ACIT 17(2), MUMBAI V. JAGSHI J CHHEDA, MUMBAI

ITA 6854/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2931 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 03-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Court: TRIBUNAL
• Department Lawyers: PARESH SHAPARIAAR
• Assessee Lawyers: S R KIRTANE
• Keywords: Gift; Business income; Business expenditure; Additional evidence; Notional interest; Commercial expediency; Revenue expenditure
• Section: 143(3)

Judgement Text

, , J , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.6733/MUM/2011 ASSESSMENT YEAR: 2008-09 JAGSHI J. CHHEDA, PROP. SILVER DEVELOPERS, 9001, MERU HEIGHTS, 268, TELANG ROAD, MATUNGA (CR), MUMBAI-400019 / VS. ACIT, 17(2) PIRAMAL CHAMBERS MUMBAI- (ASSESSEE ) (REVE NUE) P.A. NO. ACYPC2992B ITA NO.6854/MUM/2011 ASSESSMENT YEAR: 2008-09 ACIT, 17(2) PIRAMAL CHAMBERS MUMBAI- / VS. JAGSHI J. CHHEDA, PROP. SILVER DEVELOPERS, 9001, MERU HEIGHTS, 268, TELANG ROAD, MATUNGA (CR), MUMBAI-400019 ( REVENUE ) ( RESP ONDENT ) P.A. NO. ACYPC2992B JAGSHI J. CHHEDA 2 ITA NO.3851/MUM/2012 ASSESSMENT YEAR: 2009-10 JAGSHI J. CHHEDA, PROP. SILVER DEVELOPERS, 9001, MERU HEIGHTS, 268, TELANG ROAD, MATUNGA (CR), MUMBAI-400019 / VS. A CIT, 17(2) PIRAMAL CHAMBERS MUMBAI- (ASSESSEE ) (REVENUE) P.A. NO. ACYPC2992B ITA NO.4760/MUM/2012 ASSESSMENT YEAR: 2009-10 ACIT, 17(2) PIRAMAL CHAMBERS MUMBAI- / VS. JAGSHI J. CHHEDA, PROP. SILVER DEVELOPERS, 9001, MERU HEIGHTS, 268, TELANG ROAD, MATUNGA (CR), MUMBAI-400019 (ASSESSEE ) (REVENUE) P.A. NO. ACYPC2992B APPELLANT BY SHRI PARESH SHAPARIA(AR) RESPONDENT BY SHRI S.R. KIRTANE (D R) / DATE OF HEARING: 19/05/2016 / DATE OF ORDER: 24/06/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE PERTAINING TO SAME ASSESSEE AND FILED AGAINST SEPAR ATE ORDERS OF LD. ORDER OF LD. COMMISSIONER OF INCOME TAX (APP EALS), {(IN SHORT CIT(A)}, PASSED AGAINST ASSESSMENT ORDER U/ S 143(3) OF THE ACT BY THE AO. JAGSHI J. CHHEDA 3 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI PARESH SHAPARIA, AUTHORISED REPRESENTATIVE (AR ) ON BEHALF OF THE ASSESSEE AND BY SHRI S.R. KIRTANE, DE PARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. FIRST WE SHALL TAKE UP APPEAL OF THE ASSESSEE IN IT A NO.6733/MUM/2011 FOR A.Y. 2008-09: 3. GROUND NO.1: THIS GROUND IS NOT PRESSED BY THE LD. COUNSEL OF THE ASSESSEE AND THEREFORE SAME IS DISMI SSED. 4. GROUND NO.2: IN THIS GROUND THE ASSESSEE HAS CONTENDED THAT THE INTEREST INCOME OF RS. 2,90,90,872/- CREDI TED TO WORK- IN-PROCESS (I.E. WIP) (ON THE ONGOING PHASE) IS ATT RIBUTABLE TO THE WIP, AND SHOULD BE REDUCED FROM AMOUNT OF WIP O F THE PROJECT UNDERTAKEN BY THE ASSESSEE IN ITS PROPRIETO RSHIP UNIT NAMELY M/S SILVER DEVELOPERS, AND THUS THE SAME WAS NOT LIABLE TO BE INCLUDED IN THE TAXABLE INCOME SEPARAT ELY. 4.1. THE BRIEF FACTS IN THIS CASE ARE THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE THROUGH ITS PROPRIETORSH IP UNIT NAMELY M/S SILVER DEVELOPERS, ENTERED INTO THE JOIN T VENTURE AGREEMENT WITH M/S. GODREJ PROPERTIES & INVESTMENTS LTD. (GPIL) FOR DEVELOPMENT OF PROPERTY LOCATED AT LOKMA NYA PAAN BAZAR, CHUNABHATTI, VILLAGE KURLA, MUMBAI. THE PROJ ECT WAS CALLED AS GODREJ COLISEUM. THE AMOUNT OF INVESTME NT WAS TO BE BROUGHT IN BY BOTH THE PARTIES I.E. ASSESSEE (HE REIN AFTER CALLED AS SD) AS WELL AS GPIL. THE GPIL WAS APPOINT ED AS CONTROLLER OF ACCOUNTS FOR CONTROLLING THE FUNDS OF THE PROJECT, AS PER MUTUAL AGREEMENT. BOTH THE PARTIES WERE ENTI TLED FOR JAGSHI J. CHHEDA 4 INTEREST ON THE FUNDS BROUGHT IN @ OF 18% PER ANNUM . ACCORDINGLY, GPIL PAID INTEREST TO SD AGGREGATING T O RS.2,86,04,353/- ON WHICH TDS OF RS.29,91,102/-WAS DEDUCTED BY IT. APART FROM THE SAID INTEREST INCOME , THE ASSESSEE ALSO RECEIVED INTEREST INCOME OF RS.4,86,5 19/- FROM M/S. INDUSTRIAL FINANCE SECURITIES PVT LTD, AN INDE PENDENT PARTY UNCONNECTED WITH THIS PROJECT. THUS, THE AGGR EGATE AMOUNT OF RS.2,90,90,872/- WAS RECEIVED BY THE ASSE SSEE AS INTEREST INCOME. THE ASSESSEE DID NOT SHOW THE SAID INTEREST INCOME AS ITS INCOME BUT DEDUCTED THE SAME FROM THE AMOUNT OF WIP (WORK-IN-PROCESS) OF THE PROJECT. THE AO DID NOT AGREE WITH THE CLAIM OF THE ASSESSEE AND BROUGHT TO TAX T HIS AMOUNT SEPARATELY AS INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 4.2. BEING AGGRIEVED, THE ASSESSEE CONTESTED THIS ISSUE BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE PLEADED THAT TH E SAID INTEREST INCOME WAS NOT LIABLE TO BE TAXED AS INCOM E BUT IT WAS RIGHTLY DEDUCTED FROM THE AMOUNT OF WIP. IT WAS ALT ERNATIVELY CONTENDED BY THE ASSESSEE THAT IF THIS INTEREST INC OME WAS TO BE ASSESSED AS INCOME, THEN, THE SAME SHOULD BE ASS ESSED UNDER THE HEAD INCOME FROM BUSINESS ONLY. LD. CIT (A) CONSIDERED SUBMISSIONS OF THE ASSESSEE IN DETAIL AN D REJECTED THE FIRST SUBMISSIONS OF THE ASSESSEE BY HOLDING TH AT SAID INCOME WAS LIABLE TO BE TAXED AS INCOME. BUT, IT WA S HELD BY HIM THAT THE SAID INTEREST INCOME WAS TO BE ASSESSE D AS HEAD INCOME FROM BUSINESS/PROFESSION AND DIRECTED THE AO TO REWORK THE AMOUNT OF WIP AND TAXABLE INCOME, ACCORD INGLY. JAGSHI J. CHHEDA 5 4.3. STILL BEING AGGRIEVED, THE ASSESSEE FILED AN APPEA L BEFORE THE TRIBUNAL AND CONTENDED THAT THE IMPUGNED INTERE ST INCOME SHOULD NOT HAVE BEEN TAXED AS INCOME AND THE SAME SHOULD HAVE BEEN REDUCED FROM THE WIP OF THE PROJEC T. BUT, REVENUE DID NOT FILE ANY APPEAL AGAINST THE ORDER O F THE LD. CIT(A) FOR TREATING THE SAID INCOME AS INCOME FROM BUSINESS. THOUGH, REVENUE HAS FILED ADDITIONAL GROUND TO AG ITATE THIS ISSUE, BUT IT HAS NOT BEEN ARGUED OR PRESSED BY BEF ORE US. THUS, LD. DR DID NOT CONTEST THE ORDER OF THE LD. C IT(A) ON THIS GROUND. IN VIEW OF THE SAME, THE ORDER OF LD. CIT(A ) FOR TREATING THE IMPUGNED INCOME AS INCOME FROM BUSINESS HAS A TTAINED FINALITY. THUS, THE LIMITED ISSUE TO BE DECIDED BY US IS WHETHER THE SAID IMPUGNED AMOUNT OF INTEREST SHOULD BE REDU CED FROM THE AMOUNT OF WIP OR SHOULD BE TREATED AS INCOME LI ABLE TO BE TAXED IN THE YEAR UNDER CONSIDERATION. 4.4. IN THIS REGARD, LD. COUNSEL MADE DETAILED ARGUMENT S BEFORE US AND DREW OUR ATTENTION ON VARIOUS PAGES O F MEMORANDUM OF UNDERSTANDING. IN NUTSHELL, IT HAS BE EN CONTENDED BY THE LD. COUNSEL THAT THE IMPUGNED PROJ ECT WAS ONGOING PROJECT, NO INCOME WAS YET REALISED AS NO S ALE CONSIDERATION WAS RECEIVED FROM THE PROJECT AND THE REFORE IMPUGNED AMOUNT OF INTEREST COULD NOT HAVE BEEN TRE ATED AS INCOME UNDER THE PROVISIONS OF THE INCOME TAX ACT. IT WAS ALSO CONTENDED BY HIM THAT NO PERSON CAN EARN INTEREST F ROM HIMSELF. 4.5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS O F THE LOWER AUTHORITIES AND SUBMITTED THAT LD. CIT(A) HAS VERY FAIRLY JAGSHI J. CHHEDA 6 DECIDED THIS ISSUE BY TREATING IT AS INCOME FROM B USINESS. IT WAS FURTHER SUBMITTED BY HIM THAT THIS PLEADING WAS NEVER TAKEN BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT ASSESSEE COULD NOT HAVE EARNED INTEREST INCOME FROM HIMSELF. RATHER, THE ASSESSEE HAS ALWAYS TREATED IT AS AN IN DEPENDENT TRANSACTION. IT IS ALSO EVIDENT FROM THIS FACT THAT THIS AMOUNT OF INTEREST WAS PAID THAT THE OTHER COMPANY NAMELY GIPL AND TDS WAS DEDUCTED ON THIS AMOUNT. IT WAS FURTHER SUB MITTED BY HIM THAT ASSESSEE HAS ALSO PAID INTEREST ON THE FUNDS BORROWED FOR INVESTING IN JOINT VENTURE WHICH HAS B EEN CLAIMED AS EXPENSES. THUS, ASSESSEE COULD NOT HAVE ADOPTED DOUBLE STANDARD FOR GIVING DIFFERENTIAL TREATMENT BETWEEN THE INTEREST EXPENSES AND INTEREST INCOME. SUCH KIND OF APPROACH , IF ALLOWED TO THE ASSESSEE, WOULD BE CONTRADICTORY IN NATURE. HE, THUS, REQUESTED FOR UPHOLDING THE ORDER OF LD. CIT( A) ON THIS ISSUE. 4.6. WE HAVE GONE THROUGH THE FACTS OF THIS CASE AND OR DERS OF THE LOWER AUTHORITIES. THE UNDISPUTED FACTS ARE THA T WHATEVER AMOUNT OF FUNDS WAS INVESTED BY THE ASSESSEE IN JOI NT VENTURE, IT WAS CREDITED IN THE ACCOUNT OF THE ASSESSEE IN T HE ACCOUNTS OF JOINT VENTURE CONTROLLED AND MAINTAINED BY GPIL. IT IS ALSO NOT DISPUTED THAT ON THE AMOUNT OF FUNDS BROUGHT IN BY THE ASSESSEE, THE ASSESSEE WAS ENTITLED FOR INTEREST @ OF 18% P.A. IN RESPONSE TO OUR QUERY DURING THE COURSE OF HEARI NG, IT WAS FAIRLY STATED BY THE LD. COUNSEL THAT IN CASE AGREE MENT OF JOINT VENTURE WAS CANCELED ABRUPTLY AT ANY GIVEN POINT OF TIME, THEN AS PER TERMS OF THE AGREEMENT, THE ASSESSEE WAS ENT ITLED FOR REFUND OF ITS MONEY ALONG WITH STIPULATED AMOUNT OF INTEREST @ JAGSHI J. CHHEDA 7 OF 18% P.A. UNDER THESE CIRCUMSTANCES, IT CAN CLEAR LY BE HELD THAT WHEN THE IMPUGNED FINANCIAL YEAR PASSED THEN T HE ASSESSEE HAD EARNED THE AMOUNT OF INTEREST ACCRUED TO IT BECAUSE OF PASSAGE OF TIME VIZ. INTEREST @ OF 18% O N THE AMOUNT OF FUNDS INVESTED BY THE ASSESSEE IN THE JOI NT VENTURE. IN OTHER WORDS, THE IMPUGNED INTEREST IS A PERIOD I TEM. UNDER THESE CIRCUMSTANCES, IT CAN CLEARLY BE SAID THAT AS SESSEE HAD EARNED PRE-DECIDED AMOUNT OF INTEREST AS THE TIME P ASSED. IT IS FURTHER NOTED BY US THAT FACTUALLY ALSO GIPL HAD PA ID INTEREST TO THE ASSESSEE AS WAS STIPULATED IN THE AGREEMENT AND THAT TOO AFTER DEDUCTING TAX AT SOURCE FOR AN AMOUNT OF RS.29,91,102/-, AS STATED ABOVE. THE SAID AMOUNT OF TDS HAS BEEN ADMITTEDLY CLAIMED BY THE ASSESSEE IN ITS RETU RN OF INCOME. THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE INDICATE AND CLEARLY ESTABLISH THAT THE IMPUGNED IN TEREST AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE FOR THE PERIOD UNDER CONSIDERATION. IT IS ALSO NOTED THAT W ITH RESPECT TO INTEREST AMOUNT OF RS 4,86,519/- RECEIVED FROM M /S INDUSTRIAL FINANCE SECURITIES PVT LTD, LD. COUNSEL FAIRLY STATED DURING THE HEARING THAT THIS COMPANY IS AN INDEPEND ENT PARTY UNCONNECTED WITH THIS PROJECT, AND THEREFORE THIS I NTEREST INCOME IS NOT RELATABLE TO WIP, BUT IT WAS INADVERT ENTLY REDUCED FROM WIP, BUT IT SHOULD BE SEPARATELY TAXED AS BUSINESS INCOME. UNDER THESE CIRCUMSTANCES, WE UPHO LD THE ORDER OF THE LD. CIT(A) FOR TREATING THE TOTAL INTE REST INCOME AS TAXABLE IN THE YEAR UNDER CONSIDERATION AND ALSO UP HOLD HIS ACTION IN TREATING SAME AS INCOME FROM BUSINESS I N THE GIVEN JAGSHI J. CHHEDA 8 FACTS AND CIRCUMSTANCES OF THE CASE. THUS, THIS GRO UND IS DISMISSED. 5. THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. NOW WE SHALL TAKE UP APPEAL OF THE DEPARTMENT IN IT A NO.6854/MUM/2011 FOR 2008-09: THE REVENUE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.2,16,11,968/-MADE ON ACCOUNT OF INTEREST EXPENSES HOLDING THE SAME AS BUSINESS EXPENDITURE AS AGAINST THE CAPITAL EXPENSES ATTRIBUTABLE TO WIP TREATED BY ASSESSING OFFICER.' 2.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.18,09,057/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NOTIONAL INTEREST ATTRIBUTABL E TO INTEREST FREE DEPOSITS WHILE COMPUTING THE INCOME FROM THE HOUSE PROPERTY OF THE ASSESSEE.' 3.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING T HE ASSESSING OFFICER TO TREAT THE HIRE CHARGES OF RS.77,80,958/- RECEIVED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AS AGAINST THE 'INCOME FROM OTHER SOURCE' TREATED BY THE ASSESSING OFFICER.' 4.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.19,35,921/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROPORTIONATE COMMON EXPENSES DEBITED TO P&L A/C. RELATED TO LET OUT OR GIFTED OUT PROPERTY.' 5.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE, ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. JAGSHI J. CHHEDA 9 6. GROUND NO.1: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION O F RS.2,16,11,968/- WHICH WAS MADE BY THE AO ON ACCOUN T OF INTEREST EXPENSES HOLDING THE SAME AS BUSINESS EXPE NDITURE AS AGAINST THE CAPITAL EXPENSES ATTRIBUTABLE TO WIP. 6.1. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT T HE AO MADE DISALLOWANCE FOR A PROPORTIONATE AMOUNT OUT OF TOTAL INTEREST EXPENSES DEBITED BY THE ASSESSEE AT RS.2,4 3,80,067/- ON THE GROUND THAT PART OF THE BORROWED FUNDS WERE UTILISED FOR BUILDING UP WIP. IT WAS NOTED BY THE AO THAT FUNDS UTILIZED FOR THE WIP WORKED OUT @ OF 69% OF TOTAL FUNDS. ACCORDI NGLY, HE BIFURCATED THE TOTAL INTEREST INTO TWO PARTS AND DI SALLOWED THE AMOUNT OF INTEREST IN PROPORTION TO THE AMOUNT OF W IP VIZ-A-VIZ TOTAL FUNDS. 6.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN INTER ALIA IT WAS SUBMITTED THAT FUNDS WERE UTILIZED DURING THE COURSE OF BUSINESS AND INTEREST WAS A PERIOD COST AND THEREFORE THE SAME SHOULD BE ALLOWE D IN TOTALITY. LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FOUND THAT DISALLOWANCE WAS WRONGLY MADE BY THE AO. THE DETAILED REASONING GIVEN BY LD. CIT(A) ARE REPRODUC ED HEREUNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE REASONING OF THE ASSESSING OFFICER AND THE SUBMISSI ONS OF THE AUTHORISED REPRESENTATIVE. AS PER ASSESSING OFFICER THE APPELLANT HAD UTILIZED THE INTEREST BEA RING FUNDS TOWARDS THE WIP AND WORKED OUT PROPORTIONATE BORROWED FUNDS UTILIZED FOR THE SAME AND BASED ON T HE AVERAGE FORMULA WORKED ABOVE THE DISALLOWANCE OF TH E INTEREST EXPENDITURE OF RS.2,16,11,968/- FROM THE T OTAL JAGSHI J. CHHEDA 10 INCOME AND CONSIDERED IT AS PART OF WIP. HOWEVER TH E APPELLANT EXPLAINED THAT THERE IS NO NEXUS BETWEEN THE INTEREST BEARING FUNDS AND THE WIP. THE APPELLANT H AD ENTERED INTO MEMORANDUM OF UNDERSTANDING WITH GODREJ PROPERTIES & INVESTMENTS LTD (GPL) FOR JOINT VENTURE FOR DEVELOPMENT OF PROPERTY AT LOKMANYA PAA N BAZAR, KURIA. PROJECT- 'GODREJ COLISIEUM'. AS PER T HE TERMS & CONDITIONS OF THE MOU THE INTEREST EXPENSES INCURRED FOR THE PROJECT BY THE JV WAS TO BE ADDED AS COST OF THE PROJECT. HOWEVER INTEREST WILL BE ALLOW ED ON THE WORKING CAPITAL OR FUNDS INTRODUCED BY EITHER O F THE PARTIES. FROM THE DETAILS OF THE INTEREST RECEIVED AND PAID FURNISHED IT CAN BE SEEN THAT ASSESSEE HAS RECEIVED INTEREST OF RS.2,90,90,872/- AND THEREBY ASSESSING OFFICER DISALLOWED THE CLAIM OF ASSESSEE OF REDUCTION OF WIP TO THE EXTENT OF INTEREST RECEIVED . WHICH IS DEALT IN THE NEXT GROUND OF APPEAL IN PARA 9 BELOW. THE INTEREST PAID OF RS.2,43,80,067 IS NOT INCLUDED IN THE WIP BUT CLAIMED BY THE ASSESSEE AS EXPENSES AS THE SAME WAS NOT RELATED TO THE JV ACCO UNT FOR WIP. AS PER THE TERMS OF THE MOU EACH PARTY IS REQUIRED TO BEAR THE INTEREST ON THE FUNDS BORROWED BY THEM FOR INTRODUCING THE FUNDS IN JV. ON THE FUNDS LYING IN THE JV INTEREST SHALL BE PAID. THE ASSESSE E HAS CONTENDED THAT THE FUNDS BORROWED HAD DIRECT NEXUS TO THE FUNDS GIVEN FOR JV ON WHICH INTEREST I S RECEIVED. THE BORROWED FUNDS HAVE BEEN REFLECTED IN THE BALANCE SHEET OF SILVER DEVELOPERS IN THE LIABILITY SIDE AS UNSECURED LOAN, SECURED LOAN FROM JANKALYAN SAHAKARI BANK LTD BEING TERM LOAN AND CORRESPONDING ON THE ASSET SIDE ARE REFLECTED AS IN JV GODREJ CONTR OL ACCOUNT (ON WHICH INTEREST IS RECEIVED) AND STOCK O F PREMISES ETC. THUS THE INTEREST EXPENDITURE