INCOME TAX OFFICER, JAIPUR V. M/S. SHREE RAM GREEN VALLEY PVT. LTD., JAIPUR

ITA 103/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7947 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT LD
• Assessee Lawyers: VIJAY GOYAL FCA LD AR DHK
• Keywords: Question of law
• Section: 147

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S SMC, JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM VK;DJ VIHY LA-@ ITA NO.103/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 VK;DJ VIHY LA-@ ITA NO.104/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2010-11 VK;DJ VIHY LA-@ ITA NO.105/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 I.T.O. WARD 2(4), JAIPUR CUKE VS. M/S. SHREE RAM GREEN VALLEY PVT. LTD A-14, HEERA NAGAR, SHIPRA PATH, OPPOSITE: J.K PETROL PUMP, MANSAROVAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAKCS1094F VIHYKFKHZ@ APP ELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROSHANTA MEENA, JCIT, LD.DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL, FCA, LD.AR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/04/2019 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 23/04/2019 VKNS'K@ ORDER THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF LD.CIT(A)-1, JAIPUR DATED 29-11-2017 FOR THE A.YS. 2009-10, 2010-11 AND 2011-12 IN THE MATTER OF ASSESSMENT ORDERS PASSED U /S. 147/143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.103,104 & 105/JP/2018 ITO VS. M/S. SHREE GREEN VALLEY P.LTD, JAIPUR 2 2. GROUNDS TAKEN BY THE REVENUE IN ALL THE A.YS UND ER CONSIDERATION ARE COMMON. GROUND TAKEN IN A.Y 2009-10 BY THE REVE NUE READS AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING DISALLOWANCE MADE BY THE AO ON ACCOUNT OF PROVISION S FOR DEVELOPMENT EXPENSES AMOUNTING TO RS.14,70,226/- FO R A.Y 2009-10 REFERRING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF M/S. GREEN TRIVENI DEVELOPER V /S. CIT IN ITA NO. 114/2015 CONNECTED WITH ITA NO. 256/2016 AR E NOT SIMILAR AS IN THE INSTANT CASE THE ASSESSEE COMPANY HAS DEBITED THE RESPECTIVE AMOUNT TO THE P & L ACCOUNT AND THEREAFTER MADE PROVISIONS FOR DEVELOPMENT EXPENSES WHICH WOULD HAVE TO BE INCURRED DURING THE YEAR BUT THE S AME WAS NOT INCURRED DURING THE RELEVANT YEAR. (II) THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPAN Y IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE ASSESSEE COMPANY PU RCHASES AGRICULTURE LAND AND THEREAFTER IT APPLIES TO JDA FOR CONVERSI ON OF LAND FOR RESIDENTIAL AND COMMERCIAL PURPOSES. AFTER APPROVAL OF TOWNSHI P PLAN AND MAP BY JDA THE ASSESSEE MADE DEVELOPMENT WORK IN THE SCHEM ES AS PER NORMS OF THE JDA SUCH AS CONSTRUCTION OF INTERNAL ROADS, ELECTRIFICATION, WATER SUPPLY AND DEVELOPMENT OF PUBLIC PARKS AND FACILITI ES ETC. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS DEVELOPING SCH EME SITUATED AT RAGHU NANDAN ENCLAVE C-3. ITA NO.103,104 & 105/JP/2018 ITO VS. M/S. SHREE GREEN VALLEY P.LTD, JAIPUR 3 5. THE AO FRAMED THE ASSESSMENT U/S. 153A/143 OF T HE ACT.. THEREAFTER, THE AO RE-OPENED THE ASSESSMENT U/S. 14 7 ON THE PLEA THAT THE ASSESSEE MADE A PROVISION FOR DEVELOPMENT EXPEN SES. THE ASSESSMENT WAS COMPLETED, WHEREIN ADDITION(S) WAS M ADE, BUT DISALLOWING THE PROVISION FOR DEVELOPMENT AS EXPENS ES. 6. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED TH E ADDITION(S) BY OBSERVING AS UNDER:- (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT THE APPELLANT HAS MADE A PROVISION FOR DEVELOPMENT EXEP ENSES AMOUNTING TO RS. 14,70,2266/- AND HAS DEBITED THE SAME TO THE PR OFIT AND LOSS ACCOUNT, WHICH WAS DISALLOWED BY THE AO BY OBSERVIN G THAT THE SAME WAS NOT INCURRED BY THE APPELLANT DURING THE YEAR U NDER CONSIDERATION. IT IS NOTED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. SALASAR OVERSEA S PRIVATE LIMITED VIDE COMMON ORDER DATED 29.04.2016 IN DB ITA NO. 149/201 4 AND 147/2014 WHEREIN, IT WAS HELD BY THE HONBLE HIGH COURT THAT : '7. WE HAVE ALREADY TAKEN INTO CONSIDERATION THE SALIENT FEATURES OF THE BUSINESS BEING CARRIED ON BY THE ASSESSEE BEING A C OLONISER/BUILDER, DEVELOPING VARIOUS COLONIES, DEVELOPING THE LANDS, CUTTING THE PLOTS AND SELLING THEREOF, AND HAVE ALSO NAMED THE COLONIES W HICH HAVE BEEN DEVELOPED BY THE ASSESSEE. IT IS ADMITTED FACT ON P ERUSAL OF THE ORDERS THAT THE ASSESSEE IS NOT CHARGING ANYTHING OVER AND ABOVE TOWARDS DEVELOPMENT OF THE INTERNAL ROADS ELECTRIFICATION, SEWER LINES OR OTHER SIMILAR EXPENSES FOR DEVELOPING OF THE LAND FROM TH E ULTIMATE BUYERS OF PLOTS. EQUALLY IMPORTANT FACT IS THAT A PLOT OWNER WOULD PURCHASE A LAND ONLY WHEN IT IS SATISFIED THAT THE PLOT IN QUESTION WOULD HAVE ALL BASIC FACILITIES OF INTERNAL DEVELOPMENT NOT ONLY OF THE PLOT BUT ALSO OF THE COLONY WHICH IS BEING DEVELOPED BY THE COLONISER (A SSESSEE). BOTH THE APPELLATE AUTHORITIES HAVE TAKEN INTO CONSIDERATION THE SCHEME OF JDA FOR PRIVATE TOWNSHIPS WHEREIN IT HAS BEEN EXPRESSLY STATED THAT THE COLONISER CANNOT CHARGE SEPARATE CHARGES FROM THE B UYERS OF THE PLOTS IN ADDITION TO THE COST OF THE LAND FOR THE INTERNAL D EVELOPMENT WORK TO BE CARRIED OUT BY IT. THOUGH THE JDA CARRIES OUT EXTER NAL DEVELOPMENT WORK, SUCH AS PROVIDING SECTOR ROAD FOR THE COLONY ETC. B UT AT THE EXPENSE OF THE COLONISER. NOW IT IS OPTION OF THE COLONISER TO CARRY OUT THE DEVELOPMENT WORK BY ITSELF OR THROUGH THE JDA. IN C ASE THE COLONISER OPTS TO CARRY OUT INTERNAL DEVELOPMENT WORK IN THE COLONY THROUGH THE ITA NO.103,104 & 105/JP/2018 ITO VS. M/S. SHREE GREEN VALLEY P.LTD, JAIPUR 4 JDA, IT HAS TO PAY THE AMOUNT TO THE JDA AT PREDETE RMINED RATE PRESCRIBED BY THE JDA. HOWEVER, IF A COLONISER OPTS TO CARRY OUT INTERNAL DEVELOPMENT WORK OF THE COLONY BY ITSELF, THEN THE WORK HAS TO BE CARRIED OUT UNDER THE SUPERVISION OF THE JDA AND THE JDA MO NITORS THE QUALITY CONTROL OF THE WORK. AS PER THE NORMS OF THE JDA, I F A COLONISER OPTS TO CARRY OUT THE INTERNAL DEVELOPMENT WORKS BY ITSELF, THEN THE JDA TAKES 12.5% OF THE TOTAL PLOTS AS SECURITY AGAINST THE IN TERNAL DEVELOPMENT WORK OF THE COLONY TO BE CARRIED OUT BY THE COLONIS ER. THE JDA RELEASES THERE 12.5% PLOTS ONLY AFTER COMPLETION OF ENTIRE I NTERNAL DEVELOPMENT BY THE COLONISER IN ACCORDANCE WITH THE QUALITY CON TROL BEING SPECIFIED BY THE JDA. IN CASE THE COLONISER DOES NOT DO THE WORK OF INTERNAL DEVELOPMENT, THE JDA IS FREE TO SELL THESE 12.5% PL OTS IN OPEN MARKET AND DO THE WORK OF INTERNAL DEVELOPMENT OF THE COLO NY FROM THE SALE PROCEEDS OF THESE PLOTS FOR THE BENEFIT OF THE PLOT OWNERS. IT IS ONLY WHEN THE JDA IS SATISFIED ABOUT THE INFRASTRUCTURAL DEVE LOPMENT, 'PATTA' IS ISSUED AND UNLESS A 'PATTA' IS ISSUED, A PLOT MAY N OT BE SALABLE EVEN, AS 'PATTA' IN A CASE OF IMMOVABLE ASSET IN MOST VITAL AND IMPORTANT FOR HAVING OWNERSHIP OF A IMMOVABLE ASSET. 8. ADMITTEDLY, THE ASSESSEE IS FOLLOWING THE MERCAN TILE SYSTEM OF ACCOUNTING AND IT IS RECOGNISING THE SAME ON ACCRUA L BASIS AS AND WHEN THE POSSESSION OF THE PLOT IS PASSED/GIVEN. THE SAL E OF PLOT IS SUBJECT TO LIABILITY OF DEVELOPMENT WORK TO BE CARRIED OUT IN THE COLONY IN FUTURE. THIS LIABILITY ACCRUES AS SOON AS SALE OF A PLOT IS MADE. THE ASSESSEE, ADMITTEDLY MADE A PROVISION FOR DEVELOPMENT OF LAND FOR THE PLOTS SOLD DURING THE YEARS UNDER REFERENCE AND ACTUAL EXPENSE S ON DEVELOPMENT WORK INCURRED IN THE COLONY ACCOUNTED FOR BY REVERS ING THE PROVISION MADE IN RESPECT OF THE PLOTS SOLD BY IT. 9. THE APPELLATE AUTHORITY IN THE INSTANT CASE HAVE TAKEN INTO CONSIDERATION THE DIRECTIVES OF THE JDA TO DEVELOP THE COLONIES BY THE VARIOUS WORKS WHICH WE HAVE ALREADY REFERRED TO HER EINBEFORE AND NATURALLY A PROSPECTIVE BUYERS OF A PLOT GETS ATTRA CTED THE MOMENT A DEVELOPER/BUILDER SPECIFIES THAT THE LAND IN QUESTI ON WOULD BE PROVIDED WITH BASIC INFRASTRUCTURE, SUCH AS INTERNAL ROADS, WATERLINES, SEWER LINES, ELECTRIFICATION, BOUNDARY WALLS ETC. SO THAT ONCE A PLOT HOLDER, WANTS TO CONSTRUCT A HOUSE, THEN FOR THESE THINGS ONE NEED N OT LOOK TO OTHER AGENCIES. ONCE A SALE PRICE HAS BEEN RECEIVED AND A CCOUNTED FOR, THE EXPENSES WHICH ARE OBLIGATORY AND INT EH NATURE OF COMMITTED LIABILITY, ORDINARILY HAS TO BE ACCOUNTED FOR. THE DEVELOPMENT EXPENSES AS FOUND BY THE APPELLATE AUTHORITIES, IN OUR VIEW AS WELL A RE ASCERTAINED COMMITTED LEGAL LIABILITY. 10. WE FIND THAT BOTH THE APPELLATE AUTHORITIES HAV E ALLOWED THE EXPENDITURE ON A FINDING OF FACT BASED ON THE APPRE CIATION OF EVIDENCE AND IN OUR VIEW, NO SUBSTANTIAL QUESTION OF LAW CAN BE SAID TO EMERGE OUT OF THE IMPUGNED ORDERS SO AS TO CALL FOR INTERF ERENCE BY THIS COURT. WE FIND NO PERVERSITY OR ILLEGALITY IN THE IMPUGNED ORDERS. CONSEQUENTLY, THE APPEALS ARE DISMISSED. ITA NO.103,104 & 105/JP/2018 ITO VS. M/S. SHREE GREEN VALLEY P.LTD, JAIPUR 5 (II) IT MAY FURTHER BE MENTIONED THAT ON THE SIMIL AR ISSUE IN THE CASE OF M/S. THE GREEN TRIVENI DEVELOPER V/S CIT IN ITA NO. 114/2015 CONNECTED WITH ITA NO. 256/2016, THE HONBLE HIGH C OURT OF RAJASTHAN HAS CONFIRMED THE ORDER OF HONBLE ITAT, JAIPUR, IN VOLVING THE SIMILAR ISSUE. (III) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, I T IS HELD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE PROVISIONS FOR DEVELOPMENT EXPENSES MADE BY THE APPELLANT AND THUS, THE DISALLOWANCE OF RS.14,70,226/- MADE BY THE AO CANNOT BE SUSTAINED, HENCE DELETED. 7. AGAINST THE ABOVE ORDER OF THE LD.CIT(A), THE RE VENUE IS IN APPEAL BEFORE ME. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CARE FULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. IN THE P & L ACCOUNT, THE ASSESSEE HAS CLAIMED EXPENDITURE U NDER THE HEAD PROVISIONS FOR DEVELOPMENT EXPENSES, WHICH WAS DIS ALLOWED BY THE AO. IT WAS THE CONTENTION OF THE LD. AR THAT PROVISIONS WA S MADE FOR ASCERTAINED LIABILITY(IES) TOWARDS THE DEVELOPMENT OF ROAD, ELE CTRICITY, WATER AND LAND TO BE INCURRED AS PER PLOT(S) SOLD BY THE ASSESSEE. THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE CONSISTENTLY MADE PROVISION OF EXPENSES ON ACCRUAL BASIS. THE LD . CIT(A) HAS DELETED THE DISALLOWANCE OF EXPENSES AFTER OBSERVING THAT T HE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISION OF THE HON BLE JURISDICTIONAL RAJASTHAN HIGH COURT IN THE CASE OF SALASAR OVERSEAS PRIVATE LIMITED (SUPRA), WHEREIN IT WAS HELD THAT : ITA NO.103,104 & 105/JP/2018 ITO VS. M/S. SHREE GREEN VALLEY P.LTD, JAIPUR 6 .., THE ASSESSEE FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND IT IS RECOGNIZING THE SAME ON ACCRUAL BASIS AS AND WHEN THE POSSESSION OF THE PLOT IS PASSED/GIVEN. THE SALE OF PLOT IS SUBJECT TO LIABILITY OF DEVELOPMENT WORK TO BE CARRIED OUT IN THE COLONY IN FUTURE. THIS LIABILITY ACCRUES AS SOON AS SALE OF A PLOT IS MADE. THE ASSESSEE ADMITTEDLY MADE A PROVISION FOR DEVELOPMEN T OF LAND FOR THE PLOTS SOLD DURING THE YEARS UNDER REFERENCE AND ACTUAL EXPENSES ON DEVELOPMENT WORK INCURRED IN THE COLONY ACCOUNTED FOR BY REVERSING THE PROVISION MADE IN RESPECT OF THE PLOTS SOLD BY IT. 9. THE HONBLE HIGH COURT ALSO OBSERVED THAT THE EX PENDITURE HAS BEEN INCURRED AS PER DIRECTIVES OF JDA TO DEVELOP T HE COLONIES BY THE VARIOUS WORKS, WHICH ARE REQUIRED BY PROSPECTIVE B UYER OF PLOTS. IN THE INSTANT CASE ALSO PROVISION HAS BEEN MADE IN RESPEC T OF SIMILAR EXPENDITURE. AS THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE ARE SIMILAR TO WHAT HAS BEEN DECIDED BY THE HONBLE RAJASTHAN H IGH COURT IN THE CASE OF SALASAR OVERSEAS PRIVATE LIMITED, SUPRA, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) FOR FOLLOWING THE PROPOSITI ON LAID DOWN BY THE HONBLE RAJASTHAN HIGH COURT, WHILE DELETING THE DI SALLOWANCE OF EXPENDITURE. ACCORDINGLY, I DO NOT FIND ANY INFIRMI TY IN THE IMPUGNED ORDER(S) OF THE LD. CIT(A). AS THE FACTS AND CIRCUM STANCES IN ALL THE THREE A.YS UNDER CONSIDERATION ARE SAME, FOLLOWING THE SA ME REASONING AS GIVEN HEREINABOVE BY ME, I DO NOT FIND ANY INFIRMIT Y IN THE IMPUGNED ORDERS OF THE LD. CIT(A) FOR DELETING THE DISALLOWA NCE. GROUNDS RAISED BY THE REVENUE IN ALL THE APPEALS FOR THE A.YS UNDER CONSIDERATION ARE DISMISSED. ITA NO.103,104 & 105/JP/2018 ITO VS. M/S. SHREE GREEN VALLEY P.LTD, JAIPUR 7 10. IN THE RESULT, APPEALS OF THE REVENUE ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 APRIL , 2019. SD/- JES'K LH 'KEKZ (RAMESH C SHARMA) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23 APRIL, 2019 *PP/SPS VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT/REVENUE-THE ITO, WARD 2(4), JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S. SHREE RAM GREEN VALLEY PVT. LT D, JAIPUR 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NOS. 103,104 & 105/JP/2018 VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR