VEENA DEVELOPERS,THANE vs. ACIT CIR 4, THANE

The only issue in this appeal of the assessee against the order of CIT(A) confirming the action of the A.O. in disallowing expenses and attributing the same to tax free project on ad-hoc manner. For this, assessee has raised following grounds:

Briefly stated facts are that the assessee is a builder and developer. During the year under consideration, the assessee has declared income from business and profession at ₹21,52,47,493/-. The A.O. during the course of assessment proceedings noticed that the assessee has claimed deduction under section 80IB(10) of the Act on the project Veena Saaz, Building No.5, further deduction on project Veena Santoor (A, B & C Blocks) and also Veena Santoor (D, E, F & G Blocks). The assessee has disclosed taxable profit from the project Veena Saaz, wherein the claim of deduction under section 80IB(10) of the Act was made at ₹9,44,14,389/-. However, the A.O. also was of the view that 50% of the total construction expenses of ₹55,80,093/- i.e. it comes to ₹27,90,045/- is relatable to the projects involving non-taxable income. Accordingly, he disallowed 50% of the expenses on ad- hoc basis. Aggrieved against disallowance of 50% of ad-hoc expenses, preferred appeal before CIT(A). CIT(A) without giving any reason, confirmed the action of the A.O. by stating that the A.O. has disallowed proportionately assigned/distributed expenses to the projects. Aggrieved against the action of the CIT(A), now assessee is in appeal before the Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the A.O. as well as CIT(A) has just simply disallowed the expenses by proportioning the expenses to the projects, which gives taxable income and non- taxable income. But we could not find any rationale or any reason for attributing such expenses to the project of non-taxable income. Hence, we delete the disallowance and allow the appeal of the assessee.