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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. BILLAIYA
Instant appeal preferred by the Department is directed against the order dated 24th March 2013, passed by the learned Commissioner (Appeals)–34, Mumbai, for the assessment year 2010–11.
Ground no.1, raised by the Revenue, reads as under:–
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the lease rent income as M/s. Gundecha Builders 2
income from house property as against business income held by the Assessing Officer ignoring the decision in the case of Indian City Properties Vs. CIT 55 ITR 262 (Cal) and also ignoring the fact that the property was held as investment and not as trading asset".
Briefly stated the facts relating to this issue are, assessee a partnership firm is engaged in business as “Builder”. For the assessment year under consideration, the assessee filed its return of income on 25th September 2010, declaring total income of ` 8,39,11,569. During the assessment proceedings, the Assessing Officer noticed that the assessee has shown an amount of ` 3,70,94,118, as income from house property after claiming deduction of municipal tax and standard deduction of 30%. The Assessing Officer observed that the assessee has leased out certain unsold stock and earned income therefrom. He also noticed that in the assessment years 2008–09 and 2009–10, the Assessing Officer has assessed such income under the head “Business”. He, therefore, called upon the assessee to explain why the rental income should not be assessed under the head “Business”. Though, the assessee explained that the income received is on account of leave and licence of the building leased out and the intention of the assessee was to earn rental income but the Assessing Officer rejecting the claim of the assessee assessed the income from leasing out of building under the head “Business
M/s. Gundecha Builders 3 Income”. Being aggrieved of such decision of the Assessing Officer, the assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals), considering the fact that identical issue decided by his predecessor–in–office in favour of the assessee for the assessment years 2008–09 and 2009–10, was upheld by the Tribunal accepted assessee’s claim of house property income. Being aggrieved, Revenue is in appeal before us.
We have considered the submissions of the parties and perused the material available on record. Learned Representative of both the parties have agreed before us that the issue in dispute has been decided in favour of the assessee by the Tribunal in assessee’s own case for the assessment year 2009–10. On a perusal of the aforesaid order of the co–ordinate bench of the Tribunal in ITA no.762/Mum./ 2013 and ITA no.1697/Mum./2013, for the assessment year 2009–10, order dated 17th April 2015, we note that the Tribunal, while deciding identical dispute, held as under:–
“6. The next grievance of the Revenue relates to CIT(A)’s action for treating rental income as income from house property. The issues has been decided by the Tribunal in assessee’s own case in the assessment year 2008-09, wherein vide para 6, the Tribunal has held as under :- “6. We have considered rival contentions and found from the record that the issue is squarely covered by the decision of Hon'ble Supreme Court in the case of Sambhu Investment (P) Ltd. Vs. CIT (2003) 263 ITR
M/s. Gundecha Builders 4
143 (SC), wherein the Hon'ble Apex Court has held that wherein main intention of letting out the property or any portion thereof is to earn rental income, the income is to be assessed as income from house property and where the intention is to exploit the immovable property by way of complex commercial activities, the income should be assessee as income from business. Applying this proposition to the facts of the instant case, we found that the assessee has let out the property to earn the rental income. Accordingly, we do not find any infirmity in the order of CIT(A) for treating the lease income as income from house property.” As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal, we do not find any infirmity in the order of CIT(A) for treating the lease income as income from house property.”
There being no material difference in the facts of the present case, respectfully following the aforesaid decision of the co–ordinate bench of the Tribunal, we uphold the order of the learned Commissioner (Appeals) on this issue. Ground no.1, is dismissed.
Ground no.2, reads as under:–
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the addition of Rs. 7,14,287!- on account of suppressed value of closing stock without appreciating the fact that the Assessing Officer had rightly derived the value of unsold closing stock as per the details submitted by the assessee".
