividend income. sons in group concerns and not for earning exempt dividend income.
Bajaj International Reality Bajaj International Reality 4 Private Limited and 5319 5321 and 5319/MUM/2025 11.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 11.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 11.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the adjustment of disallowance of proportionate interest under erred in upholding the adjustment of disallowance of proportionate interest under erred in upholding the adjustment of disallowance of proportionate interest under section 14A read with rule ction 14A read with rule 80(2)(ii) of the Act amounting to Rs. 80(2)(ii) of the Act amounting to Rs.68,78,718/- against the Work-In-Progress Account without appreciating the fact that the investments Progress Account without appreciating the fact that the investments Progress Account without appreciating the fact that the investments were made out of owned funds were made out of owned funds. Disallowance u/s 14A r.w.r. 8 Disallowance u/s 14A r.w.r. 8D of the Act under the provisions of section 115JB D of the Act under the provisions of section 115JB [Rs.50,54,077/-] 12.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 12.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 12.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the learned Asses erred in upholding the action of the learned Assessing Officer in applying rule 8D sing Officer in applying rule 8D for the purpose of computing the expenditure relatable to exempt income while the purpose of computing the expenditure relatable to exempt income while the purpose of computing the expenditure relatable to exempt income while computing the book profit under section 115JB of the Act. ng the book profit under section 115JB of the Act.
13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not following the ratio of the decision of the Special Bench of the Hon'ble erred in not following the ratio of the decision of the Special Bench of the Hon'ble erred in not following the ratio of the decision of the Special Bench of the Hon'ble Tribunal in the case of Vi Tribunal in the case of Vireet Investments (P.) Ltd [2017] 165 I nts (P.) Ltd [2017] 165 ITR 27 (Delhi - Trib.) (SB), thereby violating the principles of judicial discipline (SB), thereby violating the principles of judicial discipline. The appellant reserves the right to add to, alter or amplify the above grounds of The appellant reserves the right to add to, alter or amplify the above grounds of The appellant reserves the right to add to, alter or amplify the above grounds of appeal
, at any time before or at the time of appeal, to enable the Hon'ble Tribunal to appeal, at any time before or at the time of appeal, to enable t appeal, at any time before or at the time of appeal, to enable t decide the appeal in accordance with law. decide the appeal in accordance with law.”
3. Briefly stated facts of the case are that the assessee, filed return Briefly stated facts of the case are that the assessee, filed return Briefly stated facts of the case are that the assessee, filed return of income of the year under consideration on 17.10.2016 declaring of income of the year under consideration on 17.10.2016 declaring of income of the year under consideration on 17.10.2016 declaring current year loss at Rs. ( current year loss at Rs. (-)1,59,99,289/- under normal provisions of normal provisions of the Income Tax Act, 1961 (in short Act) and declaring book profit u/s the Income Tax Act, 1961 (in short Act) and declaring book profit u/s the Income Tax Act, 1961 (in short Act) and declaring book profit u/s 115JB at Rs. (-1),59,11,647/ 1),59,11,647/-. Subsequently, the return of the . Subsequently, the return of the income filed by the assessee was selected for the scrutiny assessment income filed by the assessee was selected for the scrutiny assessment income filed by the assessee was selected for the scrutiny assessment and statutory notices under the and statutory notices under the provisions of the Act were issued and provisions of the Act were issued and complied with and the assessment was completed under Section and the assessment was completed under Section and the assessment was completed under Section 143(3). the Assessing Officer (AO) made addition of Rs.63,37,500/ the Assessing Officer (AO) made addition of Rs.63,37,500/ the Assessing Officer (AO) made addition of Rs.63,37,500/- invoking the deeming provisions of Section 43CA, due to difference invoking the deeming provisions of Section 43CA, invoking the deeming provisions of Section 43CA, between stated sale con stated sale consideration and the value determined by the and the value determined by the Stamp Duty Valuation (SDV) of Authority on Stamp Duty Valuation (SDV) of Authority on the date of registration the date of registration
Bajaj International Reality Bajaj International Reality 5 Private Limited and 5319 5321 and 5319/MUM/2025 in respect of the flats sold by the assessee. in respect of the flats sold by the assessee. Further, disallowances Further, disallowances under Section 14A invoking rule 8D of the Income Tax Rules,1962 invoking rule 8D of the Income Tax Rules,1962 invoking rule 8D of the Income Tax Rules,1962 amounting to Rs.50,54,027/ Rs.50,54,027/- was made despite the Assessee’s made despite the Assessee’s contention that no exempt income was earned. The Ld. CIT(A) contention that no exempt income was earned. The Ld. CIT(A) contention that no exempt income was earned. The Ld. CIT(A) affirmed these additions, leading to the present appeal. affirmed these additions, leading to the present appeal. affirmed these additions, leading to the present appeal.
Before us, the assessee filed a paper book containing pages 1 he assessee filed a paper book containing pages 1 he assessee filed a paper book containing pages 1-18.
4.1 The grounds raised The grounds raised primarily challenges two distinct additions. primarily challenges two distinct additions. Firstly, the addition of , the addition of Rs. 63,37,500/- under Section 43CA Section 43CA of the Act, regarding the difference between the sale consideration and the Act, regarding the difference between the sale consideration and the Act, regarding the difference between the sale consideration and the Stamp Duty Valuation (SDV). Stamp Duty Valuation (SDV). Secondly, the disallowance of , the disallowance of Rs. 1,19,32,795/- under under Section 14A read with Rule 8D Rule 8D, both under normal provisions and in the computation of book profits under normal provisions and in the computation of book profits under normal provisions and in the computation of book profits under Section 115JB.
In Ground Nos.1 .1-4 of the appeal the primary grievance of the the primary grievance of the Assessee is that the AO applied the Stamp Duty Value prevalent on Assessee is that the AO applied the Stamp Duty Value prevalent Assessee is that the AO applied the Stamp Duty Value prevalent the date of registration (FY 2015 date of registration (FY 2015-16) rather than the value rather than the value prevalent on the date of allotment/booking (FY 2012 date of allotment/booking (FY 2012-13) date of allotment/booking (FY 2012 5.1 Briefly stated the facts Briefly stated the facts qua the issue in dispute are that the issue in dispute are that Assessing Officer observed that Assessing Officer observed that during the year under consideration, during the year under consideration, certain properties i.e. flats i.e. flats developed by the assessee were developed by the assessee were sold by the assessee and registered registered for Stamp Duty purposes for Stamp Duty purposes, but sale consideration reported in the registration document reported in the registration documents was lower than reported in the registration document
Bajaj International Reality Bajaj International Reality 6 Private Limited and 5319 5321 and 5319/MUM/2025 the value which was determined by the Stamp Duty Value the value which was determined by the Stamp Duty Value the value which was determined by the Stamp Duty Value Authorities. The assessee contended that all those flats thorities. The assessee contended that all those flats thorities. The assessee contended that all those flats were sold in the year 2012-2013 2013, but were registered in the year 2016. The but were registered in the year 2016. The assessee referred to the provisions of section 43CA (3) and (4) and assessee referred to the provisions of section 43CA (3 assessee referred to the provisions of section 43CA (3 submitted that if assessee was entered into agreement for fixing the submitted that if assessee was entered into agreement for submitted that if assessee was entered into agreement for value of the consideration for transfer of the asset and the date of value of the consideration for transfer of the asset and the date of value of the consideration for transfer of the asset and the date of registration of such transfer of asset is not the same, then the Stamp registration of such transfer of asset is not the same registration of such transfer of asset is not the same Duty value as on the date of such agreement date the date of such agreement date may be substituted may be substituted by the Stamp Duty value by the Stamp Duty value on the date of registration f registration. But for invoking said proviso, an assessee is required to make part of the amount of an assessee is required to make part of the amount of an assessee is required to make part of the amount of consideration otherwise then by way of cash before or on the date of consideration otherwise then by way of cash before consideration otherwise then by way of cash before the agreement for transfer of the asset. the agreement for transfer of the asset.
