LODHA DEVELOPERS LTD(FORMERLY KNOWN AS LODHA DEVELOPERS PRIVATE LIMITED), MUMBAI V. DCIT CEN CIR 7(3), MUMBAI

ITA 2348/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4763 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSON
• Keywords: Capital asset; Gift; Business income; Depreciation; Earning of tax free income; Condonation of delay; Revised return; TDS; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 80IB; 36 (1) (iii); 80G; 119(2)(b); 201; 80IC; 139(1); 139(4); 80IC; 43; 2(A); 13; 119; 22; 145; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA , HON'BLE ACCOUNTANT MEMBER ITA NO . 2147 / MUM /2018 (A.Y: 201 4 - 15) DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 7(3) ROOM NO. 655, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 V. M/S. PALAVA DWELLERS PVT. LTD., 412, 71 - G, VARDHMAN CHAMBER C.P. ROAD, HORNIMAN CIRCLE FORT, MUMBAI PAN: AABCL1117D (APPELLANT) (RESPONDENT) ITA NO . 2348 / MUM /2018 (A.Y: 2014 - 15 ) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD., } 412, 4 TH FLOOR, 17 G , VARDHMAN CHAMBER C AWASJI PATEL ROAD , HORNIMAN CIRCLE FORT, MUMBAI - 400 001 PAN: AABCL1117D V. DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 7(3) ROOM NO. 655, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : S HRI RAJAN R. VORA SHRI HEMAN CHANDARIA DEPARTMENT BY : SHRI AWUNGSHI GIMSON DATE OF HEARING : 27 .11.2019 DATE OF PRONOUNCEMENT : 20 . 02 .2020 2 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} O R D E R PER C. N. PRASAD (JM) 1. THESE APPEALS ARE FILED BY THE REVENUE AND ASSESSEE AGAINST THE ORDER OF THE LD. COMMI SSIONER OF INCOME - TAX (APPEALS) 49, MUMBAI [HEREINAFTER FOR SHORT LD. CIT(A)] DATED 30.01.2018 FOR THE A.Y. 2014 - 15. 2. REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL: - 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DE LETING THE ADDITION OF RS. 89,11,71,622/ - MADE BY THE ASSESSING OFFICER U/S 36(1 )(III) AND CAP ITALIZED THE SAME TO INVENTORY. 2. 'WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 89,11,71,622/ - RELIED UPON THE DECISION OF THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LOKHANDWALA CONSTRUCTION IND S L TD 260 ITR 579 THE SAME WERE RENDERED BE FORE THE PROVISO TO SECTION 36(1 )(III) HAS BEEN INSERTED VIDE FINANCE ACT 2003 . ' 3. 'WHETHER ON THE FACT AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETI NG THE ADDITION OF RS. 80,75,718 / - MADE BY THE ASSESSING OFFICER U/S 14A R.W.R 8D AND LIMITING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE EXTENT EXEMPT INCOME OF THE ASSESSEE AS CLAIMED NOT TO THE EXPENDITURE AS PER RULE . ' 3. IN SO FAR AS GROUND NOS. 1 AND 2 ARE CONCERNED, BRIEFL Y STATED THE FACTS ARE THAT, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSM ENT ON 30.12.2016 U/S. 143(3) OF THE ACT NOTICED THAT ASSESSEE FOR THE PURPOSE OF CONSTRUCTION OF RESIDENTIAL PROJECT BORROWED INTEREST B EARING FUNDS FROM GROUP CONCERNS, BANKS A ND FINANCIAL INSTITUTIONS . ASSESSING OFFICER NOTICED THAT ASSESSEE PAID INTEREST OF . 164.71 CRORES AND EARNED INTEREST 3 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} INCOME OF . 42.57 CRORES AND NET INTEREST EXPENSES WERE SHOWN AT . 122.15 CRORES. ASSESSING OFFICER NOTICED THAT OUT OF THIS .122. 1 5 CRORES THE ASSESSEE CAPITALIZED AN INTEREST OF . 105.13 CRORES AND SHOWN AS WORK IN PROGRESS. HE FURTHER NOTICED THAT IN THE RETURN OF INCOME INTEREST OF .89.12 CRORES HAVE BEEN CLAIMED AS DEDUCTION OUT OF THIS .105.13 C R ORES WHICH WERE CA PITALISED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY INTEREST EXPENSES CLAIMED IN THE RETURN OF INCOME SHALL NOT BE DISALLOWED. THE ASSESSEE SUBMITTED THAT INTEREST EXPENSES HAVE BEEN CLAIMED AS DEDUCTION IN THE YEAR OF INCU RRENCE AS THE INTEREST IS PERIODIC COST AND PERTAINS TO THE YEAR FOR WHICH IT BELONGS TO. IT WAS FURTHER SUBMITTED THAT THE SAID INTEREST IS ALLOWABLE AS DEDUCTION U/S. 36(1)(III) OF THE ACT BEING INTEREST PERTAIN ING TO STOCK IN TRADE OF THE ASSESSEE. RE LIANCE WAS PLACED ON THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF TAPARIA TOOLS PVT. LTD., V. JCIT IN CIVIL APPEAL NO. 6366/2003 DATED 23.03.2015 AND THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. LOKANDWALA CONSTRUCTION INDUSTRIES LTD ., [260 ITR 579 ] . 4. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE , THE ASSESSING OFFICER PLACING RELIANCE ON THE JUDGEMENT OF THE HON'BLE SPECIAL BENCH , MUMBAI IN THE CASE OF M/S. WALL STREET CONSTRUCTION LIMITED [ 102 TTJ 505] WHEREIN IT HAS BEEN HELD THAT THE INTEREST COST SHALL BE DEBITED TO WORK IN 4 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} PROGRESS AND ALLOWED TO BE CLAIMED AS DEDUCTION ONLY IN THE YEAR IN WHICH CORRESPONDING INCOME OFFERED TO TAX , ASSESSING OFFICER DEN IED THE CLAIM OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) FOL LOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. LOKANDWALA CONSTRUCTION INDUSTRIES LTD., [260 ITR 579] AND VARIOUS OTHER DECISIONS OF THE COORDINATE BENCHES ALLOWED THE CLAIM FOR DEDUCTION OF INTEREST. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFORE US. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ALSO THE DECISION OF TH E SPECIAL BENCH IN THE CASE OF M/S. WALL STREET CONSTRUCTION LIMITED (SUPRA). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE OR DERS OF THE AUTHORITIES BELOW AND CASE LAWS RELIED ON. THIS ASPECT OF THE MATTER HAS BEEN ELABORATELY CONSIDERED BY THE LD.CIT(A) WITH REFERENCE TO THE AVERMENTS OF THE ASSESSING OFFICER AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. LOKANDWALA CONSTRUCTION INDUSTRIES LTD., (SUPRA) A ND VARIOUS OTHER DECISION AND ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER: - THE SUBMISSIONS OF THE LEARNED COUNSEL HAVE BEEN CAREFULLY CONSIDERED. ACCORDING TO THE LEARNED COUNSEL THE INTEREST CLAIMED BY THE ASSESSEE IS A PERIOD COST AND HAS TO BE ALLOWED UNDER SECTION 36 (1) (III) OF THE ACT. THE ASSESSEE HAS RELIED UPON THE JUDGMENT OF 5 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} THE APEX COURT IN THE CASE OF THE TAPARIA TOOLS L TD VS. DCIT (2015) 272 ITR 605 WHEREIN THE SUPREME COURT HELD THAT THE ONLY ASPECT WHICH NEEDED EXAMINATION WAS AS TO WHETHER THE PROVISIONS OF SECTION 36 (1) (III) READ WITH SECTION 43 (2) OF THE ACT WAS SATISFIED OR NOT. ONCE THESE ARE SATISFIED THERE IS NO QUESTION OF DENYING THE BENEFIT OF DEDUCTION IN THE YEAR IN WHICH SUCH AN AMOUNT WAS ACTUALLY PAID OR INCURRED. FURTHER, THE PROVISO INTRODUCED BY THE FINANCE ACT 2003 PROHIBITS THE ALLOWANCE OF INTEREST COST ONLY IF THE BORROWED FUNDS HAVE BEEN UTILIZ ED FOR ACQUISITION OF A CAPITAL ASSET EVEN FOR EXISTING BUSINESS. IN THIS CASE THE BORROWED FUNDS HAVE BEEN UTILIZED FOR STOCK IN TRADE WHICH IS NOT A CAPITAL ASSET. THE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF LOKHANDWALA CONSTRUCTIONS INDS LTD 260 ITR 579 HELD AS UNDER: 'IN THE INSTANT CASE, IT WAS DEAR THAT THE ASSESSEE UNDERTOOK TWO - FOLD ACTIVITIES. IT BOUGHT AND SOLD FLATS. SECONDLY, THE ASSESSEE WAS ALSO ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDINGS. THE PROFITS FROM BOTH THE ACTIVITIES WERE ASSESSED UNDER SECTION 28. THE ASSESSEE HAD UNDERTAKEN THE PROJECT OF CONSTRUCTION OF FLATS. THEREFORE, THE LOAN WAS OBTAINED FOR OBTAINING STOCK - IN - TRADE. THE PROJECT CONSTITUTED THE STOCK - IN - TRADE OF THE ASSESSEE. THE PROJECT DID NOT CONSTITUTE A FI XED ASSET OF THE ASSESSEE. SINCE THE ASSESSEE HAD RECEIVED LOAN FOR OBTAINING STOCK - IN - TRADE, IT WAS ENTITLED TO DEDUCTION UNDER SECTION 36(1)(III). WHILE ADJUDICATING THE CLAIM FOR DEDUCTION U/S 36(L)(III), THE NATURE OF EXPENSES, WHETHER THE EXPENSES ARE ON CAPITAL ACCOUNT OR REVENUE ACCOUNT IS IRRELEVANT AS THE SECTION ITSELF SAYS THAT INTEREST PAID BY THE ASSESSEE ON THE CAPITA! BORROWED BY THE ASSESSEE IS AN ITEM OF DEDUCTION. THE UTILIZATION OF THE CAPITAL IS IRRELEVANT FOR THE PURPOSE OF ADJUDICATING THE CLAIM FOR DEDUCTION U/S 36(L)(III).' THE SLP FILED BY THE DEPARTMENT AGAINST THE BOMBAY HIGH COURT JUDGMENT HAS BEEN REJECTED BY THE SUPREME COURT. THE HON'BLE ITAT MUMBAI IN THE CASE OF M/S ASHISH BUILDERS PRIVATE LTD VS. ACIT ITA NUMBER 310/M/2012 H ELD AS UNDER: 'A) INTEREST ON UNSECURED LOANS AND FIXED DEP OSITS: IT IS THE CLAIM OF THE ASSESSEE THAT THE ENTIRE INTEREST EXPENDITURE IS ALLOWABLE AS IT IS A TI ME RELATED FIXED FINANCE COST ON THE BORROWED CAPITAL. THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED IN FULL IN VIEW OF THE VARI OUS DECISIONS ON THIS ISSUE. TO START WITH, WE PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF ROHAN ESTATES PVT. LTD. (SUPRA) WHICH IS ONE OF THE SISTER CONCERNS OF THE ASSESSEE. WE PERUSED THE PARA 3.2 OF THE SAID ORDER OF THE TRIBUNAL AND FIND IT IS A SELF EXPLANATORY AND THE DECISION OF THE TRIBUNAL SUPPORTS THE CASE OF THE 6 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} ASSESSEE. UNDER COMPARABLE FACTS OF THE ASSESSEE, INTEREST COST WAS ALLOWED IN FAVOR OF THE ASSESSEE RELYING ON BINDING JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF M/S LOKHANDWALA CONSTRUCTION INDUSTRIES LTD. (SUPRA). FOR THE SAKE OF COMPLETENESS OF THIS ORDER WE EXTRACT RELEVANT PARA 3.2 OF THE ORDER WHICH IS REPRODUCED AS UNDER: '3.2 WITH REGARD TO THE INTEREST EXPENDITURE,...........THE INTEREST COST ON THE CORRESPONDING CAPITAL BORROWED WOULD NEVERTHELESS CONTINUE TO BE INCURRED, WITHOUT ANY CORRESPONDING INCREASE IN THE VALUE OF THE INVENTORY OR THE PROJECT. SIMILARLY, A PROJECT, OR PAR T THEREOF, MAY BE PARTLY SOLD OR EVEN REMAIN UNSOLD FOR QUITE SOME TIME AFTER ITS COMPLETION. WHILE