Kukreja Construction Co., Mumbai vs Department Of Income Tax

Kukreja Construction Co. Vs.` DCIT, Central Circle - 31, "Laalasis" Aayakar Bhavan, Plot No. 219, 11th Road, Mumbai - 400 020. Chembur, Mumbai - 400 071. PAN:-AABFK 0413 C Appellant Respondent

ITA NO.1736/Mum/2010 Assessment year: -2006-07

DCIT, Central Circle - 31, Vs.` Kukreja Construction Co. Room No. 409, 4th Floor, "Laalasis" Aayakar Bhavan, M.K. Marg, Plot No. 219, 11th Road, Mumbai - 400 020. Chembur, Mumbai - 400 071. PAN:-AABFK 0413 C Appellant Respondent

ITA NO.5536/Mum/2010 Assessment year: -2007-08

Kukreja Construction Co. Vs.` DCIT, Central Circle - 31, "Laalasis" Aayakar Bhavan, Plot No. 219, 11th Road, Mumbai - 400 020. Chembur, Mumbai - 400 071. PAN:-AABFK 0413 C Appellant Respondent Kukreja Construction Co.

ITA NO.5977/Mum/2010 Assessment year: -2007-08

DCIT, Central Circle - 31, Vs.` Kukreja Construction Co. Room No. 409, 4th Floor, "Laalasis" Aayakar Bhavan, M.K. Marg, Plot No. 219, 11th Road, Mumbai - 400 020. Chembur, Mumbai - 400 071 PAN:-AABFK 0413 C Appellant Respondent

ITA NO.6180/Mum/2011 Assessment year: -2008-09

DCIT, Central Circle - 31, Vs.` Kukreja Construction Co. Room No. 409, 4th Floor, "Laalasis" Aayakar Bhavan, M.K. Marg, Plot No. 219, 11th Road, Mumbai - 400 020. Chembur, Mumbai - 400 071 PAN:-AABFK 0413 C Appellant Respondent

Assessee By Shri J.P. Bairagra Revenue By Shri Vijay Kumar Bora

Date of hearing 07.01.2015 Date of pronouncement 16.01.2015

ORDER

Per Vijay Pal Rao, JM

These are total five appeals, out of which two set of cross appealsfor the A.Y. 2006-07 and 2007-08 and the revenue has filed the appeal for the A.Y. 2008-09. The assessee has raised common grounds in these appeals. The ground raised for A.Y. 2007-08 are as under:-

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1. The Ld. Commissioner of Income Tax (appeals) erred in confirming the addition of Rs. 19,70,000/- out of disallowance made by the Assessing Officer of Rs. 17,20,000/- towards business centre charges and Rs.

4,30,000/- towards administrative charges, both paid to M/s. Kukreja Services Pvt. Ltd.

2. The Ld. Commissioner of income tax (appeals) further erred in confirming the action of the Assessing Officer in reducing the deduction u/s. 80-IB in respect of 'Orchid' project by Rs. 3,48,270/- on account of income received under the head 'Other income received from the buyers of the flats.

3. The learned commissioner of income tax (appeals) further erred in confirming the action of the Assessing Officer in reducing the deduction u/s. 80-IB in respect of 'Luv Kush' project by Rs. 1,14,27,303 being income under the head 'Other income' received from buyers of the flats.

2. Ground no. 1 is regarding part confirmation of disallowance in respect of business centre charges and administrative charges.

3. During the course of assessment proceedings, the Assessing Officer found that the assessee had made payment of Rs. 21.50 lakh to its sister concern M/s Kukreja Services. Out of this sum of Rs. 21.50 lakh, an amount of Rs. 17.20 lakh was paid towards business centre facility and a sum of Rs. 4.30 lakh was paid towards administrative charges. The Assessing Officer asked the assessee to justify as to why the payment made to related concern should not be disallowed. The assessee furnished the details of payment made to the sister concern M/s Kukreja Services Pvt. Ltd. for business centre facility and administrative charges and submitted that the payment is made as per the practice followed in the group concern. The assessee further contended that the payments made are no excessive or unreasonable keeping in view the facilities provided by M/s Kukreja Services Pvt. Ltd. The assessee relied upon the order of this Tribunal in the case of another group concern M/s Tolaram & Company and M/s Vazirani Land Developers Pvt. Ltd., wherein the identical

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issue of payment of business centre facility and administrative charges to M/s Kukreja Services was considered and decided by the Tribunal. The Assessing Officer did not accept the contention of the assessee and observed that there has been a steep increase in the expenses under the head "business centre and administrative charges" in comparison to the expenses in the A.Y. 2005-06 and 2006-07. Accordingly, the Assessing Officer disallowed the entire expenses of Rs. 21.50 lakh.

4. On appeal, the CIT(A) has followed its order for A.Y. 2005-06 and 2006- 07 and accordingly confirmed the disallowance of Rs 19.70 lakh out of 21.50 lakh and consequently allowed the claim the extent of Rs. 1.80 lakh. Thus for both the A.Ys i.e. 2006-07 and 2007-08, the Commissioner has allowed a sum of Rs. 1.80 lakh and balance disallowance was confirmed. Therefore, both assessee and revenue filed cross appeals for these two A.Ys.

5. Before us, the Ld. Authorized Representative of the assessee has submitted that for the A.Y. 2006-07, the total disallowance was made by the Assessing Officer in respect of the payment made to the sister concern was Rs. 27,40,516/- out of which the Commissioner granted relief of Rs. 1,80,000/- and disallowed the balance amount. Similarly for the A.Y. 2007-08, out of total disallowance of Rs. 21.50 lakh, the Commissioner has agains allowed relief of Rs. 1,80,000/- and the balance amount of Rs. 19,70,000/- was disallowed. He has pointed out that the building in which Kukreja Group are carrying out there business belongs to and maintained by Kukreja Services Pvt. Ltd and accordingly, the sister concern has incurred the total expenses towards air conditioning, lighting, gardening, securities, house keeping, computer etc. The

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said company recovers these charges from group concern every year in the form of business centre charges and administrative charges. All the companies are engaged in the business of construction and development and the allocation of the expenditure is based on the volume of work in each company and depends upon the progress of a particular project in each year, therefore, the allocation of expenditure varies as per the volume of work completed in a project or starting of new project. The Ld. Authorized Representative thus submitted that the charges paid to M/s Kukreja Services Pvt. Ltd. depends on the activities carried out by a particular firm. The assessee firm is making the payment on the basis of debit note raised by M/s Kukreja Services Pvt. Ltd and TDS is deducted. This payment as per the allocation charges has been made in last November of every year. He has referred the details regarding sales, advances received, work in progress and profit earned by the assessee since A.Y. 2000-01 and payment made to M/s Kukreja Services Pvt. Ltd. in each year. For the A.Y. 2003-04, the matter went up to this Tribunal and this Tribunal allowed the payment of Rs. 10 lakh paid to M/s Kukreja Services Pvt. Ltd vide order dated 24th February 2009. He has further submitted that for the A.Y. 2000-01 and 2001-02, an identical issue came before this Tribunal in the other group concerns case M/s Tolaram & Co., wherein the Assessing Officer disallowed a sum of Rs. 20 lakh on this account, however, the Tribunal has allowed the claim of payment towards reimbursement of expenses to the sister concern vide order dated 27.10.2004. The Ld. Authorized Representative has then pointed out that even for the A.Y. 1998-99 and 1999-00, an identical issue came before the Tribunal in the case of another group concern M/s Vazirani Land Developers Pvt. Ltd., wherein the Assessing Officer disallowed a sum of Rs. 36,36,636/- which was allowed by this Tribunal vide order 7.11.2006 and on further appeal by the revenue, the Hon'ble Jurisdictional High Court has

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confirmed the order of this Tribunal vide order dated 12.02.2009. He has filed the copy of the order of the Hon'ble High Court. In case of M/s Motiram Tolaram for the A.Y. 2006-07and 2007-08, the Tribunal has again deleted the addition of Rs. 14 lakh and Rs. 19 Lakh respectively on this account vide order dated 8.5.2013. Further for the A.Y. 2008-09 an addition of Rs. 10,80,000/- was deleted vide order dated 24.12.2013. Thus the Ld. Authorized Representative has submitted that the issue involved in the assessee's appeal as well as revenue's appeal are covered by above mentioned various decisions of this Tribunal including the decision in assessee's own case for A.Y. 2003-04.

6. On the other hand, the Ld. DR has submitted that the Assessing Officer has brought out the distinguishing facts that there is a substantial increase in the payment towards reimbursement of expenses to the sister concern and, therefore, it was disallowed u/s 40A(2)(b) of the Income Tax Act. Further the assessee has not produced any proof with regard to the nature of services and value there of in support of its claim. He has relied upon the order of Assessing Officer and submitted that in the absence of any documentary evidence to prove the exact criteria on the basis of which the payment is made to its sister concern, the Assessing Officer is justified in disallowing the payment to the related party.

7. We have considered the rival submissions as well as relevant material on record. It is undisputed fact that the assessee along with other group concerns of the assessee are carrying on the business activity from the same building namely Pal Asish, Plot No. 219, Chembur, Mumbai for last more than ten years. It is also emerged from the record that all the group concerns are making the

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payment towards reimbursement of the expenses to M/s Kukreja Services Pvt. Ltd on account of payment of rent, electricity charges, security charges, gardening expenses, computer expenses, accounting expenses and all other maintenance expenses. These expenses are categorized under two head namely business centre charges and administrative charges. The Assessing Officer has disallowed the entire amount paid by the assessee towards reimbursement of charges despite the fact that the assessee is using the same building which is maintained and managed by the M/s Kukreja Services Pvt. Ltd. Thus the disallowance of expenses in toto is not justified and it is contrary to the bare fact that all the group concern of the assessee company is using the same building and the facilities. The objective of the provisions of section 40A(2) is to check evasion of tax through excessive or unreasonable payments to the associate concern. As per Board's circular dated 6.7.1968, the provisions of section 40A(2) should not be applied in a manner which will create hardship in bonafide cases. The assessee has produced the details in respect of the business activity carried out by the assessee and the expenses allocated and paid to the sister concern towards reimbursement charges. The Assessing Officer has not conducted any enquiry to make out a case of excessive or unreasonable payment by the assessee to the sister concern. Even the CIT(A) has not conducted any enquiry or brought any material on record to show that how much of the expenses paid by the assessee to the sister concern are excessive in comparison to the fair market price . We note that in assessee's own case for the A.Y. 2003-04, an identical issue was considered and decided by this Tribunal vide order dated 24.02.2009 in para 11 as under:-

"11. We have considered the rival contentions and perused the material available on record. Admittedly, both the asscssees' cases. viz. M/ s

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Tolaram & Co & M/ s vazirani Land Developers Pvt. Ltd. cited before us, are group concerns of the assessee where identical issue is involved. While in the case of M/s Tolaram & Co, the "D" Bench of the Tribunal decided the issue in favour of the assessee, another bench of the Tribunal decided the issue in favour of the revenue by upholding a partial disallowance by the CIT(A) in the case of M/s Vazirani Land Developers Pvt. Ltd. However, this decision of the Tribunal in the "case of Vazirani Land Developers Pvt. Ltd. cannot precedence inasmuch as the "I" Bench of the Tribunal has recalled the matter vide order dated 19th May, 2006. The facts and circumstances of the case are undisputedly identical to that in the case of M/s Tolararn & Co. It is also not the case of the revenue that the assessee has not received the services from M/s Kukreja Services Pvt. Ltd., who is the provider of such services to the entire group concerns. The payment in question is also not doubted or proved otherwise. The reasons for invoking provisions of section 40A(2J(b) is that the recipient of the amount is a related concern and that - (a) there is no criteria on which the payments are made and there is no written agreement in this regard; (b) no such service charges are charged from the group concerns which are incurring losses, which is unaccountable; and (c) that the expenses claimed in the hands of profit making companies are not wholly and exclusively for their business. We find that all such concerns of the revenue have been addressed in the order of the Tribunal in the case of M/s Tolararn & Co (supra), In this view of the matter we hold that the authorities below were not justified in their respective action in disallowing an amount of Rs.4 lakhs by invoking provisions of section 40A(2)(b). We delete the disallowance.

8. We further note that in case of other group companies namely M/s Tolaram & Company, M/s Vazirani Land Developers Pvt. Ltd., and M/s Motiram Tolaram who are paying the similar amounts to M/s Kukreja Services Pvt. Ltd., for using their building for there business activities. The Tribunal has repeatedly decided this issue in favour of the assessee. In the case of M/s Vazirani Land Developers Pvt. Ltd., for A.Y. 1998-99, the Tribunal vide order dated 7-11-2006 has considered and decided an identical issue in para 12 as under:-

"Having carefully examined the order of lower authorities, in the light of the rival submissions, we find that undisputedly assessee is ngaged in the construction

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activities and. is required to appoint certain staff as per its requirement. Keeping in view the volume of work, the strength of staff can be increased or decreased. The contention of the assessee that when trained staff is available with the sister concern there is no justification to appoint a new staff of its Own, cannot be out rightly rejected as it has some force therein. The strategy adopted by the assessee to appoint the staff of his sister concern for its work and make the reimbursement to its sister concern cannot be doubted as this type of practice is permissible under the law. Assessee has also placed the debit note and the vouchers before the Assessing Officer in support of his claim. The assessee and other group concern whom the payments were made are assessed to tax and Assessing Officer has not brought out a case that the other group concern to whom the payments were made was as.sesseed at a loss and these payments were made to reduce the tax liability. The CIT (A) has partly accepted the claim of the assessee but has not accepted the claim in toto. He simply estimated the disallowance without any basis. Since nothing has been brought out on record on behalf of the Revenue that the assessee has raised the bogus claim of reimbursement of expenditures, we do not find any fault therein in the light of explanations furnished by the assessee. we, therefore, do not find any merit in the disallowance made by the err (A). Accordingly, we set aside the order of the CIT(A) in this regard and direct the Assessing Officer to allow the claim of the assessee."

9. The said decision of the Tribunal was challenged by the revenue in the appeal before the Hon'ble High Court which was dismissed vide order dated 12.02.2009. Apart from other decision of the Tribunal in the Group concern cases of the assessee in the latest decision dated 24.12.2013 in case of Motiram Tolaram for A.Y. 2008-09, the Tribunal has decided the issue in favour of the assessee by following the earlier orders of this Tribunal in the case of group concern of the assessee in para 4 as under:-

"4. We have considered submissions of ld representatives of parties and orders of authorities below as well as the decision of the Tribunal in assessee's own case for assessment years 2003-04, 2006-07 & 2007-08 (supra). We observe that similar addition was made by the AO in assessment years 2003-04,2006-07 & 2007-08 (supra) and ld CIT(A) in the assessment year 2003-04 deleted the addition following the decision of the Tribunal in another group case, namely M/s. Vazirani Land Developers. In the assessment years 2006-07 & 2007-08 also,

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on identical facts similar addition has been made by the authorities below was deleted by Tribunal to which one of us is a party (JM). Hence, following the decision of the Tribunal in assessee's own case for assessment years 2003-04 and 2006-07 & 2007-08 (supra) and also in the absence of any contrary decision brought to our notice, respectfully following the same, we delete the addition of Rs.10,80,000/- for assessment year under consideration confirmed by ld. CIT(A).

10. In view of the consistent findings of this Tribunal in a series of decision and in the absence of any specific finding given by the Assessing Officer by the CIT(A) regarding the fair market value/fair market price of the services, the payment made by the assessee to the sister concern on account of using the business centre facility cannot be held as excessive or unreasonable. Further it is not the case of the Assessing Officer that by making the payment to the sister concern the assessee is avoiding the tax liability as the sister concern is not assessed to tax. Accordingly, we delete the disallowance confirmed by CIT(A) on this account for both the years.

11. Ground no. 2 and 3 are regarding disallowance of deduction u/s 80-IB in respect of other income received by the assessee from the buyers of the flat.

12. The assessee received various charges namely development charges, electric meter charges, extra work charges, grill charges, legal charges, water meter charges, share money charges and society formation charges, Gas charges, car parking charges, interest received on delayed payments, video door monitor and maintenance for 12 months charges. The assessee claimed deduction u/s 80-IB in respect of these charges received from buyers of the flat. The Assessing Officer disallowed the claim of the assessee on the ground that above said items of other income had no direct nexus with assessee's core construction activity. Accordingly, the Assessing Officer held that the said

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income has not been derived from the construction activity but from amenities/other services provided by the assessee to the buyers and therefore, not eligible for deduction u/s 80-IB(10).

13. On appeal, the CIT(A) has confirmed the disallowance of deduction u/s 80-IB for both the A.Ys i.e. A.Y. 2006-07 and 2007-08.

14. Before us, the Ld. Authorized Representative of the assessee has submitted that the CIT(A) has followed the order for A.Y. 2006-07, wherein the other income received by the assessee was only in respect of share money, society deposit and society formation charges. Whereas the charges received by the assessee for these two years are regarding construction activity being development charges, extra work charges, legal charges for drafting the documents etc. Further the charges for Gas and Car parking as well as interest received on delayed payments cannot be regarded as other income which are received in respect of the property developed by the assessee and sold to the buyers and have direct nexus with the construction activity. He has further submitted that all these charges are collected in respect of project completed before handing over the project to society, therefore, there is a first degree nexus between the said income and construction activity/industrial undertaking. He has relied upon the decision of Hon'ble Supreme Court in the case of Liberty India Vs. CIT (317 ITR 218) as well as the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Syntel Limited in Income Tax Appeal nos. 1974, 1976 and 1978 of 2009 dated 15.12.2009. The Ld. Authorized Representative has also relied upon the decision of this Tribunal in the case of Tolaram & Co. dated 19.10.2011 for A.Y. 2006-07 and 2007-08.

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Thus the Ld. Authorized Representative has submitted that the claim of deduction u/s 80-IB in respect of the income received from the buyers should be allowed.

15. On the other hand, the Ld. DR has relied upon the orders of authorities below and submitted that these items of income has not direct nexus with the assessee's construction activity, therefore, they cannot be said to be the income derived from the construction business of the assessee but from the amenities and other services provided by the assessee which is not eligible for deduction u/s 80-IB.

16. We have considered the rival submissions as well as relevant material on record. For A.Y. 2006-07, the assessee has received the following income from the buyers of the flat in orchid project:-

g Share money 33,348 h Society deposit 16,15,643 Society formation 1,39,500 charges Total 17,88,991

17. Whereas for the A.Y. 2007-08, the assessee has received the various income in respect of Luv Kush project and orichid project as under:-

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Items of other income Luv kush Orchid project project Car parking charges 2630000 - Development Charges 1107516 53064 Extra work charges - 77000 Electric meter charges 1427500 90000 Gas charges 348000 - Grill charges 1147975 68320 Interest received 148115 - Legal charges 82500 4500 Share money - 2166 Water meter charges - 44220 Maintenance 12 months 2262767 - Video door monitors 1350000 - Water meter charges 922930 - Total other income 11427303 348270

18. We find that the development charges, extra work charges, grill charges, gas charges, car parking charges, interest received on delayed payments and video monitor door charges have the direct nexus with the construction activity of the assessee. The development charges are paid by the assessee to the local authorities and accordingly the same has to be recovered from the buyers. Therefore, this has a direct degree nexus with the construction / development activity of the assessee. Similarly the extra work charges and grill charges are also directly connected with the construction and development activity of the project as part and parcel of the constructed property. The Gas charges are explained by the assessee is regarding the pipe gas fitting in the

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project and, therefore, this is part and parcel of the completed project. Car parking charges is in relation to providing the car parking along with project and, therefore, cannot be separated from the main project. Interest received on delayed payment from the buyers is also part of the sale proceeds of the project and, therefore, cannot be treated as the income from other activity. The video door monitor is a safety device provided under the project and, therefore, it is a part and parcel of the project. We further note that an identical issue has been considered by this Tribunal in the case of M/s Tolaram & Co. for A.Y. 2006-07 and 2007-08 vide order dated 19.10.2011 in para 6 to 9 as under:-

"6. We have heard the parties and perused the record. The Ld. Counsel took us through the paper book. more particularly, page no.2 and submits that the assessee has collected the development charges, electricity charges, worked done to the buyers of the flats etc, and the said receipts are having direct nexus with the project of the assessee. He, therefore, pleaded that the same may be included in the eligible profitHe, therefore, pleaded that the same may be included in the eligible profit. Per contra, the Ld. D.R. vehemently submits that it is an extra income to the assessee and as it has not a first degree income. The Ld. D.R. has supported the action of the authorities below. We find on page no.2 of the paper book that the assessee has given the break-up of 'other income' of Rs. 83,82,964/- which is as under:-

Particulars Amount Rs. Development charges 515,616.00 Electricity Charges 870,000.00 Extra Work 1,387,216.00 Interest received 336,892.00 Water charges 429,680.00 Society deposit 1,275,000.00 Society maintenance received 949,300.60 Share money 21,771.00 Society formation 88,500.00 Car parking charges 545,000.00 Grill charges 494,739.00 Video door security charges 1,425,000.00

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Legal charges 44,250.00 Total 8,382,964.00

7. Present assessee has collected the different charges from the flat buyers as builder for the specific purposes but as comparative expenditure is lesser hence, the balance credit was taken to the profit and loss account. No further description is available before us to clarify the nature of the receipts. So far as development charges are concerned. as explained by the Ld. Counsel the same are collected from flat buyers for the development purpose. In our opinion, the same has got direct nexus with the development of housing project. Same way, the following receipts are having direct nexus with the housing project.

Sr. No. Particulars Amount in Rs. 1. Extra work 13,87,216.00 2 Interest from flat buyers for late payment 336,892.00 3. Car parking 545.000.00 4. Grill charges 494,739.00 5. Video door security charges 1,425,000.00

8. in our opinion, the following receipts cannot be said to have first degree nexus with the housing project:-

Sr. No. Particulars Amount in Rs. 1. Electricity charges 870,000.00 2 Society deposit 1,275,000.00 3. Water charges 429,680.00 4. Society maintenance received 949,300.00 5. Share application money 21,771.00 6. Society formation charges 88,500.00 7. Legal charges 44,250.00 Total 4,173,230.60

9. We, therefore, hold that to the extent of Rs. 4,173,230.60 referred to the above, the same should be excluded from the eligible profit and balance has to be treated as part of the profit derived from the housing project. The A.O. is accordingly directed to work out the eligible profit in the light of the above discussion. Accordingly, ground no. 2 is partly allowed."

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19. Accordingly, by following the rule of consistency, all income received in relation to the activity which are having direct nexus with the project as discussed above are eligible for deduction u/s 80-IB except share money, society formation charges, electricity meter charges, water meter charges, legal charges and maintenance charges for 12 months which are all post completion of project activity and cannot be treated as part of the construction project. Accordingly, the income in respect of above said work are not eligible for deduction u/s 80-IB. Since the other income received for A.Y. 2006-07 is only regarding society formation and share money, therefore, the same is not eligible.

Revenue's appeal

20. The revenue has raised common grounds in the appeals for all the three A.Ys. The ground raised for A.Y. 2007-08 are as under:-

1. The ld. Assessing Officer erred in disallowing a sum of Rs. 17,20,000/-

towards business centre charges and Rs. 4,30,000/- for administrative charges paid to M/s. Kukreja Services Pvt. Ltd. u/s. 40A(2) of the Income Tax Act .

2. the ld. Assessing Officer further erred in reducing the indirect expenses of Rs. 5,75,769/- from the deduction u/s. 80-IB in respect of "Orchid Project".

3. The Ld. Assessing Officer further erred in reducing the deduction u/s 80-IB in respect of 'Orchid' Project by Rs. 3,48,270/- being income received under the head 'Other income received from the buyers of the flat.'

4. The Ld. Assessing Officer further erred in reducing the proportionate indirect expenses of Rs. 72,94,470/- while granting deduction u/s. 80-IB in respect of of " Lav Kush" Project.

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5. The Ld. Assessing Officer further erred in reducing the deduction u/s. 80- IB(10) in respect of "Lav Kush" project by Rs. 1,14,27,303/- being income under the head 'Other income received from the buyers of the flat.

6. The Ld. Assessing Officer further erred in making disallowance out of indirect expenses in respect of "Orchid project" of Rs. 5,75,769/- and in respect of Lav Kush project of Rs. 72,94,470/-

21. Ground no. 1 is regarding disallowance u/s 40A(2)(b). This ground of revenu's appeal is common to the ground no. 1 of the assessee's appeal for A.Y. 2006-07 and 2007-08. In view of our finding on this issue in the assessee's appeal, this ground of the revenue's appeal is dismissed.

22. Ground no. 2 to 5 are regarding the proportionate allocation of indirect expenses.

23. The Assessing Officer disallowed the certain indirect expenses for the purpose of deduction u/s 80-IB and applied the basis of allocation of indirect expenses as income earned by the assessee from various projects. The CIT(A) directed the Assessing Officer to allocate on the basis of expenses incurred on the project during the year by following the decision of this Tribunal in the case of Ganga Developers and Group concern in ITA no. 9136/Mum/2004 vide order dated 28.06.2007.

24. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. The Ld. DR has relied upon the orders of Assessing Officer and submitted that the Assessing Officer has applied the income earned by the assessee from various projects as the basis for allocation of indirect expenses.

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On the other hand, the Ld. Authorized Representative has submitted that the CIT(A) has followed the decision of this Tribunal in the case of Ganga Developers and Group concern (supra) and further in assessee's own case for A.Y. 2005-06, the Tribunal had directed the Assessing Officer to adopt the indirect expenses in proportion to the cost incurred on the various projects during the year.

25. Having considered the rival submission as well as relevant material on record, at the outset we note that an identical issue has been considered and decided by this Tribunal in assessee's own case for A.Y. 2005-06 in ITA No. 1469/Mum/2009 vide order dated 29.06.2010 in para 5 as under:-

"5. On a careful consideration of the rival contentions, we are of the view that the issue having been decided by the Co-ordinate Bench in a Group case, the same should be followed in the present case also. Accordingly, respectfully following the said order, we hold that the indirect expenses should be apportioned in proportion to the cost incurred on various projects during the year, as represented by the work in progress in the different projects. The figures supplied by the assessee before us however need verification. We therefore restore the issue to the file of the Assessing Officer for the limited purpose of verifying the figures of work in progress in the various projects undertaken by the assessee and thereafter to apply the rule laid down in the order of the Tribunal in the case of M/s Ganga Developers (supra). The appeal of the assessee is allowed in part with no order as to cost."

26. Accordingly, we direct the Assessing Officer to apply the same basis as directed by this Tribunal for A.Y. 2005-06 for allocation of indirect expenses among various projects for the purpose of deduction u/s 80-IB. We find that there is no error in the order of CIT(A) in directing the Assessing Officer to follow the ratio of the decision of this Tribunal in the case of Ganga Developers (supra).

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27. In the result, appeals of the assessee are allowed and that by the revenue are dismissed.

Order pronoucned in the open court on this 16th Day of January 2015.

Sd/- Sd/-

(Rajendra) (Vijay Pal Rao) ys[kk lnL;) (Accountant Member/ys lnL; U;kf;d lnL;) (Judicial Member/U;kf;d lnL;

Mumbai dated 16-01-2015 SKS Sr. P.S,

Copy to: 1. The Appellant 2. The Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. The DR, "G" Bench, ITAT, Mumbai By Order

Assistant Registrar Income Tax Appellate Tribunal, Mumbai Benches, MUMBAI

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