5.2 The assessee submitted that while sale o The assessee submitted that while sale of Flat No.1304 and f Flat No.1304 and 1303 to M/s Jayesh Rege and M/s Sambhavi Rege to M/s Jayesh Rege and M/s Sambhavi Rege to M/s Jayesh Rege and M/s Sambhavi Rege is concerned, same were registered on 24/02/2016. In the registration documents same were registered on 24/02/2016. In the registration documents same were registered on 24/02/2016. In the registration documents sale consideration is reported at Rs. 91,58,435/ sale consideration is reported at Rs. 91,58,435/-. The stamp duty . The stamp duty authorities valued each of the properties on authorities valued each of the properties on date of registration at Rs. date of registration at Rs. 1,04,01,500/-. The area of the each flat was . The area of the each flat was 52.50 square meters so 52.50 square meters so the price per square meter was worked out at Rs. 1,98,123/-. The the price per square meter was worked out at Rs. 1,98,123/ the price per square meter was worked out at Rs. 1,98,123/ said flats were however allotted to the couple on October, 2012 and said flats were however allotted to the couple on October, 2012 and said flats were however allotted to the couple on October, 2012 and stamp duty value i.e. read stamp duty value i.e. ready reckoner value per square meter as on y reckoner value per square meter as on said date was Rs.1,45,900 per Sq. meter , which when multiplied by said date was Rs.1,45,900 per Sq. meter , which when said date was Rs.1,45,900 per Sq. meter , which when the area of the each each flats, the total value for the purposes s, the total value for the purposes works out to Rs.76,58,781/-, which is less than the which is less than the sale consideration sale consideration value of Bajaj International Reality Bajaj International Reality 7 Private Limited and 5319 5321 and 5319/MUM/2025 Rs.91,58,435/-. Similarly, the assessee made submissions in respect . Similarly, the assessee made submissions in respect . Similarly, the assessee made submissions in respect of the other flats sold i.e. (i) Flat no. 1204 to sh Dev Narendra Singh/ flats sold i.e. (i) Flat no. 1204 to sh Dev Narendra Singh/ flats sold i.e. (i) Flat no. 1204 to sh Dev Narendra Singh/ Vibha Narerndra Singh Vibha Narerndra Singh (ii) Flat no. 1004 to sh Uday Shetty/ Mrs (ii) Flat no. 1004 to sh Uday Shetty/ Mrs Padmavati Shety/ Ms Kanchan Shety (iii) Flat No. 1203 to Mr Anil Padmavati Shety/ Ms Kanchan Shety (iii) Flat No. 1203 Padmavati Shety/ Ms Kanchan Shety (iii) Flat No. 1203 Mishra, however the Assessing Officer rejected the contention of the however the Assessing Officer rejected the contention of the however the Assessing Officer rejected the contention of the assessee observed as under: assessee observed as under:
“5.4 The submission made by the AR was duly considered. However, submission of 5.4 The submission made by the AR was duly considered. However, submission of 5.4 The submission made by the AR was duly considered. However, submission of the AR is not acceptable for the reasons as under: the AR is not acceptable for the reasons as under:- The Assessee has The Assessee has contended that the flat was booked by the customers in contended that the flat was booked by the customers in earlier period and initial booking amount was also received and therefore, stamp earlier period and initial booking amount was also received and therefore, stamp earlier period and initial booking amount was also received and therefore, stamp duty valuation on the date of booking of each flats works out to be less then duty valuation on the date of booking of each flats works out to be less then duty valuation on the date of booking of each flats works out to be less then agreement value. In t agreement value. In this connection, the Assessee furnished allotment letter/ ished allotment letter/ booking form /ledger accounts as well as bank statements reflecting the receipts booking form /ledger accounts as well as bank statements reflecting the receipts booking form /ledger accounts as well as bank statements reflecting the receipts from said customers. In this respect, it is stated that in the agreement there is no from said customers. In this respect, it is stated that in the agreement there is no from said customers. In this respect, it is stated that in the agreement there is no mention of issue of such allotment letter. In the said mention of issue of such allotment letter. In the said allotment letter there is mention allotment letter there is mention of receipt of initial booking amount. of receipt of initial booking amount. Moreover, section 43CA(3) of the Act states that, "where the dated of Moreover, section 43CA(3) of the Act states that, "where the dated of Moreover, section 43CA(3) of the Act states that, "where the dated of agreement fixing the value of consideration for transfer of the asset and the date of agreement fixing the value of consideration for transfer of the asset and the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transf registration of such transfer of asset are not the same, the value referred to in sub er of asset are not the same, the value referred to in sub- section (1) may be taken as the value assessable by any authority of a State section (1) may be taken as the value assessable by any authority of a State section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on Government for the purpose of payment of stamp duty in respect of such transfer on Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. The agreem the date of the agreement. The agreement has been defined in the Oxford dictionary ent has been defined in the Oxford dictionary "as a negotiated and typically legally binding arrangement between parties as to a "as a negotiated and typically legally binding arrangement between parties as to a "as a negotiated and typically legally binding arrangement between parties as to a course of action." In this case, it is mentioned in the allotment letter that course of action." In this case, it is mentioned in the allotment letter that course of action." In this case, it is mentioned in the allotment letter that "immediately after the execution of regular agree "immediately after the execution of regular agreement for sale between us ment for sale between us this allotment letter shall be returned and the same shall have no effect this allotment letter shall be returned and the same shall have no effect this allotment letter shall be returned and the same shall have no effect and it will be deemed null and void." and it will be deemed null and void." Therefore, such allotment letters can only Therefore, such allotment letters can only be considered as an intention of the builder to sale and not as an agreement as be considered as an intention of the builder to sale and not as an agreement be considered as an intention of the builder to sale and not as an agreement mentioned in section 43CA(3) of the Act. In this regard, it is stated that section 43CA mentioned in section 43CA(3) of the Act. In this regard, it is stated that section 43CA mentioned in section 43CA(3) of the Act. In this regard, it is stated that section 43CA is a deeming fiction of the Act and it is settled law that deeming section has to be is a deeming fiction of the Act and it is settled law that deeming section has to be is a deeming fiction of the Act and it is settled law that deeming section has to be interpreted strictly as the deeming fiction is incorporated in the Act for a definite interpreted strictly as the deeming fiction is incorporated in the Act for a de interpreted strictly as the deeming fiction is incorporated in the Act for a de purpose. Therefore, the contention of the Assessee in this regard is not acceptable.” purpose. Therefore, the contention of the Assessee in this regard is not acceptable. purpose. Therefore, the contention of the Assessee in this regard is not acceptable. 5.3 Before us the learned counsel for the assessee relied on various Before us the learned counsel for the assessee relied on various Before us the learned counsel for the assessee relied on various decisions (i) Kolte Patil Developers ltd vs DCIT (2024)( 167 (i) Kolte Patil Developers ltd vs DCIT (2024)( 167 (i) Kolte Patil Developers ltd vs DCIT (2024)( 167 taxmann.com 385 ( Pune taxmann.com 385 ( Pune-Trib) (ii) Parth Dashrath Gandhi in Parth Dashrath Gandhi in ITA No.
Bajaj International Reality Bajaj International Reality 8 Private Limited and 5319 5321 and 5319/MUM/2025 1990/Mum/2022 for AY 2018 1990/Mum/2022 for AY 2018-19 (iii) Sulochana Sijan Modi Vs ITO in 19 (iii) Sulochana Sijan Modi Vs ITO in (2023) 152 taxmann.com 56 ( Mumbai (2023) 152 taxmann.com 56 ( Mumbai-Trib) and submitted that and submitted that allotment letter has to be considered allotment letter has to be considered as an agreement. agreement.
5.4 We have heard rival submissions We have heard rival submissions of the parties and perused t of the parties and perused the relevant material on record. relevant material on record. The Assessee contends that while the The Assessee contends that while the formal sale deeds were registered in 2016, the "agreement fixing the formal sale deeds were registered in 2016, the "agreement fixing the formal sale deeds were registered in 2016, the "agreement fixing the value of consideration" was effectively entered into in 2012 via value of consideration" was effectively entered into in 2012 via value of consideration" was effectively entered into in 2012 via Allotment Letters. It is Allotment Letters. It is further submitted that (i) Part consideration further submitted that (i) Part consideration was received via banking channels at the time of booking, satisfying was received via banking channels at the time of booking, satisfying was received via banking channels at the time of booking, satisfying the proviso to Section 43CA(3) and (4); (ii) Section 43CA was the proviso to Section 43CA(3) and (4); (ii) Section 43CA was the proviso to Section 43CA(3) and (4); (ii) Section 43CA was introduced w.e.f. 01.04.2014 and should not apply to transactions introduced w.e.f. 01.04.2014 and should not apply to transactions introduced w.e.f. 01.04.2014 and should not apply to transactions where rights were crystallised in FY 2012 were crystallised in FY 2012-13 ; and (iii) The tolerance 13 ; and (iii) The tolerance limit (5%/10%) introduced by Finance Acts 2018/2020 is curative limit (5%/10%) introduced by Finance Acts 2018/2020 is curative limit (5%/10%) introduced by Finance Acts 2018/2020 is curative and applies retrospectively. The Assessing officer applied 43CA but and applies retrospectively. The Assessing officer applied 43CA but and applies retrospectively. The Assessing officer applied 43CA but held that allotment letters issued was not as per requirement of held that allotment letters issued was not as per requirement of held that allotment letters issued was not as per requirement of section 43CA of the Act. ection 43CA of the Act.
5.5 The learned Assessing officer has rejected the allotment letter ssessing officer has rejected the allotment letter ssessing officer has rejected the allotment letter entered into by the assessee entered into by the assessee as an ‘agreement’ . . The Revenue’s rejection of the Allotment Letter as an "agreement" rests on a narrow rejection of the Allotment Letter as an "agreement" rests on a narrow rejection of the Allotment Letter as an "agreement" rests on a narrow interpretation. The AO held t interpretation. The AO held that since the Allotment Letter was to be hat since the Allotment Letter was to be surrendered upon the execution of a formal sale deed, it lacked the surrendered upon the execution of a formal sale deed, it lacked the surrendered upon the execution of a formal sale deed, it lacked the finality of a "legally binding arrangement." finality of a "legally binding arrangement."
Bajaj International Reality Bajaj International Reality 9 Private Limited and 5319 5321 and 5319/MUM/2025 5.6 We find this interpretation to be fundamentally flawed. In real We find this interpretation to be fundamentally flawed. In real We find this interpretation to be fundamentally flawed. In real estate transactions, an Allotment Letter, accompanied by the estate transactions, an Allotment Letter, accompanied by the estate transactions, an Allotment Letter, accompanied by the payment of earnest money, creates a specific right in person in favor payment of earnest money, creates a specific right in person in favor payment of earnest money, creates a specific right in person in favor of the allottee. The subsequent execution of a Sale Deed is merely the of the allottee. The subsequent execution of a Sale Deed is m of the allottee. The subsequent execution of a Sale Deed is m culmination of the obligations initiated by the Allotment Letter. In our culmination of the obligations initiated by the Allotment Letter. culmination of the obligations initiated by the Allotment Letter. opinion such a condition opinion such a condition does not take away the essence of the does not take away the essence of the agreement.
5.7 In the various decisions cited by the assessee, it is evident that n the various decisions cited by the assessee, it is evident that n the various decisions cited by the assessee, it is evident that allotment letter also has t allotment letter also has to be considered as an agreement, therefore o be considered as an agreement, therefore provisions of the section provisions of the section 43CA are duly applicable. duly applicable. The relevant finding of the Tribunal in Kolte patil Developers ltd (supra) is finding of the Tribunal in Kolte patil Developers ltd (supra) is finding of the Tribunal in Kolte patil Developers ltd (supra) is reproduced as under: reproduced as under:
“13. We have heard the rival arguments made by both the sides 13. We have heard the rival arguments made by both the sides, perused the 13. We have heard the rival arguments made by both the sides orders of the Assessing Officer and Ld. CIT(A)/NFAC and the paper book filed by orders of the Assessing Officer and Ld. CIT(A)/NFAC and the paper book filed by orders of the Assessing Officer and Ld. CIT(A)/NFAC and the paper book filed by both the sides. We find the Assessing Officer in the Instant case made addition of both the sides. We find the Assessing Officer in the Instant case made addition of both the sides. We find the Assessing Officer in the Instant case made addition of Rs. 25,02,250/- in respect of 8 flats on the ground that the market value of these in respect of 8 flats on the ground that the market value of these in respect of 8 flats on the ground that the market value of these flats was Rs.2,73,16,150/ flats was Rs.2,73,16,150/- whereas the assessee company has registered the flats whereas the assessee company has registered the flats for a consideration of Rs. 2,48,13,900/ for a consideration of Rs. 2,48,13,900/- on the basis of agreement Value and on the basis of agreement Value and therefore, the provisions therefore, the provisions of section 43GA of the Act are applicable. We find the of section 43GA of the Act are applicable. We find the CIT(A)/NFAC, relying on the decision of the Pune Bench of the Tribunal in the CIT(A)/NFAC, relying on the decision of the Pune Bench of the Tribunal in the CIT(A)/NFAC, relying on the decision of the Pune Bench of the Tribunal in the case of Rahul Constructions (supra), deleted the addition in respect of certain flats case of Rahul Constructions (supra), deleted the addition in respect of certain flats case of Rahul Constructions (supra), deleted the addition in respect of certain flats where the difference is less than where the difference is less than 10%. He, however, sustained the addition in 10%. He, however, sustained the addition in respect of remaining flats where the difference is more than 10% between the respect of remaining flats where the difference is more than 10% between the respect of remaining flats where the difference is more than 10% between the agreement value and the market price. It is the submission of the Ld. Counsel for agreement value and the market price. It is the submission of the Ld. Counsel for agreement value and the market price. It is the submission of the Ld. Counsel for the assessee that since the assessee had received the assessee that since the assessee had received part of the consideration in part of the consideration in cheque as per agreement much prior to the date of sale, therefore, such cheque as per agreement much prior to the date of sale, therefore, such cheque as per agreement much prior to the date of sale, therefore, such agreement value has to be considered for the purpose of provisions of section agreement value has to be considered for the purpose of provisions of section agreement value has to be considered for the purpose of provisions of section 43CA of the Act and no addition is called for. We find some force in the above 43CA of the Act and no addition is called for. We find some force in the 43CA of the Act and no addition is called for. We find some force in the argument of the Ld. Counsel for the assessee. Sub argument of the Ld. Counsel for the assessee. Sub-clauses (3) and (4) of section clauses (3) and (4) of section 43CA of the Act are as under. 43CA of the Act are as under. "43CA (1)....