REVENUE WOULD STAND TO BE BOOKED ONLY ON THE PART, IF ANY, SOLD, THE INTEREST COST WOULD CONTINUE TO BE INCURRED ON THE ENTIRE CAPITAL, EVEN AS NO CORRESPON DING GAIN INURES I TERMS OF VALUE ADDITION TO THE PROJECT, WHICH STANDS IN FACT COMPLETED, SO AS TO INCREASE ITS COST BY LOADING THE SAID COST THEREON. IT IS FOR THESE REASONS THAT INTEREST (FINANCING) COST IS NORMALLY CONSIDERED AS ONLY A PERIOD (FIXED) C OST, AND CHARGED TO THE OPERATING STATEMENT FOR THE YEAR IN WHICH THE SAME IS INCURRED. AS SUCH, WHAT IN OUR VIEW WOULD PREVAIL IS THE METHOD OF ACCOUNTING BEING REGULARLY FOLLOWED BY THE ASSESSEE, I.E. ON A YEAR BASIS. THE SAME ALSO HAS THE SANCTION OF LA W INASMUCH AS SEC. 145 CLEARLY PROVIDES FOR DETERMINATION OF THE BUSINESS INCOME ON THE BASIS OF THE METHOD OF ACCOUNTING BEING REGULARLY FOLLOWED, WITH THE MANDATE OF SEC 36(L)(III) BEING ALSO SATISFIED, AND TOWARD WHICH THE ASSESSEE RELIES ON THE DECISIO N IN THE CASE OF CIT VS LOKHANDWALA CONSTRUCTION INDS. LTD(SUPRA). THE SAME ALSO CLARIFIES THAT THE INTEREST COST IS TO ALLOWED U/S 36(L)(III), IRRESPECTIVE OF WHETHER IT STANDS INCURRED IN RELATION TO STOCK - IN - TRADE OR ON CAPITAL ACCOUNT, AS THE SAID SECT ION DRAWS NO SUCH DISTINCTION. THE ISSUE, THOUGH, WE MAY CLARIFY, IS NOT AS TO WHETHER THE BORROWED CAPITAL STANDS UTILIZED TOWARD TRADING OPERATIONS OR ON CAPITAL ACCOUNT; THE INSTANT CASE BEING DECIDEDLY OF THE FORMER, BUT WHETHER THE SAID COST, HAVING B EEN INCURRED, IS TO BE CAPITALIZED AS A PART OF THE PROJECT COST AND, THUS, TAKEN INTO ACCOUNT FOR THE PURPOSE OF VALUATION OF INVENTORY (STOCK - IN - TRADE) AS AT THE YEAR - END AND, CONSEQUENTLY, THE DETERMINATION OF GROSS PROFIT FOR THE YEAR. IT IS ONLY THE C OST THAT IS INCURRED AND OTHERWISE ALLOWABLE, WHICH, IT MAY BE APPRECIATED, WOULD STAND TO BE CONSIDERED THUS, WHERE IT OTHERWISE QUALIFIES FOR BEING REKONED AS A PART OF THE COST OF PRODUCTION/CONSTRUCTION, AND THUS OF THE INVENTORY OR THE PROJECT COST A SAT THE YEAR - END. THE DEDUCIBILITY OF THE SAID COST U/S 36(L)(III) IS THUS NEITHER IN DOUBT NOR IN DISPUTE, FURTHER, IT MAY ALSO BE IN PLACE TO STATE THAT SECTION 36(L)(III) STANDS SINCE AMENDED BY FINANCE ACT, 2003 7 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} W.E.F, 01/04/2004, BY WAY OF INSERTION O F A PROVISO THERETO, SO THAT ANY INTEREST COST ON CAPITAL ACCOUNT IS TO BE NECESSARILY CAPITALIZED. ACCORDINGLY, IT IS ONLY THE INTEREST COST COMPUTING THE BUSINESS INCOME QUA THE BUSINESS OF WHICH THE RELEVANT ASSET IS A OR IS TO CONSTITUTE A PART (ALSO R EFER EXPLANATION 8 TO S.43(L)). THE SAID DECISION MAY , THUS, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AS, WELL AS THE AMENDED LAW, NOT BE OF MUCH ASSISTANCE.' WE HAVE ALSO PERUSED THE SAID BINDING HIGH COURT JUDGMENT IN THE CASE OF M/S LOKHANDWALA CONSTRUCTION INDS. LTD. (SUPRA) AND FIND THE SAME IS RELEVANT FOR THE FOLLOWING CONCLUSION - 'CONSTRUCTION PROJECT UNDERTAKEN BY THE ASSESSEE BUILDER CONSTITUTED ITS STOCK IN TRADE AND THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 36(L)(III) OF THE ACT IN RESPECT OF THE INTEREST ON THE LOAN OBTAINED FOR EXECUTION OF SAID PROJECT.' RELYING ON THE ANOTHER JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CALICO DYING AND PRINTING WORKS 34 ITR 265 BOMBAY, HON'BLE BOMBAY HIGH COURT CONCLUDED THAT THE INTEREST EXPENDITURE RELATING TO THE BORROWED CAPITAL IS ALLOWABLE U/S 36(L)(III) OF THE ACT. THE RELEVANT LINES FROM THE PARA 4 READS AS UNDER; 'THAT, WHILE ADJUDICATING THE CLAIM FOR DEDUCTION UNDER SECTION 36(L)(III) OF THE ACT THE NATURE OF EXPENSE 0 - WHETHER THE EXPENDITURE WAS ON CAPITAL ACCOUNT OR REVENUE ACCOUNT - WAS IRRELEVANT AS THE SECTION ITSELF SAYS THAT INTEREST PAID BY THE ASSESSEE ON THE CAPITAL BORROWED BY THE ASSESSEE WAS AN ITEM OF DEDUCTION. THAT THE UTILIZATION OF CAPITAL WAS THE RELEV ANT FOR THE PURPOSE OF ADJUDICATING THE CLAIM OF DEDUCTION UNDER SECTION 36(L)(III) OF THE ACT. (REFERRING TO THE JUDGMENT IN THE CASE OF CALICO) IT WAS LAID DOWN THAT WHERE AN ASSESSEE CLAIMS DEDUCTION OF INTEREST PAID ON THE CAPITAL BORROWED ALL THAT THE ASSESSEE WAS TO SHOW THAT THE CAPITAL WHICH WAS BORROWED WAS USED FOR BUSINESS PURPOSE IN THE RELEVANT YEAR OF ACCOUNT AND IT DID NOT MATTER WHETHER CAPITAL WAS BORROWED IN ORDER TO ACQUIRE THE REVENUE ASSET OR A CAPITAL ASSET.......' CONSIDERING THE ABOV E SETTLED POSITION IN THE MATTER WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO CLAIM ENTIRE INTEREST DEDUCTION RELATABLE TO THE CAPITAL BORROWED AND UTILIZED FOR BUSINESS PURPOSES IN THE YEAR UNDER CONSIDERATION. RESULTANTLY, WE DISAPPROVE THE DEC ISION OF THE ASSESSING OFFICER /CIT(APPEALS) IN TRANSFERRING THE INTEREST EXPENDITURE TO WIP ACCOUNT. THEREFORE, ASSESSEE IS JUSTIFIED IN DEBITING THE SAME TO THE P&L ACCOUNTS OF THE RESPECTIVE ASSESSMENT YEARS. THUS, WE ORDER THE ASSESSING OFFICER TO ACCEP T THE CLAIM AS MADE IN THE 8 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} RETURN OF INCOME. ACCORDINGLY, THIS PART OF THE GROUND NO. 1 IS ALLOWED IN FAVOUR OF THE ASSESSEE THE HON'BLE ITAT IN THE CASE OF ITO VS ROHAN STATES ITA NUMBER 7200/MUM/2010 HELD AS UNDER: 3.2 WITH REGARD TO THE INTEREST EXPENDITURE, THOUGH THE ACCOUNTING STANDARD - 2 (AS - 2) ON THE VALUATION OF INVENTORIES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA (ICAI) WOULD SUGGEST THAT THE INTEREST EXPENDITURE OUGHT TO BE TAKEN INTO ACCOUNT IN THE VALUATION OF INVENTORIES WHERE AND TO THE EXTENT THERE IS A DIRECT NEXUS, THE SAID STANDARD IS NOT MANDATORY UNDER THE ACT. IN FACT, EVEN FOLLOWING AS - 2 A DIRECT NEXUS HAS TO BE ESTABLISHED FOR THE INTEREST COST TO FORM PART OF THE COST OF PRODUCTION OR CONSTRUCTION, AS THE CASE MAY BE, AND, THUS, A PART OF THE VALUATION OF THE UNSOLD INVENTORY OR WORK - IN - PROGRESS AS AT THE YEAR - END. THIS IS AS, TO CITE BY WAY OF AN EXAMPLE FROM THE CIVIL CONSTRUCTION ITSELF, THE WORK ON A PROJECT MAY NOT BE UNDERWAY AT ALL FOR THE WHOLE OR A PART OF THE YEAR, OR SAY AS ITS OPTIMUM OR NORMATIVE LEVEL, ON ACCOUNT OF VARIOUS BUSINESS EXIGENCIES. THE INTEREST COST ON THE CORRESPONDING CAPITAL BORROWED WOULD NEVERTHELESS CONTINUE TO BE INCURRED, WITHOUT ANY CORRESPONDING INCREASE IN THE VALUE OF THE IN VENTORY OR THE PROJECT. SIMILARLY, A PROJECT, OR PART THEREOF, MAY BE PARTLY SOLD OR EVEN REMAIN UNSOLD FOR QUITE SOME TIME AFTER ITS COMPLETION. WHILE REVENUE WOULD STAND TO BE BOOKED ONLY ON THE PART, IF ANY, SOLD, THE INTEREST COST WOULD CONTINUE TO BE INCURRED ON THE ENTIRE CAPITAL, EVEN AS NO CORRESPONDING GAIN INURES I TERMS OF VALUE ADDITION TO THE PROJECT, WHICH STANDS IN FACT COMPLETED, SO AS TO INCREASE ITS COST BY LOADING THE SAID COST THEREON. IT IS FOR THESE REASONS THAT INTEREST (FINANCING) CO ST IS NORMALLY CONSIDERED AS ONLY A PERIOD (FIXED) COST, AND CHARGED TO THE OPERATING STATEMENT FOR THE YEAR IN WHICH THE SAME IS INCURRED. AS SUCH, WHAT IN OUR VIEW WOULD PREVAIL IS THE METHOD OF ACCOUNTING BEING REGULARLY FOLLOWED BY THE ASSESSEE, I.E. O N A YEAR BASIS. THE SAME ALSO HAS THE SANCTION OF LAW INASMUCH AS SEC. 145 CLEARLY PROVIDES FOR DETERMINATION OF THE BUSINESS INCOME ON THE BASIS OF THE METHOD OF ACCOUNTING BEING REGULARLY FOLLOWED, WITH THE MANDATE OF SEC 36(L)(III) BEING ALSO SATISFIED, AND TOWARD WHICH THE ASSESSEE RELIES ON THE DECISION IN THE CASE OF CIT VS LOKHANDWALA CONSTRUCTION INDS. LTD(SUPRA). THE SAME ALSO CLARIFIES THAT THE INTEREST COST IS TO ALLOWED U/S 36(L)(III), IRRESPECTIVE OF WHETHER IT STANDS INCURRED IN RELATION TO ST OCK - IN - TRADE OR ON CAPITAL ACCOUNT, AS THE SAID SECTION DRAWS NO SUCH DISTINCTION. THE ISSUE, THOUGH, WE MAY CLARIFY, IS NOT AS TO WHETHER THE BORROWED CAPITAL STANDS UTILIZED TOWARD TRADING OPERATIONS OR ON CAPITAL ACCOUNT; THE INSTANT CASE BEING DECIDEDL Y OF THE FORMER, BUT WHETHER THE SAID COST, HAVING 9 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} BEEN INCURRED, IS TO BE CAPITALIZED AS A PART OF THE PROJECT COST AND, THUS, TAKEN INTO ACCOUNT FOR THE PURPOSE OF VALUATION OF INVENTORY (STOCK - IN - TRADE) AS AT THE YEAR - END AND, CONSEQUENTLY, THE DETERMIN ATION OF GROSS PROFIT FOR THE YEAR. IT IS ONLY THE COST THAT IS INCURRED AND OTHERWISE ALLOWABLE, WHICH, IT MAY BE APPRECIATED, WOULD STAND TO BE CONSIDERED THUS, WHERE IT OTHERWISE QUALIFIES FOR BEING REKONED AS A PART OF THE COST OF PRODUCTION/CONSTRUCTI ON, AND THUS OF THE INVENTORY OR THE PROJECT COST A SAT THE YEAR - END. THE DEDUCIBILITY OF THE SAID COST U/S 36(L)(III) IS THUS NEITHER IN DOUBT NOR IN DISPUTE. FURTHER, IT MAY ALSO BE IN PLACE TO STATE THAT SECTION 36(L)(III) STANDS SINCE AMENDED BY FINANC E ACT, 2003 W.E.F. 01/04/2004, BY WAY OF INSERTION OF A PROVISO THERETO, SO THAT ANY INTEREST COST ON CAPITAL ACCOUNT IS TO BE NECESSARILY CAPITALIZED. ACCORDINGLY, IT IS ONLY THE INTEREST COST COMPUTING THE BUSINESS INCOME QUA THE BUSINESS OF WHICH THE RE LEVANT ASSET IS A OR IS TO CONSTITUTE A PART (ALSO REFER EXPLANATION 8 TO S.43(L)). THE SAID DECISION MAY, THUS, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AS, WELL AS THE AMENDED LAW, NOT BE OF MUCH ASSISTANCE. IN FACT, EVEN GOING BY THE REVENUE S S TAND, ANOTHER ISSUE WOULD ARISE AND, ACCORDINGLY, NEED TO BE DETERMINED APRIORI. CONSIDERING THE SAID COST AS INCLUDABLE IN THE PROJECT COST MAY HAVE A DIRECT BEARING ON THE GROSS PROFIT RATE, AND WHICH MAY THEREFORE STAND TO DECLINE FROM THE REPORTED AND ACCEPTED RATE OF 23%, AND CANNOT BE PRESUMED BE REMAIN AS SUCH, I.E., UNCHANGED. THE HON'BLE ITAT PUNE IN THE CASE OF M/S KOLTE PATIL DEVELOPERS LTD ER STWHILE COROLA REALITY