Income Tax Appellate Tribunal - Ahmedabad
Sterling Enterprise Ltd, Ahmedabad vs Assessee on 9 December, 2011
आयकर अपीलीय अिधकरण, अहमदाबाद Ûयायपीठ 'सी', अहमदाबाद
सव[ौी ौी जी.
जी.सी.
सी.गुƯा,
ा, उपाÚय¢ एवं ौी ए.
ए.मोहन अलंकामोनी,
ामोनी लेखा सदःय के सम¢
IN THE INCOME TAX APPELLATE TRIBUNAL : 'C' BENCH : AHMEDABAD
Before Shri G.C.Gupta, Hon'ble V.P. & Shri A.Mohan Alankamony, Hon'ble A.M.)
ITA No. 2696/Ahd/2000 : Assessment Year 1995-1996
Sterling Enterprises Ltd., A'bad -Vs- ACIT, Com.Circle-7(3), A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
ITA No. 144/Ahd/2001 : Assessment Year 1995-1996
DCIT, Com.Circle-7(6), A'bad -Vs- Sterling Enterprises Ltd., A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
ITA No. 806/Ahd/2004 : Assessment Year 1995-1996
ACIT, Circle-8, A'bad -Vs- Sterling Enterprises Ltd., A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
ITA No. 1633/Ahd/2002 : Assessment Year 1997-1998
Sterling Enterprises Ltd., A'bad -Vs- DCIT, Com.Circle-7(6), A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
ITA No. 2137/Ahd/2002 : Assessment Year 1997-1998
ACIT, Circle-8, A'bad -Vs- Sterling Enterprises Ltd., A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
ITA No. 2163/Ahd/2005 : Assessment Year 2001-2002
ACIT (OSD), Range-8, A'bad -Vs- Sterling Enterprises Ltd., A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
ITA No. 2164/Ahd/2005 : Assessment Year 2002-2003
ACIT (OSD), Range-8, A'bad -Vs- Sterling Enterprises Ltd., A'bad
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
िनधा[ǐरती कȧ ओर से / Appellant By : Shri S.N.Soparkar, A.R.
राजःव कȧ ओर से / Respondent By : Shri S.K.Gupta, CIT.D.R.
सुनवाई कȧ तारȣख / Date of Hearing : 09/12/2011
घोषणा कȧ तारȣख / Date of Pronouncement : 28/02/2012
आदे श / Order
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05
Per Shri A.Mohan Alankamony, Accountant Member :
These are seven appeals - (i) two appeals of the assessee and the remaining (ii) five appeals by the Revenue - are directed against the impugned orders of the ld.CsIT (A) in: (i) Appeal No.CIT(A)IX/7(3)/302/98- 99 dt: 16.10.2000 for A.Y. 1995-96; (ii)Appl. No.CIT(A)IX/ACIT C-8/32/02- 03 dt:12.12.2003 for A.Y.1995-96 (against u/s.143(3) r.w.s.250 of the Act) ; (iii) Appeal No. CIT(A)XIV/DCIT 7(6)/144/00-01 dt.26.3.02 for A.Y.1997-98; (iv) Appeal No.CIT(A)XIV/ACIT 8/99/04-05 dated 1.7.05 for A.Y. 2001-02; (v) Appeal No.CIT(A)XIV/W 8(2)/213/04-05 dated 1.7.05 for A.Y. 2002-03 in the case of M/s. Sterling Enterprises Limited, Ahmedabad respectively.
I. ITA No.2696/A/2000 - A.Y. 1995-96 - By the assessee:
2. The assessee had originally raised six grounds in an illustrative and narrative manner, subsequently, came up with revised grounds dt.20.2.2006 and yet again on 2.8.2006 and finally settled down with five concise grounds of appeal which are as under:
(1) the CIT (A) had erred in confirming the addition of Rs.1,07,78,293/- made by the AO by rejecting the method of accounting followed by the assessee;
- the CIT (A) erred in disapproving the AO's rejection of method of accounting adopted by the assessee, but, holding that the addition would be Rs.1.32 crores in stead of Rs.1.07 crores made by the AO;
(2) also erred in confirming the addition of Rs.56,46,500/- made designated as 'Scheme ACIT' and also erred in setting aside the subject and remitting back to the file of AO;
(3) the CIT (A) erred in confirming the addition of Rs.22,96,764/- being contribution to development funds collected from the members;
2ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 (4) and also erred in confirming the addition of Rs.44,98,586/- being contribution from the members towards 'development expenses' and, further, erred in remitting back the issue to the file of AO.
II. ITA No.144/A/2001 - AY 1995-96 - By the Revenue:
2.1. The issues agitated by the Revenue are as under:
(1) The Ld. CIT (A) had erred in deleting -
(i) deleting the maintenance contribution of Rs.7,56,894/-;
(ii) directing to verify and restrict the development expenditure of Rs.44,98,586/- to the extent of the difference only; &
(iii) deleting interest disallowance of Rs.6,39,353/-
III. ITA No.806/A/2004 - A.Y. 1995-96 - By the Revenue:
2.2. Solitary ground raised by the Revenue is that "the CIT (A) had erred in deleting the addition of Rs.54,46,500/- made on account of claim of Scheme ACIT.
IV. ITA No.1633/A/2002 - AY 1997-98 - By the assessee:
2.3. Solitary ground raised by the assessee is that "the CIT (A) had erred in upholding a part of the addition of Rs.11,84,598/- being 15% of Rs.78,97,322/- transferred by the assessee to the development fund."
V. ITA No.2137/A/2002 - A.Y. 1997-98 - By the Revenue:
2.4. The issues agitated by the Revenue are as under:
The Ld. CIT (A) had erred in (1) deleting the addition of Rs.35,37,585/- out of receipts on account of 'maintenance contribution' and addition of Rs.25,75,000/- out of receipts on account of electricity charges;3
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 (2) giving relief of Rs.67,12,724/- by directing that only 15% of the total receipts of Rs.78,97,322/- received by the assessee on account of development funds should be treated as assessee's income;
(3) deleting the addition of Rs.2,36,91,967/- out of the total receipts received under the head 'development expenses';
(4) deleting the disallowance of Rs.6,35,935/- out of the total interest expenses claimed by the assessee;
(5) deleting the interest charged u/s 234B and 34C of the Act. Since charging of interest u/s 234B and 234C is mandatory and consequential in nature as ruled by the Hon'ble Supreme Court and, thus, this ground doesn't qualify for adjudication ; & (6) Ground Nos.6 and 7 being general in nature and no specific issues involved, they have become inconsequential.
VI. ITA No.2163/A/2005 - A.Y. 2001-02 - By the Revenue:
2.5. The issues agitated by the Revenue are as under:
The Ld. CIT (A) had erred in (1) deleting the addition of Rs.35,65,084/- made after deducting income shown at Rs.73,75,015/- out of receipts on account of maintenance, electricity contributions etc., aggregating to Rs.1.09 crores;
(2) deleting disallowance of Rs.17,48,904/- out of interest expenses;
& (3) Ground Nos.3 and 4 being general in nature and no specific issues involved, they have become redundant.
VII. ITA No.2164/A/2005 - A.Y. 2002-03 - By the Revenue:
(1) The Ld. CIT (A) had erred in deleting the disallowance of Rs.17,01,787/- out of interest expenses claimed;
(2) Ground Nos.2 and 3 being general in nature and no specific issues involved, they do not survive for adjudication.4
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05
3. As the issues raised by the rival parties being inter-linked and pertaining to the same assessee, these appeals were heard, considered together and disposed off, for the sake of convenience and clarity, in this common order.
I. ITA No.2696/A/2000 - A.Y. 1995-96 - By the assessee:
4. The facts of the issues, in brief, are that the assessee, a Limited company ['the assessee' hence-forth] engaged in the business of developing properties for certain co-operative societies for which it has enrolled members and collected contributions. For the assessment year under consideration, it had furnished a return of income admitting a total income of Rs.2,58,754/-, the assessment of which was concluded, determining a total income of Rs.1,17,87,400/- for the detailed reasons recorded in the impugned assessment order.
4.1. Aggrieved, the assessee took up the issues, among others, with the CIT (A) for relief. The issues dealt by the authorities below are detailed, on issue basis-wise, as under:
Addition of Rs.1,07,78,293/-:
4.2. During the year under consideration, it was observed by the AO that the assessee had received by way of sale proceeds of Rs.2,16,64,908/-
which were allocated under various heads, mainly, sale bills, club fees, maintenance contribution, loan contribution, land fund, development expenses, professional fees, Scheme ACIT etc., The Club fee, loan contribution and professional fees had already been credited in the revenue account and balanced of Rs.1,07,78,293/- was taken as the income of the assessee. While doing so, the AO had observed that the assessee had claimed having taken the development work for non-trading 5 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 corporations [NTCs] and Co-operative society, but, really the assessee was involved in purchase and development of land, designing layout and selling of plots and the whole sale proceeds have been received by the assessee in the guise of NTCs and co-operative societies as they have been involved just to create one more legal entity etc., 4.3. This has been objected to by the assessee. After elaborately explaining the nature of business, method of accounting followed for booking of receipts, expenses incurred for development, payment of interests on land maintenance deposit accounts etc., as extensively recorded in the impugned order of the ld.CIT (A) under dispute, the following issues emerge, namely:
(i) the method of accounting followed in all divisions for booking the receipts;
(ii) genuineness of expenses, huge liability under the head 'sundry creditors' and expenses;
(iii) payment of interest on land maintenance deposit account;
(iv) one time entrance fees taken from the members of Sterling Club;
(v) whether the artificial allocation of proceeds on sale of plots was to defer its taxability in the year of accrual etc.,
(vi) when the assessee had huge funds in its disposal, the borrowings made were not for business purposes and thus, interest payments on such borrowal are allowable?
(vii) Whether the NTCs/Societies were genuine as majority of lands exist in the names of directors and the funds for purchase of lands were also provided by the assessee?
(viii) NTCs/Societies were not supposed to carry on the business.
4.4 After analyzing the pros and cons of the issue, the ld.AO had maintained that:
6ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 "[Para 39 of ld.CIT(A)'s order] ......the assessee had claimed expenses on accrual basis and due to this reason there was huge liability shown in the balance sheet under the head Sundry Creditors for goods and expenses and other liabilities. From the analysis of Profit and Loss account, it was quite clear that the receipts were shown in such a manner so that there was no existence of tax liability. In the name of development expenses the assessee had shown huge expenses, but, the site inspection report clearly indicated that such expenses had been incurred. During the year, the assessee had received a sum of Rs.2,16,64,908/-. In this case, the major issue was determination of income under the head 'land and development activities'. As explained earlier in the remand report, the assessee had purchased huge land running into thousands of acres. Thereafter, the land had been developed and sold. The sale proceeds received from the customers were allocated under different head in such a fashion so that major part of sale proceeds were not taken into profit and loss account. Since the assessee had developed the land and thereafter sold the plot, it was possible to determine properly expenses which the assessee was going to incur in respect of each scheme and it was possible to work out the cost of one sq. yard and thereafter he could very well calculate the profit arising on the sale of plot. An attempt was made to collect the details to work out land cost per sq. yard but the details were not submitted in the manner asked for.
The assessee had shown revenue receipts under the pretext that there were so many uncertainties involved in the development of the plots. These uncertainties were such which 7 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 could not be measured in terms of value. Therefore, the method of accounting followed in respect of booking receipts from the land development were required to be rejected. In the facts of the case it was necessary to determine the cost per sq. yard with reference to that cost the profits on the sale of the plot could be worked out. In case, the assessee did not submit these details, then after excluding the land cost, club fees, maintenance contribution, electricity charges from the sale proceeds and the net amount may be taken as the profit of the assessee and from this profit on account of land development, 10% may be allowed in view of the site inspection report. The assessing officer further reiterated that during the assessment proceedings the assessee did not allow the assessing officer to understand full facts of the assessee. Since there was an accounting jugglery hence unless the assessee explained all the aspects of the case clearly, it was difficult for the assessing officer to understand the facts of the case. In view of the above, it was strongly contended that the additions made in assessee's total income amounting to Rs.1,07,78,293/- deserve to be retained and the contention of the appellant rejected."
4.5 After due consideration of the submissions put-forth by the assessee and also perusal of the assessment records, the ld.CIT(A) had recorded his findings which are extracted as under:
"40.........The only reason for making the addition appears to be the consideration that the land measuring 1500 acres had been purchased in the names of NTCs/Societies or advances had been given for the purchase of this land. The said land was being developed by way of various schemes. Some of the land had been purchased in 1984 which was being sold in different assessment years at a higher price, but, no capital gains or business profit had been returned by the assessee. Further, in 8 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 stead of booking profits, the assessee by following an accounting method had been showing deposits and funds to the tune of Rs.3,24,71,748/-.This was the closing balance of the development fund. The assessing officer was of the view that the land had been purchased in 1984 and it was difficult to accept that 75 to 80% of the sale proceeds would go in the development of the plot of the land. The assessing officer on that basis held that the entire receipts received during the year after deducting the receipts booked in the revenue shown by the assessee required to be taxed as revenue receipts. In other words, the assessing, without establishing the applicability of section 145, without examining the method of account followed by the assessee, due to time constraint had held that the entire receipts of the assessee were to be taxed as income in view of the fact that the land had been purchased in 1984 and the assessee had not shown capital gains. In other words, the addition had been made without considering the method of accounting followed by the assessee or the accounting principles adopted by the assessee. During the year, the assessee had received total sale proceeds of Rs.2,16,64,908/- . out of these receipts the assessee already shown in its profit and loss account receipts by way of club fees of Rs.26,57,143/-, land contribution of Rs.53,65,470/- and professional fees of Rs.28,64,002/-. The above addition had been made without examining the accounting method followed by the assessee and without examining in detail the books of account maintained by the assessee. From the facts discussed earlier and the auditor's report, there is no doubt that the assessee has been following mercantile system of accounting which has been reiterated by him on number of occasions. The only exception to this system of accounting is gratuity expenses and dividend income. Gratuity expenses had been accounted on payment basis and the dividend income had been accounted on receipt basis. In Schedule - 21, the significant accounting policies followed by the appellant company have been elaborated. It clearly states that the resort membership is sold for 10 years/99 years period. A sum equal to 25% of the net sale value of the membership is recognized as income in the profits and loss account in the year of sale. 1/10th or 1/99th of the balance recognized as receipts towards providing continuous customer facilities for 10/99 years. Country club membership was either life time or ordinary. The annual subscription amounts payable by life members over and above the payment made by the ordinary members was recognized as 9 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 income in the Profit & Loss account. The maintenance expenditure of scheme of plot development was met from life time or periodical maintenance fees payable by beneficiaries/plot owners. The periodical maintenance due were recognized in the profit & loss account as income. Life time maintenance deposits were credited with yearly interest @ 12% and prorate expenses allocable to the plots on life time maintenance was debited to the maintenance deposits from the profit & loss account the amount receivable from the allottees of the plots were recoverable in installments which split over to 2nd, 3rd financial years. Out of these amounts, only such amounts which were due in the respective years were entered into the accounts. This clarifies that the assessee had been accounting for receipts on accrual basis. The land development income was considered in profit & loss account on cost plus profit basis.
41. The above stated method of accounting and the policy of the assessee has been examined critically from the books of accounts; the basis of assessee's trading receipts is the standard agreement which has been signed between the purchaser and the appellant who has been defined 'The developer'. Clause 1 of the agreement clearly states that the developer had purchased through banakhat/banachithi/sale deed etc., certain land from land owners in their favour or their nominees and or proposed housing socities/NTC etc. As per the above agreement, the assessee as a Developer had acquired certain land in the name of NTCs/Co-operative Societies which was being sold for certain price. The payment of the above price was to be made in accordance with Clause 2C of the agreement which divided the above cost into land cost, contribution for electric connection, lump sum maintenance contribution and contribution for life membership of Sterling Country Club. The land cost also included development charges. The agreement also defined the components of land cost and development cost in detail which had already been discussed in earlier. The proposed agreement between the developer and the purchaser establishes beyond any doubt that whatever sale consideration was received by the appellant by virtue of this agreement was in the nature of trading receipts which required to be credited in the Profit & Loss account on accrual basis. It is seen from the discussion made earlier that out of the total sale proceeds the assessee has credited in the profit and loss account land cost, club frees and professional charges only. The maintenance 10 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 contribution, electricity charges, development fund and development expenses have not been credited in the profit & loss account, but have been directly taken to the balance sheet as deposits. This is a clear deviation in the accepted accounting policy and the method of accounting adopted by the assessee. Since by virtue of the agreement, these items formed integral part of sale proceeds, they are in the nature of trading receipts and should have been credited to the profit & loss account. To that extent assessee's method of accounting has suffered from basic defect and it makes determination of assessee's income rather complex if not altogether impossible proposition. The receipts of account of Scheme ACIT are on a different footing because they are really the sale proceeds of Lakeview Villa Construction Scheme. The expenditure on the scheme has been shown as work-in-progress on the asset side of the balance sheet. As per the Schedule, the said scheme is going to be completed in accounting year 1997-98. The assessing officer has included the entire receipts into the income without considering the expenditure incurred by the assessee on the above. This is not correct because what has to be taxed is the profit earned by the assessee on the above sales and not the entire receipts and that too in the year of accrual of the income. This aspect has not been examined by the assessing officer. It has also been contended that in respect of above scheme, the assessee has already offered profit in the earlier years. Since, the addition has been made without examining the issue at all, the matter related to scheme ACIT is set aside. The assessing officer is directed to examine the total receipts of Rs.54,46,500/- on account of Scheme ACIT from the accounts of different year in which the expenses have been shown asnd determined the profit accordingly.
It is clear from the above that out of total sale proceeds earned by the assessee, a portion of these receipts in respect of maintenance contribution of Rs.7,56,894/-, electrical charges of Rs.2,60,000, development fund of Rs.22,96,764/-, development expenses of Rs.44,98,586/- have not been shown in the profit & loss account. The assessee has given a different treatment which has to be examined before the income arising out of these receipts is clearly determined. From the agreement itself it is seen that the assessee has allocated sale proceeds of the plot into development fund deposit, development work and professional charges at certain fixed percentage. It is further 11 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 seen from the agreement that from the total contribution received from the purchasers the assessee had set apart certain amount towards contribution for electricity connection, lump sum one time maintenance contribution and contribution for life membership of Sterling Country Club. Out of the balance, land cost was determined as actual payable by the NTC or proposed co- operative society to the vendor inclusive of legal expenses, stamp, and registration expenses and out of pocket expenses. The assessee's claim is that there is no profit element involved as far as the land cost is concerned. However, the assessee has not been clarified as to what is the actual cost of the land which had been sold during the year. From the details furnished by the assessee in respect of the land, in some of the case land had still not been transferred to the NTC. For instance, land purchase statement document 14 of the paper book in respect of Garden City - IV, Scheme village Dhantali, Block 20 is for 69283 sq. yards of the land. The above land is in the joint names of Smt. Kusum B Parmer, Moota Basant Kumar and S.S.Ringwala. the purchase price of the above land is mentioned at Rs.37,80,200/- and total cost of the land at Rs.44,29,880/-. The above example has been pointed out to show that neither the status of the NTCs has been determined nor the actual cost of the land to the societies/NTCs has yet been finalized. Therefore, the claim of the assessee that the land cost represents the actual cost of the land is not very accurate. It is further seen from the sale agreement that after reducing the land cost, the balance amount had been allocated at the rate of 20% to development fund deposit, 60% to development work and 20% for professional and organizing fees. Therefore, while 20% of this amount being professional and organizing fees has admittedly been credited sand accounted for in the profit and loss account, 20% of development fund deposit and 60% of development work expenses have not been credited in the profit and loss account, but, taken straight to the balance sheet. This again is a variation in the accepted principles of mercantile system of accounting which makes the determination of income a difficult proposition. However, in order to adjudicate the issue, the taxability of receipts accounted for under maintenance contribution, electricity charges, development fund and development expense is being examined here and now.
42. The assessee had shown in the income-tax return income at Rs.2,58,754/-. As per the statement of total income which 12 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 showed working with reference to profit and loss account. Net profit as per profit and loss account had been taken at Rs.37,34,422/-. To it had been added disallowance on depreciation etc., at Rs.11,64,165/- and deduction had been claimed for unpaid bonus of Rs.50,000/-, depreciation allowable at Rs.39,23,924/-. Profit & gins of business were taken at Rs.9,24,663/- which was, further, reduced by brought forward loss of Rs.6,52,290/- and deduction u/s 80G at Rs.3,609/-. The income returned was Rs.2,58,754/-.The assessing officer adopted an independent computation after rejecting trading results. Sale proceeds were adopted at Rs.2,16,64,908/- with allocation of income under different heads. The chart had been supplied by the assessee. The allocation of the sale proceeds as per the chart correctly totaled to Rs.2,41,45,361/- and not Rs.2,16,64,908/- as shown in column No.4 of the chart and adopted by the assessee and assessing officer. Subsequently, the assessee filed a reconciliation during the course of appellate proceedings which clarified that this column of sale proceeds showing total of Rs.2,16,64,908/- did not include following receipts:
1. Total error pertaining to sale under Lakeview Villa Scheme, amount shown was Rs.54,72,390/- which should have been taken at Rs.51,48,309/-, resulting into difference of Rs.2,98,110
2. Professional fees of Sadbhavana Scheme Rs.3,40,000
3.Professional fee for Abu Resort Rs.7,00,000
4. Direct Club members subscription (those who are not plot holders) Rs.6,22,343
5. Abu Resort & Sadbhavana design fees Rs.5,20,000 24,80,453 Further, if the above amount was added, the correct total of sale proceeds works out to Rs.2,4,45,362/-. The assessing officer had taken the sale bill at Rs.2,16,64,908/- from which it had reduced three items as having been credited in the profit and loss account. These were the club fees of Rs.26,57,146/-, land contribution R.53,65,470/- and professional charges Rs.28,64,003/-. The total of these three items works out to 13 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 Rs.1,08,86,617/-. The difference between Rs.2,16,64,908/- & Rs.1,08,86,617/- amounting to Rs.1,07,78,291/- has been added by the assessing officer in assessee's total income on page 5, item No.2.
43. Further, if the items added by the assessing officer out of the break-up of the sale bills are considered, the total addition does not match with the figure adopted by the assessing officer. The items considered for addition and break-up of addition is as under:-
(1) Maintenance contribution Rs. 7,56,894
(2)Electric charges Rs. 2,60,000
(3)Development fund Rs. 22,96,764
(4)Development expenses Rs. 44,98,586
(5)Scheme ACIT Rs. 54,46,500
Rs.1,32,58,744
As against above amount, addition has been made only of Rs.1,07,78,293/- which reflects a totaling error on the part of the assessing officer. Therefore, if out of sale bills of Rs.2,41,45,361/- , the addition is considered after excluding Rs.1,08,86,617/-, the correct addition would be Rs.1,32,58,744/-"
4.6. Aggrieved by the stand of the ld.CIT (A), the assessee came up with the present appeal. During the course of hearing, the Ld. A R had submitted the method of accounting and other aspects in an elaborate and exhaustive manner which are summarized as below:
(i) though the CIT (A) had held that the rejection of the assessee's method of accounting was justified [in para 40 of his impugned order], he ought to have ordered for the deletion of the addition of Rs.1.07 crores especially when the AO had admitted in his assessment order;
(ii) without prejudice, the ld.CIT (A) ought to have appreciated as elaborately explained by the assessee in its submission dated 8.3.2000 that the method of accounting which was admittedly 14 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 consistently followed by the assessee from inception could not be faulted and regarded as such from which income could not properly be deduced and, therefore, there was no reason for rejecting the assessee's method of accounting and on that basis to make the addition of Rs.1,07,78,293/- or to sustain any part thereof;
(iii) that even after disapproving of the assessing officer's rejection of the assessee's method of accounting as observed by the CIT (A) (supra), the CIT (A) erred in sustaining the stand of the AO and, subsequently determined the addition at Rs.1,32,58,744/- as against Rs.1,07,78,293/- determined by the AO;
(iv) that there was no basis for assuming that the aggregate amount of the sale bills was Rs.2,41,45,361/-; and that the correct amount under the head 'Scheme ACIT' was only Rs.51,48,390/- and not Rs.54,46,500/- as attributed by the CIT (A).
(v) that the CIT (A) erred in not deleting the addition of Rs.54,46,500/- designated as 'Scheme ACIT' and forming part of the aggregate amount of addition of Rs.1.32 crores, in stead, set aside the issue with a direction to the AO to deal with the issue as directed in his impugned order;
(vi) that the CIT (A) erred in sustaining the addition of Rs.22,96,764/-
(forming part of Rs.1.32 crores addition) collected by the assessee from the members by way of contribution for 'development fund''
(vii) that the CIT (A) erred in remitting back the issue of addition of Rs.44,98,586/- (forming part of Rs.1.32 crores) collected from 15 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 the members by way of contribution for 'development expenses' for fresh consideration as per his directions given in his order;
With regard to the accounting policy adopted by the assessee, it was submitted that:
(viii) the assessee had accounted the land bookings on accrual basis;
that the amount which the assessee receives from the member on land bookings, debits to the respective members' account and credits the various heads, namely, club fees, maintenance contribution, land contribution, development fund, etc. As per the agreement, members are paying land contribution, club fees etc., immediately at the time of signing the agreement and balance amount for the development fund, development expenses etc., were paid in installment. The assessee had made commitments for various developments such as roads, land leveling, water supply, drainage system etc., and these commitments were fulfilled in phase manner because the location of the land was little interior and the assessee had long term planning for the developments;
- that as per the agreement between the members and society, the assessee's charges double the amount actually spent on development and maintenance; and that the assessee recognizes the income in the year of actual development execution;
- that at the time of booking the plots, the assessee credits only certain income such as club fees, professional fees etc., in the year of booking and debits the development expenses, development funds and maintenance deposits with the liabilities and carry forwards in the balance sheet and that in the year of actual 16 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 developments it transfers from respective funds to the profit and loss account and, thus, the assessee was accounting the income in the year of actual expenditure incurred for the development/ maintenance.
4.7. In conclusion, it was forcefully advocated that in the facts and circumstances of the assessee's case, the CIT (A) had failed while dealing with this item for the assessment year under consideration in isolation with disregard to the fact that the assessee had been consistently following a particular method of accounting since its inception for this particular item as well. It was, therefore, vehemently argued that the additions made by the assessing officer which were subsequently sustained by the Ld. CIT (A) with certain modifications require to be deleted. To substantiate his claim, the Ld A R had relied on various case laws and also furnished voluminous paper books running into hundreds of pages containing, among others, copies of (i) correspondences with the authorities; (ii) remand report of the AO and rejoinder to such report; (iii) Note on 'holiday scheme' of the assessee.
4.8. On the other hand, the Ld. D R came up with spirited arguments, the sum and substance of which, are detailed as under:
(i) that the assessee being a land developer/organizer owning lands to the extent of 1500 acres and derived income from sale of plots from various schemes organized, the details of receipts and expenses of each scheme were called for verification during the course of assessment proceedings which have not been furnished by the assessee;17
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05
(ii) that the AO, for the reasons recorded in his assessment order, had made the addition to the extent of Rs.1.07 crores which was modified by the CIT (A) at Rs.1.32 crores;
(iii) the authorities below could not be in a position to examine the issue(s) in proper perspective in the absence of required details; that even though the AO had furnished all the details at his possession through his remand reports, the CIT (A) had not properly considered the same which culminate in deleting certain additions made by the AO;
(iv) as the assessee has been maintaining its accounts on mercantile system of accounting, the CIT (A) ought to have considered that the income accrues or arises as soon as it becomes legally due and even before it is actually received which similarly brings into debit the amount for which a legal liability has been incurred before it is actually disbursed;
Relies on: 534 ITR 114 (SC) & 37 ITR 1 (SC)
(v) that the CIT (A) had not considered the settled position of law that according to s.4, the income-tax is chargeable in respect of the total income of each previous year and as a corollary, the income accruing in one year cannot be deferred to future years by adopting an incorrect method of accounting with a view to postpone the tax liability; and that once income has accrued to an assessee in a particular year, it has to be assessed in that year irrespective of the method of accounting adopted by the assessee;
Relies on: 79 ITD 595 (DEL) & 103 ITD 15 (Del)
(vi) with regard development expenditure of Rs.44.98 lakhs, though the CIT (A) held that the said expenses represents assessee's 18 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 trading receipts which should have been credited in its P & L account, it was argued, that there was no need to remit the issue and restrict the addition to the difference of Rs.44.98 lakhs and the amount credited in the P & L account; and that there was contradiction in the accounts of the assessee that it seemed to have credited Rs.34.11 lakhs and claimed expenses of Rs.20.43 lakhs as per schedule 15 of P & L account and, thus, the actual credit remains only for Rs.13.67 lakhs; &
(vii) that the assumption of assessee's double credit of expenses does not seem to be correct which had been examined neither by the CIT (A) nor by the AO; that the assessee was booking the expenses of one scheme against the other scheme and, thus, claiming that development work was going on, though no details as called for during the course of assessment proceedings have been furnished; and that this aspect has not been considered by the CIT (A) before remitting the issue to the AO 4.9 In conclusion, it was vehemently urged that since the findings of the ld.CIT (A) are required to be modified.
4.10 We have duly considered the rival submissions, carefully perused the relevant case records, the voluminous documentary evidences produced by the Ld. A R in the shapes of Paper Books and also various case laws on similar issue relied upon by the either side 4.11 On a careful perusal of the assessment order under consideration, it has been observed that the assessee was a sole 19 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 organizer for the following schemes on behalf of various associations and co-operative societies:
(i) Garden city I/Garden City II/Greenwoods Plots - a scheme of residential plots organized by the assessee on behalf of Ognaj Park Plot Owners Association;
(ii) LSSKM farm plots on behalf of Lilapur Samudaik Kheti Mandali;
(iii) OSSKM Farm Plots on behalf of Ognaj Samudayik Kheti Mandali;
(iv) Garden City Phase 3 Scheme (a scheme of residential plots on behalf of Panchjyoti Plot Owners Association) 4.12. In addition to the above, the assessee also had other divisions known as Sterling Club and Sterling Resort. In Sterling Resort Scheme, there is Greenwood Flexiplan Membership Scheme. It is stated that this is a time sharing scheme where four different types of accommodations under four different options are being marketed through the assessee's network of progress as well as their own field sales staff. It was, further, observed that as per the accounting purposes finalized by the assessee's Board of Directors, a certain fixed amount was transferred to the P & L account every year during the years of booking of memberships and, subsequently, balance amount was being transferred in subsequent year (either 10 years or 99 years by equal yearly installments divided accordingly depending on the type of scheme). Under the Sterling Club, the assessee had made the members. On further perusal, it was also noticed that the ld.AO had stated that due to time constraints, various types of schemes floated by the assessee, its method of accounting, the accounting principles followed for treating the receipt as revenue or capital could not be 20 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 examined in detail, that those aspects will have to be examined in detail in the assessment year 1997-98; that it was seen that the assessee had acquired around 1500 acres of lands either in the names of NTCs/Societies or advances have been given for purchase of land; and that those lands were being developed in phases and were being sold after development etc., It was, further, stated by the ld.AO that the assessee was required to furnish the details of receipts and expenses in respect of each scheme and in the absence such details;
and also that the assessee has been booking the expenses of one scheme against the receipt of another scheme and, thus, claiming that the development was still going on. In view of the above, the assessing officer asserted that each scheme should have been taken as one and complete project for the purpose of booking of profit and, accordingly, the profit should have been booked etc., 4.13. As could be seen from the above, it can safely be arrived at a conclusion that most of the issues, as the Ld. D R had conceded during the course of hearing before this Bench, have not been thoroughly examined such as various types of schemes floated by the assessee, the method of accounting adopted by the assessee, the accounting principles being followed in treating the receipts as revenue or capital and magnanimously admitted by the ld.AO himself in his impugned order that due to time constraints these aspects have not been gone through in detail. On his part, the ld.CIT (A) in his impugned order under challenge had categorically observed thus:
"40......But it appears that due to time constraints various types of schemes being followed by the assessee, the method of accounting and accounting principles followed for treating the receipt as revenue or capital could not be examined in detail. The assessing officer wanted to examine this aspect in detail in assessment hear 1997-98. therefore, it is strange that the 21 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 method of accounting and the trading result have been rejected without examining the same in detail....."
4.14. However, after analyzing the issues in his own way as recorded in his impugned order, the Ld. CIT (A) had arrived at the addition at Rs.1,32,58,744/- as against Rs.1,07,78,293/- determined by the ld.AO [Para 43 of the ld.CIT (A)'s order].
4.15. We have, however, noticed that there were some glaring contradictions and lack of clarity of the ld.CIT (A)'s observations, a few of which, are highlighted as below:
(i) In the item in respect of Rs.54,46,500/- under Scheme ACIT, out of five items which considered to be the addition aggregating to Rs.1.32 cores, the CIT (A) had directed the AO to exclude the above amount from the income of the assessee and work out the correct income by reducing from the above receipts the expenses incurred by the assessee and shown by way of work-in-progress. The AO will also consider the amount of income already disclosed by the assessee in the earlier year which will be excluded from the addition. For this purpose, the assessee is set aside on limited issue;
(ii) Rs.7,56,894/- being maintenance contribution was included in the total addition of Rs.1.32 crores. However, for the reasons recorded in Para 45 of his order, the CIT (A), directed that this addition was to be deleted.
This observation of the ld.CIT (A), in our view, is contrary to his stand taken at para 43 (of his order) and rather confusing.
(iii) Likewise under the head 'Development Expenditure' of Rs.44,98,856/- the reasons recorded in paras 50 & 51, of the ld.CIT (A) are as under:
"51.(On page 58).....There is a credit of Rs.34,11,050/- on account of land scheme maintenance and development income. On the other hand, the assessee has debited Rs.20,43,973/- as 22 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 expenditure under the same head, the details of which have been given in Schedule-15 of the profit & Loss account. Development expenses have been shown at Rs.16,20,217/-. In other words, the assessee has incurred expenditure on development expenses schemes to the extent of Rs.16,20,217/-. Against which it has credited in its account Rs.34,11,050/-. However, the correct amount credited out of development expenses taken into balance sheet has to be ascertained. The balance, if any, remaining between total amount of Rs.44,98,586/- and the amount credited in the Profit & Loss account has to be viewed in the light of development work actually carried out by the assessee. The assessing officer will, therefore, verify the accounts and restrict the addition to the difference only. Subject to above directions, this ground is partly allowed to the assessee."
4.16. To towering them all, the ld.AO had conceded that due to time constraints, various types of schemes floated by the assessee, its method of accounting, the accounting principles followed for treating the receipts as revenue or as capital have not been examined threadbare with reference to each and every scheme introduced by the assessee.
4.17. Taking all these aspects into consideration and also the entire gamut of the issues require thorough verification and investigation at the assessing authority's level and in the interests of principles of natural justice and fairness, the impugned order of the Ld. CIT (A ) is set-aside and the entire issues are restored to the file of the ld.AO with specific directions to go into the bottom of such schemes which have been floated and the method of accounting adopted by the assessee, analyze the claims of the assessee under various heads in item-wise and then arrive at an appropriate conclusion in accordance with provisions of the Act prevailed at that relevant time. While doing so, the assessee shall be afforded reasonable opportunity to put-forth its points of view on the issues. In the meanwhile, the assessee, through its Ld. Counsel, is advised to place all relevant particulars at its possession before the ld.AO 23 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 in one go which will facilitate the ld.AO to carry out the above directions of this Bench expeditiously. It is ordered accordingly.
ii. & III ITA Nos.144/2001 & 806/2004 - AY 1995-96 - By the Revenue:
5. At the outset, we would like to clarify that the impugned order of the Ld. CIT (A) has since been set-aside in toto and directed the ld.AO to look into the issues thoroughly and frame the assessment order afresh in the assessee's appeal (supra), these appeals of the Revenue have become redundant.
IV. ITA NO.1633/A/2002 - A.Y. 1997-98 - By the assessee:
6. The solitary grievance of the assessee being that the ld.CIT (A) erred in upholding the part of addition of Rs.11,84,598/- being 15% of Rs.78,,97,322/- transferred by the assessee to the development fund.
6.1. It was submitted by the assessee during the course of hearing that the Ld. CIT (A), having accepted the main principle laid down by the Hon'ble Supreme Court in the case of Calcutta Company Ltd v. CIT [37 ITR 1 (SC), can safely apply to the facts of the assessee's case and having further accepted that the amount transferred by the assessee to the development fund during the year was so received from the members for providing various facility on a future date and not the sale consideration as such and having found during the accounting year, no expenditure was incurred by the assessee for providing such facilities, it was argued that, he ought to have appreciated that no profit accrued or arose to the assessee during the accounting year from providing such development facilities. It was, further, submitted that there was no justification in bringing to tax the estimated profit of 15% that the assessee may earn (or may not earn) on some future date for the simple 24 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 reason that the revenue cannot be kept waiting for the assessee to earn the income.
6.2. However, the ld.CIT (A), after considering the contentions of the assessee as recorded in his order and also extensively quoting the ruling of the Hon'ble Apex Court in the case of Calcutta Company Ltd v. CIT cited supra, was of the view that:
"(On page 31) Though the facts of the appellant's case are not exactly identical to the facts cited supra, the main principle which the Hon'ble Court has laid down can be safely applied to the facts of the instant case. When there is no time frame to raise the particular amenities as agreed upon the members, the most suitable thing will be to estimate the expenditure likely to be involved on the intended facilities and tax the balance of receipts as profit arising out of such receipts. In my view, the total receipts transferred under the head 'development fund' cannot constitute the profit, rather some element of profit is in built in the receipts and after the receipts are taken from the members, the revenue cannot kept in waiting. In the circumstances, I estimate 85% of the receipts to be spent in meeting intended facilities to be provided for in future and 15% of the receipts are to be taken as net profit to be taxed during the year under consideration. The receipts for the year under the head 'development fund' comes to Rs.78,97,322/-, 15% of which is taken the net profit which will be taxable during the year and 85% of the receipts shown under the head 'development fund' are to be treated as the expenditure to be incurred by the appellant in future. The AO while passing the order has made an addition of Rs.23,28,084/- on account of development fund. However, in the body of the assessment order vide para 4, the AO has stated 'the assessee has created a development fund of Rs.78,97,322/- during the year..............................................................................
Therefore, the claim development fund of Rs.23,28,084/- is rejected. From the above, it is clear that AO actually intended to make an addition of development fund of Rs.78,97,322/- and not Rs.23,28,084/- as is done in the computation and concluding sentence of para 4. The development fund amounting to Rs.78,97,322/- actually formed part of Rs.3,79,27,874/-, the bifurcation of which is given as under:25
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 Maintenance contribution Rs. 35,37,585 Electricity charges Rs 27,75,000 Development expenses Rs.2,36,91,967 Development fund Rs. 78,97,322 If the figure of Rs.23,28,084/- is taken over and above Rs.78,97,322/- the same is also subjected by applying the net profit rate of 15%. However, before the AO resort to application of 15% of Rs.23,28,084/-, he is directed to verify whether he intended to make an addition of Rs.78,97,322/- on account of development fund or otherwise. With these remarks, I allow relief to the appellant of Rs.67,12,724/- (7897322-15% of 7897322=1184598).
6.3. On a critical perusal of the observations of the ld.CIT (A), it is observed that the finding of the ld.CIT (A), to put it mildly, was indecisive in the sense that on the one hand, he observed that the claim of development fund of Rs.23,28,084 has been rejected by the ld.AO, but, at the same breath, he said that the ld.AO actually intend to make an addition of development fund of Rs.78,97,322/- and not Rs.23,28,084/-.
The observation of the ld.CIT (A) is rather confusing as to say what he meant it. To clear the confusion, we are of the considered view that the entire issue should be looked into afresh with reference to the agreements entered into. This has to be examined and verified by the assessing authority on the basis of relevant particulars which will be furnished by the assessee. To enable the ld.AO to carry out the above direction, the issue is remitted back to the file of the ld.AO for needful.
V. ITA No.2137/A/2002 - A.Y. 1997-98 - By the Revenue:
6.4. The first grievance of the Revenue being that the ld.CIT (A) erred in deleting the addition of Rs.35,37,585/- out of receipts on account of 'maintenance contribution' and addition of Rs.25,75,000/- out of receipts on account of electricity charges.26
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 6.5. At a glimpse of the observations of the ld.CIT (A), it has been noticed that with the concurrence of the reasons recorded by the ld.CIT (A) for the AY 1995-96 in the assessee's own case, the Ld CIT (A) had directed the ld.AO to delete the additions of Rs.35.37 lakhs and Rs.27.75 lakhs being 'maintenance contribution' and electricity charges.
6.6. At this juncture, we would like to point out that the findings of the ld.CIT(A) for the AY 1995-96 in the assessee's own case have been set-aside by this Bench in the assessee's case (supra) with directions to the ld.AO to reframe the assessment afresh. Therefore, the deletion of the additions allowed by the ld.CIT(A) in the case under consideration is reversed with a direction to the ld.AO to follow the stand which he would adopt in the assessee's case for the AY 1995-96 for this assessment year also. It is ordered accordingly.
6.7. The second issue is with regard to giving relief of Rs.67.12 lakhs to the assessee by directing that only 15% of the total receipts of Rs.78.97 lakhs received by the assessee on account of development funds etc., 6.8. Ironically, this issue has since been decided in the case of the assessee while dealing with its appeal for the same A.Y. (supra) and, thus, this ground of the Revenue has become redundant.
6.9. In respect of the ld.CIT (A)'s action in deleting the addition of Rs.2.36 crores out of the total receipts received under the head 'development expenses', We have noticed that the ld.CIT (A) had, while quoting and extracting the observation of the ld.CIT (A) for the 27 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 assessment year 1995-96 in the assessee's own case, however, observed:
"(On page 27)....I have considered the above arguments of the AR. I find that the collection on account of development expenses is made by the appellant to meet with the expenditure that may be incurred in future. The appellant has already transferred from this maintenance expenses account from the Balance Sheet to the profit and loss account an amount which is twice the expenditure incurred in the relevant year. Thus, the appellant has shown more than 50% of the profit on this account for the credits taken to the profit and loss account. I also appreciate that it is the liability of the appellant to carrying out the development activity for which the expenditure is to be incurred at future date. However, the collection towards the development expenses account has been made from the persons who booked the premises in advance. Hence, in my opinion, the collections so made is the liability of the appellant. In any case, the collection so made is the receipt of the appellant and it cannot be considered as income for the purpose of the I.T. Act. The income is to be arrived at only after the expenses are deducted from the sales/receipts of the appellant. In the present case the expenditure is not incurred or not claimed at the time of collection. However, the appellant has adopted a method of transfer the amount from the expenses to the profit and loss account as and when expenditure is incurred and such amount credited to the profit & loss account is twice the amount of expenditure. From the details submitted by the appellant as explained in para 3.2. above, I find that in fact the appellant has consistently adopted the same method of crediting twice the amount of actual development expenditure incurred from year to year to the profit and loss account; the appellant has incurred such expenditure for various works like development of land, leveling the same, fencing, road work, tube-well, electric supply cable etc., In the circumstances, in my opinion, the above directions of the CIT (A) in appellate order for AY 1995-96 do not take into consideration the income aspect but it considers only receipts of the appellant which is not correct. To this extent I differ from the said appellate order. The method of accounting for this item of receipt and income there-from adopted by the appellant is found to be reasonable and, therefore, it is the correct income which is offered by the appellant in the relevant 28 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 year. Hence, I direct the assessing officer tax only that amount which is credited to the profit and loss account in the year under consideration against the development expenditure in stead of the funds for which collection is made from persons booking the premises. The appellant therefore gets a relief of the amount of Rs.2,36,91,967/- referred to above.
6.10. On critical observation of the findings of the CIT (A) for the AY under consideration, we have noticed that he had differed with the findings of the CIT (A) for the AY 1995-96 in the assessee's own case. At this juncture, we recall the findings of this Bench for the AY 1995-96 in the assessee's own case wherein we have set-aside the impugned order of the CIT (A) in its entirety and restored to the file of the AO with a direction to look into the gamut of the entire issue afresh and to take appropriate action. If this Bench were to record a different finding with regard to an inter-linked issue to that of the present one which, we apprehend, may influence the assessing authority to fall in line with the finding of this Bench on this particular case. It is an undisputed fact that each assessment year is an independent, distinctive from that of either preceding or succeeding assessment of an assessee. However, the issues which have cropped in the present assessee's case are rather unique, peculiar and quite different normal business involving different housing schemes under one roof which have ramification of the incomes of succeeding assessment years. To keep the independence of the assessing authority that has been assigned the job of arriving at a conclusion after going through the entire gamut of the schemes floated by the assessee in our findings for the A.Y. 1995-96 in the assessee's own case (supra), we deem it fit to remit back this also to the file of the ld.AO in conformity with the conclusion he arrives at while reframing the assessment order for the A.Y. 1995-96. Accordingly, we remit back the issue to the file of the ld.AO for needful.29
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 6.11. The next ground is deletion of disallowance of interest of Rs.6,35,935/-. After considering the contentions of the assessee as well as the reasoning of the ld.AO, the ld.CIT (A) had observed thus:
"5.1. in this connection, the AR submitted that the observations made by the assessing officer are based on the presumptions. It is submitted that the payment to the Sterling Housing Construction P. Ltd are made as per the agreement towards cost of construction. The amount paid to Sterling Club P Ltd is also as per the agreement and is not in the nature of loan. Amount of Sterling Resorts P Ltd it is submitted has running account with assessee for business transactions and not a loan. No nexus has been established by AO of funds on which interest is paid and balance referred to above. It is further submitted that the other deposits are like telephone deposits, car booking advances, gas deposits which are made in the course of business of the assessee and hence it is not in the nature of loan. It is further argued that a similar question had arisen in appellant's own case for AY 1995-96 where the assessing officer had made disallowance of Rs.6,39,353/-. The disallowance so made was deleted by the CIT (A) vide para 55 of the appellate order, after considering the same submission as are made before me.
5.2. I have considered the assessment order and the above submissions. As the issue involved in this year is similar to that for AY 1995-96 and facts show that the amounts are not in the nature of loans but are given as a part of business activities, I agree with the findings given by the CIT (A,. in the appellate order for AY 1995-96 and direct the assessing officer to delete this addition."
6.12. We have carefully perused the findings of the ld.CIT (A) which contained the assessee's submission the justification in its claim. In this regard, we would like to point out that the impugned order of the ld.CIT (A) for the assessment year in the assessee's own case for the A.Y. 1995-96 has since been set-aside by this Bench for the detailed findings recorded therein. The ld.CIT (A) for the present issue had followed the 30 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 findings of the ld.CIT (A) for the A.Y. 1995-96 [which has been set-aside] in deleting the addition. The assessee had vouched that no loans have been lent to its sister concerns, but, paid amounts towards cost of construction, and since it had running account with Sterling Resorts P Ltd, it were only for business transactions as per agreements entered into between them and so on and so forth. The authenticity of the assessee had not been cross verified by the ld.CIT (A) on the face value of the assessee's assertion and rather in conformity with the findings of the ld.CIT (A) for the A.Y. 1995-96 which has been set-aside by this Bench.
6.13. Considering above facts and circumstances of the issue referred above, the issue is remitted back to the file of the AO to verify the claim of the assessee with reference to the agreements purported to have been entered to by the assessee with its sister concerns towards cost of construction, car booking advances, gas deposits and if were found to be in order, the assessee shall be entitled for its claim. It is ordered accordingly.
VI. ITA No.2163/A/2005 - A.Y. 2001-02 - By the Revenue:
7. The first ground of the Revenue being deletion of the addition of Rs.35,65,084/- made after deducting the income of Rs.73,75,015/- out of receipts on account of maintenance, electricity contributions etc., aggregating to Rs.1.09 crores.
7.1. The CIT (A) had observed that the amounts of maintenance contributions and electricity charges were held as receipts as per the agreement and these were treated as non revenue receipts and the additions were, accordingly, deleted by the CIT (A) for the assessment years 1995-96 and 1996-97 in the assessee's own case. He had, further, 31 ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 observed that since the facts were same for the AY 2001-02 as well as AY 1997-98 and the addition made by the AO on the basis of the order for AY 1996-97 was deleted by the CIT (A) and following the order of his predecessor, he had allowed the relief to the assessee on this count.
7.2. At this point of time, we would like to recollect that the entire issues including that of the present issue for the AY 1995-96 have been remitted back to the file of the AO, thereby set-asiding the CIT (A)'s order, for framing of fresh assessment, this issue under consideration is also remitted back to the file of the AO for similar treatment.
7.3. The other common grounds for the AY 2001-02 and 2002-03 being that the CIT (A) had erred in deleting the disallowances of Rs.17,48,904/- and Rs.17,01,787/- for the AYs 2001-02 and 2002-03 respectively out of interest expenses claimed by the assessee.
7.4. A similar set of the issue to that of present one had cropped up for the assessment year 1997-98 in the assessee's own case, wherein considering facts of the issue the issue was remitted back to the file of the AO to verify the claim of the assessee with reference to the agreements purported to have been entered by the assessee with its sister concern towards cost of construction, car booking advances, gas deposits and if found to be in order, the assessee shall be entitled for its claim. As the present issue is identical to that of the issue raised for the 1997-98; the findings recorded therein is squarely applicable to the AYs under consideration. It is ordered accordingly.
8. In the result:
(1) The assessee's appeal for the A.Y. 1995-96 is treated as allowed for statistical purposes;
(2) The assessee's appeal for the A.Y. 1997-98 is treated as allowed for statistical purposes;32
ITA Nos.2696,144,806,1633,2137,2163&2164-Ahd-2000,01,04,02,02,05&05 (3) The Revenue's appeals for the A.Y. 1995-96 (two appeals) are treated as allowed for statistical purposes (4) The Revenue's appeals for the A.Y. 1997-98, 2001-02 and 2002-03 are treated as allowed for statistical purposes.
इस आदे श कȧ घोषणा Ǒदनांकः28/02/2012 को Ûयायालय मɅ कȧ गई Sd/- Sd/-
(G.C.Gupta) (A.Mohan Alankamony)
Vice President Accountant Member
DATED :28/02/2012
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3. संबंिधत आयकर आयुƠ
4. आयकर आयुƠ- अपील-
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद ।
6. गाड[ फाइल आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद।
Talukdar/ Sr. P.S. 33