Bajaj International Reality Bajaj International Reality 10 Private Limited and 5319 5321 and 5319/MUM/2025 (2)..... (3) Where the date of agreement fixing the value of consideration for transfer of the (3) Where the date of agreement fixing the value of consideration for transfer of the (3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the asset and the date of registration of such transfer of asset are not the same, the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub value referred to in sub-section (1) may be taken as the value assessable by any section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in authority of a State Government for the purpose of payment of stamp duty in authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement. ch transfer on the date of the agreement. (4) The provisions of sub (4) The provisions of sub-section (3) shall apply only in a case where the amount section (3) shall apply only in a case where the amount of consideration or a part thereof has been received by way of an account payee consideration or a part thereof has been received by way of an account payee consideration or a part thereof has been received by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system cheque or an account payee bank draft or by use of electronic clearing system cheque or an account payee bank draft or by use of electronic clearing system through a bank account [or through such other electronic mode as may be through a bank account [or through such other electronic mode as may be through a bank account [or through such other electronic mode as may be prescribed on or before the date of agreement for transfer of the asset." prescribed on or before the date of agreement for transfer of the asset." prescribed on or before the date of agreement for transfer of the asset."
A perusal of the details 14. A perusal of the details filed by the assessee in the paper book reveals that the filed by the assessee in the paper book reveals that the assessee has received advances by cheque in respect of those three flats as per assessee has received advances by cheque in respect of those three flats as per assessee has received advances by cheque in respect of those three flats as per agreement and the sale deeds were executed subsequently where the market price agreement and the sale deeds were executed subsequently where the market price agreement and the sale deeds were executed subsequently where the market price is more than the agreement value. Sin is more than the agreement value. Since the assessee has received a part of the ce the assessee has received a part of the consideration as advance as per agreement and the sale deeds were made on the consideration as advance as per agreement and the sale deeds were made on the consideration as advance as per agreement and the sale deeds were made on the basis of the agreement value, although the market price gone by that time, basis of the agreement value, although the market price gone by that time, basis of the agreement value, although the market price gone by that time, therefore, in view of the provisions of sub therefore, in view of the provisions of sub-clauses (3) and (4) of section 43CA of nd (4) of section 43CA of the Act, no addition is called for since a part of the consideration has been received the Act, no addition is called for since a part of the consideration has been the Act, no addition is called for since a part of the consideration has been by cheque on the basis of agreement and the sale deeds were registered on the by cheque on the basis of agreement and the sale deeds were registered on the by cheque on the basis of agreement and the sale deeds were registered on the basis of value mentioned in the agreement. We, therefore, set aside the order of basis of value mentioned in the agreement. We, therefore, set basis of value mentioned in the agreement. We, therefore, set the CIT(A)/NFAC and direct the Assessing Officer to delete the addition of the CIT(A)/NFAC and direct the Assessing Officer to delete the addition of the CIT(A)/NFAC and direct the Assessing Officer to delete the addition of Rs.14,70,250/-. The first issue raised by the assessee is accordingly allowed. . The first issue raised by the assessee is accordingly allowed. . The first issue raised by the assessee is accordingly allowed.” 5.8 The finding of Tribunal in Parth dashrath Ganghi (supra) is The finding of Tribunal in Parth dashrath Ganghi (supra) is The finding of Tribunal in Parth dashrath Ganghi (supra) is reproduced as under: nder:
Accordingly, following the above said decision, we hold that the respective 10. Accordingly, following the above said decision, we hold that the respective 10. Accordingly, following the above said decision, we hold that the respective allotment letters issued to the assessee should be considered as Since the allotment letters issued to the assessee should be considered as Since the allotment letters issued to the assessee should be considered as Since the "Agreement to sell" for the purposes of sec 56(2)(x) of the Act. Since the assessee has "Agreement to sell" for the purposes of sec 56(2)(x) of the Act. "Agreement to sell" for the purposes of sec 56(2)(x) of the Act. paid the parts of consideration as per the terms and conditions of allotment through paid the parts of consideration as per the terms and conditions of allotment through paid the parts of consideration as per the terms and conditions of allotment through banking channels prior to the execution of Sale agreement, we are of the view that banking channels prior to the execution of Sale agreement, we are of the view that banking channels prior to the execution of Sale agreement, we are of the view that the provisos to sec.56(2)(x) shall apply to the facts of the present case. Accordingly, the provisos to sec.56(2)(x) shall apply to the facts of the present case. Accordingly the provisos to sec.56(2)(x) shall apply to the facts of the present case. Accordingly the stamp duty valuation as on the date of respective Allotment letters should be stamp duty valuation as on the date of respective Allotment letters should be stamp duty valuation as on the date of respective Allotment letters should be considered for the purposes of sec. 56(2)(x) of the Act. Hence the AO was not considered for the purposes of sec. 56(2)(x) of the Act. Hence the AO was not considered for the purposes of sec. 56(2)(x) of the Act. Hence the AO was not justified in considering the stamp duty valuation as on the date of execution of justified in considering the stamp duty valuation as on the date of execution of justified in considering the stamp duty valuation as on the date of execution of agreement to sell.
On a perusal of record, we notice that the details of stamp duty value as on the 11. On a perusal of record, we notice that the details of stamp duty value as on the 11. On a perusal of record, we notice that the details of stamp duty value as on the date of respective allotment letters was not brought on record. Since we have held date of respective allotment letters was not brought on record. Since we have held date of respective allotment letters was not brought on record. Since we have held that the stamp duty valuation as on the date of respective allotment letters should that the stamp duty valuation as on the date of respective allotment letter that the stamp duty valuation as on the date of respective allotment letter be considered for the purpose of sec.56(2)(x) of the Act, it is imperative on the part of be considered for the purpose of sec.56(2)(x) of the Act, it is imperative on the part of be considered for the purpose of sec.56(2)(x) of the Act, it is imperative on the part of Bajaj International Reality Bajaj International Reality 11 Private Limited and 5319 5321 and 5319/MUM/2025
