SWASTIK DEVELOPMENTS,MUMBAI vs. ITO WD 16(1)(4), MUMBAI

ITA 3437/MUM/2014Status: DisposedITAT Mumbai24 June 2016AY 2010-113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal directed that the amount in question be allowed. They found that the physical value of maintenance by the assessee could not be appreciated, and the revenue had not disputed the finishing work done by the assessee.

What were the facts?

The assessee claimed expenses of Rs. 6,32,366/- for material consumed in constructing internal partition compound walls for a project. The Assessing Officer disallowed this expense, questioning the use of residual materials without labor. The assessee argued they followed the percentage completion method and the materials were used for the project.

What were the issues?

The primary issue was whether the consumption of opening stock of materials, used for internal partitions in a construction project, constituted an allowable business expenditure.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI “E” BENCH, MUMBAI

Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.

Hearing: 08.06.2016Pronounced: 24.06.2016

अपीलाथ� क� ओर से /By Appellant : Shri D. B. Sanghavi, A.R. ��यथ� क� ओर से/By Respondent : Shri Vachaspati Tripathi, D.R. सुनवाई क� तार�ख/Date of Hearing : 08.06.2016 घोषणा क� तार�ख/Date of Pronouncement : 24.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-27, Mumbai, dated 27.02.2014 for A.Y. 2010-11 on following grounds:

A.Y. 10-11 [M/s. Swastik Developments vs.ITO] Page 2

“1. The learned Commissioner of Income Tax (Appeals) erred in confirming the order passed by the learned A.O. for disallowance of expenses of Rs.6,32,366/-. The disallowance is against the provisions of law and arbitrary. The learned Commissioner of Income Tax (Appeals) failed in appreciating the fact that the appellant firm is following percentage completion method and not project completion method and the materials in the opening stock were used for constructing internal partition compound wall of Sheetal Supreme Building Nos.2 & 4.

The learned Commissioner of Income Tax (Appeals) failed to appreciate that the labour charges incurred during the year have been merged with expenses of labour charges of Sheetal Supreme building no.3 as the entire project of Sheetal Supreme is one project.

3. The learned Commissioner of Income Tax (Appeals) erred in not treating the consumption of opening stock of Rs.6,32,366/- as business expenditure.”

2. Issue before us is regarding disallowance of expenses of Rs.6,32,366/- made by the Assessing Officer in respect of consumption of material allegedly used in respect of the project at hand. Assessing Officer made addition as she did not believe that residual materials which were not linked to finishing work of construction project without use of labour was an allowable expenditure. The stand of ld. Authorized Representative has been that project of the assessee includes building nos. 2, 3 & 4. Building nos. 2 & 4 were completed while there was a progress of work in respect of building no.3. It is undisputed fact that assessee has applied for Completion Certificate and received the same subsequent to the claim in question. It is not the case that no labour expenses be A.Y. 10-11 [M/s. Swastik Developments vs.ITO] Page 3 deducted but only dispute is that same has been debited to the labour account. On other buildings, this physical value of maintenance on the part of assessee cannot be appreciated while Revenue has not disputed the finishing work done by assessee in respect of expenses in question. Before obtaining as and when there are chances of incurring legal process in the construction of project, in the facts and circumstances of the case, amount in question is directed to be allowed.

As a result, appeal filed by assessee is allowed.

Pronounced in the open Court on this the 24th day of June, 2016.

Sd/- Sd/- (RAJESH KUMAR) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 24/06/2016 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।

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