ACIT, Circle - 50, Kolkata, Kolkata V. Kolkata Metropolitan Development Authority, Kolkata

ITA 945/KOL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8189 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA
• Assessee Lawyers: N K PODDER
• Keywords: Business income; Business expenditure; Corroborative evidences; Revenue expenditure
• Section: 143(3)

Judgement Text

I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER), AND SHRI MAHAVIR SINGH (JUDICIAL MEMBER) I.T.A. NO.: 945/ KOL. / 2011 ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX.....APPE LLANT CIRCLE-50, KOLKATA, UTTARAPAN SHOPPING COMPLEX, MANICKTOLA CIVIC CENTRE, ULTADANGA, KOLKATA-700 054 -VS.- KOLKATA METROPOLITAN DEVELOPMENT AUTHORITY...RES PONDENT, PRASASHAN BHAWAN, DD-I, SECTOR-I, SALT LAKE CITY, KOLKATA-700 064 [PAN :AAALK 0714 F), & I.T.A. NO. 986/KOL./2011 ASSESSMENT YEAR : 2008-2009 KOLKATA METROPOLITAN DEVELOPMENT AUTHORITY... APPELLANT, PRASASHAN BHAWAN, DD-I, SECTOR-I, BIDHANNAGAR, KOLKATA-700 064 -VS.- ASSISTANT COMMISSIONER OF INCOME TAX.....RESP ONDENT CIRCLE-50, KOLKATA, UTTARAPAN SHOPPING COMPLEX, MANICKTOLA CIVIC CENTRE, ULTADANGA, KOLKATA-700 054 [PAN :AAALK 0714 F) APPEARANCES BY: A.K. MAHAPATRA, D.R., FOR THE DEPARTMENT N.K. PODDER, A.R. FOR THE ASSESSEE I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 2 OF 16 DATE OF CONCLUDING THE HEARING : SEPTEMBER 19, 201 2 DATE OF PRONOUNCING THE ORDER : NOVEMBER 29, 2012 O R D E R PER PRAMOD KUMAR: 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2008-09. AS THESE APPEALS HAVE BEEN HEARD TOGETHER, INVOLVE IN COMMON ISSUES AND ARISE ON THE SAME SET OF FACTS, BOTH THE APPEALS AR E BEING TAKEN OF FOR DISPOSAL BY WAY OF THIS CONSOLIDATED ORDER. 2. WE FIRST TAKE UP THE I.T.A. NO. 945/KOL./2011, I .E. REVENUES APPEAL, WHEREIN FOLLOWING GRIEVANCES ARE RAISED:- (1) THAT LD. CIT(A) HAS ERRED IN LAW AS WELL AS FAC TS IN DETERMINING INCOME AT RS.1,12,10,35,867/- IN PLACE OF ASSESSED INCOME OF RS.5,92,04,65,613/-. (2) THAT LD. CIT(A) HAS ERRED IN LAW AS WELL AS FAC TS IN DELETING RS.4,77,99,935/-. THIS FIGURE REPRESENTS ACCUMULATED BALANCE BROUGHT FORWARD FROM PREVIOUS Y EARS UPTO 31.03.2007. THE ASSESSEE HAS TRANSFERRED THIS DIRECTLY TO THE BALANCE SHEET WHICH IS NOT ROUTED THROUGH TH E INCOME & EXPENDITURE A/C. 3. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS WHETHER OR NOT THE LD. CIT(APPEALS) WAS JUSTIFIE D IN DELETING THE DISALLOWANCE OF RS.4,77,99,935/- IN RESPECT OF ACCU MULATED LOSS BROUGHT FORWARD FROM THE PRECEDING PREVIOUS YEARS. I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 3 OF 16 4. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSEE BEFORE US IS SET UP UNDER CALCUTTA METROPO LITAN DEVELOPMENT AUTHORITY ACT, 1972 AND IS FUNCTIONING UNDER THE AD MINISTRATIVE CONTROL OF THE URBAN DEVELOPMENT DEPARTMENT OF GOVERNMENT O F WEST BENGAL. IT IS ENGAGED IN PLANNING, FUNCTIONING, COORDINATIN G AND EXECUTING VARIOUS PROJECTS WITHIN THE CALCUTTA METROPOLITAN D EVELOPMENT AREA. IN THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH WERE CO MPLETED UNDER SECTION 144, THE ASSESSING OFFICER ADOPTED THE FIGU RE OF RS.5,92,04,65,613/- WHICH WAS, ACCORDING TO THE ASS ESSING OFFICER, EXCESS OF INCOME OVER EXPENDITURE AS PER THE PRINTE D AUDITED