the assessee to show that the actual consideration was equal or less than the the assessee to show that the actual consideration was equal or less than the the assessee to show that the actual consideration was equal or less than the stamp duty valuation as on the date of issue of respective allotment letters. stamp duty valuation as on the date of issue of respective allotment letters stamp duty valuation as on the date of issue of respective allotment letters Accordingly, we are restoring this issue to the file of AO for the limited purpose of Accordingly, we are restoring this issue to the file of AO for the limited purpose of Accordingly, we are restoring this issue to the file of AO for the limited purpose of comparing the actual sale consideration with the stamp duty valuation as on the comparing the actual sale consideration with the stamp duty valuation as on the comparing the actual sale consideration with the stamp duty valuation as on the date of respective allotment letters. In the limited set aside, the AO shall take date of respective allotment letters. In the limited set aside, the AO shall take date of respective allotment letters. In the limited set aside, the AO shall take appropriate decision in accordance with law after affording adequate opportunity of propriate decision in accordance with law after affording adequate opportunity of propriate decision in accordance with law after affording adequate opportunity of being heard.” 5.9 Similarly in the case of Sulochana Saijan Modi (supra) the Similarly in the case of Sulochana Saijan Modi (supra) the Similarly in the case of Sulochana Saijan Modi (supra) the Tribunal fillwng the parth Dashrath Gandhi(suora) held that Tribunal fillwng the parth Dashrath Gandhi(suora) held that Tribunal fillwng the parth Dashrath Gandhi(suora) held that allotment letters issued to an allotment letters issued to an assessee should be considered as assessee should be considered as agreement to sell for the purpose of section 56(2)(x). The section agreement to sell for the purpose of section 56(2)(x). The section agreement to sell for the purpose of section 56(2)(x). The section 56(2)(x), which is pari materia pari materia to section 43CA of the Act, hence ratio to section 43CA of the Act, hence ratio of said decision applied to the facts of assessee. of said decision applied to the facts of assessee. Following the ratio Following the ratio laid down above decisions, we hold that:" ove decisions, we hold that:"an Allotment Letter shall be an Allotment Letter shall be treated as an 'agreement' for the purposes of Section 43CA(3), provided treated as an 'agreement' for the purposes of Section 43CA(3), provided treated as an 'agreement' for the purposes of Section 43CA(3), provided the consideration or part thereof is received through prescribed banking the consideration or part thereof is received through prescribed banking the consideration or part thereof is received through prescribed banking channels on or before the date of such allotment." channels on or before the date of such allotment 5.10 But, the learned counsel for the assessee , the learned counsel for the assessee has has filed additional evidence in support of the Stamp Duty Valuation as on the date of the evidence in support of the Stamp Duty Valuation as on the date of the evidence in support of the Stamp Duty Valuation as on the date of the allotment letter by way of an application for additional evidence. A allotment letter by way of an application for additional evidence. allotment letter by way of an application for additional evidence. List of those additional evidence se additional evidences is reproduced as under: s under:
INDEX OF ADDITIONAL EVIDENCE INDEX OF ADDITIONAL EVIDENCE Sl. No. Particulars Page Number 1 Flat No. 1204: - Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year 1 of allotment of allotment - SDV determined by Registration and Stamp Department SDV determined by Registration and Stamp Department SDV determined by Registration and Stamp Department 2 - Bank statement evidencing receipt of booking amount Bank statement evidencing receipt of booking amount 3 2 Flat No. 1004:
Bajaj International Reality Bajaj International Reality 12 Private Limited and 5319 5321 and 5319/MUM/2025
- Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year 4 of allotment of allotment - SDV determined by Registration and Stamp Department. SDV determined by Registration and Stamp Department. SDV determined by Registration and Stamp Department. 5 - Bank statement evidencing receipt of booking amount Bank statement evidencing receipt of booking amount Bank statement evidencing receipt of booking amount 6 3 Flat No. 1203: - Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year 7 of allotment of allotment - SDV determined by Registration and Stamp Department SDV determined by Registration and Stamp Department SDV determined by Registration and Stamp Department 8 - Bank statement evidencing receipt of booking amount Bank statement evidencing receipt of booking amount Bank statement evidencing receipt of booking amount 9 4 Flat No. 1303 and 1304: Flat No. 1303 and 1304: - Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year 10 of allotment for Flat 1303 of allotment - SDV determined by Registration and Stamp Department for SDV determined by Registration and Stamp Department for SDV determined by Registration and Stamp Department for 11 Flat 1303 - Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year Statement determining Stamp duty value (SDV) in the year 12 of allotment for Flat 1304 of allotment for Flat 1304 - SDV determined by Registration and Stamp Department for SDV determined by Registration and Stamp Department for SDV determined by Registration and Stamp Department for 13 Flat 1304 - Bank statement evidencing receipt of booking amount for Bank statement evidencing receipt of booking amount for 14 both the flats both the flats 5 Stamp Duty Ready Reckoner Rates for year 2012, 2013, 2015 Stamp Duty Ready Reckoner Rates for year 2012, 2013, 2015 Stamp Duty Ready Reckoner Rates for year 2012, 2013, 2015 15-18 and 2016 6 Computation of Income Computation of Income 19-20 5.11 The Assessee has furnished additional evidence, including bank The Assessee has furnished additional evidence, including bank The Assessee has furnished additional evidence, including bank statements and SDV Ready Reckoner rates for the year 2012, which statements and SDV Ready Reckoner rates for the year 2012, which statements and SDV Ready Reckoner rates for the year 2012, which were not fully examined by the lower authorities. These documents go were not fully examined by the lower authorities. These documents go were not fully examined by the lower authorities. These documents go to the root of the matter. Consequently, we remit this issu remit this issue to the to the root of the matter. Consequently, we file of the Assessing Officer file of the Assessing Officer for the limited purpose of: for the limited purpose of:
Verifying the receipt of part consideration via banking channels Verifying the receipt of part consideration via banking channels Verifying the receipt of part consideration via banking channels at the time of allotment. at the time of allotment.
Comparing the actual sale consideration with the SDV prevalent Comparing the actual sale consideration with the SDV prevalent Comparing the actual sale consideration with the SDV prevalent on the date of the Allotment Letter date of the Allotment Letter.
Bajaj International Reality Bajaj International Reality 13 Private Limited and 5319 5321 and 5319/MUM/2025 5.12 The ground No.1 The ground No.1-4 of appeal of the assessee were accordingly 4 of appeal of the assessee were accordingly allowed for statistical purpose. allowed for statistical purpose.
The ground No.5 was not pressed by the assessee and accordingly . The ground No.5 was not pressed by the assessee and accordingly . The ground No.5 was not pressed by the assessee and accordingly same dismissed as infructuous. same dismissed as infructuous.
The ground No.6 is alternative remedy in respect of . The ground No.6 is alternative remedy in respect of ground Nos.1-3 . The ground No.6 is alternative remedy in respect of which we have already restored to the file of the Assessing Officer which we have already restored to the file of the Assessing Officer which we have already restored to the file of the Assessing Officer (A.O), and therefore t (A.O), and therefore this ground seeking alternative remedy his ground seeking alternative remedy is also restored to the file of the assessing officer for deciding afresh after restored to the file of the assessing officer for deciding afresh after restored to the file of the assessing officer for deciding afresh after considering submission and docume considering submission and documentary evidence of the assesse. ntary evidence of the assesse.
Ground Nos. 7 to 11 raised by the assessee assail the disallowance Ground Nos. 7 to 11 raised by the assessee assail the disallowance Ground Nos. 7 to 11 raised by the assessee assail the disallowance made under Section 14A of the Income made under Section 14A of the Income-tax Act, 1961, quantified at tax Act, 1961, quantified at ₹1,19,32,795/-.