WAS INC URRED FOR COMMERCIAL EXPEDIENCY OF THE BUSINESS OF THE ASSESSEE. THE RELIANCE IS PLACED ON SUPREME COURT JUDGEMENT IN THE CASE OF S A BUILDERS VS CIT 288 IT R 1 (SC) WHERE IT IS HELD THAT IF THE NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS IS ESTA BLISHED THE SAME IS ALLOWABLE. IN THE ASSESSEE'S CASE THE P URPOSE OF BORROWING IS DIRECTLY LINKED TO THE BUSINESS OF THE SILVER DEVELOPERS AND NOT TO THE WIP OF THE JV PROJECT, HE NCE THE INTEREST PAID BY THE ASSESSEE ON THE FUNDS BORR OWED JAGSHI J. CHHEDA 11 FOR INTRODUCING FUNDS IN THE JV CANNOT BE ADDED TO THE COST OF WIP. THE INTEREST EXPENDITURE HAS DIRECT NEXUS WITH THE BUSINESS OF THE APPELLANT, HENCE ALLOWABLE AS AN EXPENSE. RELYING ON THE ABOVE, IT IS HELD THAT T HE INTEREST EXPENDITURE OF RS.2,43,80,067/- BEING INCU RRED IN REGULAR COURSE OF BUSINESS FOR COMMERCIAL EXPEDIENC Y IS ALLOWABLE FROM BUSINESS INCOME AND NO ADDITION IS C ALLED FOR TO THE WIP. THE PROPORTIONATE ADDITION ON ACCOU NT OF INTEREST OF RS.2,16,11,968/- TO THE WIP IS HEREBY D ELETED. THIS GROUND OF APPEAL IS ALLOWED. 6.3. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AS WELL AS SUBMISSIONS MADE BY BOTH THE SIDES BEFOR E US. IT IS NOTED THAT ASSESSEE HAD FOLLOWED DOUBLE STANDARDS. ON THE ONE HAND, THE ASSESSEE CLAIMED THAT AMOUNT OF INTER EST INCOME EARNED FOR THE PROJECT WAS PART OF WIP AND T HEREFORE THE SAME WAS ADJUSTED AGAINST THE AMOUNT OF WIP AND THE SAME WAS THUS NOT OFFERED TO TAX, BUT THE AMOUNT OF INTEREST PAID ON THE FUNDS BORROWED FOR THE PURPOSE OF PROJE CT WAS NOT CONSIDERED AS PART OF WIP PROJECT, BUT IT WAS TREAT ED AS BUSINESS EXPENDITURE WHILE COMPUTING BUSINESS INCOM E FROM THIS PROJECT. THE CONTRADICTORY APPROACH OF THE ASS ESSEE WAS NOT CORRECT AS PER LAW. WE FIND FORCE IN DETAILED R EASONING GIVEN BY THE LD. CIT(A) FOR TREATING INTEREST EXPEN SES AS PART OF BUSINESS EXPENSES ALLOWABLE IN THE YEAR UNDER CONSI DERATION. IN ADDITION TO THAT, IT IS NOTED BY US THAT INTERES T INCOME FROM THE SAME PROJECT WAS HELD TO BE INCOME UNDER THE HE AD BUSINESS BY LD. CIT(A). IN OUR VIEW, SIMILAR TREATM ENT SHOULD BE GIVEN TO INTEREST INCOME AND INTEREST EXPENSE. W E HAVE ALREADY HELD IN EARLIER PART OF OUR ORDER THAT INTE REST INCOME IS NOT PART OF WIP AND IT WAS ASSESSABLE SEPARATELY AS BUSINESS INCOME OF THE PERIOD UNDER CONSIDERATION. THUS, DRA WING SAME JAGSHI J. CHHEDA 12 ANALOGY, WE FIND THAT INTEREST EXPENSE IS ALSO NOT PART OF WIP BUT BUSINESS EXPENSE OF THE ASSESSEE FOR THE PERIOD UNDER CONSIDERATION. THE AO HAD ALSO UNFORTUNATELY FOLLOW ED DOUBLE STANDARDS WHILE PASSING THE ASSESSMENT ORDER. WHEN HE HAD TREATED THE INTEREST INCOME AS SEPARATE INCOME AN D DID NOT CHOOSE TO REDUCE IT FROM THE COST OF WIP, THEN THER E WAS NO JUSTIFICATION ON HIS PART TO TREAT INTEREST EXPENS E AS PART OF WIP AND DISALLOW THE SAME. THUS, TAKING INTO TOTALI TY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ORDER O F LD. CIT(A) IS WELL REASONED AND THUS LD CIT(A) IS JUSTIFIED IN TREATING THE INTEREST EXPENSES AS HAVING BEEN INCURRED IN THE RE GULAR COURSE OF BUSINESS AND DEDUCTIBLE IN FULL AS BUSINE SS EXPENSE OF THE PERIOD UNDER CONSIDERATION. WE DO NOT FIND A NY NEED TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A) AND THE SAME ARE UPHELD. THIS GROUND OF REVENUE IS DISMISSED. 7. GROUND NO.2: IN THIS GROUND, THE REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION O F RS.18,09,057/- MADE BY THE AO ON ACCOUNT OF NOTIONA L INTEREST ATTRIBUTABLE TO INTEREST FREE DEPOSITS WHI LE COMPUTING THE INCOME UNDER THE HEAD HOUSE PROPERTY OF THE ASS ESSEE DURING THE YEAR. 7.1. BRIEF FACTS AS NOTED FROM THE ORDERS OF LOWER AUTH ORITIES ARE THAT WHILE COMPUTING THE ANNUAL LETTING OUT VAL UE OF THE LET OUT PROPERTY, IT WAS NOTED BY THE AO THAT ASSESSEE HAD RECEIVED FROM ITS TENANT, AN INTEREST-FREE DEPOSIT AMOUNTING TO RS.4.42 CRORES AND THEREFORE, HE ADDED NOTIONAL INT EREST @ OF JAGSHI J. CHHEDA 13 12% AMOUNTING TO RS.18,09,057/-. THE REASONING GIVE N BY THE AO WAS THAT IN VIEW OF PROVISIONS OF SECTION 22, AL V WAS REQUIRED TO BE DETERMINED CONSIDERING THE RENT AT W HICH PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET OU T FROM YEAR TO YEAR. 7.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AND SUBMITTED IN DETAIL THAT AS PER SECT ION 22 AND 23, FOR THE PURPOSE OF DETERMINING ANNUAL RENTAL VA LUE, NO AMOUNT OF INTEREST WAS REQUIRED TO BE ADDED ON NOTI ONAL BASIS ON THE DEPOSITS RECEIVED FROM THE TENANT AND FOR TH IS PURPOSE RELIANCE AS PLACED UPON MANY DECISIONS FROM VARIOUS COURTS OF THE COUNTRY. AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE, LD. CIT(A) HELD THAT ADDITION OF NOTIONAL INTEREST WAS WRONGLY MADE BY THE AO AND OBSERVED AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. AS PER ASSESSING OFFICER THE APPELLANT H AD TAKEN HUGE INTEREST FREE DEPOSITS FOR THE LET OUT PROPERTY. THE ASSESSING OFFICER HAD STATED THAT THE STANDARD RENT UNDER MAHARASHTRA RENT CONTROL ACT, 1999 IS NOT APPLICABLE AS THE PROPERTIES WERE COMMERCIAL PROPERTIES. THE ASSESSING OFFICER HAD RE LIED UPON CASES LIKE MAAKRUPA CHEMICALS PVT. LTD 108 ITD 95 (MUM) FOR DETERMINATION OF ALV WHICH WAS FOR THE PROPERTIES WHICH WERE LIABLE TO RENT CONTROL ACT. FURTHER THE OTHER CASE LAWS RELIED BEING ACIT VS RI TA A. PAREKH 10 SOT 779 (MUM), TIVOLI INVESTMENTS & TRADI NG CO (P) LTD CIT VS MONIKUMAR SUBHA FOR DETERMINING T HE ALV BASED ON NOTIONAL INTEREST. THE CASE LAWS RELIE D UPON BY THE ASSESSING OFFICER WERE DISTINGUISHED BY THE APPELLANT IN THE ABOVE SUBMISSION. FROM THE DETAILS FILED IT IS SEEN THAT THE INTEREST FREE DEPOSITS RANGES B ETWEEN 9 MONTHS TO 12 MONTHS RENT, WHICH IS A GENERAL PRAC TICE JAGSHI J. CHHEDA 14 FOR LETTING OUT THE PROPERTY. THERE WERE NO ABNORMA L OR HUGE INTEREST FREE DEPOSITS AS UNDERSTOOD BY THE ASSESSING OFFICER. THERE CANNOT BE ANY ADDITION BAS ED ON INTEREST FREE DEPOSITS. THE ASSESSING OFFICER HA S NO WHERE TAKEN A VIEW THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS NOT ANNUAL LET OUT VALUE (ALV) NOR HAS HE GIVEN ANY COMPARABLES TO DETERMINE THE ALV. IN THE ABSENCE OF ANY SUCH FINDINGS THE ACTUAL RENT RECEIV ED REQUIRES TO BE ACCEPTED. EVEN IN THE CASE WHERE REN T CHARGED IS LOWER, THE PROVISIONS RELATING TO COMPUT ATION OF PROPERTY DOES NOT PERMIT ADDITION OF NOTIONAL INTER EST TO THE INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS RE LIED UPON FOLLOWING JUDGMENTS: 1. CIT VS ASIAN HOTELS LTD 323 ITR 490 (DELHI- FB) 2. TRIVOLI INVESTMENTS & TRADING CO LTD ITA NO 2808/2809/MUM/1996 DATED 13.4.2011 3. CIT VS J.K. INVESTORS (BOMBAY) LTD 248 ITR 723 (BOM ) 4. M. V. SONAVALA VS. CIT 177 ITR 246 (BOM.) 5. CIT VS. PRABHABATI BANSALI 141 ITR 419 (CAL.) 6. INDERSONS LEATHERS PVT LTD VS ADDI CIT 295 ITR 295 (AT- AMRITSAR) 7. CIT VS. SATYA CO. LTD. 140 CTR 569 (CAL) IN THE RECENT DELHI FULL BENCH JUDGEMENT IN THE CAS E OF CIT VS ASIAN HOTELS LTD 323 ITR 490 IT HAS BEEN HELD TH AT THERE IS NO SCOPE IN LAW FOR TAXING ANY NOTIONAL IN TEREST. 5.4 ON THE BASIS OF THE FACTS OF THE CASE AND THE DECISIONS OF ABOVE HIGH COURTS FIND THAT THE INTERE ST FREE DEPOSITS ARE REASONABLE AS PER TRADE PRACTICE AND T HERE CANNOT BE ANY ADDITION ON ACCOUNT OF NOTIONAL INTER EST AS MADE BY THE ASSESSING OFFICER OF RS.18,09,057/- BEI NG NOTIONAL INTEREST ON DEPOSITS OF RS.4.42 CORES 12 %. THE ADDITION OF RS.18,09,057/- TO INCOME FROM HOUSE PROPERTY IS THEREFORE DELETED. THIS GROUND OF APPEA L IS ALLOWED. 7.3. IT IS NOTED BY US THAT LD. CIT(A) HAS RELIED UPON VARIOUS JUDGMENTS IN SUPPORT OF HIS VIEW. IT IS NOTED FROM THE FACTS NARRATED BY THE LD. CIT(A) THAT THE AO NOWHERE HELD THAT ACTUAL RENT RECEIVED BY THE ASSESSEE WAS NOT ANNUAL LET OUT VALUE AND NOWHERE HE HAD GIVEN ANY OTHER COMPARABLE S TO JAGSHI J. CHHEDA 15 DETERMINE THE ALV. UNDER THESE CIRCUMSTANCES, THE A CTUAL RENT RECEIVED WAS REQUIRED TO BE ACCEPTED AS ALV. T HE LAW DOES NOT PERMIT THE ADDITION OF NOTIONAL INTEREST O N THE GROUND OF INTEREST-FREE DEPOSITS RECEIVED FROM THE TENANT. THE LAW IN THIS REGARD HAS BEEN CLEARLY EXPLAINED IN THE VARIO US JUDGMENTS AS HAS BEEN RELIED UPON BY THE LD. CIT(A) , AS REPRODUCED ABOVE. NO CONTRARY JUDGMENT WAS BROUGHT TO OUR NOTICE BY THE LD. DR. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CI T(A) AND THEREFORE SAME IS UPHELD GROUND NO.2 OF REVENUES A PPEAL IS DISMISSED. 8. GROUND NO.3: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) AND DIRECTING THE AO TO TR EAT THE HIRE CHARGES INCOME RECEIVED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AS AGAINST INCOME FROM OTHER SOURC ES, AS WAS TREATED BY THE AO. 8.1. THE AO TREATED THE RENT RECEIPTS TOWARDS AMENITIES FROM THE TENANT IN THE FORM OF HIRE CHARGES AS INCOME FR OM OTHER SOURCES. THE REASONING GIVEN BY THE AO WAS THAT THE ASSESSEE HAD ENTERED INTO SEPARATE AGREEMENTS FOR THE HIRING AMENITIES AND THEREFORE THE AMOUNT RECEIVED BY THE ASSESSEE W AS TOWARDS UTILIZATION OF AMENITIES AND NOT FOR THE UT ILIZATION OF HOUSE PROPERTY, WHEREAS AS PER PROVISIONS OF LAW ON LY RENTAL INCOME FROM BUILDING CAN BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 8.2. BEING AGGRIEVED, THE ASSESSEE HAD FILED AN APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS SUBMITTED IN DETAIL W ITH THE HELP JAGSHI J. CHHEDA 16 OF EVIDENCES THAT PROPERTY WHICH WAS GIVEN ON RENT AND THE AMENITIES WERE INSEPARABLE. THE LD. CIT(A) CONSIDER ED SUBMISSIONS OF THE ASSESSEE IN DETAIL AND ACCEPTED THE CLAIM OF THE ASSESSEE BY HOLDING THE IMPUGNED INCOME AS INCO ME FROM HOUSE PROPERTY WITH FOLLOWING OBSERVATIONS: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. AS PER ASSESSING OFFICER THE APPELLANT H AD ENTERED INTO TWO SEPARATE AGREEMENTS ONE FOR RENT A ND ANOTHER FOR AMENITIES AND NOT FOR UTILIZATION OF TH E HOUSE PROPERTY, AND THEREFORE ASSESSING OFFICER TAX ED THE HIRE CHARGES AS INCOME FROM OTHER SOURCES AND DISALLOWED THE CLAIM OF THE ASSESSEE FOR TAXABILITY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AUTHORISED REPRESENTATIVE HAS CONTENDED THAT THE AMENITIES ARE INTEGRAL PART OF THE PREMISES WHICH HAVE BEEN RENTE D. MERELY USING A DIFFERENT NOMENCLATURE DOES NOT TAKE AWAY THE NATURE OF USE OF THE PROPERTY. THEREFORE T HE AMENITIES ARE PART AND PARCEL OF THE PREMISES WHICH IS LET OUT AND THEREFORE LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE AUTHORISED REPRESENTATIVE IN THE PAPER BOOK HAS SUBMITTED THE COPIES OF RENTAL AS WELL AS AMENITIES AGREEMENT OF ALL THE THREE PARTIES. FROM THE SAID AMENITIES AGREEMEN T IT CAN BE SEEN THAT IT REFERRED TO THE SAME PREMISES F OR WHICH RENTAL AGREEMENTS WERE ENTERED INTO FOR LET OUT OF PREMISES AND THE AMENITIES ANNEXURE IN ALL THREE AGREEMENTS WERE IDENTICAL AND, IT PERTAINED TO: 1. RCC FRAME STRUCTURE - COMMON AREAS SPECIFICATION : A) MARBLE / GRANITE/GRANAMITE IN COMMON AREAS, LOBBIES , ETC B) KOTAH ON STAIRCASE; C) 2 OTIS ELEVATORS 2. CONTROL ROOM: CCTV IN COMMON AREA 3. WATER SUPPLY: UNDERGROUND / BASEMENT WATER TANK WITH PNEUMATIC SYSTEM 4. ELECTRICITY: SUBSTATION WITHIN THE PREMISES JAGSHI J. CHHEDA 17 5. AHU ROOMS: FOR HOUSING SPLIT/ OUTDOOR UNITS 6. FIRE CONTROL: WET RISERS AND SPRINKLERS, SMOKE D ETECTORS FROM THE LIST OF AMENITIES IT CAN BE SEEN THAT THE PREMISES CANNOT BE PUT TO USE WITHOUT AMENITIES MENTIONED AB OVE. THE HIRE CHARGES ARE FOR THE USE OF AMENITIES WHICH ARE INSEPARABLE FROM PREMISES WHICH ARE LET OUT. HENCE THE MAIN INTENTION APPEARS TO EXPLOIT THE PROPERTY AND NOT TO RENDER ANY SERVICES. AS SUCH THERE ARE NO SERVIC ES PROVIDED WHICH ARE DISTINCT FROM LETTING OUT OF PRO PERTY. THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF SHAMBHU INVESTMENTS P. LTD. VS CIT 263 ITR 143 HAS HELD THAT COMMERCIAL SPACE LET OUT WITH FACILITIES AND AMENITIES LIKE SECURITY, POWER, FIXTURES ETC. HAS T O BE TAXED AS INCOME FROM HOUSE PROPERTY. 6.4 ON THE BASIS OF ABOVE FACTS, I FIND THAT THE HI RE CHARGES ARE INSEPARABLE AND MAIN INTENTION OF THE APPELLANT IS TO LET OUT PROPERTY WITH AMENITIES. HE NCE THE SAME REQUIRES TO BE TAXED AS INCOME FROM HOUSE PROP ERTY. THE ASSESSING OFFICER IS DIRECTED TO TREAT THE INCO ME DERIVED FROM SO CALLED AMENITIES AS INCOME FROM HOU SE PROPERTY. THIS GROUND OF APPEAL IS ALLOWED. 8.3. WE HAVE GONE THROUGH THE EVIDENCES AND DETAILS SHO WN TO US. THE PERUSAL OF PARTICULARS OF ITEMS PROVIDED UN DER THE AMENITIES, AS HAS BEEN DISCUSSED BY THE LD. CIT(A) IN HIS ORDER, SHOW THAT THESE AMENITIES ARE OF THE NATURE THAT THEY CONSTITUTE INTEGRAL PART OF THE HOUSE BUILDING E.G. ELECTRICAL PANELS, AHU ROOMS AND FIRE CONTROL SYSTEM, WATER TA NKS, ELEVATOR, ETC. IN OUR CONSIDERED VIEW, ALL THESE IT EMS ARE NOWADAYS CONSIDERED AS ITEMS OF BASIC NECESSITIES. IT HAS BEEN CONTENDED BEFORE US THAT THE IMPUGNED PREMISES COUL D NOT HAVE BEEN PUT TO USE WITHOUT THESE AMENITIES. IN AN Y CASE, THE MAIN INTENTION OF THE ASSESSEE WAS STATED TO BE FOR EXPLOITING THE PROPERTY AND NOT TO RENDER ANY SERVICE WITH THE HELP OF JAGSHI J. CHHEDA 18 THESE AMENITIES. WE DO NOT FIND ANYTHING INDICATING THAT SERVICES PROVIDED WITH THE HELP OF THESE AMENITIES WERE IN ANY MANNER DISTINCT FROM LETTING OUT OF THE PROPERTY. U NDER THESE CIRCUMSTANCES, HIRE CHARGES NEED NOT NECESSARILY BE SEPARATELY ASSESSED FROM RENTAL INCOME. THUS, BOTH OF THESE CA N BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PART OF TOTAL RENTAL INCOME. WE FIND THAT THE ORDER OF L D. CIT(A) IS JUSTIFIED ON FACTS AND LAW BOTH. NO INTERFERENCE TH EREIN IS CALLED FOR AND THEREFORE, SAME IS UPHELD. THIS GROU ND IS DISMISSED. 9. GROUND NO.4: THIS GROUND RELATES TO PROPORTIONATE DISALLOWANCE OR RS. 19,35,921/- MADE BY THE AO ON T HE GROUND THAT THERE MIGHT BE SOME EXPENSES WHICH WOUL D HAVE BEEN INCURRED TOWARDS THE PROPERTY WHICH WAS EITHER LET OUT OR GIFTED. THE AO MADE DISALLOWANCE @ OF 25% OF THE TO TAL EXPENSES ON THE BASIS OF AREA OCCUPIED BY THE LET O UT PROPERTIES. 9.1. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED IN DETAIL THAT THE EXPENSES DE BITED IN THE P & L ACCOUNT WHICH WERE CLAIMED AS BUSINESS EXPENS ES WERE NOT RELATED TO THE PROPERTIES LET OUT. AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) ANALYSE D THE SAME IN DETAILED AND ACCEPTED IT AFTER GIVING DETAILED R EASONING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , THE REASONING OF THE ASSESSING OFFICER AND THE SUBMISSI ONS OF THE AUTHORISED REPRESENTATIVE. AS PER ASSESSING OFF ICER THE APPELLANT HAD DEBITED VARIOUS COMMON EXPENSES JAGSHI J. CHHEDA 19 WHICH CANNOT BE SAID TO HAVE INCURRED WHOLLY & EXCLUSIVELY FOR BUSINESS BUT ARE ALSO INCURRED IN R ESPECT OF PROPERTIES WHICH ARE RENTED AND GIFTED. THE APPELLA NT EXPLAINED THAT THE EXPENSE DIRECTLY RELATED TO THE RENTED/GIFTED PROPERTY LIKE PROPERTY TAX, MAINTENAN CE CHARGES, ARE ALREADY