Briefly stated the facts are, in the course of assessment proceedings, the Assessing Officer, by adding certain direct and indirect cost to the cost of construction of the housing project named
M/s. Gundecha Builders 5 as “Gundecha Enclave”, had worked out the cost of construction at 2047.45 sq.ft. By applying the said rate to the unsold area of 49520 sq.ft., he valued the closing stock at ` 10,13,89,933, as against the value shown at ` 10,06,75,646. Differential amount of ` 7,14,287, was added back to the income of the assessee alleging suppression of closing stock. Addition made was challenged by the assessee before the learned Commissioner (Appeals).
Learned Commissioner (Appeals), following his decision on identical issue in assessee’s own case for the assessment year 2008– 09, and also taking into account the fact that the said decision was upheld by the Tribunal deleted the addition made by the Assessing Officer.
We have considered the submissions of the parties and perused the material available on record. Learned Representative of both the parties agreed before us that the issue raised in this ground is squarely covered by the decision of the co–ordinate bench of the Tribunal in assessee’s own case for the assessment year 2009–10. On a perusal of the order of the Tribunal referred to above, it is seen that the Tribunal, while deciding the identical issue followed its own order passed in assessee’s own case for the assessment year 2008–09 and held as under:–
M/s. Gundecha Builders 6
“5. We have considered rival contentions and gone through the orders of the authorities below and found that during the year the AO had followed the addition made by the AO in the immediately preceding A.Y. 2008-09. In A.Y. 2008-09 addition so made was deleted by the CIT(A) and the order of CIT(A) was confirmed by the Tribunal. We had gone through the order of Tribunal in assessee‟s own case and found that the issue with regard to addition on account of suppressed value of closing stock which has been deleted by the CIT(A), has been confirmed by the Tribunal in the assessment year 2008-09, vide order dated 19-2-2014. The precise observation of the Tribunal was as under:-
“11. We have considered rival contentions and found that the AO has wrongly added expenses of previous year to the value of closing stock without finding fault in assessee‟s method of valuation, which was consistently followed by it. The AO has wrongly included indirect cost of project which is not going to form part of value of work in progress. While computing value of closing stock the AO has not pointed out any particular expenses, which should have charged to closing stock and not added by the assessee to the closing stock. Accordingly, we do not find any reason to interfere in the findings of CIT(A) resulting into deletion of addition on account of valuation of closing stock.” As the facts and circumstances during the year under consideration are same, respectfully following the order of Tribunal in assessee‟s own case, we do not find any reason to interfere in the order of CIT(A) for deleting the addition made on account of suppressed value closing stock.”
No material difference in facts has been brought to our notice by the learned Departmental Representative. Respectfully following the decision of the co–ordinate bench of the Tribunal in assessee’s own case, as referred to above, we uphold the order of the learned
M/s. Gundecha Builders 7 Commissioner (Appeals) by dismissing the ground no.2, raised by the Department.
Ground no.3, raised by the Revenue, reads as under:–
3. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the addition of Rs. 34,23,881/- made by the Assessing Officer on account of allocation of common expenditure to Poisar Project and Sakinaka 'D' Wing Project by ignoring the fact that the said expenses were incurred by the assessee firm for running its common office and hence attributable to all projects.
Briefly stated the facts are, while considering the assessee’s claim of “Rental Income” as “House Property”, the Assessing Officer, irrespective of the fact that he has treated the “Rental Income” as “Business Income” also, held that the assessee, while computing the income under the head “Income From House Property”, should have added back a part of the expenditure claimed towards security, staff salary, welfare, etc., as such, expenditure cannot be relating to the properties which were not let out. He was of the view that substantial part of these expenses is also incurred towards let out properties also. Since the assessee is allowed 30% standard deduction from the income under the head “Income From House Property”, Assessing Officer disallowed an amount of ` 34,23,881, from the expenditure claimed by the assessee towards security, staff welfare expenses, etc.
M/s. Gundecha Builders 8 Being aggrieved of such disallowance, the assessee preferred appeal before the learned Commissioner (Appeals).
The first appellate authority, considering the fact that similar issue was decided by the first appellate authority in assessee’s favour in the assessment years 2006–07 to 2009–10 and the decision of the first appellate authority was also upheld by the Tribunal deleted the addition.
We have considered the submissions of the parties and perused the material available on record. At the outset, learned Representative of both the parties admitted that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for the assessment year 2009–10 as well as preceding assessment year. On a perusal of the order of the co–ordinate bench of the Tribunal, in assessment year 2009–10, as referred to above, it is seen that the Tribunal following its decision in assessee’s own case for the preceding assessment year held as under:–
7. The next grievance of the Revenue relates to deletion of expenses on account of allocation of common expenditure. The CIT(A) has deleted the addition vide para 4.3, after observing as under :-
“4.3. I have carefully considered the above submissions, paper book and the material available on record. Identical issue arose during AY.2006-07. The CIT(A) had given relief to the appellant. Against
M/s. Gundecha Builders 9 the order of the CIT(A), the department had filed an appeal before the ITAT. The findings of the IT A T is in para 11 of its order which is reproduced as under- "11. We have heard the rival submissions and perused the records placed before us. It is submitted by the learned counsel for the assessee that the assessee had maintained two separate accounts for Poiser as well as Sakinaka projects and the CIT(A) gave a finding that the assessee had maintained two separate accounts. The learned CIT(A) has given a further finding that the Assessing Officer presumed that the assessee might have debited the expenditure relating to Poiser project to Saki Naka project to get the benefit u/s. 80IB(10) because the project is fully eligible for deduction. It is a fact that the assessee has already debited expenses for Poiser project of Rs.1,05,11,664/- and the Assessing Officer has not pointed out any defect in the books of account submitted by the assessee. In view of the above, we do not find any infirmity in the order of the CIT(A) and uphold the same. The order of the CIT(A) was uphold by the ITAT. Since the facts and circumstances are identical and the projects being the same, respectfully following the Hon'ble ITAT's decision, I direct the Assessing Officer to delete the addition made. This ground of appeal is allowed.”
8. We found that similar issue has been decided by the Tribunal in assessee‟s own case vide para 12, 13 & 14, which reads as under :-
12. The last grievance of the Revenue relates to deletion of addition of Rs.38,75,050/- on account of allocation of common expenditure to Poisar Project and Sakinaka “D” project.
13. The CIT(A) has deleted the addition after following the order of the Tribunal in assessee‟s own case for the assessment year 2006-07. The precise observations of the CIT(A) are as under :- “5.3 I have gone though the contents of the impugned assessment order as well as arguments & submissions of Ld. Authorized Representative of the appellant along with material available on record Including the Hon'ble ITA Ts orders In appellant's own case (supra) I have also gone through the chart
M/s. Gundecha Builders 10 furnished by the appellant It Is clear from the details of expenses furnished that separate expenditure was debited under all heads of Poiser Project and the Assessing Officer has also not pointed out a single instance in his order as to which expenditure was taxable income. He has worked simply on presumption without bringing any evidence on record. On the other hand, the appellant has maintained separate books of accounts and bank account for the Poiser Project wherein no discrepancy was pointed out by the Assessing Officer So in the absence of any conclusive evidence and investigation done by the Assessing Officer and in view of the submissions made by the appellant, I am of the view that the Assessing Officer was not justified In allocating the expenditure of Rs. 38,75,050/- to Poiser Project wherein expenditure of Rs. 17,26,112/- was already debited by the appellant before making re-allocation or disallowance. On perusal of Profit & Loss Account submitted regarding 'D' wing of Sakinaka. Assessee has debited the expenses to the tune of Rs. 6,88,12,548/- and all these has been added to the closing stock. Therefore, addition of Rs. 81,37,369/- made by the Assessing Officer to 'D' wing of Sakinaka without pointing out any reason is not justifiable. The Assessing Officer should have pointed out the defects in the books of accounts of the appellant and the items of expenditure which were diverted for reducing the taxable income. Instead of that, the Assessing Officer has simply made reallocation of expenses of the project which cannot be approved and confirmed in the absence of any evidence. Further respectfully following the decisions in appellant's own case of Hon'ble ITAT Mumbai, G Bench, for A.Y.2006–07 and the reasoning of my Ld. Predecessor's appellate order for A.Y.2007–08, the Assessing Officer is directed to allow deduction as claimed by the appellant to maintain the judicial discipline in the facts and circumstances of the instant case as discussed above. Accordingly this ground of appeal is also allowed.”
14. We have considered rival contentions. As the facts and circumstances during the year under consideration are pari materia to the facts and M/s. Gundecha Builders 11 circumstances as considered and decided by the Tribunal in assessees own case, which has been elaborately referred by the CIT(A) in his impugned order Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of allocation of common expenditure.” As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal as quoted above, we confirm the action of the CIT(A) with regard to allocation of expenditure.”
16. No material difference in facts having been brought to our notice by the learned Departmental Representative by adhering to the rule of consistency, we follow the order of the Tribunal in assessee’s own case as referred to above and uphold the order of the learned Commissioner (Appeals) on this issue. Ground no.3, raised by the Department is dismissed.
17. Ground no.4, reads as under:–
4. On the facts and in the circumstances of the case and in law, the Hon'ble I.T.A.T. erred in directing the Assessing Officer to treat the interest income as income from business as against assessed by the Assessing Officer as income from other source relying on the decision of Hon'ble I.T.A.T. in the case Minal Enterprises in / 2010 ignoring the fact that that the Hon'ble I.T.A.T. in the case of M/s. Mamta Enterprises in ITA No 5205 /Mum / 2010 for Asst. Year 2005 - 2006 and ITA No. 5206 I Mum / 2010 for Asst. Year 2006 - 2007 dated 30.12.2011 has decided the issue in favour of the revenue by following the Hon'ble Bombay High Court's decision in the case of CIT Vs Swani Spice Mills P. Ltd. (2011) 332 ITR 288 (Born) (2001) 12 Taxmann.com 432 (Born) High Court's Order dt. 19.4.2010 after taking note of the Hon'ble Bombay High Court's decision in the case of CIT Vs Lok Holdings Ltd 308 ITR 356 (Born).
M/s. Gundecha Builders 12
Briefly stated the facts are, during the assessment proceedings, the Assessing Officer noticed that interest income earned on fixed deposits and loans have been shown by the assessee under the head “Business”. The Assessing Officer being of the opinion that the income earned is not from any activity of adventure in the nature of trade, same cannot be considered as “Business Income”. He, therefore, called upon the assessee to justify his claim. In response, the assessee submitted that as the interest income earned is incidental to its business activity, it should be assessed under the head “Business or Profession”. The Assessing Officer, however, did not acccept the claim of the assessee. Relying upon the decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v/s CIT, [1997] 227 ITR 172 (SC), and some other decisions of the Hon'ble High Courts, the Assessing Officer held that interest income earned by the assessee on fixed deposits / loans has to be assessed under the head “Income From Other Sources”. Being aggrieved of the aforesaid decision of the Assessing Officer, the assessee challenged the same in an appeal preferred before the learned Commissioner (Appeals).
The learned Commissioner (Appeals), after considering the submissions of the assessee and taking note of the fact that in case of assessee’s sister concern, Milan Enterprises for the assessment year 2007–08 and Mamta Enterprises for the assessment year 2004–05 his
M/s. Gundecha Builders 13 predecessor–in–office has held that interest earned on surplus business fund kept as fixed deposit or given on loan is assessable under the head “Business” which is also confirmed by the Tribunal accepted assessee’s claim by holding that interest income earned by the assessee has to be assessed under the head “Business or Profession”.
The learned Departmental Representative submitted before us that the learned Commissioner (Appeals), while giving relief to the assessee has overlooked the fact that the Tribunal in assessee’s sister concern Mamta Enterprise’s case in ITA 5205/Mum./2010 and ITA no. 5208/Mum./2010, for the assessment year 2005–06 and 2006–07 has decided the issue in favour of the Department.
Learned Counsel for the assessee, on the other hand, strongly supporting the view of the learned Commissioner (Appeals), submitted that though, it may be a fact that in case of Mamta Enterprises, the Tribunal, in assessment year 2005–06 and 206–07, has decided the issue in favour of the Revenue but in case of the very same assessee, subsequently, the Tribunal, while deciding appeal for the assessment year 2004–05, and subsequent assessment year decided the issue in favour of the assessee by holding that interest earned on surplus business fund is to be assessed under the head “Business”. He
M/s. Gundecha Builders 14 submitted, even in case of another sister concern Minal Enterprises, the Tribunal has upheld the view of the learned Commissioner (Appeals) holding that interest earned on surplus business fund kept as fixed deposit is to be assessed under the head “Business”. Copies of the order passed by the co–ordinate bench of the Tribunal were also placed on record by the learned counsel.
We have considered the submissions of the parties and perused the material available on record. The dispute in the aforesaid ground is confined to the issue whether interest income earned on utilization of surplus business fund is to be assessed under the head “Business” as claimed by the assessee or as “Income From Other Sources” as held by the Assessing Officer. The learned Commissioner (Appeals) has decided the issue in favour of the assessee by following the orders of the Tribunal passed in case of two other sister concerns of the assessee viz. Minal Enterprises and Mamta Enterprises wherein the Tribunal upheld assessee’s claim that interest earned on surplus business funds is to be assessed under the head “Business”. Though, we agree with the learned Departmental Representative that the co– ordinate bench of the Tribunal in Mamta Enterprises for the assessment year 2005–06 and 2006–07 has decided the issue against the assessee but fact remains that subsequently the co–ordinate bench of the Tribunal in the case of same assessee i.e., Mamta
M/s. Gundecha Builders 15 Enterprises while deciding the appeal for the assessment year 2004– 05 in ITA no.8713/Mum./2010, order dated 27th June 2013, has decided the issue in favour of the assessee by following the decision of the co–ordinate bench in case of another sister concern Minal Enterprises vide ITA no.8185/Mum./2010, dated 16th April 2013. The observation of the Tribunal is as under:–
2. At the outset it was pointed out by Ld. A.R that similar appeal was filed by the revenue in the case of the group concern namely M/s. Minal Enterprises and Tribunal vide its order dated 16/04/2013 in has upheld the order of Ld. CIT(A). A copy of the said order was placed on our record and a copy was also given to Ld. D.R. It was observed that the ground raised
by the revenue in the present case is exactly similar to the aforementioned group case. For the sake of completeness the said order is reproduced below: “The present appeal is directed against the order dt.14.10.2010 passed by the CIT(A)-34, Mumbai. Following Grounds of Appeal have been raised by the Assessing Officer (AO) 1. “On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to treat the interest income of the assessee as business income instead of income from other sources ignoring the fact that the case is covered by the decision of High Court, Bombay in the case of Shree Krishna Polyster Ltd. Vs. Deputy Commissioner of Income tax (274 ITR 271).
2. On the facts and circumstances of the case and in law, the Ld. CIT(‟4} erred in allowing the interest paid on unsecured loans against the above stated interest income considering it to be business income. The appellant prays that the order of the CIT‟A,) on the grounds be set aside and matter may he decided according to law. The appellant craves leave to amend or alter any ground or add new ground which may be necessary.”
M/s. Gundecha Builders 16
2.Assessee-firm,engaged in the business of builders and developers, filed its return of income on 31.10.2007 declaring total income at Rs 1.76 Crores. Assessment was finalized u/s. 143(3) of the Act by the AO on 15.12.2009 determining total income of the assessee at Rs.1.83 Crores. 2.1..Effective Ground of the appeal is about treating the interest income amounting to Rs. 1,92, 00,094/- earned by the assessee under the head „business income‟ and not under the head „income from other sources‟ .During the assessment proceedings, AU found that assessee had claimed that income earned by it for the AY under consideration should be assessed as business income and interest paid by it should be allowed u/s.57 of the Act. After considering the facts of the case AO held that income of the assessee was to be taxed under the head income from other sources. He further held that interest paid by the assessee was not allowable either u/s. 36(l)(iii) or u/s 57 of the Act. 2.2.Assessee preferred an appeal before the First Appeal Authority(FAA).After considering the submissions of the assessee and the assessment order he held that the same issue in the case of sister concern M/s. Mamta Enterprises (ME) for the same assessment year had arisen before his predecessor and it was decided in favour of the appellant, that same AO had passed the orders for M/s. ME for AYs. 2005-06 & 2006-07 as well as for the assesse firm, that there was no material difference in either the action of the AO or the facts and circumstances of both the cases. Following the Order of his predecessor in the case of M/s. ME and relying upon the judgments of the Hon‟ble High Courts of Karnataka and Bombay in the cases Satish Chandra & Co.(234 ITR 70) and Lok Holdings(3081TR356) decided the issue in favour of the assessee. He held that interest earned on surplus funds of business should be assessed as business income and not as income from other sources. He further directed the AO to allow the interest paid against the same , accordingly as per the provisions of Act. 2.3. Before us, Departmental Representative(DR) supported the order of the AO. Authorised Representative (AR) submitted that AO had treated the interest-income as business income in the case of M/s.ME, the sister concern, on identical facts, that assessee was engaged in the business of advancing money and the interest received by it was to be assessed under the head business. He relied upon the judgment of jurisdictional High Court delivered in the case of Lok Holdings (supra).The brief relevant facts of the case are that M/s. Lok Holdings, a firm involved in the business of development of properties, received monies in advance from customers intending to purchase flats in the properties as M/s. Gundecha Builders 17 developed by it. These monies were of the nature of booking! advances. Since these monies received could not be immediately utilised for the business of the firm, so surplus amounts from such money received was temporarily invested with banks and other concerns. Such deposits with accrued interest and same was assessed by the AU as income from other sources. FAA and Tribunal held that interest income was to be assessed as business income. Revenue preferred an appeal before the Hon‟ble High Court. While deciding the question of law as whether the interest income earned by the assessee was assessable as „income from business‟ or as „income from other source Hon‟ble Court dismissed the appeal of the Revenue. We find that the facts of the case under consideration are similar to the facts of M/s. Lok Hodings. We also find that on similar facts AO; in the case of the sister concern; has held that the interest-income had to be assessed as business income. Respectfully, following the judgment of the Hon‟ble Jurisdictional High Court delivered in the case of Lok Holdings we confirm the order of the FAA. Grounds of appeal filed by the AO are decided against him. As a result appeal filed by the AO stands dismissed.
3. In this view of the situation, after hearing both the parties, respectfully following the aforementioned order passed by the Co- ordinate Bench, as the facts are and circumstances are same we dismiss the appeal filed by the revenue.
23. Therefore, following the view expressed by the Tribunal in case of Mamta Enterprises and Minal Enterprises, which have been passed subsequent to the order of the Tribunal in case of Mamta Enterprises for the assessment year 2005–06 and 2006–07, we uphold the view of the learned Commissioner (Appeals) to the effect that interest income earned by the assessee under the head “Business”. Accordingly, ground no.4, raised by the Department is dismissed.
24. Ground no.5, raised by the Department, reads as under:–
M/s. Gundecha Builders 18
5. "Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in deleting the addition of Rs. 9,1267!- made by the A.O. as per the provisions u/s 14A r.w.s. Rule 8D on the exempt income, ignoring decision of the Hon'ble I.T.A.T. in the case of Daga Investment wherein it has been held that expenditure related to earning of exempt income has to be disallowed"
Briefly stated the facts are, in the course of assessment proceedings, Assessing Officer, noticing that the assessee has earned exempt income by way of dividend of ` 15,100, asked the assessee to explain why expenditure relating to earning of such income shall not be disallowed as per section 14A of the Act. After considering the explanation of the assessee and finding that the assessee has not incurred any direct expenditure relating to interest disallowed an amount of ` 9,126, being 0.5% of average investment by applying rule 8D(2)(iii) r/w section 14A of the Act. Assessee challenged the disallowance before the learned Commissioner (Appeals).
The first appellate authority, though, rejected assessee’s claim that no amount was paid for earning the dividend income but he nevertheless restricted the disallowance to ` 755/– being 5% of the dividend income earned of ` 15,100.
Learned Counsel for the assessee fairly stated before us that the Tribunal, in assessment year 2009–10, has decided the issue against
M/s. Gundecha Builders 19 the assessee by upholding the disallowance of expenditure made by the Assessing Officer by applying provisions of rule 8D.
It is seen from the assessment order that the Assessing Officer has not made any disallowance on account of direct expenditure. He has only made disallowance under section 8D(2)(iii). Considering the fact that the assessee has earned exempt income during the year and disallowance has to be made in terms with section 14A r/w rule 8D and also keeping in view the decision of the co–ordinate bench as referred to above, we uphold the disallowance made by the Assessing Officer by restoring the addition of ` 9,126. Ground no.5, raised by the Department is allowed.
The common issue raised in grounds no.6, 7 and 8, read as under:–
6. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T(A) erred in deleting the addition of Rs. 15,44,746/- made on account of 1/3 of security expenses and professional expenses ignoring the fact that till Asst. Year 2008 - 2009 the assessee himself has transferred a portion of expenditure towards security, legal and professional fees to the work in progress as the properties.
7. Whether on the facts and in the circumstances of the case and in law, the Ld. C.I.T(A) erred in deleting the addition of ` 15,44,746 made on account of 1/3rd of security expenses and professional expenses ignoring the in Asst. Year 2009 - 2010 the issue had been decided in favour of the revenue by the Ld. C.I.T. (A). 8. Whether on the facts and in the circumstances of the case
M/s. Gundecha Builders 20 and in law, the Ld. C.I.T. (A) erred in deleting the addition of Rs. 15,44,746/- made on account of 1/3 rd of security expenses and professional expenses ignoring the fact that the assessee had deviated from the consistent practice followed when the facts and circumstances were almost identical.
Briefly stated the facts are, during the assessment proceedings, the Assessing Officer disallowed an amount of ` 15,44,746, being 1/3rd of the amount claimed towards security expenditure, professional expenses and legal expenses by holding that certain properties of other purchases are under dispute for which assessee had to incur these expenses, therefore, the assessee should have transferred proportionate expenditure relatable to other properties from the work– in–progress and accordingly disallowed an amount of ` 15,44,746. Being aggrieved of such addition, assessee preferred appeal before the first appellate authority.
The learned Commissioner (Appeals) following the decision of the Tribunal in assessee’s own case for the assessment year 2008–09, wherein assessee’s claim was allowed deleted the addition.
We have considered the submissions of the parties and perused the material available on record. At the outset, the learned Representative for both the parties, stated before us that the issue in dispute is covered by the decision of the Tribunal in assessee’s own case for the assessment year 2009–10. On perusing the order of the M/s. Gundecha Builders 21 co–ordinate bench as referred to above, we find that the issue has been decided in favour of the assessee by holding as under:–
“14. The CIT(A) has also confirmed the disallowance of Rs.8,51,418/- being 1/3rd of expenses on security, legal fees and professional fees. We found that these expenditures were incurred in respect of properties, which was in dispute. Such expenses were indirect expenditure and item of profit and loss account, the same cannot be added to work-in-progress as same are indirect expenditure. Even the provisions of Section 145 which provides method of accounting also states that indirect expenditure is to be deducted to profit and loss account and the same is not to be added to the value of closing stock as per AS2. Accordingly, we do not find any merit in the action of the lower authorities for disallowing Rs.8,51,418/- being 1/3rd of the expenditure incurred on security, legal fee and professional fee.
There being no material difference in the facts brought to our notice by the learned Departmental Representative, following the decision of the co–ordinate bench as aforesaid, we uphold the order of the learned Commissioner (Appeals) by dismissing the grounds no.6, 7 and 8 raised by the Department.
In the result, Department’s appeal is partly allowed. Order pronounced in the open Court on 5th January 2016