8.1 Briefly stated, the Assessing Officer noted that the assessee was Briefly stated, the Assessing Officer noted that the assessee was Briefly stated, the Assessing Officer noted that the assessee was holding investments in quoted and unquoted shares amounting to lding investments in quoted and unquoted shares amounting to lding investments in quoted and unquoted shares amounting to ₹1,01,08,40,481/- as as on on the the opening opening of of the the year year and and ₹1,01,07,90,481/- as on the closing of the year. The Assessing Officer as on the closing of the year. The Assessing Officer as on the closing of the year. The Assessing Officer further observed that similar disallowances had been made in the further observed that similar disallowances had been made in the further observed that similar disallowances had been made in the assessee’s own case from Assessment Year 2011 e’s own case from Assessment Year 2011–12 onwards, as the 12 onwards, as the assessee had not, in the opinion of the Assessing Officer, assessee had not, in the opinion of the Assessing Officer, assessee had not, in the opinion of the Assessing Officer, satisfactorily satisfactorily satisfactorily demonstrated demonstrated demonstrated that that that the the the investments investments investments were were were made made made exclusively out of own funds and not from interest-bearing exclusively out of own funds and not from interest exclusively out of own funds and not from interest borrowings. Invoking borrowings. Invoking Rule 8D of the Income-tax Rules, 1962, the tax Rules, 1962, the Bajaj International Reality Bajaj International Reality 14 Private Limited and 5319 5321 and 5319/MUM/2025 Assessing Officer computed the disallowance and ultimately made a Assessing Officer computed the disallowance and ultimately made a Assessing Officer computed the disallowance and ultimately made a net disallowance of ₹50,54,077/ 50,54,077/- observing as under: as under:
“6.4 The submission made by the AR was duly considered but found not to be 6.4 The submission made by the AR was duly considered but found not to be 6.4 The submission made by the AR was duly considered but found not to be acceptable. The investment in shares has not been made by the assessee during the investment in shares has not been made by the assessee during the investment in shares has not been made by the assessee during the year rather the same has been made in earlier years. Similarly, the claim of interest year rather the same has been made in earlier years. Similarly, the claim of interest year rather the same has been made in earlier years. Similarly, the claim of interest expenses made during the year relates to interest bearing fund received by the expenses made during the year relates to interest bearing fund received by the expenses made during the year relates to interest bearing fund received by the assessee in earlier years assessee in earlier years. The disallowance of interest and other expenses has been . The disallowance of interest and other expenses has been made in this case from A.Y.2011 made in this case from A.Y.2011-12 onwards as the assessee could not 12 onwards as the assessee could not satisfactorily explain that the investment has not made of own fund and not interest satisfactorily explain that the investment has not made of own fund and not interest satisfactorily explain that the investment has not made of own fund and not interest bearing fund. Therefore, disallowance of ex bearing fund. Therefore, disallowance of expense u/s. 14A as per Rule 8D is pense u/s. 14A as per Rule 8D is computed as under:- - [1] The amount of expenditure directly relating to income which [1] The amount of expenditure directly relating to income which NIL - NIL does form part of total income does form part of total income (2) Expenditure by way of interest = A X(B/C) (2) Expenditure by way of interest = A X(B/C) 68.78.718 68.78.718 2.23.19.497 X 101.08.15.481 2.23.19.497 X 101.08.15.481 3,27,98,10,648 3,27,98,10,648 A = The amount of expenditure by way of interest other than A = The amount of expenditure by way of interest other than - amount of interest included in clause(i) incurred during the amount of interest included in clause(i) incurred during the previous year. Particulars Amount Amount Interest 2,23,19,497 2,23,19,497 B = The average of value of investment, income from which does B = The average of value of investment, income from which does not or shall not form part of the total income, as appearing in the shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and last day of balance sheet of the assessee, on the first day and last day of the previous year. Particular Investment Investment Opening Balance 1,01,08,40,481 1,01,08,40,481 Closing Balance 1,01,07,90,481 1,01,07,90,481 Average 1,01,08,15,481 1,01,08,15,481 C = the average of total assets as appearing in the balance C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the sheet of the assessee, on the first day and the last day of the previous year. Particulars Opening Balance of total assets Opening Balance of total assets 3,22,58,36,178/- 3,22,58,36,178/ Closing Balance of total assets Closing Balance of total assets 3,33,37,85,117/- 3, Total 6,55,96,21,295/- 6,55,96,21,295/
Bajaj International Reality Bajaj International Reality 15 Private Limited and 5319 5321 and 5319/MUM/2025 Average of total assets 3,27,98,10,648/- 3,27,98,10,648/ 50,54,077/- 50,54,077/ [3] An amount equal to one [3] An amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet form part of the total income, as appearing in the balance sheet of the assessee on the first day and last day of the previous of the assessee on the first day and last day of the previous year. i.e., Rs.101,08,15,481/ i.e., Rs.101,08,15,481/- Disallowance u/s. 14A read with Rule 8D Disallowance u/s. 14A read with Rule 8D 1,19,32,796/- 1,19,32,796/ [1]+[2]+[3] 9. On further appeal On further appeal, the learned CIT(A) upheld the disallowance the learned CIT(A) upheld the disallowance made by the Assessing Officer. made by the Assessing Officer.
10. We have heard rival submissions of the parties and perused the have heard rival submissions of the parties and perused the have heard rival submissions of the parties and perused the relevant material on record. relevant material on record. The principal contention of the learned The principal contention of the learned counsel for the assessee is that no exempt income was earned during counsel for the assessee is that no exempt income was earned during counsel for the assessee is that no exempt income was earned during the year under consideration and, therefore, no disallowance under the year under consideration and, therefore, no disallowanc the year under consideration and, therefore, no disallowanc Section 14A could have been made. Reliance was placed on the Section 14A could have been made. Reliance was placed on the Section 14A could have been made. Reliance was placed on the judgment of the jurisdictional High Court in judgment of the jurisdictional High Court in Pr. CIT vs. Ballarpur Pr. CIT vs. Ballarpur Industries Limited (ITA No. 51 of 2016), (ITA No. 51 of 2016), no disallowance no disallowance could have made in the hands of the assessee made in the hands of the assessee in the year under in the year under consideration.
10.1. From the assessment order itself, particularly paragraph From the assessment order itself, particularly paragraph From the assessment order itself, particularly paragraph 6.3, it is evident that the assessee had specifically asserted that no 6.3, it is evident that the assessee had specifically asserted that no 6.3, it is evident that the assessee had specifically asserted that no exempt income was received during the relevant previous year. This exempt income was received during the relevant previous year. This exempt income was received during the relevant previous year. This factual position has not been controver factual position has not been controverted by the Revenue. ted by the Revenue.
The legal position is no longer res integra. The jurisdictional The legal position is no longer res integra. The jurisdictional The legal position is no longer res integra. The jurisdictional High Court has unequivocally held that in the absence of any exempt High Court has unequivocally held that in the absence of any exempt High Court has unequivocally held that in the absence of any exempt income, no disallowance under Section 14A of the Act is warranted. income, no disallowance under Section 14A of the Act is warranted. income, no disallowance under Section 14A of the Act is warranted.
Bajaj International Reality Bajaj International Reality 16 Private Limited and 5319 5321 and 5319/MUM/2025 Respectfully following the binding Respectfully following the binding precedent, the disallowance precedent, the disallowance sustained by the authorities below is unsustainable in law. sustained by the authorities below is unsustainable in law. sustained by the authorities below is unsustainable in law.
10.2 Accordingly, the disallowance made under Section 14A is Accordingly, the disallowance made under Section 14A is Accordingly, the disallowance made under Section 14A is directed to be deleted. Ground Nos. 7 to 11 are allowed. directed to be deleted. Ground Nos. 7 to 11 are allowed. directed to be deleted. Ground Nos. 7 to 11 are allowed.
11. The next ground in respect of the disallowance of 14A made in The next ground in respect of the disallowance of 14A made in The next ground in respect of the disallowance of 14A made in respect of computation of the book profit under the provisions of respect of computation of the book profit under the provisions of respect of computation of the book profit under the provisions of Section 115JB of the Act. As the issue in dispute is covered by the Section 115JB of the Act. As the issue in dispute is Section 115JB of the Act. As the issue in dispute is decision of the Special Bench in the case of the Assistant decision of the Special Bench in the case of the decision of the Special Bench in the case of the Commissioner of Income ommissioner of Income-tax, Circle 17(1), New Delhi Vs. tax, Circle 17(1), New Delhi Vs. Vireet Investment Private Limited Investment Private Limited in for Asstt. Yr.: for Asstt. Yr.: 2008-09 and accordingly no disallowance can be made u/s 14A while and accordingly no disallowance can be made u/s 14A while and accordingly no disallowance can be made u/s 14A while computing book profit under the provision of section 115JB of the computing book profit under the provision of section 115JB o computing book profit under the provision of section 115JB o Act. The ground No.12 and 13 of the appeal of the assessee are he ground No.12 and 13 of the appeal of the assessee are he ground No.12 and 13 of the appeal of the assessee are accordingly allowed.
Now we take up the appeal of the assessee for the Assessment Now we take up the appeal of the assessee for the Assessment Now we take up the appeal of the assessee for the Assessment Year 2018-19. The ground raised by the assessee are reproduced as The ground raised by the assessee are reproduced as The ground raised by the assessee are reproduced as under:
Addition made under section 43CA of the Act (Rs. 1.59.21.788/ section 43CA of the Act (Rs. 1.59.21.788/ section 43CA of the Act (Rs. 1.59.21.788/-] 1. On the facts and in the circumstances of the case and in law, the Commissioner 1. On the facts and in the circumstances of the case and in law, the 1. On the facts and in the circumstances of the case and in law, the of income tax (Appeals), National Faceless Appeal Center (hereinafter referred to as f income tax (Appeals), National Faceless Appeal Center (hereinafter referred to as f income tax (Appeals), National Faceless Appeal Center (hereinafter referred to as Ld. CITI(A)’) erred i ) erred in upholding the addition of Rs.1,59,21,788/ 1,59,21,788/- made by the Assessing Officer under the provisions of section 43CA of the Act. Assessing Officer under the provisions of section 43CA of the Act. Assessing Officer under the provisions of section 43CA of the Act.
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2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the allotment letters issued as "an agreement" as erred in not considering the allotment letters issued as "an agreement" as erred in not considering the allotment letters issued as "an agreement" as envisaged in section 43CA(3). envisaged in section 43CA(3).
On the facts and in the circumstances of the case and in law, the ld. CIT(A) 3. On the facts and in the circumstances of the case and in law, the 3. On the facts and in the circumstances of the case and in law, the failed to appreciate that the value of the consideration was fixed between the failed to appreciate that the value of the consideration was fixed b failed to appreciate that the value of the consideration was fixed b appellant and the buyers while issuing the allotment letters, which were issued appellant and the buyers while issuing the allotment letters, which were issued appellant and the buyers while issuing the allotment letters, which were issued even prior to the date of Insertion of section 43CA in the Act, and the value of the even prior to the date of Insertion of section 43CA in the Act, and the value of the even prior to the date of Insertion of section 43CA in the Act, and the value of the consideration was agreed on the date of booking itself. consideration was agreed on the date of booking itself.
4. On the facts and 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in circumstances of the case and in law, the Ld. CIT(A) erred in ignoring that the provisions of section 43CA are not applicable in the instant case ignoring that the provisions of section 43CA are not applicable in the instant case ignoring that the provisions of section 43CA are not applicable in the instant case for 7 out of 8 flats, since the said section was introduced by the Finance Act, 2013 for 7 out of 8 flats, since the said section was introduced by the Finance Act, 2013 for 7 out of 8 flats, since the said section was introduced by the Finance Act, 2013 w.e.f. 01-04-2014, whe 2014, whereas the booking and allotment to the buyer with respect to reas the booking and allotment to the buyer with respect to these 7 out of & flats were already made prior to FY 2012-13, Le, much prior to these 7 out of & flats were already made prior to FY 2012 these 7 out of & flats were already made prior to FY 2012 the insertion of provision in the Act. the insertion of provision in the Act.
5. Non-applicability of section 43CA applicability of section 43CA when the appellant applies Perc when the appellant applies Percentage of Completion Method (POCM) for revenue recognition Completion Method (POCM) for revenue recognition (a) Without prejudice to grounds above, on the facts and in the circumstances of (a) Without prejudice to grounds above, on the facts and in the circumstances of (a) Without prejudice to grounds above, on the facts and in the circumstances of the case and in law, the L the case and in law, the Ld. CIT(A) erred in not appreciating that the revenue was CIT(A) erred in not appreciating that the revenue was required to be recognized under the required to be recognized under the Percentage of Completion Method ("POCM") as ompletion Method ("POCM") as per the Guidance Note and Accounting Standards issued by the ICAI. per the Guidance Note and Accounting Standards issued by the ICAI. per the Guidance Note and Accounting Standards issued by the ICAI. (b) Without prejudice to grounds above, on the facts and in the circumstances of (b) Without prejudice to grounds above, on the facts and in the circumstances of (b) Without prejudice to grounds above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciatin the case and in law, the Ld. CIT(A) erred in not appreciating that for the purpose g that for the purpose of section 43CA. the definition of transfer as per section 2(47) of the Act cannot be section 43CA. the definition of transfer as per section 2(47) of the Act cannot be section 43CA. the definition of transfer as per section 2(47) of the Act cannot be applied and the date of transfer of property has to be construed in accordance applied and the date of transfer of property has to be construed in accordance applied and the date of transfer of property has to be construed in accordance with the provisions of the Transfer of Property Act, 1882. with the provisions of the Transfer of Property Act, 1882. (c) Without prejudice to grounds above, on the facts and in the circumstances of Without prejudice to grounds above, on the facts and in the circumstances of Without prejudice to grounds above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition without the case and in law, the Ld. CIT(A) erred in confirming the addition without the case and in law, the Ld. CIT(A) erred in confirming the addition without appreciating the fact that no 'transfer of asset had taken place in the current appreciating the fact that no 'transfer of asset had taken place in the current appreciating the fact that no 'transfer of asset had taken place in the current assessment year, as assessment year, as the flats were non-existent at that point in time and no right existent at that point in time and no right of ownership and possession was given to the buyers pursuant to registration of ownership and possession was given to the buyers pursuant to registration of ownership and possession was given to the buyers pursuant to registration of agreement with the stamp duty valuation authorities. agreement with the stamp duty valuation authorities. (d) Without prejudice to grounds above, on the facts and in the circumstances of (d) Without prejudice to grounds above, on the facts and in the circumstances of (d) Without prejudice to grounds above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that even if section 43CA the case and in law, the Ld. CIT(A) failed to appreciate that even if section 43CA the case and in law, the Ld. CIT(A) failed to appreciate that even if section 43CA gets attracted, it is not applicable for the relevant assessment year. gets attracted, it is not applicable for the relevant assessment year. gets attracted, it is not applicable for the relevant assessment year.
Bajaj International Reality Bajaj International Reality 18 Private Limited and 5319 5321 and 5319/MUM/2025 Disallowance under section 14A [Rs. 1,01,07,904/ r section 14A [Rs. 1,01,07,904/-] 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 1,01,07,904/ erred in confirming the addition of Rs. 1,01,07,904/-made under section 14A of made under section 14A of the Act.
7. On the facts and in the circumstances of the ca 7. On the facts and in the circumstances of the case and in law, the L. CIT(A) se and in law, the L. CIT(A) failed to appreciate that the appellant had not earned any exempt income appreciate that the appellant had not earned any exempt income appreciate that the appellant had not earned any exempt income consideration and hence the question of an consideration and hence the question of any disallowance under section 14A y disallowance under section 14A does not arise.
8. On the facts and in the cir 8. On the facts and in the circumstances of the case and in cumstances of the case and in law, the Ld. CIT(A) erred in confirming the application of Rule 8D rming the application of Rule 8D while computing the disallowance while computing the disallowance under section 14A.
9. On the facts and in the circumstances of t 9. On the facts and in the circumstances of the case and in law, the Ld. CIT( he case and in law, the Ld. CIT(A) erred in not considering the fact that the investmen considering the fact that the investments were made for strategic ts were made for strategic reasons in group concerns and not for earning exempt dividend income reasons in group concerns and not for earning exempt dividend income reasons in group concerns and not for earning exempt dividend income Disallowance u/s 144 r.w.r. 80 of the Act under the provisions of section 115/8 [Rs. 1.01.07,904/-] Disallowance u/s 144 r.w.r. 80 of the Act under the provisions of section 115/8 [Rs. 1.01.07,904/ Disallowance u/s 144 r.w.r. 80 of the Act under the provisions of section 115/8 [Rs. 1.01.07,904/ 10. On the facts and in the circumstances of t 10. On the facts and in the circumstances of the case and he case and in law, the Ld. CIT(A) erred in upholding the action of the learned Asses erred in upholding the action of the learned Assessing Officer in applying rule 8D sing Officer in applying rule 8D for the purpose of computing the expenditure relatable to exempt income while for the purpose of computing the expenditure relatable to exempt income while for the purpose of computing the expenditure relatable to exempt income while computing the book profit under section 115JB e book profit under section 115JB of the Act.
11. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) facts and in the circumstances of the case and in law, the Ld. CIT(A) facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the disallowance computed under section 14A r.w.r erred in not appreciating that the disallowance computed u erred in not appreciating that the disallowance computed u 8D does not represent actual expenditure incurred for earning exempt income represent actual expenditure incurred for earning exempt income represent actual expenditure incurred for earning exempt income and the same therefore, n and the same therefore, need not be added back while computing book profit eed not be added back while computing book profit under section 115JB of the Act. under section 115JB of the Act.
12. On the facts and in the circumstances of t 12. On the facts and in the circumstances of the case and in law, the Ld. CIT( he case and in law, the Ld. CIT(A) has failed to understand that section 115JB would cover only direct expenses has failed to understand that section 115JB would cover only direct expenses has failed to understand that section 115JB would cover only direct expenses which are actually been debited to Profit and Loss account. The appellant has not tually been debited to Profit and Loss account. The appellant has not tually been debited to Profit and Loss account. The appellant has not debited any actual expenditure relating to the earning of exempt income, debited any actual expenditure relating to the earning of exempt income, debited any actual expenditure relating to the earning of exempt income, therefore, the provisions of section 14A cannot be brought into the computation of therefore, the provisions of section 14A cannot be brought into the computation of therefore, the provisions of section 14A cannot be brought into the computation of book profit under section 1 book profit under section 115JB of the Income Tax Act, 1961.
13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) 13. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not following the ratio of the decision of the Special Bench of the Hon'ble erred in not following the ratio of the decision of the Special Bench of the Hon'ble erred in not following the ratio of the decision of the Special Bench of the Hon'ble Tribunal in the case of Vireet Tribunal in the case of Vireet Investments (P.) Ltd (2017) 165 (TR 27 (Delhi Investments (P.) Ltd (2017) 165 (TR 27 (Delhi- Trib) (5B), thereby violating the (5B), thereby violating the principles of judicial discipline.
Bajaj International Reality Bajaj International Reality 19 Private Limited and 5319 5321 and 5319/MUM/2025 Treatment of deferred tax [Rs. 98,966/ Treatment of deferred tax [Rs. 98,966/-] 14. On the facts and in the circumstances of t 14. On the facts and in the circumstances of the case and in law, the Ld. CIT( he case and in law, the Ld. CIT(A) erred in not adjudicating the ground raised by the appellant with respect to the erred in not adjudicating the ground raised by the appellant with respect to the erred in not adjudicating the ground raised by the appellant with respect to the addition made on account of deferred tax while computing the income u/s 115JB of addition made on account of deferred tax while computing the income u/s 115JB addition made on account of deferred tax while computing the income u/s 115JB the Act. The appellant reserves the right to add to, alter or amplify the above grounds of appeal, at The appellant reserves the right to add to, alter or amplify the above grounds of The appellant reserves the right to add to, alter or amplify the above grounds of any time before or at the time of appeal, to enable the Hon'ble Tribunal to decide the any time before or at the time of appeal, to enable the Hon'ble Tribunal to decide the any time before or at the time of appeal, to enable the Hon'ble Tribunal to decide the appeal in accordance with law.” appeal in accordance with law.” 12.1 Ground No.1-4 of the appeal are i 4 of the appeal are identically worded as ground dentically worded as grounds raised in the year Assessment year 2016 raised in the year Assessment year 2016-17. In the year und n the year under consideration also the assessee has filed additional evidence as we consideration also the assessee has filed additional evidence as we consideration also the assessee has filed additional evidence as we have accepted in Assessment Year 2016 have accepted in Assessment Year 2016-17 and restored the matter 17 and restored the matter back to the file of the assessing officer, back to the file of the assessing officer, therefore, following following or finding in the Assessment Year 2016 in the Assessment Year 2016-17, the issue in dispute in the year 17, the issue in dispute in the year under consideration is also restored to the file of the ld Assessing under consideration is also restored to the file of the under consideration is also restored to the file of the officer for adjudication after considering the additional evidence and officer for adjudication after considering the additional evidence and officer for adjudication after considering the additional evidence and other documents which may be filed by the other documents which may be filed by the assessee. assessee.
12.2. Ground No.5 of the appeal has not been pressed in the Ground No.5 of the appeal has not been pressed in the Ground No.5 of the appeal has not been pressed in the year under consideration also and therefore same is dismissed as year under consideration also and therefore same is dismissed as year under consideration also and therefore same is dismissed as infructuous.
In ground Nos.6 .6-9, the assessee has raised the issue of the the assessee has raised the issue of the disallowance u/s 14A. Since disallowance u/s 14A. Since in the year under consideration also no er consideration also no exempted year has been exempted year has been earned, therefore, following following our finding in the assessment year 2016 assessment year 2016-17, ground Nos.6-9 of the appeal are 9 of the appeal are accordingly allowed.
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14. Ground Nos.10 Nos.10-13 of the appeal relates to adjustment 13 of the appeal relates to adjustment for disallowance u/s 14A disallowance u/s 14A to the book profit computed under the to the book profit computed under the provisions of Section 115JB. As the identical issue has been allowed provisions of Section 115JB. As the identical issue has been allowed provisions of Section 115JB. As the identical issue has been allowed in favour of the assesse in the assessment year 2016-17 and therefore in favour of the assesse in the assessment year 2016 in favour of the assesse in the assessment year 2016 following or finding in the assessment year 2016-17 the ground following or finding in the assessment year 2016 following or finding in the assessment year 2016 Nos.10-13 of the assessee are accordingly allowed. e assessee are accordingly allowed.
Regarding ground No.14 for claim of the deferred taxes the Regarding ground No.14 for claim of the deferred taxes the Regarding ground No.14 for claim of the deferred taxes the learned counsel for the assessee before us submitted that matter may learned counsel for the assessee before us submitted that matter may learned counsel for the assessee before us submitted that matter may be restored to the file of A file of Assessing officer for verification of the claim ssessing officer for verification of the claim of the assessee. As both parties agreed that ee. As both parties agreed that this is the matter this is the matter of only verification at the level of the assessing officer and therefore, we feel it verification at the level of the assessing officer and therefore verification at the level of the assessing officer and therefore appropriate to restore the issue back appropriate to restore the issue back to the file of the assessing officer to the file of the assessing officer for verification and decide in for verification and decide in accordance with law.
In the result both the appeals of the parties are partly allowed for In the result both the appeals of the parties are partly allowed for In the result both the appeals of the parties are partly allowed for the statistical purposes. the statistical purposes.