LTD MERGED WITH KOLTE PATIL DEVELOPERS LTD) ALSO HEL D AS UNDER: 'FURTHER, WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S ASHISH BUILDERS PVT. LTD. (SUPRA) HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. RELEVANT PARAGRAPHS ARE BEING REPRODUCED HEREUNDER FOR B ETTER APPRECIATION OF THE ISSUE : '6. GROUND NO. 1 OF TH E APPEAL RELATES TO THE ADDITION OF SOME OF THE EXPENSES TO THE WIP ACCOUNT I.E. INTEREST ON UNSECURED LOAN/FIXED DEPOSIT (SIC - CAR LOAN), ADVERTISEMENT EXPENSES, BROKERAGE EXPENSES AND LOAN PROCESSING FEES. AO CONSIDERED THE ABOVE EXPENSES AS RELATABLE TO THE WIP ACCOUNT AND RECOMPUTED THE WIP ACCOUNT AT RS.5,33,28,399/ - . /ASSESSEE CONTENDS THAT THE ABOVE SAID EXPENDITURE IS FULLY ALLOWABLE IN THE YEAR UNDER CONSIDERATION. IN THIS REGARD, ASSESSEE RELIED ON VARIOUS ITA NO. 80/PUN/2016 M/S KOLTE PATIL DEVELO PERS LTD., DECISIONS. THIS ISSUE IS RELEVANT FOR 10 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} AYS/APPEALS UNDER CONSIDERATION. WE SHALL TAKE UP EXPENDITURE - ACCOUNT WISE ADJUDICATION IN THE FOLLOWING PARAGRAPHS: 'A) INTEREST ON UNSECURED LOANS AND FIXED DEPOSITS: IT IS THE CLAIM OF THE ASSESSEE THAT T HE ENTIRE INTEREST EXPENDITURE IS ALLOWABLE AS IT IS A TIME RELATED FIXED FINANCE COST ON THE BORROWED CAPITAL. THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED IN FULL IN VIEW OF THE VARIOUS DECISIONS ON THIS ISSUE. TO START WITH, WE PERUSED THE ORDER OF THE T RIBUNAL IN THE CASE OF ROHAN ESTATES PVT. LTD. (SUPRA) WHICH IS ONE OF THE SISTER CONCERNS OF THE ASSESSEE. WE PERUSED THE PARA 3.2 OF THE SAID ORDER OF THE TRIBUNAL AND FIND IT IS A SELF EXPLANATORY AND THE DECISION OF THE TRIBUNAL SUPPORTS THE CASE OF TH E ASSESSEE. UNDER COMPARABLE FACTS OF THE ASSESSEE, INTEREST COST WAS ALLOWED IN FAVOR OF THE ASSESSEE RELYING ON BINDING JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF M/S LOKHANDWALA CONSTRUCTION INDUSTRIES LTD. (SUPRA). FOR THE SAKE OF COMPLETENESS O F THIS ORDER WE EXTRACT RELEVANT PARA 3.2 OF THE ORDER WHICH IS REPRODUCED AS UNDER: '3.2 WITH REGARD TO THE INTEREST EXPENDITURE............THE INTEREST COST ON THE CORRESPONDING CAPITAL BORROWED WOULD NEVERTHELESS CONTINUE TO BE INCURRED, WITHOUT ANY COR RESPONDING INCREASE IN THE VALUE OF THE INVENTORY OR THE PROJECT. SIMILARLY, A PROJECT, OR PART THEREOF, MAY BE PARTLY SOLD OR EVEN REMAIN UNSOLD FOR QUITE SOME TIME AFTER ITS COMPLETION. WHILE REVENUE WOULD STAND TO BE BOOKED ONLY ON THE PART, IF ANY, SOL D, THE INTEREST COST WOULD CONTINUE TO BE INCURRED ON THE ENTIRE CAPITAL, EVEN AS NO CORRESPONDING GAIN INURES I TERMS OF VALUE ADDITION TO THE PROJECT, WHICH STANDS IN FACT COMPLETED, SO AS TO INCREASE ITS COST BY LOADING THE SAID COST THEREON. IT IS FOR THESE REASONS THAT INTEREST (FINANCING) COST IS NORMALLY CONSIDERED AS ONLY A PERIOD (FIXED) COST, AND CHARGED TO THE OPERATING STATEMENT FOR THE YEAR IN WHICH THE SAME IS INCURRED, AS SUCH, WHAT IN OUR VIEW WOULD PREVAIL IS THE METHOD OF ACCOUNTING BEING REGULARLY FOLLOWED BY THE ASSESSEE, I.E. ON A YEAR BASIS, THE SAME ALSO HAS THE SANCTION NF LAW INASMUCH AS SEC. 145 CLEARLY PROVIDES FOR DETERMINATION OF THE BUSINESS INCOME ON THE BASIS OF THE METHOD OF ACCOUNTING BEING REGULARLY FOLLOWED, WITH THE MAND ATE OF SEC 36(L)(III) BEING ALSO SATISFIED, AND TOWARD WHICH THE ASSESSEE RELIES ON THE DECISION IN THE CASE OF CIT VS LOKHANDWALA CONSTRUCTION INDS. LTD(SUPRA). THE SAME ALSO CLARIFIES THAT THE INTEREST COST IS TO ALLOWED U/S 36(L)(III), IRRESPECTIVE OF W HETHER IT STANDS INCURRED IN RELATION TO STOCK - IN - TRADE OR ON CAPITAL ACCOUNT, AS THE SAID SECTION DRAWS NO SUCH DISTINCTION. THE ISSUE, THOUGH, WE MAY CLARIFY, IS NOT AS TO WHETHER THE BORROWED CAPITAL STANDS UTILIZED TOWARD TRADING 11 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} OPERATIONS OR ON CAPITAL ACCOUNT; THE INSTANT CASE BEING DECIDEDLY OF THE FORMER, BUT WHETHER THE SAID COST, HAVING BEEN INCURRED, IS TO BE CAPITALIZED AS A PART OF THE PROJECT COST AND, THUS, TAKEN INTO ACCOUNT FOR THE PURPOSE OF VALUATION OF INVE NTORY (STOCK - IN - TRADE) AS AT THE YEAR - END AND, CONSEQUENTLY, THE DETERMINATION OF GROSS PROFIT FOR THE YEAR. IT IS ONLY THE COST THAT IS INCURRED AND OTHERWISE ALLOWABLE, WHICH, IT MAY BE APPRECIATED, WOULD STAND TO BE CONSIDERED THUS, WHERE IT OTHERWISE Q UALIFIES FOR BEING RECKONED AS A PART OF THE COST OF PRODUCTION/CONSTRUCTION, AND THUS OF THE INVENTORY OR THE PROJECT COST A SAT THE YEAR - END. THE DEDUCIBILITY OF THE SAID COST U/S 36(L)(III) IS THUS NETHER IN DOUBT NOR IN DISPUTE. FURTHER, IT MAY ALSO BE IN PLACE TO STATE THAT SECTION 36(L)(III) STANDS SINCE AMENDED BY FINANCE ACT, 2003 W.E.F. 01/04/2004, BY WAY OF INSERTION OF A PROVISO THERETO, SO THAT ANY INTEREST COST ON CAPITAL ACCOUNT IS TO BE NECESSARILY CAPITALIZED. ACCORDINGLY, IT IS ONLY THE INT EREST COST COMPUTING THE BUSINESS INCOME QUA THE BUSINESS OF WHICH THE RELEVANT ASSET IS A OR IS TO CONSTITUTE A PART (ALSO REFER EX PLANATION 8 TO S.43(L)). THE SAID DECISION MAY, THUS, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AS, WELL AS THE AMEND ED LAW, NOT BE OF MUCH ASSISTANCE.' WE HAVE ALSO PERUSED THE SAID BINDING HIGH COURT JUDGMENT IN THE CASE OF M/S LOKHANDWALA CONSTRUCTION INDS. LTD. (SUPRA) AND FIND THE SAME IS RELEVANT FOR THE FOLLOWING CONCLUSION - 'CONSTRUCTION PROJECT UNDERTAKEN BY THE ASSESSEE BUILDER CONSTITUTED ITS STOCK IN TRADE AND THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 36(L)(III) OF THE ACT IN RESPECT OF THE INTEREST ON THE LOAN OBTAINED FOR EXECUTION OF SAID PROJECT/' RELYING ON THE ANOTHER JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CALICO DYING AND PRINTING WORKS 34 ITR 265 BOMBAY, HON'BLE BOMBAY HIGH COURT CONCLUDED THAT THE INTEREST EXPENDITURE RELATING TO THE BORROWED CAPITAL IS ALLOWABLE U/S 36(L)(III) OF THE A CT. THE RELEVANT LINES FROM THE PARA 4 READS AS UNDER; 'THAT, WHILE ADJUDICATING THE CLAIM FOR DEDUCTION UNDER SECTION 36(L)(III) OF THE ACT THE NATURE OF EXPENSE 0 - WHETHER THE EXPENDITURE WAS ON CAPITAL ACCOUNT OR REVENUE ACCOUNT WAS IRRELEVANT AS THE S ECTION ITSELF SAYS THAT INTEREST PAID BY THE ASSESSEE ON THE CAPITAL BORROWED BY THE ASSESSEE WAS AN ITEM OF DEDUCTION. THAT THE UTILIZATION OF CAPITAL WAS THE RELEVANT FOR THE PURPOSE OF ADJUDICATING THE CLAIM OF DEDUCTION UNDER SECTION 36(L)(III) OF THE ACT. (REFERRING TO THE JUDGMENT IN THE CASE OF CALICO) IT WAS LAID DOWN THAT WHERE AN ASSESSEE CLAIMS DEDUCTION OF INTEREST PAID ON THE CAPITAL BORROWED ALL THAT THE ASSESSEE WAS TO SHOW THAT THE CAPITAL WHICH WAS BORROWED WAS USED FOR BUSINESS PURPOSE IN THE RELEVANT YEAR 12 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} OF ACCOUNT AND IT DID NOT MATTER WHETHER CAPITAL WAS BORROWED IN ORDER TO ACQUIRE THE REVENUE ASSET OR A CAPITAL ASSET....../' CONSIDERING THE ABOVE SETTLED POSITION IN THE MATTER WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO CLAIM ENTIRE INTEREST DEDUCTION RELATABLE TO THE CAPITAL BORROWED AND UTILIZE D FOR BUSINESS PURPOSES IN THE YEAR UNDER CONSIDERATION, RESULTANTLY, WE DISAPPROVE F DECISION OF THE ASSESSING OFFICER/CIT(APPEALS) IN TRANSFERRING THE INTEREST EXPENDITURE TO WIP ACCOUNT. THEREFORE , ASSESSEE IS JUSTIFIED IN DEBITING THE SAME TO THE P&L ACCOUNTS OF THE RESPECTIVE ASSESSMENT YEARS. THUS, WE ORDER THE ASSESSING OFFICER TO ACCEPT THE CLAIM AS MADE IN THE RETURN OF INCOME. ACCORDINGLY, THIS PART OF THE GROUND NO. 1 IS ALLOWED IN FAVOUR OF THE ASSESSEE.' 14. FROM THE ABOVE, IT IS EVIDENT THAT ANY AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE BUSINESS PURPOSES CONSTITUTES A N ALLOWABLE DEDUCTION. THE SAID CLAUSE (HI) OF SECTION 36(1) OF THE ACT SUPPORTS THE ASSESSEE 'S CLAIM IN THE PRESENT CASE. THIS VIEW IS UPHELD IN THE CASE OF CIT VS LOKHANDWALA CONSTRUCTION INDUSTRIES LTD. (SUPRA) AS WELL AS THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. ASHISH BUILDERS PVT. LTD. (SUPRA) IRRESPECTIVE OF THE METHOD OF ACCOUNTING OF RECOGNIZING THE INCOME FOLLOWED BY THE ASSESSEE. THE PRESENT CASE INVOLVES THE PAYMENT OF INTEREST OF RS.8,19,23,638/ - , THE INTEREST PAID TO DEBENTURE HOLDERS, FINANCIAL INSTITUTIONS, UNSECURED LOAN ETC. IT IS NOT THE CASE OF THE REVENUE THAT THE INTEREST CLAIM OF RS.3,00,57,566/ - AND RELATED CAPITAL BORROWED WAS NOT UTILIZED BY THE ASSESSEE FOR BUSINESS PURPOSES OF THE ASSESSEE.' HOWEVER, THE CASE OF WALL STREET CONSTRUCTION IS ONE WHERE THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AND THEREFORE THE ITAT HELD THAT THE INTEREST COST SHALL BE DEBITED TO WORK IN PROGRESS AND ALLOWED TO BE CLAIMED AS DEDUCTION ONLY IN THE YEAR IN WHICH THE CORRESPONDING INCOM E IS OFFERED TO TAX. IN THE INSTANT CASE, THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD (POCM) OF THEREFORE THE JUDGMENT OF WALL STREET CONSTRUCTION IS NOT APPLICABLE TO THIS CASE. THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLETION AND OFFERS A PART OF THE REVENUE EVERY YEAR DEPENDING UPON THE PERCENTAGE OF COMPLETION. THE FUNDS HAVE BEEN BORROWED FOR THE PURPOSE OF CONSTRUCTION AND HAVE GONE INTO THE PROJECTS OF THE ASSESSEE WHICH ARE STOCK IN TRADE AND NOT CAPITAL ASSET OF THE ASSESSEE. THEREFORE, T HE AMENDMENT BROUGHT IN THE ACT WITH EFFECT FROM 2003 BY WAY OF INTRODUCING THE PROVISO TO SECTION 36 (1) (III) ALSO DOES NOT AFFECT THE FACTS OF THE CASE OF THE ASSESSEE. IN VIEW OF THE BINDING JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF 13 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} LOKH ANDWALA CONSTRUCTIONS AND ALSO OF THE JURISDICTIONAL ITAT IN THE