RECOVERED FROM THE PERSONS TO WHOM IT IS LET OUT I GIFTED AND NOT DEBITED TO THE PROFIT & LOSS ACCOUNT. THE OTHER EXPENSES LIKE BANK CHARGES, PROFESSIONAL CHARGES , TRAVELLING, MOTOR CAR EXPENS ES, PRINTING & STATIONERY, SALARY & WAGES ETC ARE INCUR RED WHOLLY & EXCLUSIVELY FOR BUSINESS OF THE APPELLANT AND CANNOT BE DISALLOWED. I HAVE GONE THROUGH THE DETAI LS OF THE EXPENSES AND THE LEDGER ACCOUNTS FURNISHED AND FIND THAT EXPENSES DIRECTLY RELATABLE TO THE PREMISES LE ASED AND GIFTED ARE RECOVERED AND NOT CLAIMED AS EXPENSE S. FROM THE DETAILS IT IS SEEN THAT BANK CHARGES CLAIM ED ARE RS.16,50,689/- WHICH IS MAINLY FOR MORTGAGE OF PROPERTY WITH BANK FOR SECURED TERM LOANS & PROCESSING CHARGES. PROPERTY TAX CLAIMED IS RS.6,53,288/-. THE TOTAL PROPERTY TAX EXPENSES INCURRED IS RS.7,68,945/- OUT OF WHICH RS.1,15,657/ - PERTAINING TO THE GIFTED PROPERTY HAS BEEN RECOVERE D . THE REST OF THE PROPERTY TAX RELATES TO BUILDING HE LD AS STOCK IN TRADE AND THEREFORE IS AN ALLOWABLE BUSINE SS EXPENDITURE. AS REGARDS THE PROPERTY TAX OF RENTED OUT PROPERTY IT HAS NOT BEEN CLAIMED AS AN EXPENDITURE BY THE APPELLANT SINCE THEY HAVE BEEN PAID BY THE RESPECTIVE LICENSEES AS PER LEASE AGREEMENT. MAINTENANCE CHARGES CLAIMED IS OF RS.11,60,037/-. T OTAL EXPENSES INCURRED IS RS.15,69,981/- OUT OF WHICH TH E EXPENSES PERTAINING TO THE GIFTED/ RENTED PROPERTY OF RS.4,09,944 IS RECOVERED. THE REST OF THE MAINTENAN CE CHARGES DO NOT RELATE TO THE LET OUT PROPERTY OR TH E GIFTED PROPERTIES. RESPECTIVE MAINTENANCE CHARGES HAVE BEE N RECOVERED FROM LICENSEES AND PERSONS RECEIVING THE GIFTED PROPERTIES AND NOT CLAIMED AS EXPENDITURE. THEREFORE THIS CANNOT BE DISALLOWED. PROFESSIONAL FEES CLAIMED IS RS.16,77,364. FROM THE DETAILS IT I S SEEN THAT THE EXPENSES ARE NOT PERTAINING TO LEASED GIFT ED PROPERTY BUT FOR LEGAL FEES PERTAINING TO REHABILIT ATION BUILDINGS, CLUB HOUSE ETC. THE OTHER COMMON EXPENSE S ARE ALSO INCURRED WHOLLY & EXCLUSIVELY FOR BUSINESS JAGSHI J. CHHEDA 20 PURPOSE AND HENCE NO PROPORTIONATE DISALLOWANCE IS CALLED FOR. THE REST OF THE EXPENSES ARE NOT RELATE D TO THE HOUSE PROPERTY INCOME BUT ARE INCURRED FOR THE PURPOSES OF APPELLANT'S BUSINESS. HENCE NO DISALLOW ANCE IS CALLED FOR. THE DISALLOWANCE OF RS.19,35,921/- I S DELETED. THIS GROUND OF APPEAL IS ALLOWED. 9.2. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND SUBMISSIONS MADE BY BOTH THE SIDES BEFORE US. I T IS NOTED THAT LD. CIT(A) HAS MADE ITEM WISE ANALYSIS OF ALL THE EXPENSES AND FOUND THAT NONE OF THESE EXPENSES WERE RELATED TO THE LET OUT PROPERTIES OR GIFTED PROPERTIES. IF ANY EXPENSE S WERE INCURRED ON SUCH TYPE OF PROPERTIES THEN THE SAME W ERE RECOVERED. IT IS FURTHER NOTED THAT LD. CIT(A) HAS ANALYSED OTHER EXPENSES ALSO FOR EXAMPLE PROFESSIONAL FEE AN D VARIOUS OTHER EXPENSES BEFORE GIVING THE FACTUAL FINDINGS T HAT NONE OF THESE EXPENSES RELATED TO LET OUT PROPERTIES. NOTHI NG WAS ARGUED BY THE LD. DR AND NOTHING WAS BROUGHT BEFORE US TO CONTROVERT THE FACTUAL FINDINGS GIVEN BY THE LD. CI T(A) AS REPRODUCED ABOVE. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) AND THEREFORE, SAME IS UPHELD AND GROUND NO.4 OF REVENUES APPEAL IS DISMISSED. ADDITIONAL GROUND : 10. DURING THE COURSE OF HEARING OUR ATTENTION WAS ALS O DRAWN UPON ADDITIONAL GROUND FILED BY THE REVENUE. IN THE ADDITIONAL GROUND, THE REVENUE HAS CHALLENGED THE ACTION OF LD . CIT(A) IN DIRECTING THE INTEREST INCOME TO BE TAKEN AS BUSINE SS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. DURING THE CO URSE OF JAGSHI J. CHHEDA 21 HEARING NOTHING WAS ARGUED BY LD. DR ON THIS ISSUE AND THEREFORE, SAME IS DISMISSED AS NOT PRESSED. 11. AS A RESULT APPEAL FILE BY THE REVENUE IS DISMISSE D. NOW, WE SHALL TAKE ASSESSEES APPEAL IN ITA NO.3851/MUM/2012 FOR A.Y. 2009-10: 12. GROUND NO.1: THIS GROUND WAS NOT PRESSED BY THE ASSESSEE AND THEREFORE SAME IS DISMISSED. 13. GROUND NO.2: THIS GROUND RELATES TO THE SUBMISSIONS OF THE ASSESSEE FOR TREATING THE INTEREST INCOME OF RS.3,36,97,261/- AS PART OF THE WORK IN PROCESS (WI P). THIS GROUND IS SIMILAR TO GROUND NO.2 OF ASSESSEES APPE AL FOR A.Y. 2008-09. WE DIRECT THE AO TO FOLLOW OUR ORDER FOR A .Y. 2008-09 AND DISMISS THIS GROUND. ACCORDINGLY, APPEAL FILED BY THE ASSESSEE IS DISMISSED. NOW WE SHALL TAKE UP REVENUES APPEAL IN ITA NO.4760/MUM/2012 FOR 2009-10: 14. GROUND NO.1: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN DELETING ADDITION OF RS .77,24,739/- DEBITED UNDER THE HEAD PURCHASES ON THE GROUND THAT LD. CIT(A) HAD CONSIDERED ADDITIONAL EVIDENCES IN VIOLA TION OF RULE 46A OF INCOME TAX RULE 1962. 14.1. DURING THE COURSE ASSESSMENT PROCEEDINGS, IT WAS N OTED BY THE AO THAT VARIOUS EXPENSES DEBITED BY THE ASSE SSEE IN THE P & L ACCOUNT WERE NOT ALLOWABLE AS ASSESSEE WAS FO LLOWING JAGSHI J. CHHEDA 22 PROJECT COMPLETION METHOD AND THESE EXPENSES WERE N OT PERIOD COST BUT WERE REQUIRED TO BE CAPITALISED AS PART OF WIP. 14.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN DETAILED SUBMISSIONS WERE FILED. IT WAS DEMONSTRATED THAT IMPUGNED EXPENSES RELATED TO THE PERIOD COST OF THE ASSESSEE. 14.3. IT WAS FURTHER DEMONSTRATED THAT THESE EXPENSES WE RE NOT RELATED TO THE JOINT VENTURE PROJECT, AND THESE EXPENSES WERE REVENUE NATURE EXPENSES AND THESE WERE INCURRE D AS PER THE CONTRACTUAL OBLIGATIONS OF THE ASSESSEE. LD. CI T(A) CONSIDERED SUBMISSIONS OF THE ASSESSEE IN DETAIL AN D DELETED THE SAME BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , REASONS FOR ADDITION BY THE ASSESSING OFFICER AND THE WRITTEN SUBMISSION OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT AS PER ASSESSING OFFICER THE EXPENDITURE INCURRED OF RS.77,24,739.- IS NOT A PERIOD COST BUT REQUIRES TO BE CAPITALIZED FO R THE ONGOING PROJECT OF THE APPELLANT PERTAINING TO JV WITH GODREJ PROPERTIES & INVESTMENTS LTD (GPL), THE AR HAS EXPLAINED & SUBSTANTIATED HIS CONTENTION THAT THE SAID EXPENDITURE WAS NOT INCURRED IN RELATION TO THE JOINT VENTURE WITH M/S GODREJ PROPERTIES & INVESTMENTS LTD. BASED ON THE CLAUSES OF MOU DATED 17.6.1999 WITH GPL & AGREEMENT DATED 25.7.2002 WITH LOKMANYA PAN BAZAR ASSOCIATION LTD. 4.5 AS PER THE MOU DATED 17.6.1999 WITH M/S GODREJ PROPERTIES & INVESTMENTS LTD (GPL) AND AGREEMENT DATED 25.7.2002 WITH LOKMANYA PAN BAZAR ASSOCIATION LTD FOR REHABILITATION AND AWARD PAYMENT IT WAS AGREED BETWEEN THE PARTIES THAT THE APPELLANT ONLY HAD TO BEAR THE COST FOR HIS PORTION OF PROJECT. THE JOINT VENTURE AGREEMENT WITH GPL IS IN RESPECT OF THE DEVELOPMENT OF THE SALEABLE AREA TO JAGSHI J. CHHEDA 23 BE CONSTRUCTED WHICH IS TOTALLY DIFFERENT. THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT FO R BOREWELL CHARGES, CIVIL LABOUR CHARGES, LABOUR CHARGES FOR K BUILDING, MATERIALS PURCHASED AND TRANSPORTATION CHARGES ARE NOT RELATABLE TO JV PROJECT AS UNDERSTOOD BY THE AO. AS PER THE CLAUSES 18(E) OF THE MOU DATED 17.6.1999 BETWEEN GPL, COST OTHER THAN FOR THE JV PORTION OF THE DEVELOPMENT IS EXCLUSIVELY TO BE BORNE BY THE APPELLANT WHICH IS SPECIFIED IN THE CLAUSE 18.(E). THIS READS THAT AS 'SILVER WILL PROVIDE AT ITS OWN COST, IN A SEPARATE BUILDING TO BE CONSTRUCTED ON PART OF THE SAID PROPERTY (NOT THE THEATRE PLOT) AREA OF 14000 SQ. F T. (BUILT UP) TO BE PROVIDED TO THE ASSOCIATION UNDER THE SAI D AGREEMENT DATED 24TH MARCH, 1994 THE IV IS RELATABLE ONLY TO THE SALEABLE AREA TO BE DEVELOPED IN JV BY GPL, WHEREAS THE EXPENSES INCURRED ARE IN RELATION TO AREA OTHER THAN JV AREA FOR WHICH THERE IS CONTRACT UAL LIABILITY ARISING OUT OF THE AGREEMENT WITH LOKMANY A PAN BAZAR ASSOCIATION LTD. IT IS ALSO SEEN FROM THE SUBMISSION THAT A SIMILAR EXPENDITURE WAS ALSO DEBI TED IN THE EARLIER YEAR I.E. A Y 2008-09 AND NO SUCH DISALLOWANCE WAS MADE BY THE AO IN THE ORDER PASSED U/S 143(3) IN THAT YEAR. THERE IS NO CHANGE IN FACT S AND CIRCUMSTANCES FOR BOTH THE YEARS. THE EXPENSES RELA TED TO THE JV ARE SEPARATELY ACCOUNTED IN THE WIP ACCOUNT. THE EXPENSES DEBITED BY THE APPELLANT WHIC H ARE NOT RELATED TO JV ARE REVENUE EXPENDITURE AND INCURRED AS PER THE CONTRACTUAL OBLIGATION FOR WHIC H NO REVENUE IS TO BE GENERATED. HENCE IT IS AN ALLOWABL E AS BUSINESS EXPENDITURE. THE DISALLOWANCE OF RS.77,24,739/- IS THEREFORE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 14.4. DURING THE COURSE OF HEARING, IT WAS PUT TO THE LD . DR BY POINT OUT THAT WHAT ARE THOSE ADDITIONAL EVIDENC ES WHICH HAVE BEEN REFERRED BY THE LD. CIT(A) IN HIS ORDER. LD. DR WAS NOT ABLE TO POINT OUT ANY ADDITIONAL EVIDENCES. EVE N ON MERITS LD. DR WAS NOT ABLE TO CONTROVERT OR CONTRADICT THE FACTUAL JAGSHI J. CHHEDA 24 FINDINGS GIVEN BY THE LD. CIT(A). IT IS SEEN THAT L D. CIT(A) HAS ANALYSED ENTIRE FACTS AND SIMILAR EXPENSES HAVE BE EN ALLOWED IN EARLIER YEAR A.Y. 2008-09 IN THE ORDER PASSED U/ S 143(3) BY THE AO HIMSELF. IT WAS FURTHER FOUND BY THE LD. CIT (A) THAT THE IMPUGNED EXPENSES WERE NOT RELATED TO THE JOINT VEN TURE PROJECT AND THEREFORE THERE WERE NO REASONS FOR TRA NSFERRING THESE EXPENSES TO THE WIP ACCOUNT. UNDER THESE FACT S, WE FIND THAT LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANC E MADE BY THE AO. WE DO NOT FIND ANY REASONS TO INTERFERE IN THE FINDINGS RECORDED BY THE LD. CIT(A) AND THEREFORE THESE ARE UPHELD AND CONSEQUENTLY GROUND NO.1 OF REVENUES APPEAL IS DIS MISSED. 15. GROUND NO.2 TO 5: THESE GROUNDS ARE COVERED BY OUR ORDER OF A.Y. 2008-09 IN THE CASE OF REVENUES APPE AL. NO DISTINCTION HAS BEEN MADE BY THE EITHER PARTY ON FA CT OR LAW BETWEEN THE TWO YEARS, THEREFORE, FOLLOWING OUR ORD ER WE DISMISS GROUND NO.2 TO 5 OF REVENUES APPEAL. 16. AS A RESULT APPEAL OF THE REVENUE IS DISMISSED. 17. IN THE RESULT, ALL OF THE APPEALS FILED BY THE ASSE SSEE AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 24/06/2016 CTX? P.S/. .. JAGSHI J. CHHEDA 25 #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI