M/s. H.B. Estate Developers Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 106/DEL/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2626 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: SANTOSH K AGGARWAL
• Keywords: Tax effect
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH C CC C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 1168/DEL/2013 1168/DEL/2013 1168/DEL/2013 1168/DEL/2013 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007 - -- - 08 0808 08 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1) 12(1) 12(1) 12(1), ,, , NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S H.B. ESTATE DEVELOPERS M/S H.B. ESTATE DEVELOPERS M/S H.B. ESTATE DEVELOPERS M/S H.B. ESTATE DEVELOPERS PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., H HH H- -- -72, CONNAUGHT CIRCUS, 72, CONNAUGHT CIRCUS, 72, CONNAUGHT CIRCUS, 72, CONNAUGHT CIRCUS, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : AAACH3122M. PAN : AAACH3122M. PAN : AAACH3122M. PAN : AAACH3122M. (APPELLANT) (RESPONDENT) CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO NONO NO .106/DEL/2013 .106/DEL/2013 .106/DEL/2013 .106/DEL/2013 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007 - -- - 08 0808 08 M/S H.B. ESTATE DEVELOPERS M/S H.B. ESTATE DEVELOPERS M/S H.B. ESTATE DEVELOPERS M/S H.B. ESTATE DEVELOPERS PVT.LTD PVT.LTD PVT.LTD PVT.LTD., .,., ., H HH H- -- -72, CONNAUGHT CIRCUS, 72, CONNAUGHT CIRCUS, 72, CONNAUGHT CIRCUS, 72, CONNAUGHT CIRCUS, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : AAACH3122M. PAN : AAACH3122M. PAN : AAACH3122M. PAN : AAACH3122M. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), 12(1), 12(1), 12(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI A.K. SAROHA, CIT - DR. ASSESSEE BY : SHRI SANTOSH K. AGGARWAL, ADVOCATE. DATE OF HEARING : 19.12.2016 19.12.2016 19.12.2016 19.12.2016 DATE OF PRONOUNCEMENT : 20.12.2016 20.12.2016 20.12.2016 20.12.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THE APPEAL BY THE REVENUE AND THE CROSS-OBJECTION BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 ARE DIRECT ED AGAINST THE ORDER OF LEARNED CIT(A)-XXVII, NEW DELHI DATED 2 ND NOVEMBER, 2012. ITA NO.1168/D/2013 : ITA NO.1168/D/2013 : ITA NO.1168/D/2013 : ITA NO.1168/D/2013 :- -- - 2. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE TAX EFFECT IN THIS APPEAL BY THE R EVENUE IS ONLY ITA-1168/D/2013 & C.O.-106/D/2013 2 `3,33,705/-. HE POINTED OUT THAT SINCE IN THIS CAS E THE TAX WAS ACTUALLY LEVIED UNDER THE MAT, THE DISPUTED ADDITION IN THE MAT IN THE REVENUES APPEAL IS ONLY `29,74,200/- IN RESPECT OF WHICH, THE TAX EFFECT WOULD BE ONLY `3,33,705/-. HE, THEREFORE, S UBMITTED THAT THE REVENUES APPEAL SHOULD BE DISMISSED IN VIEW OF THE CIRCULAR NO.21/2015 DATED 10 TH DECEMBER, 2015 OF THE CBDT. 3. LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT FO R COMPUTING THE TAX EFFECT, NOT ONLY THE DISPUTED ADDITION UNDER TH E BOOK PROFIT IS TO BE CONSIDERED BUT THE DISPUTED ADDITION WHILE COMPUTIN G THE NORMAL INCOME SHOULD ALSO BE CONSIDERED. HE ALSO REFERRED TO PARAGRAPH 4 OF THE CIRCULAR AND STATED THAT AS PER THIS PARAGRAPH 4, THE NOTIONAL TAX ON THE DISPUTED ADDITION IS TO BE CONSIDERED. HE, THEREFORE, SUBMITTED THAT THIS APPEAL SHOULD BE HEARD ON MERITS AND SHOU LD NOT BE DISMISSED ON TAX EFFECT. 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE GRO UNDS RAISED IN THIS APPEAL BY THE REVENUE READ AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DIRECTING TO ASSESS THE LEASE RENTAL RECEIVED FROM UNSOLD HOUSE PROPERTY AS INCO ME FROM BUSINESS AS AGAINST INCOME FROM HOUSE PROPER TY ASSESSED BY THE A.O. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE IS SUE OF ASSESSABILITY OF LEASE RENTALS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE GROUND OF APPEAL RELATING TO DISA LLOWANCE OF AGGREGATE EXPENSES OF RS.16,83,663/- BECOMES INFRUCTUOUS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN RESTRICTING THE DIS ALLOWANCE OF RS.29,74,200/- MADE U/S 14A OF THE ACT READ WITH RULE 8D TO RS.4,24,789/-. ITA-1168/D/2013 & C.O.-106/D/2013 3 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE AM OUNT OF DISALLOWANCE U/S 14A CANNOT BE ADDED TO BOOK PROFIT U/S 115JB BY IGNORING THE CLEAR CUT PROVISIONS OF CLAUS E (F) BELOW EXPLANATION-1 TO SECTION 115JB(2) OF THE I.T. ACT. 5. GROUND NOS.1, 2 & 3 ARE RELATING TO DETERMINATIO N OF INCOME UNDER THE NORMAL PROVISIONS AND GROUND NO.4 IS FOR THE DETERMINATION OF INCOME UNDER SECTION 115JB. SO FAR AS NORMAL PR OVISION IS CONCERNED, THE TOTAL DISPUTED ADDITION IS `16,83,66 3/- + `25,49,411/- (`29,74,200 - `4,24,789) I.E. `42,33,074/-. ADMITT EDLY, THE TAX HAS BEEN LEVIED ON THE MAT INCOME BECAUSE THE TOTAL INC OME UNDER THE NORMAL PROVISION AFTER THE ADDITIONS MADE BY THE AS SESSING OFFICER IS `1,43,02,850/- WHILE THE INCOME DETERMINED BY THE A SSESSING OFFICER UNDER MAT PROVISION IS `12,36,50,765/-. ACCORDINGL Y, THE TAX HAS BEEN LEVIED ON THE BASIS OF MAT INCOME. IT IS ALSO NOT IN DISPUTE THAT EVEN AFTER THE RELIEF BY THE CIT(A), THE TAX WOULD BE CH ARGED ON MAT INCOME BECAUSE THE MAT INCOME IS MUCH MORE THAN INCOME UND ER THE NORMAL PROVISIONS OF IT ACT. THEREFORE, THE QUESTION REMA INS WHETHER THE RELIEF ALLOWED BY THE CIT(A) UNDER THE NORMAL PROVISIONS O F THE IT ACT IS LIABLE TO BE CONSIDERED FOR DETERMINING THE TAX EFFECT. L EARNED DR IN THIS REGARD HAS RELIED UPON PARAGRAPH NO.4 OF THE CIRCUL AR, WHICH READS AS UNDER :- 4. FOR THIS PURPOSE, TAX EFFECT MEANS THE DIFFER ENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND TH E TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCO ME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS DISPUTED ISSUES). HO WEVER THE TAX WILL NOT INCLUDE ANY INTEREST THEREON, EXCEPT W HERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUT E, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CAS ES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDIT IONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QU ANTUM OF ITA-1168/D/2013 & C.O.-106/D/2013 4 APPEAL DELETED OR REDUCED IN THE ORDER TO BE APPEAL ED AGAINST. 6. FROM THE ABOVE, IT IS EVIDENT THAT TAX EFFECT IS TO BE WORKED OUT BY DETERMINING :- (I) TAX CHARGEABLE ON THE TOTAL INCOME, AND (II) TAX WHICH IS CHARGEABLE AFTER THE DISPUTED ADD ITION IS REDUCED FROM THE TOTAL INCOME. DIFFERENCE OF ABOVE WOULD BE TAX EFFECT. 7. ADMITTEDLY, IN BOTH THE CIRCUMSTANCES, IN THE PR ESENT CASE, TAX IS CHARGEABLE ON THE MAT INCOME. AS PER ABOVE PARAGRA PH NO.4, NOTIONAL TAX EFFECT IS TO BE DETERMINED IN THE CASE OF ASSES SED LOSS BECAUSE THE VARIATION IN THE ASSESSED LOSS HAS A CONSEQUENCE IN THE SUBSEQUENT YEAR IN THE FORM OF CARRY FORWARD AND SET OFF. HOW EVER, IN THE YEAR UNDER CONSIDERATION, THE INCOME DECLARED IN THE NOR MAL PROVISION WAS POSITIVE INCOME AND THE INCOME DETERMINED BY THE AS SESSING OFFICER IS ALSO POSITIVE INCOME AND INCOME WORKED OUT AFTER TH E ORDER OF THE CIT(A) IS ALSO POSITIVE INCOME. THEREFORE, ANY VAR IATION IN THE INCOME UNDER THE NORMAL PROVISION UNDER THE INCOME-TAX ACT DOES NOT HAVE ANY CONSEQUENCE IN THE SUBSEQUENT YEAR BECAUSE THER E IS NO QUESTION OF ANY CARRY FORWARD OR SET OFF OF LOSS. IN THIS Y EAR, TAX IS LEVIED BY THE ASSESSING OFFICER UNDER MAT AND AFTER THE ORDER OF CIT(A) ALSO, TAX WOULD BE CHARGED UNDER MAT. THEREFORE, IN OUR OPIN ION, NO NOTIONAL TAX EFFECT IS TO BE WORKED OUT ON THE DISPUTED ADDI TION UNDER THE NORMAL PROVISIONS OF THE IT ACT. 8. UNDISPUTEDLY, THE DISPUTED ADDITION UNDER THE MA T PROVISION IS ONLY OF `29,74,200/- ON WHICH TAX EFFECT IS ADMITTE DLY BELOW `10 LAKHS. IN VIEW OF THE ABOVE, IN OUR OPINION, THE ABOVE CIR CULAR OF THE CBDT IS ITA-1168/D/2013 & C.O.-106/D/2013 5 SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE SA ME, WE DISMISS THE REVENUES APPEAL. CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO.106/DEL/2013 : NO.106/DEL/2013 : NO.106/DEL/2013 : NO.106/DEL/2013 :- -- - 9. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FAIRLY ADMITTED THAT IF THE REVENUES APPEAL IS NOT ADMITTED, THEN THE ASSE SSEES CROSS- OBJECTION MAY BE TREATED AS INFRUCTUOUS. 10. AS WE HAVE DISMISSED THE REVENUES APPEAL, THE CROSS-OBJECTION OF THE ASSESSEE IS TREATED AS INFRUCTUOUS AND IS DI SMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS- OBJECTION OF THE ASSESSEE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 20.12.2016 . SD/- SD/- (CHA (CHA (CHA (CHA NDRA MOHAN GARG NDRA MOHAN GARG NDRA MOHAN GARG NDRA MOHAN GARG ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. REVENUE : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 2. ASSESSEE : M/S H.B. ESTATE DEVELOPE M/S H.B. ESTATE DEVELOPE M/S H.B. ESTATE DEVELOPE M/S H.B. ESTATE DEVELOPERS PVT.LTD., RS PVT.LTD., RS PVT.LTD., RS PVT.LTD., H HH H- -- -72, CONNAUGHT CIRCUS, NEW DELHI 72, CONNAUGHT CIRCUS, NEW DELHI 72, CONNAUGHT CIRCUS, NEW DELHI 72, CONNAUGHT CIRCUS, NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR