|The Tax Publishers2021 TaxPub(DT) 0333 (Mum-Trib)
INCOME TAX ACT, 1961
Common administrative expenses must be allocated on all the activities carried on by the assessee therefore allocated based on gross revenue thus, allocation of common expenses relevant for the project Classique in the ratio of gross revenue and closing WIP i.e. total common expenses divided by total gross revenue including closing WIP multiplied by revenue from Classique Project.
Deduction under section 80-IB(10) - Development and construction of housing projects - Allocation of common expenses between project and TDR -
Assessee was in business of real estate which includes construction of flats and selling the TDR (transferable development rights). During the assessment year, assessee had sold 3 flats of project 'Classique', which comes under provisions of section 80-IB(10), the profit earned in this project was eligible to claim as deduction under section 80-IB(10). The assessee had declared net profit after reducing direct expenses of the project without considering common administration expenses and claimed deduction under section 80-IB(10). AO considered the status of the project and estimated the portion of common expenditure allocable to this project @15%. However, CIT(A) rejected the proposition of the AO and enhanced the allocable expenses to the project Classique by observing that the common expenses had to be allocated based on the ratio of sales. CIT(A) treated the activity of sale of TDR as sundry activity and cannot be regarded as business of the assessee. Some of the expenses incurred by the assessee relating to sale of TDR. Held: Assessee was in real estate business and any sale of transferable development rights will fall within the activity of real estate business. Therefore, all the expenses relevant for the business was eligible to be apportioned between all the activities carried on by the assessee. Assessee was currently carrying on 2 projects by name Classique and Royal and other activities, i.e., sale of TDR. Common administrative expenses must be allocated on all the activities carried on by the assessee, therefore, allocated based on gross revenue. AO was, therefore, directed to allocate the expenses relevant for the project classique in the ratio of gross revenue and closing WIP, i.e., total common expenses divided by total gross revenue including closing WIP multiplied by revenue from Classique project.
Relied:Zandu Pharma (2013) 350 ITR 366 (Bom) : 2013 TaxPub(DT) 494 (Bom-HC).
REFERRED : Hindustan Unilever Ltd. (2016) 394 ITR 73 (Bom) : 2016 TaxPub(DT) 3997 (Bom-HC).
FAVOUR : In assessee's favour (Partly).
A.Y. : 2009-10
IN THE ITAT, MUMBAI BENCH
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