ACCOUNTS FILED BY THE ASSESSEE. BEING AGGRIEVED, THE ASSESSE E, INTER ALIA, APPEALED BEFORE THE LD. COMMISSIONER ON THE GROUND THAT THE AMOUNT OF RS.592,04,65,613/- WHICH WAS ADOPTED BY THE ASSESSI NG OFFICER UNDISPUTEDLY INCLUDED THE AMOUNT OF RS.4,77,99,92,9 35/-, WHICH REPRESENTED ACCUMULATED SURPLUS IN THE AUDITED PROF IT & LOSS A/C BROUGHT FORWARD FROM THE PRECEDING YEARS. IT WAS AL SO THE ASSESSEES CONTENTION THAT EVEN WHILE MAKING THE IMPUGNED BEST JUDGMENT ASSESSMENT, THE ASSESSING OFFICER WAS OBLIGED IN LA W TO MAKE AN INDEPENDENT AND WELL BALANCED ASSESSMENT BASED ON A DEQUATE MATERIAL ON RECORD AND ASSESSING OFFICER IS NOT PERMITTED TO ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. THIS CONTENTION FOUND FAVOUR WITH THE COMMISSIONER (APPEALS). IN A DETAILED ORDER GIVING ANALYSIS OF THE FACTUAL ELEMENTS, THE LD. COMMISSIONER, INTER ALIA, OBSERVED AS FOLLOWS :- 11. I HAVE EXAMINED THE AFORESAID ISSUES RAISED BY THE ASSESSING OFFICER IN HIS REMAND REPORT. THE ASSESSI NG OFFICER, IN THE IMPUGNED ASSESSMENT ORDER COMPUTED THE TOTAL INCOME FOR THE ASSESSMENT YEAR 2008-09 WITH R EFERENCE TO RS.592,04,65,613/-, WHICH IS THE BALANCE IN THE PRINTED I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 4 OF 16 AUDITED INCOME & EXPENDITURE ACCOUNT CARRIED TO THE BALANCE SHEET DRAWN AS AT 31 ST MARCH, 2008. THE SAID SUM OF RS.592,04,65,613/- CONSISTS OF THE FOLLOWING :- NET BALANCE IN THE INCOME & EXPENDITURE ACCOUNT FOR THE YEAR UNDER APPEAL.RS.79,53,56, 308 ADD.: BALANCE BROUGHT FORWARD FROM PREVIOUS YEARS (UPTO 31.03.2007)..RS.4,77,99,92, 935 _________________ RS.557,53,49,243 ADD.: TRANSFERRED FROM SINKING FUND FOR REDEMPTION OF LOAN BONDS RS.34,59,25,744 LESS : REDEMPTION OF LOAN BONDS.RS. 8,09,374 _______________ RS.34,51,16,370 _________________ NET AMOUNT CARRIED OVER IN THE PRINTED AUDITED BALANCE SHEET DRAWN AS AT 31.03.2008 RS.5,92,04,65,613 12. THE OPENING BALANCE OF RS.4,77,99,92,935/- BROU GHT FORWARD IN THE INCOME & EXPENDITURE ACCOUNT FOR THE YEAR UNDER APPEAL, IS ACTUALLY THE CLOSING BALANCE IN TH E SAID ACCOUNT AS ON 31 ST MARCH, 2007 CORRESPONDING TO THE ASSESSMENT YEAR 2007-08. THIS SUM OF RS.477,99,92,9 35/-, BY NO STRETCH OF IMAGINATION, LAW OR LOGIC CAN EVER BE TAXED AS THE INCOME OF THE APPELLANT FOR THE FINANCIAL YE AR ENDING 31 ST MARCH, 2008 CORRESPONDING TO THE ASSESSMENT YEAR 2008-09, NOW UNDER APPEAL BEFORE ME. 13. ADMITTEDLY, THE INCOME TAX ACT PROVIDES FOR COMPUTATION OF INCOME OF AN ASSESSEE ON YEAR TO YEA R BASIS. THE ACCUMULATED ACCOUNTING SURPLUS IN THE SUM OF RS.4,77,99,92,935/- RELATING TO THE EARLIER YEARS C ANNOT BE BROUGHT TO TAX BY ANY STRETCH OF IMAGINATION IN THE YEAR UNDER APPEAL, MORE PARTICULARLY WHEN THE ASSESSING OFFICER HAS ALREADY ASSESSED THE APPELLANT IN EACH OF THE P RECEDING I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 5 OF 16 FOUR YEARS BASED ON ITS AUDITED ACCOUNTS FOR THOSE YEARS; AND THAT FOR YEAR PRIOR TO 01.04.2002, ITS INCOME WAS N OT LIABLE TO TAX IN VIEW OF THE EXEMPTION CONTAINED IN SECTIO N 10(20A) OF THE SAID ACT, WHICH PROVISION WAS DELET ED BY THE FINANCE ACT, 2002 ONLY W.E.F. 01.04.2003. IN THAT V IEW OF THE MATTER, THE TOTAL INCOME OF THE APPELLANT FOR T HE YEAR UNDER APPEAL HAS TO BE COMPUTED WITH REFERENCE TO T HE NET SURPLUS OF RS.79,53,56,308/- REFLECTED IN THE AUDIT ED INCOME AND EXPENDITURE ACCOUNT DRAWN FOR THE FINANCIAL YEA R ENDING 31 ST MARCH, 2008 CORRESPONDING TO THE ASSESSMENT YEAR 2008-09; AND WITHOUT CONSIDERING ANY ACCOUNTIN G SURPLUS LYING IN THE INCOME AND EXPENDITURE ACCOUNT , AS BROUGHT FORWARD FROM THE EARLIER YEARS. 14. FURTHER THE TRANSFERS FROM THE SINKING FUND IN THE SUM OF RS.34,57,25,744/- AND/OR TRANSFERS TO THE SI NKING FUND IN THE SUM OF RS.809,374/- ARE NOTHING BUT APPROPRIATION OF PROFITS. SUCH TRANSFERS CANNOT AFF ECT THE TAXABLE INCOME, MORE PARTICULARLY WHEN THE TRANSFER S TO AND/OR FROM THE SINKING FUND FOR REDEMPTION OF LOAN BONDS WERE NEVER CLAIMED AND/OR ALLOWED AS A BUSINESS DED UCTION EITHER IN ANY OF THE EARLIER YEARS OR IN THE YEAR U NDER APPEAL. 15. THEREFORE, THE ASSESSING OFFICER, IN MY VIEW, W AS WHOLLY INCORRECT IN LAW IN TAKING THE FIGURE OF RS.592,04,65,613/- AS THE TOTAL INCOME ASSESSABLE T O TAX FOR THE YEAR UNDER APPEAL. THE STARTING POINT TO COMPUT E THE TOTAL INCOME OF THE APPELLANT FOR THE YEAR UNDER AP PEAL SHOULD HAVE BEEN THE NET INCOME OF RS.79,53,56,308/ - AS SHOWN IN THE PRINTED AUDITED INCOME AND EXPENDITURE ACCOUNT OF THE APPELLANT FOR THE YEAR UNDER APPEAL, WHICH PRINTED ACCOUNTS WERE ADMITTEDLY PART OF THE ASSESS MENT RECORDS WHEN THE ASSESSING OFFICER PROCEEDED TO PAS S THE IMPUGNED ASSESSMENT ORDER. THE REVENUE IS NOT SATISFIED BY THE STAND SO TAKEN BY THE LD. CIT(APPEALS) AND IS IN APPEAL BEFORE US. I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 6 OF 16 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. A PLAIN READING OF FACTS SET OUT IN COMMISS IONERS ORDER CLEARLY SHOWS THAT THE AMOUNT OF RS.4,77,99,92,935/- WAS BA LANCE BROUGHT FORWARD FROM EARLIER YEARS AND, THEREFORE, HE DID N OT REPRESENT BY NO STRETCH OF IMAGINATION, LAW OR LOGIC, INCOME OF THE CURRENT YEAR WHICH COULD BE BROUGHT TO TAX. LD. COUNSEL FOR THE ASSESS EE HAS ALSO FILED VOLUMINOUS EVIDENCE BEFORE US WHICH SHOWS THAT THE AMOUNT OF RS.477.99 CRORES WAS PERTAINING TO THE PRECEDING PR EVIOUS YEARS. LD. DEPARTMENTAL REPRESENTATIVE HAS NOT BROUGHT ON RECO RD ANY MATERIAL WHICH CONTROVERTS THESE FACTUAL FINDINGS. AS A MATT ER OF FACT, THERE WERE NO SPECIFIC ARGUMENT IN SUPPORT OF REVENUES APPEAL BEFORE US SAVE AND EXCEPT RELIANCE ON THE STAND OF THE ASSESSING OFFIC ER. IN THESE CIRCUMSTANCES AND BEARING IN MIND THE ENTIRETY OF T HE FACTUAL POSITION THAT RS.477.99 CRORES INCLUDED IN THE PROFIT & LOSS A/C. PERTAINING TO THE PRECEDING PREVIOUS YEARS, WE SEE NO REASON TO I NTERFERE IN THE CONCLUSIONS ARRIVED AT BY THE LD. CIT(APPEALS). WE APPROVE AND AFFIRM THE SAME AND DECLINE TO INTERFERE IN THE MATTER. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 7. WE NOW TAKE UP THE I.T.A. NO. 986/KOL./2011, I.E . ASSESSEES APPEAL WHICH WAS AGAINST THE IMPUGNED LD. CIT(APPEA LS)S ORDER. 8. IN THE FIRST THREE GROUNDS OF APPEAL, WHICH WE W ILL TAKE UP TOGETHER, THE ASSESSEE HAS RAISED THE FOLLOWING GRI EVANCES:- (1) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- XXXII, KOLKATA ERRED IN ARBITRARILY AND WRONGLY HOL DING THAT THE APPELLANT ASSESSEE AUTHORITY WAS NOT ENTIT LED TO DEDUCT FROM THE EXCESS OF INCOME OVER EXPENDITURE ( AS PER I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 7 OF 16 AUDITED ACCOUNTS) THE INTEREST OF RS.17,23,91,106/- PROVIDED BY IT ON THE LOANS GRANTED TO THE STATUTORY BODIES AND LOCAL AUTHORITIES, EVEN WHEN THERE WAS NO RECOVERY OF EIT HER THE PRINCIPAL AND/OR THE INTEREST DEEMED TO ACCRUE THER EON UNDER THE MERCANTILE SYSTEM OF ACCOUNTING DURING THE LAST 20 YEARS OR SO. (2) THAT THE LEARNED CIT(APPEALS) ERRED IN ARBITRAR ILY AND WRONGLY ALLEGING AND /OR HOLDING THAT THERE WAS NO EVIDENCED ON RECORD TO SHOW THAT THE RECOVERY OF LO ANS GRANTED TO THE STATUTORY BODIES AND LOCAL AUTHORITI ES BY THE APPELLANT ASSESSEE AUTHORITY WAS DOUBTFUL AND/OR TH AT THERE HAD BEEN NO RECOVERY OF ANY PART OF THE INTEREST DE EMED TO ACCRUE THEREON UNDER THE MERCANTILE SYSTEM OF ACCOU NTING. (3) THAT THE LEARNED CIT(A) SHOULD HAVE HELD THAT T HE SAID INTEREST OF RS.17,23,91,106/- WAS NOT ASSESSABLE TO INCOME TAX IN THE HANDS OF THE APPELLANT ASSESSEE AUTHORIT Y IN THE YEAR UNDER APPEAL, ON DEEMED ACCRUAL BASIS, AS IT W AS NOT ITS REAL INCOME; AND ALSO IN THE LIGHT OF THE UNDISPUTE D FACT THAT SUCH INTEREST WAS NOT BEING CHARGED TO INCOME-TAX B Y THE ASSESSING OFFICER IN THE HANDS OF THE APPELLANT ASS ESSEE AUTHORITY EVER SINCE THE ASSESSMENT YEAR 2004-05. 9. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THE ABOVE GROUNDS OF APPEAL IS WHETHER OR NOT THE CIT(APPEALS ) WAS JUSTIFIED IN UPHOLDING TAXABILITY OF RS.17,23,91,106/- IN RESPEC T OF INTEREST ON DEEMED ACCRUAL BASIS. 10. EVEN THOUGH THE ASSESSMENT WAS COMPLETED ON BES T JUDGMENT BASIS AND AS SUCH THERE IS NO DISCUSSION ABOUT SPEC IFIC OF THIS ISSUE IN THE ASSESSMENT ORDER, THE CIT(APPEALS) HAS DISCUSSE D THE ISSUE IN DETAIL AND, ON THE ISSUE, OBSERVED AS FOLLOWS :- 18. AS REGARDS, THE SUM OF RS.17,23,91,106/-, MR. N.K. PODDAR, SENIOR COUNSEL APPEARING FOR THE APPELLANT EXPLAINED BOTH ORALLY AS WELL AS IN WRITING THAT THE SAID SUM I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 8 OF 16 REPRESENTED INTEREST CREDITED IN THE INCOME AND EXP ENDITURE ACCOUNT PREPARED ON MERCANTILE SYSTEM OF ACCOUNTING FOR THE YEAR UNDER APPEAL ON ACCOUNT OF LOANS ADVANCED TO S TATUTORY AND LOCAL BODIES IN THE EARLIER YEARS. IT IS STATED THAT THE APPELLANT HAS NOT RECEIVED EITHER THE PRINCIPAL AND /OR ANY PORTION OF THE INTEREST FROM SUCH STATUTORY AND LOC AL BODIES FOR MORE THAN FIFTEEN (15) YEARS. EACH OF THESE LOA NS IS IN THE CATEGORY OF NPA. HE ALSO CONTENDED THAT ACCORDING T O ACCOUNTING STANDARD, AS-9 ISSUED BY THE INSTITUTE O F CHARTERED ACCOUNTANTS OF INDIA IF UNCERTAINTY AS TO THE ULTIMATE COLLECTION OF REVENUE EXISTS, THE RECOGNIT ION OF SUCH REVENUE SHOULD BE POSTPONED TO THE EXTENT OF UNCERT AINTY INVOLVED TILL THE ULTIMATE COLLECTION IS MADE. SH. PODDAR ALSO RELIED UPON THE CASES OF CIT VS. MOTOR CREDIT CO. P VT. LTD. (1981) 127 ITR 572 (MAD.); CIT VS. RAIGHARH JUTE MI LLS LTD. (1981) 132 ITR 702 (CAL.); SRI KEWAL CHAND BAGRI VS . CIT (199) 183 ITR 207 (CAL.), CIT VS. EASTERN INVESTMEN TS LTD. (1995) 213 ITR 334 (CAL.), CIT VS. METHOD TRADING A ND INVESTMENT LTD. (2000) 246 ITR 588, 599-600 (CAL.); UCO BANK VS. CIT (1999) 237 ITR 889 (SC) AND CIT VS. GI RIRAJ UDYOG PVT. LTD. (2005) 273 ITR 495 (ALL) IN SUPPORT HIS ARGUMENTS. 19. IT HAS ALSO BEEN STATED ON BEHALF OF THE APPELL ANT THAT THE SAID SUM OF RS.16,23,91,106/- RELATED TO LOANS ADVANCED TO STATUTORY AND LOCAL BODIES IN EARLIER YEARS. HOW EVER, I FIND THAT IT IS ONLY AN ASSERTION MADE BY THE APPELLANT THAT THE RECOVERY OF SUCH LOANS ITSELF WAS DOUBTFUL SINCE SU CH ASSERTION ON PART OF THE ASSESESE IS NOT BACKED BY ANY EVIDEN CE. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG, THEREFORE, IT IS REQUIRED TO OFFER TO TAX ALL THE I NCOMES THAT HAD ACCRUED TO IT DURING THE YEAR UNDER CONSIDERATI ON. WHEN, ADMITTEDLY, THE LOANS HAVE BEEN GIVEN TO STATUTORY BODIES AND LOCAL BODIES, IT APPEARS HIGHLY UNLIKELY THAT THE R ECOVERY OF LOAN AND THE AMOUNT OF INTEREST THEREON FROM THEM W OULD BE DOUBTFUL. THERE IS NO EVIDENCE PLACED ON RECORD BY THE APPELLANT THAT ACTUALLY THERE HAD BEEN NO RECOVERY OF ANY PART OF THE INTEREST THAT HAD BECOME DUE ON THE LOANS LE NT BY IT TO OTHER STATUTORY BODIES AND LOCAL AUTHORITIES. THERE IS NO CLAIM OF NON-PERFORMING ASSETS (NPA) IN THE AUDITED INCOM E AND EXPENDITURE ACCOUNT OF THE YEAR UNDER APPEAL TO WHI CH THE I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 9 OF 16 APPELLANT HAS CLAIMED THE AMOUNT OF INTEREST UNDER CONSIDERATION TO RELATE TO. THEREFORE, I DO NOT FIN D ANY JUSTIFICATION IN THE ASSESSEES SUGGESTION TO REDUC E THE AMOUNT OF SUCH INTEREST FROM THE EXCESS OF INCOME O VER EXPENDITURE (AS PER AUDITED ACCOUNTS) OF RS.79,53,5 6,308/-. THE ASSESSEE IS NOT SATISFIED BY THE STAND SO TAKEN BY THE CIT(APPEALS) AND IS IN APPEAL BEFORE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. 12. WE FIND THAT THE MAIN CONTENTION OF THE ASSESSE E IS THAT THE INTEREST, WHICH IS BROUGHT TO TAX ON DEEMED ACCRUAL BASIS IN RESPECT OF LOANS GRANTED TO THE STATUTORY BODIES AND LOCAL AUT HORITIES AND WHICH LOANS ITSELF WERE NOT RECOVERED. THE ASSESSEES STA ND IS THAT NO PART OF THE INTEREST WAS EVER ACTUALLY REALIZED, AND THAT F OLLOWING REAL INCOME THEORY SUCH INTEREST INCOME, ON DEEMED ACCRUAL BASI S, CANNOT BE BROUGHT TO TAX. WE HAVE NOTED THAT EVEN THE CIT(APP EALS) HAS NOT DISPUTED THE LEGAL PRINCIPLE EMBEDDED IN THIS LINE OF ARGUMENT BUT HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE SHORT GRO UND THAT THERE IS NO EVIDENCE PLACED ON RECORD BY THE APPELLANT THAT ACT UALLY THERE HAD BEEN NO RECOVERY. . OUR ATTENTION IS NOW INVITED TO THE COPIES OF ASS ESSMENT ORDERS PLACED IN THE PAPER BOOK WHICH TAKE ON RECOR D THE ABOVE FACTUAL POSITION. IN ANY CASE, WHETHER RECOVERY IS ACTUALLY MADE OR NOT IS A FACTUAL ASPECT WHICH IS TO BE DECIDED ONE WAY OR TH E OTHER, PARTICULARLY AS THERE SEEMS TO BE NO DISPUTE ON THE LEGAL PREPOS ITION. IN VIEW OF THESE DISCUSSIONS, WHILE WE UPHOLD THE PLEA OF THE ASSESSEE IN PRINCIPLE, TO THE EFFECT THAT WHEN PRINCIPAL AMOUNT ITSELF IS UN- I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 10 OF 16 RECOVERED AND PRACTICALLY UNRECOVERABLE, DEEMED ACC RUED INTEREST ON SUCH LOANS AND ADVANCES CANNOT BE BROUGHT TO TAX, W E REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR GIVING A F INDING OF FACT ABOUT ACTUAL STATUS OF RECOVERY OF PRINCIPAL AND INTEREST , AND RELATED FACTORS. WE DIRECT THE ASSESSEE TO PLACE ALL THE RELATED FAC TS AND SUBMISSIONS BEFORE THE ASSESSING OFFICER, AND DIRECT THE ASSESS ING OFFICER TO DECIDE THE ISSUE AFRESH, IN THE LIGHT OF OUR OBSERVATIONS, BY WAY OF A SPEAKING ORDER, IN ACCORDANCE WITH THE LAW AND AFTER GIVING A FAIR REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE ORDER SO . 13. GROUND NOS. 1, 2 & 3 ARE THUS ALLOWED FOR STATI STICAL PURPOSES IN THE TERMS INDICATED ABOVE. 14. IN GROUND NO. 4, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE:- THAT THE LEARNED CIT(APPEALS) ERRED IN HOLDING THA T THE OVERHEAD EXPENDITURES IN THE AGGREGATE SUM OF RS.31,,21,93,576/- DID NOT RELATE TO THE ACTIVITIES CARRIED ON BY THE APPELLANT ASSESSEE AUTHORITY AND/OR THAT SUC H REVENUE EXPENDITURE WAS NOT DEDUCTIBLE IN COMPUTING THE INCOME OF THE APPELLANT ASSESSEE AUTHORITY FOR THE YEAR UNDER APPEAL, MORE PARTICULARLY IN THE LIGHT OF THE UNDISPUTED FACT THAT SUCH EXPENDITURE WAS ALLOWED B Y THE ASSESSING OFFICER HIMSELF IN THE HANDS OF THE APPEL LANT ASSESSEE AUTHORITY EVEN IN THE IMMEDIATELY PRECEDIN G YEAR, VIZ. ASSESSMENT YEAR 2007-08. 15. THIS CLAIM FOR DEDUCTION FROM AMOUNT OF EXCESS OF INCOME OVER EXPENDITURE HAS BEEN DECLINED BY THE CIT(APPEALS) B Y OBSERVING AS FOLLOWS :- 20. SIMILARLY, I DO NOT FIND ANY JUSTIFICATION IN T HE ACTION OF THE ASSESSEE IN REDUCING THE AMOUNT OF ABSORBED OVERHEADS NOT DEDUCTED EARLIER OF RS.31,21,93,576/- FROM THE AMOUNT OF I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 11 OF 16 EXCESS OF INCOME OVER EXPENDITURE (AS PER AUDITED A CCOUNTS). IT HAS BEEN CONTENDED BY THE ASSESSEE THAT THE SAID EXPENDITURE WAS NOT BEING CLAIMED BY THE ASSESSEE D UE TO A WRONG ACCOUNTING POLICY BEING FOLLOWED BY IT AND TH AT A WRONG ACCOUNTING POLICY FOLLOWED BY AN ASSESSEE CAN NOT BE DECISIVE FOR TAX PURPOSES. 21. AN EXPENDITURE TO BE ALLOWED SHOULD FIRST ALL T HE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF AN ASSESSEE. IT IS FOR THE ASSES SEE TO PROVE THAT THE SAID EXPENDITURE RELATED WHOLLY AND EXCLUS IVELY TO ITS BUSINESS. THE APPELLANT ADDUCED NO EVIDENCE WHATSOE VER TO SHOW THAT THE ABSORBED OVERHEADS NOT DEDUCTED EARL IER WERE RELATED TO ITS BUSINESS. IN THE ABSENCE OF SUCH PRO OF THE SAME CANNOT BE ALLOWED AS REVENUE EXPENDITURE. IF THE AS SESSEE CLAIMED THAT THE METHOD OF ACCOUNTING FOLLOWING BY IT WAS FAULTY, IT IS FOR IT TO SET ITS HOUSE IN ORDER. THEREFORE, I DO NOT CONSIDER THE SUM OF RS.31,21,93 ,576/- TO BE ALLOWABLE BUSINESS EXPENDITURE. AGGRIEVED BY THE STAND SO TAKEN BY THE CIT(APPEALS) , THE ASSESEE IS IN APPEAL BEFORE US. 16. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. WE FIND THAT ON THE PECU LIAR FACTS OF THIS CASE, THE ASSESSING OFFICER NEVER HAD AN OCCASION TO EXAM INE ALL THE RELATED FACTS, AS THE ASSESSMENT WAS COMPLETED ON BEST JUDG MENT BASIS FOR WANT OF COMPLIANCE, THE CIT(APPEALS) HAS ALSO DEALT WITH THIS ISSUE ON A RATHER SUPERFICIAL BASIS EVEN AS INPUTS BY WAY OF R EMAND REPORT WERE AVAILABLE. LEARNED COUNSELS CONTENTION BEFORE US I S THAT THE EXPENSES WERE EARLIER ALLOCATED TO SPECIFIC PROJECTS AND HAV E BEEN WRITTEN BACK NOW. ON THESE FACTS, THE DEDUCTION SEEMS TO BE PRIM A FACIE JUSTIFIED BUT, IN OUR CONSIDERED VIEW, IT IS FIT AND PROPER T HAT THE MATTER IS I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 12 OF 16 RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR F RESH ADJUDICATION BY WAY OF A SPEAKING ORDER DEALING WITH SPECIFIC FACTU AL CONTENTIONS OF THE ASSESSEE AND GIVING FINDINGS OF FACT THEREON, IN AC CORDANCE WITH THE LAW AND BY WAY OF A SPEAKING ORDER. WE ORDER SO. 17. GROUND NO. 4 IS THIS ALLOWED FOR STATISTICAL PU RPOSES. 18. IN GROUND NOS. 5, 6 & 7, THE ASSESSEE HAS RAISE D THE FOLLOWING GRIEVANCES:- (5) THAT THE LEARNED CIT(APPEALS) ERRED IN ARBITRAR ILY AND WRONGLY DISALLOWING THE LOSS OF RS.5,79,03,511/- IN RESPECT OF HOUSING PROJECTS COMPLETED DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2008-09, MERELY ON THE ALLEGED GROUND THAT SUCH LOSS WAS CLASSIFIED BY THE APPELLANT ASSESSEE AUTHORITY ITSELF AS AN ESTIMATE D LOSS; AND THAT FOR INCOME TAX PURPOSES IT IS ONLY THE REA L INCOME THAT IS TO BE BROUGHT TO TAX AND ONLY THE REAL EXPE NDITURE CAN BE ALLOWED AS DEDUCTION. (6) THAT THE LEARNED CIT(APPEALS) ERRED IN ARBITRAR ILY AND WRONGLY DISALLOWING THE LOSS OF RS.66,57,12,685/- I N RESPECT OF DEVELOPMENT PROJECTS COMPLETED BY THE APPELLANT ASSESSEE AUTHORITY, OUT OF ITS OWN FUNDS, DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2008-09. (7) THAT THE LEARNED CIT(APPEALS) ERRED IN ARBITRAR ILY AND WRONGLY ALLEGING AND/OR HOLDING THAT APPELLANT ASSE SSEE AUTHORITY DID NOT ADDUCE ANY DETAILS OR ANY EVIDENC E IN SUPPORT OF THE SAID LOSS OF RS.66,57,12,685/-. 19. AS THE ASSESSMENT WAS COMPLETED ON BEST JUDGMEN T BASIS, THE FACTS RELATING TO THESE ISSUES DID NOT COME UP FOR SPECIFIC ADJUDICATION BY THE ASSESSING OFFICER, THOUGH THE CIT(APPEALS) H AS REJECTED THE I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 13 OF 16 CLAIM OF THE ASSESSEE, AFTER TAKING INTO ACCOUNT IN PUTS BY WAY OF REMAND REPORT, BY OBSERVING AS FOLLOWS:- 22. AS REGARDS THE CLAIM OF LOSS OF RS.40,44,99,56 2/-, WHICH THE APPELLANT SOUGHT TO REDUCE FROM THE AMOUN T OF EXCESS OF INCOME OVER EXPENDITURE IN THE COMPUTATIO N OF INCOME PROPOSED IN THE STATEMENT OF FACTS FILED ALO NG WITH FORM 35, IT IS OBSERVED THAT ESTIMATED LOSSES OF RS.5,79,03,511/- IN RESPECT OF PARTIALLY COMPLETED HOUSING PROJECTS AND ESTIMATED PROFITS OF RS.1,38,30,260/ - OF COMPLETED BIG LOCATION/SPACE/SHOP/HAWKERS STALLS AT SOUTHEND CONCLAVE, OTHER THAN HOUSING PROJECTS MEN TIONED THEREIN ARE CLASSIFIED BY THE ASSESSEE ITSELF TO BE ESTIMATED. FOR THE TAXATION PURPOSES UNDER THE INCOME TAX ACT IT IS THE REAL INCOME THAT IS TO BE BROUGHT TO TAX AND IT IS THE REAL EXPENDITURE THAT IS TO BE ALLOWED, UNLESS SPECIFICA LLY PROVIDED OTHERWISE IN THE ACT. SIMILARLY, REGARDING THE ITEM EXPENDITURE ON NON IDA DEVELOPMENT PROJECTS COMPLE TED IN THE FY 2007-08, FUNDED BY KMDAS OWN FUNDS OF RS.66,57,12,585/- NEITHER ANY DETAILS NOR ANY EVIDE NCE WAS ADDUCED BY THE ASSESSEE. THOUGH THE APPELLANT HAS MENTIONED IN ITS SUBMISSIONS THAT DETAILS FOR THE S AME WERE FURNISHED AS ANNEXURE A TO ITS SUBMISSION, BUT NO S UCH ANNEXURE A WAS ACTUALLY SUBMITTED. IN ABSENCE OF AN Y DETAILS OR SUPPORTING EVIDENCES, THE SAME CANNOT BE CONSIDERED TO AN ALLOWABLE EXPENDITURE. THEREFORE, THE ABOVE MENTIONED ITEMS CANNOT BE CONSIDERED TO COMPUTE THE ASSESSABLE INCOME OF THE APPELLANT FOR THE ASSESSME NT YEAR UNDER APPEAL. AGGRIEVED BY THE STAND SO TAKEN BY THE CIT(APPEALS) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 20. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 14 OF 16 21. IN OUR CONSIDERED VIEW, THE APPROACH ADOPTED BY THE CIT(APPEALS) PROCEEDS ON THE BASIS OF HIS ERRONEOUS UNDERSTANDING OF THE LEGAL POSITION. IT IS ONLY ELEMENTARY THAT COMP UTATION OF BUSINESS PROFITS IS TO BE COVERED BY COMMERCIAL PRINCIPLES, WHICH REQUIRES ANTICIPATED LOSSES TO BE TAKEN INTO ACCOUNT. IN THE CASE OF CIT VS. WOODWARD GOVERNOR (312 ITR 254) FOREIGN EXCHANGE F LUCTUATION LOSSES WERE HELD TO BE ALLOWABLE, EVEN THOUGH THE SAME HAD NOT CRYSTALLIZED AS SUCH, ON ACCRUAL BASIS. WHEN LOSS IS VISIBLE ON THE ACCOUNTING CLOSURE DATE, EVEN THOUGH IT MAY NOT HAVE BEEN COMPLETELY Q UANTIFIED, A REASONABLE ESTIMATION OF THE SAME HAS TO BE ALLOWED AS DEDUCTION IN COMPUTATION OF BUSINESS INCOME. IN PRINCIPLE, THERE FORE, WE UPHOLD THE CONTENTION OF THE ASSESSEE THOUGH WE REMIT THE MATT ER TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING ALL THE RELATED FAC TS AND ADJUDICATING THE MATTER AFRESH IN THE LIGHT OF ABOVE OBSERVATION S, IN ACCORDANCE WITH THE LAW, BY WAY OF A SPEAKING ORDER AND AFTER GIVIN G A FAIR AND REASONABLE OPPORTUNITY OF HEARING OF THE ISSUES. 22. GROUND NOS. 5, 6 & 7 ARE THUS ALLOWED IN THE TE RMS INDICATED ABOVE. 23. IN GROUND NOS. 8 & 9, THE ASSESSEE HAS RAISED T HE FOLLOWING GRIEVANCES:- 8. THAT THE LEARNED CIT(APPEALS) ERRED IN ARBITRAR ILY AND WRONGLY NOT ALLOWING DEDUCTION IN RESPECT OF RS.46,818/-, WHICH MOUNT WAS DISALLOWED IN THE IMMEDIATELY PRECEDING YEAR, UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961; AND THE RELEVANT TAXES DEDUCT ED AT SOURCE IN THE AGGREGATE SUM OF RS.1,030/- WAS DULY DEPOSITED BY THE APPELLANT ASSESSEE AUTHORITY DURIN G THE I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 15 OF 16 PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. 9. THAT THE LEARNED CIT(APPEALS) ERRED IN ARBITRARI LY AND WRONGLY ALLEGING AND/OR HOLDING THAT THE APPELL ANT ASSESSEE AUTHORITY DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE TAXES DEDUCTED AT SOURCE IN T HE AGGREGATE SUM OF RS.1,030/- HAD BEEN DULY PAID BY I T DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, EVEN WHEN THE RELEVANT RECEIPTED CHAL LANS EVIDENCING SUCH PAYMENTS WERE DULY PRODUCED BEFORE THE LEARNED CIT(APPEALS) IN THE COURSE OF THE HEARING O F THE APPEAL BEFORE HIM. 24. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THESE ISSUES CAN ALSO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER GIVING YET ANOTHER OPPORTUNITY OF HEARING TO THE ASSESESE TO PRODUCE THE REQUISITE CHALLAN. IN CASE, THE ASSESSE E IS ABLE TO PRODUCE THE CHALLAN EVIDENCING PAYMENT OF TAXES, NEEDLESS T O SAY, THE DISALLOWANCE WILL STAND DELETED. 25. GROUND NOS. 8 & 9 ARE THUS ALSO ALLOWED FOR STA TISTICAL PURPOSES. 26. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 27. TO SUM UP, WHILE APPEAL OF THE ASSESSING OFFICE R IS DISMISSED, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TER MS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON DAY OF NOV EMBER, 2012. SD/- SD/- MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE DAY OF NOVEMBER, 2012 PRONOUNCED IN THE OPEN COURT ON 29/11/2012 SD/- 29.11.2012 SD/- (C.D.R.) (M.S.) A.M. J.M. I.T.A. NOS. 945 & 986/ KOL. / 2011 ASSESSMEN T YEAR : 2008-09 PAGE 16 OF 16 COPIES TO : (1) THE ASSESSEE (2) THE DEPARTMENT (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.