CASES OF ASHISH BUILDERS PRIVATE LTD AND ROHAN ESTATE PRIVATE LTD AND ALSO THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE IS HELD TO BE ALLOWABLE, IT IS ALSO TO BE MENTIONED HERE THAT DURING THE PROCEEDINGS BEFORE THE INCOME TAX SETTLEMENT COMMISSION, THE AO HAD RAISED SPECIFIC QUESTION IN RELATION TO CLAIM ON INTEREST EXPENDITURE MADE BY THE APPELLANT AND REPLY WAS FILED BY THE APPELLANT EXPLAINING THE SAME. WHEREIN THE ASSESSEE EXPLAINED THAT DISALLOWANCE CANNOT BE MADE U/S 36(L)(III) OF THE ACT, IN VIEW OF THE JURISDICTIONAL HIGH COURT'S DECISION IN THE CASE OF LOKHANDWALA CONSTRUCTION (SUPRA). AFTER CONSIDERING THE ASSESSEE'S SUBMISSIONS, THE AO ACCEPTED THE SAME AND DID NOT RAISE OBJECTION IN RELATION TO INTEREST CLAIMED IN THE REPORT U/S 245D (3) REPORT FILED BEFORE THE ITSC. FURTHER NO DISALLOWANCE/ ADJUSTMENT WAS MADE BY ITSC IN RELATION TO SUCH INTEREST CLAIMED WHILE PASS ING THE ORDER. THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 7. ON A CAREFUL PERUSAL OF THE ORDER OF LD.CIT(A) , WE DO NOT SEE ANY INFIRMITY IN ALLOWING T HE CLAIM OF THE ASSESSEE AS T HE CLAIM OF THE ASSESSEE IS IN TUNE WITH THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF LOKANDWALA CONSTRUCTION (SUPRA) WHEREIN IT HA S BEE N HELD THAT WHEN THE PROJECT CONS TRUCTED BY THE ASSESSEE IS ITS STOCK IN TRADE AND NOT A FIXED ASSET OF THE ASSESSEE THE INT EREST PAID ON LOANS OBTAINED FOR STOCK IN TRADE I S AN ALLOWABLE DEDUCTION U/S. 36(1)(III) OF THE ACT. WE ALSO FIND THAT IN THE PROCEEDINGS BEFORE THE SETTLEMENT COMMISSION THE ASSESSEE CLAIMED INTEREST EXPENSES AND AS PER THE ORDER DATED 28.07.2014 OF THE SETTLEMENT COMMISSION AND DURING VERIFICATION PROCEEDINGS U/S. 245D(3) OF I.T. ACT, THE ASSESSEE INFORMED THE ASSESSING OFFICER THAT INTEREST OF .124.02 CRORES AS CLAIMED IN THE COMPUTATION OF INCOME ON GROUND OF INTEREST EXPENSES RETAINED IN INVENTORY IS DEDUCTIBLE UNDER PROVISIONS OF 14 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} SECTION 36(1)(III) OF THE ACT. IT WAS FURTHER INFORMED THAT THE SAID AMOUNT OF INTEREST PAID WAS IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PR OFESSION. IT WAS FURTHER SUBMITTED THAT THE CONSTRUCTION AND DEVELOPMENT HAVING COMMENCED , THE BUSINESS IS IN OPERATION, T HEREFORE, INTEREST IS ALLOWABLE U/S. 36 ( 1)(III) OF THE ACT. IT WAS ALSO FURTHER BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT IN THE CASE OF CIT V. LOKANDWALA CONSTRUCTIONS INDUSTRIES LTD., [131 TAXMAN 810] THE ASSESSEE S CLAIM FOR DEDUCTION OF INTEREST, ALTHOUGH THE REVENUE WAS RECOGNIZED ONLY ON PROJECT COMPLETION BASIS IN SUBSEQUENT YEAR, WAS ALLOWED IN THE YE A R IN WHICH THE C LAIM OF INTEREST WAS MADE. THUS, IT WAS CONTENDED THAT THE INTEREST EXPENDITURE INCURRED DURING THE YEAR IS CLAIMED AND ALLOWABLE AS EXPENSES EVEN THOUGH THE SAME HAS BEEN INVENTORISED IN THE BOOKS OF ACCOUNTS. THESE CONTENTIONS WERE ACCEPTED BY THE REVE NUE AND NO OBJECTION HAS BEEN RAISED BY THE ASSESSING OFFICER AND THE SETTLEMENT COMMISSION HAS ACCEPTED THESE CONTENTIONS OF THE ASSESSEE. THIS FACT WAS ALSO TAKEN NOTE BY THE LD.CIT(A) IN ALLOW ING THE CLAIM OF THE ASSESSEE. THEREFORE, SINCE THE REVENUE COULD NOT CONTROVERT THE FINDINGS OF THE LD.CIT(A) THAT THE PROJECT CON STRUCTED BY THE ASSESSEE FOR WHICH THE LOANS HAVE BEEN TAKEN IS NOT A STOCK IN TRADE AND ALSO THE OTHER FINDINGS OF THE LD.CIT(A), W E DO NOT FIND ANY VALID REASON TO INTERFERE WITH 15 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} THE FINDINGS OF THE LD.CIT(A) AND ACCORDINGLY WE SUSTAIN THE ORDER O F THE LD.CIT(A) ON THIS ISSUE. GROUNDS RAISED BY THE REVENUE ARE REJECTED. 8. COMING TO GROUND NO. 3 OF GROUNDS OF APPEAL OF THE REVENUE IT RELATES TO RESTRICT ING THE DISALLOWANCE U/S. 14A OF THE ACT TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. 9. THE ASSESSING OFFICER W HILE COMPLETING THE ASSESSMENT APPLYING RULE 8D MADE DISALLOWANCE U/S. 14A OF THE ACT AT 80,75,718/ - , THOUGH ASSESSEE MADE SUOMOTO DISALLOWANCE OF .5 4,01,967/ - WHICH IS THE ENTIRE EXEMPT INCOME EARNED BY THE ASSE SSEE AND CLAIMED AS DEDUCTION. 10. ON APPEAL THE LD.CIT(A) RESTRICTED THE DISALLOWANCE ONLY TO THE EXEMPT INCOME OBSERVING AS UNDER: - THE SUBMISSIONS OF THE LEARNED COUNSEL HAVE BEEN CAREFULLY C ONSIDERED . IT IS THE CONTENTION OF THE LEARNED COUNSEL THAT THE INVESTMENTS MADE HAVE BEEN MADE OUT OF OWN FUNDS AND THAT THE OWN FUNDS OF THE ASSESSEE ARE MUCH MORE THAN THE INVESTMENTS MADE. FURTHER THE INVESTMENTS HAVE BEEN MADE IN THE SUBSIDIARIES FOR STRATEGIC PURPOSE AND HENCE HAVE TO BE EXCLUDED FOR DISALLOWANCE UNDER SECTION 14 A. THE LEARNED COUNSEL FURTHER RELIED UPON THE JUDGMENT OF HON'BLE CHENNAI HIGH COURT IN THE CASE OF SHIVA INDUSTRIES HOLDINGS LTD VS. ACIT 11 TAXMANN.COM 404 AND ALSO THAT O F THE JURISDICTIONAL ITAT IN THE CASE OF DAGA GLOBAL CHEMICAL PRIVATE LTD VS. ACIT ITA NUMBER 5592/MUM/2012 WHEREIN IT HAS BEEN HELD THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO AND SHOULD NOT EXCEED THE EXEMPT INCOME. FURTHER, THE JURISDICTIONAL ITAT IN THE CASE OF SANDEEP BHARAT SINGH KOTHARI VS. ACIT ITA NUMBER 8706/MUM/2011 FOLLOWED THE COORDINATE BENCH IN THE CASE OF DAGA GLOBAL CHEMICAL PRIVATE LTD AND HELD THAT THE DISALLOWANCE U NDER SECTION 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT INCOME. W HI LE THE DISALLOWANCE MADE BY THE AO IN ACCORDANCE WITH RULE 8D IS AGREED TO IN PRINCIPLE, FOLLOWING THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF DAGA GLOBAL CHEMICAL PRIVATE LTD, 16 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE EXEMPT INCOME EARNED I.E. RS.54,01,967/ - . THIS GROUND OF APPEAL IS ALLOWED. 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ORDER S OF THE ASSESSING OFFICER AND LD.CIT(A) . WE FIND THAT LD.CIT(A) RESTRICTED THE DISALLOWANCE U/S. 14A OF THE ACT TO THE EXEMPT INCOME EARNED BY THE ASSESSEE FOLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SHIVA INDUSTRIES HOLDINGS LTD V. ACIT [11 TAXMANN.COM 404] AND THE DECISION OF THE COORDINATE BENCH IN T HE CASE OF DAGA GLOBAL CHEMICAL PVT. LTD., V. ACIT IN ITA.NO. 5592/MUM/2012. THIS BENCH IS CONSISTENTLY HOLDING THAT, THE DISALLOWANCE U/S. 14A OF THE ACT SHALL NOT BE MORE THAN THE EXEMPT INCOME AND SHALL BE RESTRICTED TO THE EXEMPT INCOME EARNED BY THE A SSESSEE. THUS, T HE DECISION OF THE LD.CIT(A) IS IN TUNE WITH THE CONSISTENT VIEW OF THIS TRIBUNAL. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). THIS GROUND OF THE REVENUE IS DISMISSED. ITA.NO. 2348/MUM/2018 (A.Y: 2014 - 15) 12. COM ING TO THE APPEAL OF THE ASSESSEE THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1 (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX - APPEAL ERRED IN CONFIRMING THE NON - COGNIZANCE OF THE REVISED RETURN OF INCOME FILED BY THE APPELLANT ON 31 ST MARCH 2015, ON THE GROUND THAT FILING OF ORIGINAL RETURN WAS DELAYED BY FEW MINUTES. 17 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} THE LEARNED CIT(A) ERRED IN APPRECIATING THE FACT THE ORIGINAL RETURN WAS DELAYED BY FEW MINUTES DUE TO TECHNICAL GLITCHES IN THE INCOME TA X WEBSITE. (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX - APPEAL IGNORED THE FACT THAT INCOME TAX RETURN WAS REVISED TO GIVE EFFECT TO THE ORDER OF HON'BLE BOMBAY HIGH COURT FOR MERGER OF TWO COMPANIES WI TH APPELLANT COMPANY. (C) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX - APPEAL IGNORED THE FACT THAT LEARNED ASSESSING OFFICER CONSIDERED ONLY ADDITIONAL INCOME AND DISALLOWANCES DISCLOSED IN THE REVISED RET URN AND IGNORED ADDITIONAL EXPENSES / ALLOWANCES CLAIMED IN THE REVISED RETURN. 2(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX APPEAL ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80IB OF RS. 7,32,04,923 ON THE GROUND THAT FILING OF ORIGINAL RETURN WAS DELAYED BY FEW MINUTES. (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEANED AO ERRED IN REDUCING THE CLAIM U/S 80 - IB (10) BY RS. 38,18,880 IN RESPECT OF AMOUNT RECEIVED ON CA NCELLATION OF FLATS BOOKED BY THE CUSTOMERS AND THE LEARNED COMMISSIONER OF INCOME TAX - APPEAL ERRED IN NOT ADJUDICATING THE SAME. (C) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEANED AO ERRED IN NOT ALLOWING ENHANCEMENT OF CLAIM U/S 80 - IB (10) DUE TO DISALLOWANCE OF EXPENSES IN ASSESSMENT AND THE LEARNED COMMISSIONER OF INCOME - TAX APPEALS ERRED IN NOT ADJUDICATING THE SAME. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING T HE DISALLOWANCE OF THE BUSINESS PROMOTION EXPENSES OF . 2,04,51,610/ - . 13. GROUND NO.1 OF GROUNDS OF APPEAL OF THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT CONSIDERING THE REVISED RETURN ON THE GROUND THAT THE ORIGINAL RETURN FILED BY THE ASSESSEE IS A NONEST AND IS A BELATED R ETURN. 18 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 14. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IS A BUILDER AND ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF REA L ESTATE PROJECTS. DURING THE ASSESSMENT Y EAR UNDER CONSIDERATION ASSESSEE EXECUTED VARIOUS PROJECTS AND MANY OF THEM WERE STILL U NDER CONSTRUCTION . THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 30.11.2014 MIDNIGH T. HOWEVER DUE TO TECHNICAL GLITCH AND RUSH HOURS THERE WAS A DELAY OF TWO MINUTES IN RETURN GETTING UPLOADED AND D UE TO WHICH THE DATE OF FILING OF RETURN APPEAR ED ON THE ACKNOWLEDGMENT AS 01 ST DECEMBER 2014. IN ITS RETURN OF INCOME, THE ASSESSEE DECLARED INCOME OF .206,93,75,430/ - UNDER NORMAL PROVISIONS OF THE ACT AND BOOK PROFITS AT . 290,37,59,620/ - U/S. 115JB OF THE ACT. SUBSEQUENTLY, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 31 .03.201 6 DECLARING INCOME AT . 196,14,10,368/ - UNDER NORMAL PROVISIONS OF THE ACT FOR GIVING EFFECT TO THE ORDER OF THE HO N'BLE BOMBAY HIGH COURT WHICH APPROVED THE MERGER OF MAHAVIR BUILD ESTATE LIMITED AND GALAXY PREMISES PRIVATE LIMITED WITH THE ASSESSEE W.E.F. 01 ST APRIL, 2013 AND ALSO TO RECTIFY CERT AIN CLERICAL ERRORS. 15. THE AS SESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 30.12.2016 AND THE ASSESSING OFFICER DETERMINED T HE INCOME OF THE ASSESSEE AT . 306,02,55,260/ - UNDER THE NORMAL PROVISIONS OF T HE ACT AND BOOK PROFITS AT . 291,18,35,338/ - . WHILE COMPLETING THE ASSESSMENT THE 19 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} ASSESSING OFFICER IGNORED THE REVISED RET URN OF INCOME FILED BY THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS NOT FILED ITS ORIGINAL RETURN WITHIN TIME PRESCRIBED AS PER THE PROVISIONS OF SECTION 139(1) OF THE ACT. THE SUBMISSION OF THE ASSESSEE THAT DUE TO TECHNICAL ERROR IN UPLOADING THE RETURN ON THE LAST DATE BECAUSE OF WHICH THE RETURN GOT UPLOADED JUST AFTER MIDNIGHT WITH A DELAY OF TWO MINUTES BUT FOR THAT THE DELAY OF FILING IS NOT INTENTIONAL , HAS BEEN REJECTED BY THE ASSESSING OFFICER OBSERVING THAT AS PER THE PROVISIONS OF ACT THE DELAY CANNOT BE CONDONED . WITH THESE OBSERVATIONS THE ASSESSING OFFICER DID NOT TAKE COGNIZANCE OF THE REVISED RETURN FILED AND THE TOTAL INCOME WAS ASSESSED AS PER THE ORIGINAL RETURN FILED FOR THE PURPOSE OF COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERAT ION. ACCORDINGLY, THE ASSESSING OFFICER MADE COMPUTATION OF INCOME DETERMINING THE TOTAL INCOME AT . 306,02,55,260/ - . WHILE ARRIVING AT THIS TOTAL INCOME THE ASSE SSING OFFICER ALSO CONSIDERED .4,05,74,337/ - WHICH ARE THE SUOMOTO ADDITIONS/DISALLOWANCE M ADE BY THE ASSESSEE IN ITS REVISED RETURN OF INCOME, EVEN THOUGH THE REVISED RETURN WAS IGNORED. THIS A MOUNT OF . 4,05,74,337/ - REPRESENTS REDUCTION IN DEPRECIATION AS PER I.T. ACT, DISALLOWANCE U/S. 43C , INTEREST ON DISALLOWED PAYMENTS OF TDS, INTEREST ON INCOME TAX. APART FROM THIS THE ASSESSING OFFICER MADE DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT AT .89,11,71,62 2/ - , DISALLO WANCE U/S. 14A OF THE ACT AT . 80,75,718/ - , DISALLOWANCE OF 20 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} BUSINE SS PROMOTION EXPENSES AT . 2,21,81,610/ - AND THE CLAIM FOR DEDUCTION U/S. 80IB (1 0 ) HAS BEEN DENIED COMPLETELY. 16. ON APPEAL THE LD.CIT(A) DELETED THE DISALLOWANCE MADE TOWARDS INTEREST U/S. 36(1)(III) OF THE ACT AND RESTRICTED THE DISALLOWANCE U/S. 14A OF THE ACT TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE. HOWEVER, THE LD.CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER IN NOT ALLOWING DEDUCTION CLAIMED U/S. 80IB(10) OF THE ACT, REJEC TED THE REVISED RETURN AND THE RESULTED ADJUST MENTS OF . 4.05 CRORES, CONFIRMED THE DISALLOWANCE OF BUSINESS PROMOTION EXPENSES TO THE EXTENT OF . 2.05 CRORES AS AGAINST . 2.22 CRORES. 17. LD. COUNSEL SHRI RAJA N VORA APPEARING FOR THE ASSESSEE SUBMITTED THAT ASSESSEE FILED ITS RETURN OF INCOME ON LAST DATE FOR FILI NG OF RETURN OF INCOME FOR THE AY 2014 - 15 I.E. ON 30.11.2014 . HOWEVER, DUE TO TECHNICAL GLITCH AND LAST HOUR RUSH ON THE WEBSITE, THE RETURN GOT UPLOADED BY 00.02 AM ON 01.12.2014 WITH A DELAY OF TWO MINUTES . THE SAID RETURN WAS REVISED SUBSEQUENTLY ON 31 .03.2016 DECLARING TOTAL INCOME OF . 196,14,10,368. THE RETURN WAS REVISED TO GIVE EFFECT TO MERGER OF MAHAVIR BUILD ESTATE LIMITED AND GALAXY PREMISES PRIVATE LIMITED WITH THE ASSESSEE COMPANY AND TO RECTIFY CERTAIN CLERICAL ERRORS. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER REJECTED REVISED 21 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} RETURN FILED BY THE ASSESSEE ON THE GROUND THAT THE ORIGINAL RETURN WAS NOT FILED WITHIN THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE ACT. HOWEVER, ASSESSING OFFICER WHILE MAKING AS SESSMENT, HAS CONSIDERED THE ADDITIONAL DISALLOWANCE S MADE BY THE ASSESSEE IN THE REVISE RETURN AT . 4.05 CRORES AND HAS REJECTED/IGNORED THE ADDITIONAL DEDUCTION/EXPENSES OF . 8.17 CRORES CLAIMED BY THE ASSESSEE. REFERRING TO PAGE NO. 57 OF THE PAPER BOO K WHICH IS THE COPY OF ACKNOWLEDGMENT RECEIVED FROM THE INCOME - TAX DEPARTMENT , LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT ASSESSEE COULD NOT UPLOAD THE RETURN OF INCOME TILL LATE ON THE NIGHT OF 30 .11.2014 I.E. THE DUE DATE FOR FILING RETURN OF INCO ME FOR THE SUBJECT A . Y . 2014 - 15, AND THE RETURN GOT UPLOADED AT 00.02 AM ON 01.12.2014 DUE TO WHICH THE ACKNOWLEDGEMENT IN THE SYSTEM OF TAX AUTHORITIES WAS REFLECTING DATE OF FILING OF THE RETURN OF INCOME AS 01.12.2014 INSTEAD OF 30 .11.2014 . LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE DELAY IN FILING OF ORIGINAL RETURN BY TWO MINUTES CANNOT BE CONSIDERED AS MALAFIDE CONSIDERING THE FACT THAT DELAY WAS ON ACCOUNT OF TECHNICAL GLITCHES AND DELAY WAS BY ONLY TWO MINUTES. IN THIS REGA RD RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: ITO VS MANTANGI RUBBER PVT LTD (DEL HI ITAT) (ITA NO. 4498/D EL/2013) DATED 29 MAY 2015. BOMBAY MERCANTILE CO - OP BANK [322 ITR 87] (BOMBAY HIGH COURT) COSME MATIAS MENEZES PVT. LTD., [379 ITR 31] (BOMBAY HIGH COURT) LODHI PROPERTY CO. LTD [323 ITR 441] (DELHI HIGH COURT) CBDT VS REGEN INFRASTRUCTURE (WRIT APPEAL NO. 1314 OF 2016) DATED 01.11.2016. HIMUDA V. ACIT IN ITA.NO. 480, 481 & 972/CHD/2012 DATED 10.05 .2019 22 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 18. LD. COUNSEL FOR THE ASSESSEE FURTHER WITHOUT PREJUDICE TO THE ABOVE SUBMITS THAT , THOUGH THE ASSESSING OFFICER HAS STATED THAT REVISED RETURN HAS NOT BEEN CONSIDERED FOR THE PURPOSE OF COMPUTATION OF INCOME, HOWEVER THE FOLLOWING DISALLOWANCE S WHICH WERE MADE BY THE ASSESSEE IN THE REVISED RETURN FILED ON 31 .03.2016 WERE PICKED UP AND DISALLOWED WHILE COMPUTING TOTAL INCOME WHILE PASSING ASSESSMENT ORDER: - REDUCTIONS IN DEPRECIATION AS PER THE ACT 3.9161 CRORES ADDITIONS UNDER SECTION 43C 0.0058 CRORES INTEREST ON DELAYED PAYMENT OF TDS 0.1284 CRORES INTEREST ON INCOME TAX 0.0069 CRORES TOTAL 4.0572 CRORES 19. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER IGNORED FOLLOWING DEDUCTIONS CLAIMED BY ASSESSEE IN THE REVISED RETURN FILED : REDUCTION IN 14A DISALLOWANCES 0.295 CRORES ADDITIONAL DEDUCTION CLAIMED UNDER SECTION 80G OF THE ACT 7.87 CRORES TOTAL 8.165 CRORES 20. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF REVISED RETURN IS REJECTED ON THE BASIS THAT ORIGINAL RETURN WAS FILED AFTER DUE DATE OF FILING OF RETURN OF INCOME TH E N THE SAME SHOULD BE IGNORED IN ENTIRETY BUT CANNOT ADOPT IN A MANNER BENEFICIAL TO THE REVENUE . 21. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE FACT IS THAT RETURN WAS UPLOA DED AT 00:02 AM ON 01.12.2014 WHICH IS BEYOND THE DUE DATE AS THE 23 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} DUE DATE IS 30.11.2014. THEREFORE, THE ASSESSING OFFICER HAS STRICTLY GONE BY THE DATE AND THE ASSESSING OFFICER HAS NO POWER TO CONDONE THE DELAY. REFERRING TO THE PROVISIONS OF SECTION 1 19(2)(B) OF THE ACT, LD. DR SUBMITS THAT ONLY THE CBDT HAS THE POWER TO CONDONE THE DELAY AND THE ASSESSEE SHOULD HAVE MADE AN APPLICATION TO THE BOARD FOR CONDONATION OF DELAY. THEREFORE, SINCE THE RETURN FILED WAS DELAYED THE ASSESSING OFFICER HAS RIGHTLY IGNORED THE REVISED RETURN OF INCOME AS THE ORIGINAL RETURN WAS NOT FILED IN TIME. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED ON. IN THIS CASE THE ASSESSEE FILED ITS RETURN OF INCOME O N THE LAST DAY OF FILING OF RETURN I.E. ON 30.11.2014. HOWEVER, DUE TO TECHNICAL GLI TCH AND LAST HOUR RUSH ON THE WEBSITE THE RETURN GOT UPLOADED PAST MIDNIGHT BY 00:02 AM ON 01.11.2014 . THUS , THE RETURN WAS DELAYED BY TWO MINUTES. SUBSEQUENTLY THE ASSES SEE FILED REVISED RETURN OF INCOME ON 31.03.2016 MAKING SOME ADJUSTMENTS AND ALSO TO GIVE EFFECT TO THE MERGER OF TWO ENTITIES AS APPROVED BY THE HON'BLE BOMBAY HIGH COURT. HOWEVER, W HILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER IGNORED T HE REVISED RETURN OF INCOME ON THE GROUND THAT THE ASSESSEE FILED ORIGINAL RETURN OF INCOME BELATEDLY AS THE RETURN WAS FILED ONLY AT 00:02 AM ON 01.12.2014. ACCORDINGLY, ASSESSING OFFICER COMPUTED INCOME OF THE ASSESSEE BY DENYING THE DEDUCTION U/S. 80IB (10) 2 4 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} OF THE ACT EVEN THOUGH THE ASSESSING OFFICE R HAS QUANTIFIED ALLOWABLE DEDUCTION U/S. 80IB (10) OF THE ACT , MADE DISALLOWANCE U/S. 36(1)(III) OF THE ACT, DISALLOWANCE U/S. 14A OF THE ACT, DISALLOWANCE OF BUSINESS PROMOTION EXPENSES . APART FROM THESE DI SALLOWANCES THE ASSESSING OFFICER CONSIDERED EVEN THE SUOMOTO ADJUSTMENTS I.E., THE DISALLOWANCE OF .4.0572 CRORES AS MADE BY THE ASSESSEE IN ITS REVISED RETURN OF INCOME FOR DISALLOWANCE WHILE COMPUTING THE INCOME BY THE ASSESSING OFFICER. THIS SHOWS TH E ASSESSING OFFICER IN FACT PARTLY ACTED UPON THE REVISED RETURN FILED BY CONSIDERING THE ADJUSTMENTS AS MADE BY THE ASSESSEE FOR DISALLOWANCE IN THE REVISED RETURN. THE ASSESSING OFFICER FURTHER CONVENIENTLY IGNORED THE DEDUCTIONS OF .8.165 CRORES CLAIM ED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME. 23. A S FAR AS THE TECHNICAL GLI TCH AND LAST HOUR RUSH AND CONSEQUENTLY WHETHER THE RETURN FILED BY THE ASSESSEE WITH A DELAY OF TWO MINUTES CAN BE CONSIDERED AS THE RETURN FILED IN TIME IS CONCERNED, IN THE CASE OF BOMBAY MERCANTILE CO - OP. BANK LTD., V. CBDT [322 ITR 87] THE HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER: 8 . IT IS WELL SETTLED THAT IN MATTERS OF CONDONATION OF DELAY A HIGHLY PEDANTIC APPROACH SHOULD BE ESCHEWED AND A JUSTICE ORIENTED APPROACH SHOULD BE ADOPTED AND A PARTY SHOULD NOT BE MADE TO SUFFER ON ACCOUNT OF TECHNICALITIES . 25 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 24. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF COSME MATIAS MENEZES (P.) LTD. V. CIT [ 379 ITR 31] OBSERVED AS UNDER: - 9. READING THE SAID PROVISIONS, WE FIND THAT SECTION 139 AND 239 OF THE SAID ACT ITSELF ALLOWS FOR FILING OF THE RETURNS AND CLAIM OF REFUND WITHIN A PERIOD OF ONE YEAR FROM THE END OF THE ASSESSMENT YEAR I.E. ON OR B EFORE 31.03.2008. THE PROVISIONS OF SECTION 119(2)(B) OF THE ACT ALLOW THE CBDT TO ADMIT AN APPLICATION BEYOND THE TIME PRESCRIBED UNDER SECTION 139 AND SECTION 239 OF THE SAID ACT. IN THE PRESENT CASE WE FIND THAT THE RESPONDENTS HAVE FAILED TO EXERCISE S UCH POWERS TO CONDONE THE DELAY IN FILING RETURNS AND CONSEQUENT REFUND BY THE PETITIONERS ON IRRELEVANT AND EXTRANEOUS REASONS. 10. THIS COURT IN THE JUDGMENT IN THE CASE OF M/S. BOMBAY MERCANTILE CO - OP BANK LTD VS. THE CENTRAL BOARD OF DIRECT TAXES & OTH ERS (SUPR A), HAS OBSERVED AT PARA 8 THUS : '8. IT IS WELL SETTLED THAT IN MATTERS OF CONDONATION OF DELAY A HIGHLY PEDANTIC APPROACH SHOULD BE ESCHEWED AND A JUSTICE ORIENTED APPROACH SHOULD BE ADOPTED AND A PARTY SHOULD NOT BE MADE TO SUFFER ON ACCOUNT OF TECHNICALITIES.' 11. TAKING NOTE OF THE SAID OBSERVATIONS AND CONSIDERING THAT THE DELAY IN THE PRESENT CASE IS ONLY OF ONE DAY, WE FIND THAT THE APPROACH OF THE RESPONDENTS IN REFUSING TO CONDONE THE DELAY IS A PEDANTIC WHICH, IF ALLOWED TO STAND, WOULD R ESULT IN GREAT HARDSHIP TO THE PETITIONERS FOR NO FAULT OF THE PETITIONERS. THE PETITIONERS HAVE ALSO PRODUCED THE HARD COPY TO SHOW THAT IN FACT SUCH RETURN IN FORM - 1 WERE FILED ON 31.03.2008 WHICH WAS ADMITTEDLY THE LAST DATE FOR FILING SUCH RETURNS. T HIS FACTUAL ASPECTS HAVE NOT BEEN DISPUTED BY THE RESPONDENTS. NEEDLESS TO SAY, WE HAVE NOT EXAMINED THE MERITS OF THE CLAIM OF THE PETITIONERS BASED ON THE RETURNS FILED BY THE PETITIONERS BUT ONLY CONSIDERED WHETHER THE DELAY IN FILING SUCH RETURNS DESER VES TO BE CONDONED. SUCH RETURNS AND THE CLAIM OF THE PETITIONERS HAVE TO BE EXAMINED BY THE RESPONDENTS ON ITS OWN MERITS . 25. HON'BLE DELHI HIGH COURT I N THE CASE OF LODHI PROPERTY CO. LTD. V. UNDER SECRETARY (ITA - II) DEPARTMENT OF REVENUE [323 ITR 441] OBS ERVED AS UNDER: - 7. IN VIEW OF THE FOREGOING, IT IS ABSOLUTELY CLEAR THAT THE SUBMISSIONS SOUGHT TO BE RAISED BEFORE US BY THE LEARNED COUNSEL 26 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} FOR THE RESPONDENT HAVE SPECIFICALLY AND CATEGORICALLY BEEN REJECTED BY THE KARNATAKA HIGH COURT AND THE SAME HAVE BEEN ACCEPTED NOT ONLY BY THE BOARD, BUT ALSO BY THE MINISTRY OF LAW. WE NOTICE THAT A SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE BOMBAY HIGH COURT IN THE CASE OF SITALDAS K. MOTWANI V. DIRECTOR GENERAL OF INCOME - TAX (INTERNATIONAL TAXATION ): 187 TAXMAN 44 (BOM). CONSEQUENTLY, AGREEING WITH THE KARNATAKA HIGH COURT, WE ARE OF THE VIEW THAT THE BOARD HAS THE POWER UNDER SECTION 119 (2) TO CONDONE THE DELAY IN THE CASE OF A RETURN WHICH IS FILED LATE AND WHERE A CLAIM FOR CARRY FORWARD OF LOSSES IS MADE. 8. COMING BACK TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE IMPUGNED ORDER UNDER SECTION 119 PASSED BY THE BOARD IS A NON - SPEAKING ONE. NORMALLY, WE WOULD HAVE REMANDED THE MATTER TO THE BOARD TO CONSIDER THE APPLICATION OF THE PETITIONER AFRESH. HOWEVER, WE FIND THAT IN THE PRESENT CASE, THE DELAY IS ONLY OF ONE DAY AND THE CIRCUMSTANCES HAVE BE EN EXPLAINED AND HAVE NOT BEEN CONTROVERTED BY THE RESPONDENTS. THE FACT OF THE MATTER IS THAT THE PETITIONER DID REACH THE CENTRAL REVENUE BUILDING BEFORE THE CLOSURE OF THE COUNTER ON 01.11.2004. IT IS ONLY BECAUSE HE WAS SENT FROM ONE ROOM TO THE OTHER AND HAD TO WAIT IN LONG QUEUES THAT HE COULD NOT PRESENT THE RETURN AT THE COUNTER WHICH WAS RECEIVING THE RETURNS PRIOR TO 6.00 P.M. ON THAT DATE. WE FEEL THAT SUFFICIENT CAUSE HAS BEEN SHOWN BY THE PETITIONER FOR THE DELAY OF ONE DAY IN FILING THE RETURN . IF THE DELAY IS NOT CONDONED, IT WOULD CAUSE GENUINE HARDSHIP TO THE PETITIONER. THUS, IN THE CIRCUMSTANCES OF THIS CASE, INSTEAD OF REMANDING THE MATTER BACK TO THE CBDT, WE DIRECT THAT THE DELAY OF ONE DAY IN FILING OF THE RETURN BE CONDONED. 26. WE ALSO NOTICED THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CBDT V. REGEN INFRASTRUCTURE & SERVICES (P.) LTD., [75 TAXMANN.COM 135] CONDONED DELAY OF ONE DAY IN UPLOADING T HE RETURN OF INCOME. THE FACTS IN THIS CASE, THE ASSESSEE HAD UPLOADED ITS RETURN SOMETIME IMMEDIATELY PA ST MIDNIGHT ON 15.10.2010 I.E. LA ST DATE OF FILING RETURN DUE TO FLOODS. THE CBDT REJECTED THE APPLICATION SEEKING CONDONATION OF DELAY ON THE GROUND THAT THERE WERE NO FLOODS AND HENCE , THE ASSESSEE COULD HAVE EASILY FI LED ITS RETURN IN THE NORMAL PERIOD . THE HON'BLE SINGLE JUDGE HAD 27 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} COME TO THE CONCLUSION THAT THE ENDS OF JUSTICE WOULD BE SERVED BETTER BY SETTING ASIDE THE ORDER OF THE CBDT AND DIRECTED THE ASSESSING OFFICER TO CONSIDER THE RETURN OF INCOME FILED BY TH E ASSESSEE ON MERITS. ON THESE FACTS THE HON'BLE DIVISION BENCH OF THE MADRAS HIGH COURT ON A WRIT APPEAL HELD AS UNDER: 6. IT IS APPROPRIATE TO NOTICE THAT UNDER SECTION 119(2)(B) OF THE INCOME TAX ACT, THE CENTRAL BOARD DIRECT TAXES HAS BEEN EMPOWERED 'TO ADMIT AN APPLICATION OR CLAIM FOR EXEMPTION, DEDUCTION, REFUND * ANY OTHER RELIEF UNDER THE ACT, AFTER THE EXPIRY OF THE PERIOD SPECIFIED BY OR UNDER THE ACT BY MAKING SUCH AN APPLICATION OR CLAIM AND DEAL WITH THE SAME ON MERITS IN ACCORDANCE WITH LA W.' IN OTHER WORDS, THE STATUTE HAS CONFERRED DISCRETION IN THE HANDS OF THE BOARD TO ADMIT OF ANY CLAIM WHICH IS MADE BEYOND THE PERIOD SPECIFIED FOR DOING SO AND WHEN ONCE THE DISCRETION IS CONFERRED BY A STATUTE UPON AN AUTHORITY, SUCH A DISCRETION IS R EQUIRED TO BE EXERCISED ON SOUND LINES. IT IS ONE OF THE IMPORTANT FACTORS TO BE CONSIDERED WHILE DEALING WITH AN APPLICATION SEEKING CONDONATION OF DELAY AS TO WHETHER GRAVE AND IRREPARABLE INJURY OR HARDSHIP WILL BE CAUSED TO THE PERSON CONCERNED AND AS TO WHETHER OR NOT THE INTERESTS OF JUSTICE WOULD BE SERVED BETTER, IN CONDONING THE DELAY. IN THE INSTANT CASE, THERE IS NO DISPUTE OR DENIAL OF THE FACT THAT THE RETURN OF INCOME FILED BY THE RESPONDENT/ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11, HAS BEEN U PLOADED SOMETIME PAST 00.00 HOURS ON 15.10.2010. ONE CAN TAKE JUDICIAL NOTICE OF THE FACT THAT UPLOADING OF RETURN REQUIRES NOT ONLY AN EFFORT BUT ALSO CONSUMES SOMETIME. IF THE ASSESSEE HAS ENCOUNTERED CERTAIN HARDSHIP OR DIFFICULTY IN UPLOADING HIS RETUR N, AS ALLEGED BY HIM DUE TO A TECHNICAL SNAGS IN THE WEBSITE OF THE INCOME TAX DEPARTMENT DUE TO THE LAST HOUR RUSH OF FILING OF RETURNS, THE DELAY DESERVES TO BE CONDONED. 27. WE OBSERVED THAT THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. MANTANGI RUBBER PVT. LTD., IN ITA.NO. 4498/DEL/2013 DATED 29.05.2015 CONSIDERED A SITUATION WHE RE THERE WAS A DELAY OF 46 MINUTES IN UPLOADING THE E - RETURN AND THE TRIBUNAL CONDONED THE DELAY OBSERVING AS UNDER: - 28 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 2. BRIEF FACTS OF THE CARE ARE THAT AS PER AO, E - RETURN OF INCOME, DECLARING NIL INCOME, WAS FILED WITH ACKNOWLEDGEMENT NO. 982454810111009 ON 1 - 10 - 2009, AFTER CLAIMING DEDUCTION U/S 80IC OF RS. 2,34,41,162/ - . THE AO DENIED DEDUCTION U/S 80IC ON THE GROUND THAT ASSESSEE HAD NOT FILED THE RETURN WITHIN SPECIFIED TIME U/S 139(1), BECAUSE AS PER RECORDS THE RETURN WAS FILED ON 1 - 10 - 2009 AND NOT ON 30 - 9 - 2009. HE DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE RETURN WAS ACTUALLY UPLOADED AND FILED ON THE SITE OF THE INCOME - TAX DEPARTMENT AT 12.46 AM ON 1 - 10 - 2009 AND THUS THERE WAS ONLY A TECHNICAL DELAY OF 46 MINUTES IN FILING OF RETURN WHICH, IN ANY CASE, WAS FILED BEFORE THE COMMENCEMENT OF THE NEXT WORKING DAY. 3. LD. CIT(A) DIRECTED THE AO TO VERIFY THE DATE WHEN THE RETURN WAS UPLOADED AND SE NT INTO TRANSMISSION OBSERVING AS UNDER : THE AO IS DIRECTED TO VERIFY THE CONTENTION OF THE APPELLANT WITH THE INFORMATION AVAILABLE WITH THE DIRECTORATE OF SYSTEMS REGARDING THIS ELECTRONIC TRAIL OF THE E - RETURN FILED. IN CASE IT IS FOUND THAT THE RETURN WAS INDEED UNLOADED WITH THE ELECTRONIC SIGNATURE ON 30 - 09 - 2009, THE STIPULATED DATE OF FILING OF THE RETURN, THEN IT SHALL BE HELD AS PER THE PRINCIPLES OF LAW OF CONTRACT THAT THE RETURN WAS IRREVOCABLY SET INTO TRANSMISSION, THE ACT AS PER LAW, ON THE PART OF THE APPELLANT BEING COMPLETE. IN SUCH A CASE THE DELAY IN THE ACKNOWLEDGEMENT BEING SENT, AND IT BEING DATED 01 - 10 - 2009 SHALL NOT HAVE ANY BEARING ON THE CASE. IN THE EVENT OF BEING UPLOADING AND SUBMISSION BEING COMPLETED BY 30 - 09 - 2009 IT SHALL BE HELD THAT T HE RETURN WAS FILED ON TIME AND ALL THE RELATED BENEFITS SHALL THEN BE MADE AVAILABLE TO THE APPELLANT. THE AO IS THUS DIRECTED TO OBTAIN THE ELECTRONIC TRAIL OF FILING OF THE RETURN FROM DIT(SYSTEMS). IF THE RETURN WAS DULY UPLOADED AND SET IN TO TRANSMISSION BY 30 - 09 - 2009 THEN THE AO IS DIRECTED TO GIVE THE BENEFITS OF SECTION 80IC. IN CASE IT IS SEEN THAT THE RETURN WAS DULY UPLOADED AND SET INTO TRANSMISSION SONLY BY 01 - 10 - 2009 THEN THE BENEFIT OF SECTION 80IC SHALL NOT BE AVAILABLE AS THE M ANDATORY REQUIREMENT OF SECTION 80AC WOULD NOT HAVE BEEN MET. 4 . BEING AGGRIEVED WITH THE DIRECTION OF LD. CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS ERRONEOUS AND CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN HOLDING THAT IF THE 29 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} UPLOADING AND SUBMISSION OF E - FILED RETURN BY THE ASSESSEE WAS COMPLETED BY 30.09.2009 THEN THE ASSESSEE W ILL BE GET THE BENEFIT OF DEDUCTION U/S 801E. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN DELETING THE ADDITION THE ADDITION WITHOUT GIVING AO OPPORTUNITY FOR REBUT AS PER RULE 46A , AS NO REMAND REPORT WAS CALLED FOR IN RESPECT OF VERIFYING THE ELECTRONIC TRIAL OF FILLING THE RETURN FROM DIT (SYSTEMS). 4. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON THE FACTS AND IN LAW. 5. THAT THE GROUNDS OF APPEAL ARE WIT HOUT PREJUDICE TO EACH OTHER. 6. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ON THE GROUND OF AT THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 5. THE ASSESSEE HAS FILED CROSS - OBJECTION, TAKING FOLLOWING GROUNDS: (1) THAT THE ORDER DATED 06 - 06 - 2013 PASSED U/S 250(6) OF THE INCOME - TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) IX, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS SHE WAS NOT JUSTIFIED TO SET ASIDE THE ASSESSMENT AND RESTORE THE MATTER BACK TO THE FILE OF LD ASSESSING OFFICER. (2) THAT THE ORDER DATED 06 - 06 - 2013 PASSED U/S 250(6) OF THE INCOME - TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IX, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS SHE WAS NOT JUSTIFIED TO HOLD THAT THE BENEFIT OF SECTION 80 - IC OF THE INCOME - TAX ACT, 1961 SHALL NOT BE AVAILABLE AS THE REQUIREMENTS OF SECTION 80 - AC ARE MANDATORY WHEREAS THE PROVISIONS OF SECTION 80 - AC ARE NOT MANDATORY BUT ONLY DIRECTORY IN NATURE. 6. WE HAVE CONSIDERED THE SUBMI SSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY, AT BEST THE DELAY IS OF 46 MINUTES IN FILING THE E - RETURN. ON ACCOUNT OF THIS DELAY, THE ACKNOWLEDGEMENT BEARS THE DATE 1 - 10 - 2009. THERE CAN BE SEVERAL REASONS FOR THIS SMALL D ELAY INCLUDING TECHNICAL REASONS. BUT CONSIDERING THE FACT THAT THE RETURN WAS FILED IN THE INTERVENING NIGHT OF 30 - 9 - 2009 AND 1 - 10 - 2009, THE ASSESSEES CLAIM, IF OTHERWISE ADMISSIBLE, CANNOT BE DENIED ON ACCOUNT OF THIS TECHNICAL DELAY. IN OUR OPINION, IT WOULD BE TRAVESTY OF JUSTICE IF FOR A TECHNICAL DELAY OF 46 MINUTES IN FILING THE RETURN OF INCOME, A DEDUCTION OF RS. 2,34,41,162/ - IS DENIED TO ASSESSEE. 30 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 7. SECTION 80AC PROVIDES THAT DEDUCTION U/S 80IC SHALL BE ALLOWED TO ASSESSEE IF THE RETURN IS FIL ED ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB - SECTION (1) OF SECTION 139. HOWEVER, SECTION 139(4) CARVES OUT AN EXCEPTION TO THE TIME LIMIT U/S 139(1) FOR FILING THE RETURN OF INCOME. THEREFORE, TIME LIMIT FOR FILING THE RETURN OF INCOME IS NEITHER INFL EXIBLE NOR INELASTIC. THUS, THE PROVISIONS OF SECTION 80AC ARE DIRECTORY AND EVEN THE BOARD MAY, UNDER THE PROVISION OF SECTION 119, CONDONE THE DELAY IN ORDER TO AVOID UNDUE HARDSHIP. 8. IN THE PRESENT CASE IT CANNOT BE SAID THAT THE DELAY WAS, IN ANY MA NNER, MALA FIDE. ON THE CONTRARY, THE ASSESSEE WAS VIGILANT ENOUGH TO FILE THE RETURN AT THE MIDNIGHT. WE, THEREFORE, CONDONE THE DELAY IN FILING THE RETURN. 9. AS FAR AS LD. CIT(A)S DIRECTION TO THE AO IS CONCERNED, WE FIND THAT THE ASSESSEE ITSELF HAS CLEARLY STATED IN ITS REPLY REPRODUCED BY AO IN THE ASSESSMENT ORDER, THAT THE RETURN WAS UPLOADED AT 12.46 AM ON 1 - 10 - 2009. THEREFORE, THERE WAS NO NECESSITY FOR RESTORING THE MATTER TO THE FILE OF AO FOR ANY VERIFICATION. 10. IN VIEW OF ABOVE DISCUSSION, THE CROSS - OBJECTION FILED BY THE ASSESSEE IS ALLOWED AND, THEREFORE, THE DEPARTMENTS APPEAL HAS BECOME INFRUCTUOUS. HOWEVER, SINCE THE AO HAS NOT EXAMINED THE ASSESSEES CLAIM U/S 80IC IN DETAIL AND HAS REJECTED THE SAME ONLY ON THE GROUND OF DELAY IN FILING OF THE RETURN, WE RESTORE THE MATTER TO THE FILE OF AO FOR EXAMINING THE ASSESSEES CLAIM U/S 80IC. 28. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS AND ALSO TAKING NOTE OF THE FACT THAT THE DELAY IS ONLY OF TWO MINUTE S WHICH WAS CAUSED DUE TO TECHNICAL GLITCH AND LAST HOUR OF RUSH IN THE WEBSITE , WE DIRECT THE ASSESSING OFFICER TO TREAT THE ORIGINAL RETURN FILED BY THE ASSESSEE FOR THE A.Y. 2014 - 15 AS FILED IN TIME AND CONSEQUENTLY TO CONSIDER THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE FOR THE PURPOSE OF COMPUT ING THE INCOME OF THE ASSESSEE. 31 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 29. COMING TO GROUND NO. 2(A) OF GROUNDS OF APPEAL, ASSESSEE CHALLENGED THE ORDER OF THE LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S. 80IB OF THE ACT. 30. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER THOUGH QUANTIFIED THE AMOUNT OF DEDUCTION ALLOWABLE U/S. 80IB(10) OF THE ACT IGNORED THE DEDUCTION U/S. 80IB (10) OF THE ACT FOR THE REASON THAT THE ORIGINAL RETURN ACCORDING TO THE ASSESSING OFFICER WAS NOT FILED WITHIN THE TIME PRESCRIBED AND T HEREFORE ASSESSEE IS N OT ENTITLED FOR THE DEDUCTION. 31. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 32. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER , WE FIND THAT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO SUBMIT DETAILED WORKING OF CLAIM FOR DEDUCTION U/S.80IB(10) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT IN THE COMPUTATIO N SUBMITTED BY THE ASSESSEE , ASSESSEE HAS M ADE A CLAIM FOR DEDUCTION OF . 8,12,78,583/ - AND WHEREAS IN THE REPORT SUBMITTED UNDER 10CCB THE PROFITS ELIGIBLE FOR THE CLAIM FOR DEDUCTION HAS BEEN CLAIMED AT .7,32,04,923/ - . THE ASSESSEE EXPLAINED THAT THE C LAIM WAS MADE AT .8,12,78,583/ - INADVERTENTLY AS THIS FIGURE WAS APPEARED ONLY IN THE DRAFT 32 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} COMPUTATION INSTEAD OF . 7,32,04,923/ - . CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER COMPUTED THE EXCESS CLAIM OF DEDUCTION U/S. 80 IB OF THE ACT AT . 80,73,660/ - AT PARA NO. 8 OF THE ASSESSMENT ORDER. FURTHER, THE ASSESSING OFFICER NOTICED THAT ASSESSEE OFFERED INCOME OF .38,18,880/ - TOWARDS CANCELLATION CHARGES OF THE APARTMENTS IN ITS TWO PROJECTS NAMELY CASABELLA GOLD & CASA RIO . HE ALSO NOTICED THAT DEDUCTION U/S. 80IB OF THE ACT WAS CLAIMED ON THESE CANCELLATION CHARGES BY THE ASSESSEE. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID RECEIPTS SHOULD BE CONSIDERED AS PROFITS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT, TO WHICH ASSESSEE HAS REPLIED THAT THE SAID INCOME IS DIRECTLY RELATING TO ITS ELIGIBLE PROJECT S . NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER PLACING RELIANCE ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF PANDIAN CHEMICALS LTD AND CIT V. STERLING FOODS [104 TAXMAN 204] T REATED THESE CHARGES RECEIVED ON CANCELLATION OF FLATS AS MISCELLANEOUS INCOME AND DENIED DEDUCTION U/S. 80IB(10) OF THE ACT OBSERVING THAT THESE CHARGES CANNOT BE SAID TO BE HAVING DIRECT N EXUS WITH THE DEVELOPMENT OF HOUSING PROJECTS SINCE IT IS NEITHER PART OF THE COST NOR PART OF THE SALE RECEIPTS. HE ALSO OBSERVED THAT ONCE THE FLAT BOOKING IS CANCELLED THE SAID FLAT IS OPEN FOR SALE TO SOME OTH E R BUYER AND SALE RECEIPT S IN RESPECT OF THAT FLAT WOULD BE ACCOUNTED SEPARATELY. THUS, THE ASSESSING OFFICER 33 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} RESTRICTED THE CLAIM FOR DEDUCTION ALLOWABLE U/S. 80IB(10) OF THE ACT TO . 6,93,86,043/ - BY REDUCING THE EXCESS CLAIM OF . 80,73,660/ - WHICH I S DUE TO INADVERTENCE OF THE ASSESSEE AS AD MITTED AND ALSO THE CANCELLATION CHARGES OF .38,18,880/ - FROM THE TOTAL CLAIM MADE AT .8,12,78,353/ - . IN EFFECT THE ASSESSING OFFICER ALLOWED THE CLAIM FOR DEDUCTION U/S. 80IB(10) OF THE AC T BY RESTRICT ING THE SAME TO . 6,93,86,043/ - . HOWEVER, THIS WAS NOT ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME AS THE ORIGINAL RE TURN WAS NOT FILED WITHIN TIME. SINCE , WE HAVE DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ORIGINAL RETURN FILED WITH A DELAY OF TWO MINUTES DUE TO TECHNICAL GLITCH AS THE RETURN FI LED IN TIME, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION AS QUANTIFIED BY HIM IN THE ASS ESSMENT ORDER AT .6,93,86,043/ . THUS, GROUND NO.2(A) IS ALLOWED. 33. IN SO FAR AS THE DEDUCTION U/S. 80IB OF THE ACT ON THE CANCELLATION CHARGES ARE CONCERNED I T IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT CANCELLATION CHARGES RECEIVED BY THE ASSESSEE ARE NOTHING BUT INCOME DERIVED FROM ELIGIBLE BUSINESS AND ASSESSEE HAS RIGHTFULLY INCLUDED SUCH INCOME WHILE COMPUTING DEDUCTION U/S. 80IB OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: - A) VIDYUT CORPORATION [324 ITR 221] (BOMBAY HIGH COURT) B) SADHU FORGING LTD [336 ITR 444] (DELHI HIGH COURT) C) SESA INDUSTRIES LTD [415 ITR 257] (BOMBAY HIGH COURT) D) ARUN MARIAMMAL TEXTILES LTD [97 TAXMANN.COM 298) (MADRAS HC) E) VIMAL BUILDERS IN ITA.NO. 3451/8MUM /2008 DATED 09.09.2009. 34 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 34. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 35. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUT HORITIES BELOW AND THE CASE LAWS RELIED ON. THE ASSESSEE FORFEITED THE ADVANCES RECEIVED FROM THE BUYERS ON BOOKING OF FLATS DUE TO CANCELLATION AND WHETHER SUCH FORFEITED AMOUNT IS PART OF INCOME DERIVED FROM THE ELIGIBLE BUSINESS OF THE ASSESSEE FO R THE PURPOSE OF DEDUCTION U/S. 80IB(10) OF THE ACT IS THE DISPUTE. UNDOUBTEDLY THE ASSESSEE IS A BUILDER AND DEVELOPER AND THE APARTMENTS CONSTRUCTED BY THE ASSESSEE ARE ITS STOCK IN TRADE. WHEN THE BUYER ADVANCES MONIES TO THE ASSESSEE FOR BOOKING THE FLATS , IT IS NOTHING BUT PART OF SALE CONSIDERATION AND WHEN SUBSEQUENTLY IF CANCELLATION HAPPENS SUCH AMOUNTS WERE FORFEITED AND NOT REFUNDED . THESE AMOUNTS CANNOT BECOME A MISCELLANEOUS INCOME FOR THE ASSESSEE AND T HIS INCOME WILL FORM PART OF INCOME FROM ELI GIBLE BUSINESS. SALE OF THE APARTMENTS VIS - - VIS THE ADVANCES RECEIVED FOR PURCHASE OF FLATS F ROM THE BUYERS ARE IN EXTRICABLE LINKED WITH ELIGIBLE BUSINESS OF THE ASSESSEE AND T HEREFORE THE AMOUNTS RETAINED ON CANCELLATION OF THE APARTMENTS IS NOTHING BU T BUSINESS INCOME AND IS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. THE CASE LAWS RELIED ON BY THE ASSESSEE ALSO SUPPORTS THE CONTENTION OF THE ASSESSEE. HOWEVER, WHEN THE ASSESSEE SELLS THE APARTMENTS SUBSEQUENTLY IN LATER YEARS WHICH WERE 35 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} CANCELLED B Y THE BUYERS IN EARLIER YEARS THE AMOUNTS FORFEITED /RETAINED BY THE ASSESSEE ON ACCOUNT OF CANCELLATIONS SHALL HAVE TO BE REDUCED FROM THE SALE PRICE AND ONLY ON THE BALANCE SALE CONSIDERATION/INCOME, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IB OF THE ACT. WITH THESE OBSERVATIONS , WE ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80IB(10) OF THE ACT ON THE AMOUNTS RECEIVED ON CANCELLATION OF FLATS OF . 38,18,880/ - . THUS, GROUND NO. 2(B) IS ALLOWED. 36. GROUND NO.3 IN GROUNDS OF APPEAL IS RELATING TO DISALLOWANCE OF BUSINESS PROMOTIO N EXPENSES OF .2,04,51,610/ - . 37. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT ASSESSEE INCURRED BUSINESS PROMOTION EXPENSES IN THE FORM OF DISTRIBUTION OF GOLD COINS PURCHASED AT .2,21,81,610/ - FROM RAKSHA BULLION, RIDDHI SIDDHI BULLION, TRIBHUVANDAS BHOMJI ZAVERI & VENUS JEWELS. THE ASSESSEE WAS ASKED TO EXPLAIN HOW THE SAID PURCHASES OF BULLION AND JEWELLERY IS AN ALLOWABLE EXPENSE IN RELATION TO THE BUSINESS OF THE ASSESSEE. THE ASSESSEE FURNISHED COPIES OF INVOICES FOR THE BULLION PURCHASES FROM VARIOUS PARTIES AND SUBMITTED THAT THE SAME WAS INCURRED FOR THE PURPOSE OF BUSINESS. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER DISA LLOWED AND ADDED BACK THESE EXPENSES OBSERVING THAT ASSESSEE COULD NOT PROVE 36 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} THAT THE SAID EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSI NESS AND NO PROPER EXPLANATIONS/ EVIDENCES WERE PROVIDED BY THE ASSESSEE. 38. ON APPEAL THE LD.CIT(A) RE STRICTED THE DISALLO WANCE TO . 2,04,51,610/ - AS THE ASSESSEE COULD PRODUCE DETAILS TO THE TUNE OF . 17,30,000/ - OUT OF THE TOTAL EXPENSES OF .2,21,81,610/ - CLAIM. 39. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT OF R EAL E S TATE PROJECTS IN AND AROUND MUMBAI. DURING THE YEAR UNDER CONSIDERATION, THE REAL ESTATE MARKET WAS FACING SLOW DOWN AND BOOKING SALE AT AN EARLY STAGE OF CONSTRUCTION WAS VERY CHALLENGING. TO SURPASS SUCH SITUATIONS, THE REAL ESTATE DEVELOPERS WERE DEVIS ING VARIOUS SCHEMES TO LURE CUSTOMERS AND SELL FLATS/APARTMENTS AT EARLY STAGE OF CONSTRUCTION. CONSIDERING THE FESTIVAL SCHEME WHICH COMPETITORS WERE OFFERING TO ATTRACT CUSTOMERS THE MANAGEMENT OF THE ASSESSEE COMPANY ALSO DECIDED TO COME OUT WITH THE F ESTIVE OFFER IN THE MONTH OF MAY 2013 TO MAKE ITS PRODUCTS COMPETITIVE. THE MANAGEMENT OF ASSESSEE COMPANY CAME OUT WITH A GOLD FESTIVE SCHEME FOR PROJECTS WHICH ASSESSEE WAS UNDERTAKING ON 'AKSHAYA TRITHIYA FESTIVAL' WHEREBY THEY DECIDED TO GIFT GOLD COIN S/GOLD CERTIFICATES ON BOOKING OF FLATS/APARTMENTS DURING THE OFFER PERIOD. FOR THIS PURPOSE, THE ASSESSEE HAD PURCHASED GOLD AND INCURRED AN AMOUNT OF .2.21 37 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} CRORES. IN VIEW OF THE FACT THAT THIS IS LEGITIMATE BUSINESS PROMOTION EXPENDITURE THE SAME WAS CLAIMED AS DEDUCTIBLE WHILE COMPUTING TAXABLE INCOME FOR THE AY 2014 - 15. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FURNISHED INVOICES IN RELATION TO PURCHASE OF THE SAID GOLD COINS AND GOLD CERTIFICATES. THE LEARNED ASSESSING OFFICER DISALLOWED E XPENDIT URE AMOUNTING TO . 2.21 CRORES IN RELATION TO PURCHASE OF GOLD WHILE COMPLETING ASSESSMENT . LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRING TO PAGE NOS. 58 TO 65 OF THE PAPER BOOK SUBMITTED THAT ASSESSEE HAD MADE ADVERTISEMENT FOR GOLD FESTIVAL SCHEME TO ATTRACT CUSTOMERS. FURTHER, THE MANAGEMENT HAD PREPARED ONE INTERNAL PRESENTATION TO LAY DOWN PLAN HOW THIS SCHEME WILL RUN AND WHAT ALL OFFERS SHOULD BE MADE TO THE CUSTOMERS AND THE COPY OF ADVERTISEMENT BROACHER AND INTERNAL PRESENTATION WERE PLACED IN PAPER BOOK. IT IS FURTHER SUBMITTED THAT T HE EXPENSES WERE INCURRED FOR MARKETING AND EXHIBITION OF VARIOUS PROJECTS OF THE ASSESSEE OVERSEAS AND A S A RESULT OF THEIR MARKETING EFFORTS, THE ASSESSEE HAS BEEN ABLE TO SELL AROUND 70 FLATS TO VARIO US OVERSEAS CUSTOMERS. IT IS FURTHER SUBMITTED THAT AS A RESULT OF THE FESTIVAL OFFER MARKETING DRIVE, THE ASSESSEE WAS ABL E TO BOOK HIGHER SALES OF UNITS/ FLATS IN THE PROJECTS WHICH WERE UNDER CONSTRUCTION. THEREFORE, IT IS SUBMITTED THAT THE EXPENSES I NCURRED ON GIFTS TO CUSTOMERS IS WHOLLY AND EXCLUSIVELY 38 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND THE SAME IS ALLOWABLE DEDUCTION . 40. HOWEVER, LD. DR SUBMITS THAT THE ASSESSEE COULD PROVE EXPENSES ONLY TO THE EXTENT OF .17,30,000/ - AS SUBM ITTED BEFORE THE LD.CIT(A) AND T HEREFORE IN THE ABSENCE OF ANY DETAILS FURNISHED BY THE ASSESSEE THE EXPENSES WERE RIGHTLY DISALLOWED BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD.CIT(A). 41. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER WE NOTICE THAT THE ASSESSEE FURNISHED COPIES OF INVOICES FOR PURCHASE OF THE GOLD COINS/ BULLION MADE AND THERE IS NO DOUBT TH AT THE ASSESSEE PURCHASED THE GOLD COINS/ BULLION FROM VARIOUS PARTIES. HOWEVER, THE ASSESSING OFFICER DO UBTED THE INCURRENCE OF THESE EXPENSES FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE LD.CIT(A) PARTLY ALLOWED THE EXPENSES TO THE EXTENT OF . 17,30,000/ - AND C ONFIRMED THE DISALLOWANCE OF . 2,04,51,610/ - FOR WANT OF DET AILS. THE LD.CIT(A) DID GAVE A FINDING THAT THE ASSESSEE PROMOTED A SCHEME TO BOOST UP THE SALES AND THE CUSTOMERS WERE GIVEN GOLD COIN CERTIFICATES RANGING FROM . 10 ,000/ - TO . 1,00,000/ - . EVEN THE BROACHERS FURNISHED BY THE ASSESSEE BEFORE US SUGGEST T HAT THE ASSESSEE FLOATED A SCHEME FOR ITS PROMOTIONAL CAMPAIGN 39 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} FOR THE AKSHAYA TRITHIYA FESTIVAL DURING THE 04 TH MAY, 2013 TO 26 TH MAY, 2013. THE SCHEME PROMOTED BY THE ASSESSEE IS AS UNDER: - 42. THEREFORE, THE EXPLANATION OF THE ASSESSEE IS THAT T HE ASSESSEE INCURRED BUSINESS PROMOTIONAL EXPENSES TO BOOST ITS SALES CANNO T BE DOUBTED. MERELY BECAUSE THE ASSESSEE COULD NOT PROVIDE THE NAMES OF THE CUSTOMERS TO WHOM THE ASSESSEE GIFTED THE G OLD COINS IT CANNOT BE PRESUMED THAT THE EXPENSES WERE NOT INCU RRED AT ALL. THE COORDINATE 40 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} BENCH OF THE TRIBUNAL IN THE CASE OF AGFA INDIA (P) LTD., V. ACIT [81 TAXMANN.COM 453 (MUM)] HELD AS UNDER: - 8. WE HAVE CONSIDERED THE RIVAL CONTENTION AND FOUND THAT INCURRING OF EXPENDITURE ON PROMOTION OF BUSINESS WAS NOT IN DISPUTE. ACTUAL PAYMENT WAS ALSO NOT DISPUTED BY THE A.O. MERELY BECAUSE THE CONFIRMATION FROM THIRD PARTY TO WHOM SUCH SERVICES WERE RENDERED, COULD NOT BE FURNISHED, THE A.O. HAS MADE THE DISALLOWANCE. WE FOUND THAT IN NORMAL BUSINESS PARLANCE ON DIWA LI AND OTHER FESTIVE OCCASIONS, GIFTS ARE DISTRIBUTED TO VARIOUS CUSTOMERS AND CLIENTS, HOWEVER, NO RECEIPT FOR SUCH GIFTS ARE TAKEN. THE A.O. DECLINED THE CLAIM OF DEDUCTION MERELY ON THE PLEA THAT NO THIRD PARTY EVIDENCE HAD BEEN OBTAINED, IS NOT A VALID REASON FOR DISALLOWANCE. KEEPING IN VIEW THE FACT THAT ASSESSEE HAD FURNISHED FULL DETAILS OF EXPENSES ALONG WITH SUPPORTING BILLS, VOUCHERS, THERE IS NO REASON FOR MAKING SUCH ADHOC DISALLOWANCE. THE A.O. IS DIRECTED TO ALLOW THE EXPENSES OF RS. 1,64,792 / - . 43. THE TOTAL EXPENSES TOWARD S GOLD COIN AND BULLION PURCHASES BY THE ASSESSEE WAS .2,21,81,610/ - AND THE ASSESSEES TURNOVER FOR THE YEAR ENDED 31 .03.2014 STOOD AT .1708 CRORES AS AGAINST .149 9 CRORES AS ON 31.03.2013. THEREFORE, THE INCREASE IN VOLUME OF TURNOVER FROM THE PREVIOUS YEAR TO THE CURRENT YEAR IS AT . 209 CRORES . THE EXPENSES INCURRED BY THE ASSESSEE ON ITS SCHEME FOR DISTRIBUTION OF GOLD COINS WHEN COMPARED TO THE VOLUME OF BUSINESS IS VERY NEGLIGIBLE. THEREFORE, SINCE FLOATING OF SCHEME BY THE ASSESSEE IS NOT IN DOUBT AT ALL, PURCHASES OF GOLD COINS AND BULLION BY THE ASSESSEE FROM THE PARTIES IS PROVED , INCURRING OF EXPENSES ON THE DISTRIBUTION OF GOLD COINS FOR THE PURPOSE OF BOOSTIN G THE BUSINESS OF SALE OF FLATS BY T HE ASSESSEE CANNOT BE DOUBTED. 41 ITA NO. 2147 & 2348 /MUM/2018 (A.Y: 2014 - 15) LODHA DEVELOPERS LIMITED {SINCE MERGED M/S. PALAVA DWELLERS PVT. LTD.,} 44. THEREFORE, TAKING TOTALITY OF FACTS AND CIRCUMSTANCES INTO CONSIDERATIONS, WE ARE OF THE VIEW THAT THE EXPENSES INCURRED BY THE ASSESSEE TOWARDS DISTRIBUTION OF GOLD COINS/CERTIFICATES ETC. , FOR PROMOTING ITS BUSINESS THROUGH A PROMOTIONAL SCHEME IS NOTHING BUT EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THUS, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF .2,04,51,610/ - AS CONFIRMED BY THE LD.CIT(A ). THIS GROUND IS ALLOWED. 45. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 20 TH FEBRUARY , 2020 SD/ - SD/ - ( G. MANJUNATHA ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 20/ 02 / 2020 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM