BSR Builders Engineers Contractors Vs DCIT (ITAT Chennai)
On-Money Advances, Retraction Statements, Notional Rent Section 68 Issues Decided: ITAT Chennai Largely Upholds CIT(A) in BSR Builders Case
The Chennai Bench of the ITAT disposed of cross-appeals and cross-objections filed by the assessee and the Revenue for AYs 2016-17 and 2017-18 in the case of BSR Builders Engineers Contractors, delivering a detailed ruling on multiple substantive and procedural issues.
For AY 2016-17, the Tribunal dismissed the Revenue’s appeal and upheld the CIT(A)’s deletion of major additions. The ITAT held that cash on-money of ₹1 crore received towards sale of commercial space was only an advance, taxable in the year of project completion since the assessee consistently followed the Project Completion Method and had already offered the income in AY 2019-20—thereby avoiding double taxation. The Tribunal also confirmed deletion of ₹4.84 crore added as alleged unaccounted receipts based solely on statements of purchaser doctors, noting that (i) corresponding additions in the hands of the doctors had already been deleted and upheld by the ITAT, and (ii) statements were relied upon without furnishing copies to the assessee, violating principles of natural justice. Further, the interest disallowance on alleged diversion of borrowed funds was deleted, as the assessee had sufficient own capital far exceeding interest-free advances.
On the assessee’s appeal for AY 2016-17, the ITAT confirmed taxation of notional rent on unsold flats held as stock-in-trade under sections 22/23, following the Delhi High Court decision in Ansal Housing and holding that the benefit of section 23(5) applies only prospectively from AY 2018-19.
For AY 2017-18, the Tribunal upheld the validity of reopening, rejecting the assessee’s challenge. On merits, disallowance under section 40(a)(ia) for non-deduction of TDS on interest paid to IIFL-HFC was remanded to the AO for verification of Form 26A and compliance with the second proviso to section 40(a)(ia). The ITAT deleted the section 68 addition of ₹15 lakh, holding that it represented an opening balance of security deposit and section 68 cannot be invoked for credits not arising during the relevant year.
The assessee’s cross-objections were dismissed as infructuous. Overall, the Tribunal largely upheld the CIT(A)’s relief, granting limited remand on the TDS issue.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
