The ACIT, 19(1), Mumbai V. M/s. Raj Trust, Mumbai

ITA 107/MUM/2004

• Counselvise Citation: 10719914 RSA 2004
• Duration Of Justice: 11 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 18-12-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 07-01-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: ARVIND SONDE

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI R.C.SHARMA , ACCOUNTANT MEMBER ITA NO.107/MUM/2004(A.Y. 2000-01) THE ACIT-19(1), PIRAMAL CHAMBERS, 3 RD FLOOR, PAREL, LALBAUG, MUMBAI 400 012. (APPELLANT ) VS. M/S. RAJ TRUST, CONSTRUCTION HOUSE-A, 24 TH ROAD, KHAR(W), MUMBAI 400 052 PAN:AAATR 0662B (RESPONDENT) APPELLANT BY : SHRI AKHILENDRA YADA V RESPONDENT BY : SHRI AR VIND SONDE DATE OF HEARING : 03/03/2015 DATE OF PRONOUNCEMENT : 03 /03/2015 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-XX, MUMBAI DATED 31/10/2003 FOR ASSE SSMENT YEAR 2000-01. GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ADMITTIM NEW EVIDENCES IN CONTRAVENTION OF RULE 46A (3) OF 1.T. RULES, 1962 AND THEREBY DELETING THE ADDITION OF RS. 7,22,250/- CLAIMED AS COMPENSATION PAID TO PROSPECTIVE BUYERS FOR DELAY IN COMPLETION OF PROJECT AND FURTHER DELETING ADDITION OF RS.55.94 LACS CLAIMED AS PAYME NT TO M/S. R.M. TRUST AS DEVELOPMENT CHARGES. ITA NO.107/MUM/2004(A.Y. 2000-01) 2 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING ADDITION OF RS.I,46,910/- PAID AS COMPOUND ING LEES TO BANGALORE MAHANGARPALIKA BEING PENAL IN NATURE. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING ADDITION OF RS.19.56 LACS MADE ON ACCOUNT OF OPTION MONEY RECEIVED IN EXCHANGE OF OPTION RIGHT SOLD BY THE ASSESSEE. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE OF RS.8,53,L89/- MAD E TOWARDS THE ADMINISTRATIVE CHARGES PAID TO SISTER CONCERN WITHO UT APPRECIATING THE FACT THAT THE SAID EXPENDITURE WAS A SUBJECT MATTER OF G REAT CONTROVERSIES WITHIN THE MEMBERS OF AOP ITSELF 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 2. THOUGH INITIALLY LD. DR SOUGHT ADJOURNMENT BUT I T WAS POINTED OUT THAT IT IS AN OLD APPEAL THEN LD. DR WAS FAIR ENOUGH TO PL EAD THE MATTER AND IN THIS MANNER THIS APPEAL WAS HEARD TODAY. 3. GROUND NO.1, RELATES TO TWO ADDITIONS NAMEL Y RS.7,22,250/- AND RS.55,94,000/-. THE ISSUE RELATING TO A SUM OF RS.7 ,22,250/- IS DISCUSSED IN THE ORDER PASSED BY LD.CIT(A) IN PARA-2 ALOGWITH ISSUE RAISED IN GROUND NO.2, WHICH RELATES TO ADDITION OF RS.1,46,910/-. THE OTHER PA RT OF GROUND NO.1, WHICH RELATES TO DISALLOWANCE OF A SUM OF RS.55,94,000/- IS DISCU SSED IN THE ORDER PASSED BY LD. CIT(A) IN PARA-6 OF THE ORDER. 3.1 THE FACTS RELATING TO THE ADDITION OF RS.7,22,2 50/- ARE THAT ASSESSEE BEING BUILDER AND DEVELOPER PAID COMPENSATION TO TWO OF ITS BUYERS ON ACCOUNT OF LATE DELIVERY OF THE FLATS, NAMELY SHRI Y. SUDHESH AND S HRI SUBHASH MENON. THE AO ITA NO.107/MUM/2004(A.Y. 2000-01) 3 DISALLOWED THIS AMOUNT STATING THAT THE SAID PAYME NT MADE BY THE ASSESSEE ARE GRATUITOUS IN NATURE AND WITHOUT ANY BUSINESS CON SIDERATION. HOWEVER, LD. CIT(A), AFTER GOING THROUGH THE AGREEMENT OF THE AS SESSEE WITH THE RESPECTIVE PARTIES HAS RETURNED A FINDING THAT AS PER RELEVANT CLAUSES OF THE SALE AGREEMENT THE BUYERS WERE ENTITLED TO GET COMPENSATION @21% PER A NNUM IN CASE OF LATE DELIVERY OF THE FLATS AND CONSEQUENTLY THE ASSESSEE WAS LIABLE TO PAY THE SAME AND THESE PAYMENTS WERE NOT GRATUITOUS IN NATURE. LD. CIT(A) ALSO REFERRED TO THE RELEVANT CLAUSES OF THE SALE AGREEMENT AND AFTER CO NSIDERING THESE CLAUSES HE HAS DRAWN THE CONCLUSION THAT NO DISALLOWANCE WAS CALLE D FOR. 3.2 IN RESPECT OF DISALLOWANCE OF RS.1,46,910/-, WH ICH IS SUBJECT MATTER OF GROUND NO.2, THIS AMOUNT IS PAID BY THE ASSESSEE TO BANGALORE MAHANAGAR PALIKA(BMP). VIDE LETTER DATED 24/3/2003 IT WAS EX PLAINED TO THE AO THAT AS PER PRACTICE AT BANGALORE THE PROJECT WILL BE SANCTIONE D BY BMP BEFORE COMMENCEMENT OF THE PROJECT AND DURING THE PROJECT THERE ARE POSSIBILITY THAT CONSTRUCTION OF THE PROJECT MAY DEVIATE FROM THE P LAN SANCTIONED BY BMP AND IN CONNECTION WITH THAT THEY COLLECT ADDITIONAL AMOUNT AS COMPOUNDING FEE. COPY OF VOUCHERS RELATING TO THE SAME WAS ALSO PRODUCED. H OWEVER, AO DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND DISALLOWED THE AMOUN T AS ACCORDING TO AO THE SAID AMOUNT COULD NOT BE ALLOWED WHEN THE SAME WAS NOT IN THE NATURE OF COMPENSATORY BUT WAS PENAL IN NATURE. LD. CIT(A) HAS RETURNED A FINDING THAT THE DISALLOWANCE ON THAT ACCOUNT WAS ALSO NOT CALLED FO R AS THE SAID PAYMENTS WAS MADE BY THE ASSESSEE TO BMP TOWARDS TAX IN CONNECTI ON WITH PROJECT NAMELY RAHEJA REGENT AS PER LETTER WRITTEN BY JOINT DIRE CTOR, BMP, DATED 22/06/1999. THUS, THE ADDITION OF RS.7,22,250/- AND RS.1,46,91 0/- ARE DELETED BY LD. CIT(A) ON THE BASIS OF AFOREMENTIONED DOCUMENTS. ITA NO.107/MUM/2004(A.Y. 2000-01) 4 3.3 THE FACTS RELATING TO DISALLOWANCE OF RS.55,94, 000/- ARE THAT THESE WERE CLAIMED TO BE PAID AS DEVELOPMENT CHARGES TOWARDS D EVELOPMENT OF PLOTS WHICH WERE SOLD DURING THE YEAR. ALL THESE DETAILS WERE FILED BEFORE THE AO AS WELL AS LD. CIT(A). THE ASSESSEE HAD PURCHASED A PROPERTY KNOW N AS JADE GARDEN,WESTERN EXTENSION FROM SHRI SATISH PAI AND FOR THE PURPOSE OF DEVELOPING THE LAND PURCHASED, IT ENTERED INTO AN AGREEMENT WITH R&M TR UST HAVING OFFICE AT BANGALORE ON 1/3/1995 FOR DEVELOPING THE PROPERTY. AS PER THE AGREEMENT, THE DEVELOPER WAS TO CARRY OUT DEVELOPMENT WORK SPECIFI ED IN THE AGREEMENT AND WAS GIVEN LICENCE TO CARRY OUT WORK. SUBSEQUENTLY, BY AN AGREEMENT DATED 2/3/1996, AFTER GETTING THE POSSESSION OF THE PROPERTY IT ENT ERED INTO FRESH DEED WITH R&M TRUST FOR DEVELOPMENT OF THE PROPERTY AS APPROVED BY THE PANCHAYAT. THE TERMS OF DEVELOPMENT TO BE CARRIED OUT WAS SPELT OUT IN THE AGREEMENT. IN THE AGREEMENT IT IS MENTIONED THAT THE RATE TO BE DETERMINED FOR THE PURPOSE OF DEVELOPMENT IS WITH R&M TRUST. THE ENTIRE COST OF DEVELOPMENT WAS TO B E BORNE BY R&M TRUST BESIDES MAKING DEPOSIT FOR CARRYING OUT THE WORK. SUBSEQUENTLY, IT WAS AGREED UPON BY THE PARTIES THAT THE DEVELOPMENT CHARGES PA YABLE TO R&M TRUST WAS RS.50/SQ.FT. FROM THE GROSS CONSIDERATION RECEIVED ON SALE OF FLATS DEVELOPED BY THE SAID R&M TRUST, RS.50/SQ.FT. WAS PAYABLE AND AS PER TERMS OF AGREEMENT A SUM OF RS.59,94,250/- WAS PAID TO THE R&M TRUST. THIS FACT WAS ALSO MENTIONED IN THE TRI-PARTY AGREEMENT BETWEEN THE PURCHASER OF THE LA ND, THE ASSESSEE AND ALSO R&M TRUST. ALL THESE DOCUMENTS WERE SUBMITTED BEFORE T HE AO WHO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED THE SAID AMOUNT. LD. CIT(A) AFTER CONSIDERING ALL DOCUMENTS AND SUBMISSIONS OF THE A SSESSEE HAS DELETED THE ADDITIONS WITH THE FOLLOWING OBSERVATIONS: 6.3 1 HAVE CAREFULLY CONSIDERED SUBMISSION OF AUTHO RIZED REPRESENTATIVE OF THE APPELLANT. ORDER OF AO AND OTHER MATERIAL AVAIL ABLE ON RECORD. ITA NO.107/MUM/2004(A.Y. 2000-01) 5 APPELLANT HAS SOLD PLOTS OF JADE GARDEN DURING THE YEAR. THESE PLOTS ARE LOCATED AT BANGALORE AT VARIOUS SITES. THESE PLOTS ARE DEVELOPED AS PER AGREEMENT WITH M/S.R & M TRUST. M/S.R&M TRUST CARRI ED OUT DEVELOPMENT WORK ON PLOT AS UNDER: 1. CONSTRUCTION OF COMPOUND WALL AROUND THE ENTIRE JADE GARDEN ANN EXE LAYOUT. 2. LEVELLING, PAVING, METALLING, FLAGGING, FORMING, CONSERVING ALL THE ROADS IN THE ENTIRE JADE GARDEN ANNEXE LAYOUT AS PER AP PROVED PLANS. 3. FIXING UP OF ELECTRIC POLES FOR THE STREET LIGHT ING AND INSTALLATION OF TRANSFORMER, STAND-BY GENERATORS FOR STREET LIGHTIN G AND PUMPS. 4. DIGGING OF BOREWELLS, INSTALLATION OF PUMP, CONS TRUCTION OF OVERHEAD TANKS WHEREVER NECESSARY. 5. MAKING ARRANGEMENTS FOR DRINKING WATER TO EACH P LOT WITH WATER METER AND LAYING PIPELINE FROM THE OVERHEAD TANK. 6. INTERCOM CONNECTIONS FOR EACH PLOT FROM SECURITY ROOM. 7. CONSTRUCTION OF SECURITY CABINS AND QUARTERS. 8. DIVIDING THE SITES IN JADE GARDEN ANNEXE LAYOU T WITH HEDGES, LANDSCAPING OF GREEN BELT AREA AND PLANNING THE AVE NUE TREES WHEREVER SUGGESTED BY THE ARCHITECTS OF THE LAYOUT. THE APPELLANT HAS PAID RS.50/- PER SQ.FT. AS DEVELO PMENT CHARGES ON SALE OF PLOT. SUCH DEVELOPMENT CHARGES HAVE BEEN PAID AND A LLOWED BY AO IN EARLIER ASSESSMENT YEARS ALSO. THE PAYMENT OF SUCH DEVELOPMENT CHARGES ARE ALSO MENTIONED IN TRIPARTITE AGREEMENT BETWEEN PURC HASER OF LAND, APPELLANT AND R&M TRUST., IN VIEW OF ABOVE DISCUSSION, I FIND NO REASON IN DI SALLOWING DEVELOPMENT CHARGES OF RS.55,94,000/- DISALLOWED BY AO, HENCE S AME IS ALLOWED. AS A RESULT APPELLANT GETS RELIEF OF RS.55,94,000/-. ITA NO.107/MUM/2004(A.Y. 2000-01) 6 ON DELETION OF ABOVE MENTIONED THREE DISALLOWANCES DEPARTMENT HAS RAISED GROUND NO.1 & 2. 4. AFTER NARRATING THE FACTS LD. DR RELIED ON THE ORDER PASSED BY AO AND SUBMITTED THAT DISALLOWANCES HAVE BEEN WRONGLY DELE TED BY LD. CIT(A). HE SUBMITTED THAT THESE DISALLOWANCES SHOULD BE RESTOR ED AND ORDER PASSED BY LD. CIT(A) SHOULD BE SET ASIDE. 5. ON THE OTHER HAND, LD. AR SUBMITTED THAT THE ORD ER PASSED BY LD. CIT(A) IS A SPEAKING ORDER. IT WAS SUBMITTED THAT ALL EVIDEN CES AND DOCUMENTS WERE SUBMITTED TO THE AO AND ON THE BASIS OF THOSE EVIDE NCES AND DOCUMENTS LD. CIT(A) HAS ARRIVED AT A CONCLUSION THAT THESE ADDIT IONS WERE NOT CALLED FOR. TO SUBSTANTIATE THESE SUBMISSIONS LD. AR HAS REFERRED TO THE FOLLOWING EVIDENCES, COPIES OF WHICH ARE FILED IN THE PAPER BOOK. (I) (A) REGARDING ADDITION OF RS.7,22,250/-, SALE AGREEMENT DATED 5/2/1997 ENTERED INTO BY THE ASSESSEE WITH MR. SUBASH MENON & MRS. R ADHIKA SUBASH, COPY OF AGREEMENT PLACED AT PAGES 22 TO 58 OF THE PAPER BOO K. RELEVANT CLAUSE 11(D) RELYING UPON WHICH THE RELIEF HAS BEEN GIVEN BY LD. CIT(A) IS AT PAGE 36 OF THE PAPER BOOK, WHICH READ AS UNDER: (D) IN THE EVENT OF THE PURCHASER NOT BEING DESIR OUS OF TERMINATING THE AGREEMENT, THE VENDER/DEVELOPER SHALL BE LIABLE TO PAY THE PURCHASER, FOR EVERY MONTH OF DELAY BEYOND 3 MONTH S OF THE DATE OF POSSESSION AS CONTEMPLATED IN CLAUSES 11(A) AND (B) ABOVE, UPTO THE DATE THAT THE VENDER/DEVELOPER INTIMATES THAT THE SAID APARTMENT IS READY FOR POSSESSION AS PER THE TERMS OF CLAUSE 10 ABOVE, COMPENSATION AT THE RATE OF 21% PER ANNUM ON THE INSTALLMENTS OF CONSIDERAT ION THAT MAY HAVE BEEN PAID BY THE PURCHASER TO THE VENDOR/DEVELOPER AS P ER THE TERMS OF CLAUSE 2(A) AND (B) ABOVE. PROVIDED, HOWEVER, T HAT THE PURCHASER ITA NO.107/MUM/2004(A.Y. 2000-01) 7 SHALL NOT BE ENTITLED TO CLAIM THE AFORESAID COMPEN SATION IF THE PURCHASER HA DELAYED/DEFAULTED IN PAYMENT OF ANY I NSTALLMENTS OF CONSIDERATION AS PER THE TERMS HEREOF. IN SUCH CAS E THE SAID COMPENSATION SHALL BE PAYABLE ONLY ON THE INSTALLMENTS OF CONSI DERATION THAT MAY HAVE BEEN PAID ON TIME STRICTLY AS PER THE TERMS OF CLA USE 2 (A) AND (B) ABOVE. (B) SALE AGREEMENT DATED 21/5/1997 OF THE ASSES SEE WITH MR.Y. SATISH & MRS. SANDHYA, COPY OF THIS AGREEMENT IS FILED AT PAGES 6 2 TO 95 OF THE PAPER BOOK. THE RELEVANT CLAUSE 10(D) IS MENTIONED AT PAGE 74 & 75 OF THE PAPER BOOK, FOR WHICH SIMILAR CLAUSE IS THERE, AS HAS BEEN REPRODUCED AB OVE. LD. AR HAS ALSO REFERRED TO THE COPY OF THE POSSESSION LETTERS TO THE AFOREMENT IONED PARTIES WHICH ARE PLACED AT PAGES 59 & 96 OF THE PAPER BOOKS. (II) REGARDING ADDITION OF RS.1,46,910/-, COPY OF LETTER DATED 22/6/1999 ISSUED BY BMP IS PLACED AT PAGE 204 OF THE PAPER BOOK ALONG W ITH TRANSLATION THEREOF AT PAGE 205 OF THE PAPER BOOK, WHICH READ AS UNDER: WITH REFERENCE TO ABOVE, YOU WHILE INDIVIDUALLY CO NSTRUCTING THE BUILDING TO THAT PORTION, TAX AMOUNTING TO SUM OF RS.1,46,910/- (RUPEES ONE LACK FORTY- SIX THOUGH NINE HUNDRED TEN ONLY) IS DUE TO BE PAID BY YOU TO THE TREASURY OF MUNICIPAL CORPORATION. AN UNDERTAKING IS REQUIRED TO BE GIVEN ON STAMP PAPER STATING THAT BASEMENT FOR CAR PARKING WOULD N OT BE USED FOR ANY PURPOSE WHATSOEVER. ON SUBMITTING OF PAYMENT RECEIPT AND ABOVE UNDERTAK ING TO THIS OFFICE, FURTHER THINGS AS TO GIVING OF SWADHEEN PATRA WOU LD BE LOOKED INTO. (III)(A) REGARDING ADDITION OF RS.55,94,000/-, AT PAGE 168, CERTIFICATE OF THE CHARTERED ACCOUNTANT IN WHICH THE RECEIPT OF RS.59 .54 LACS BY R&M TRUST IS ACKNOWLEDGED. ITA NO.107/MUM/2004(A.Y. 2000-01) 8 (B) COPY OF AGREEMENT BETWEEN THE ASSESSEE AND R& M TRUST FOR DEVELOPMENT OF THE PROPERTY IS PLACED AT PAGE 169 TO 180 OF THE PA PER BOOK AND THE AGREEMENT DATED 6/9/1995 BETWEEN R&M TRUST AND ONE PLOT OWNE R MR. RAMESH RUPAREL TO SHOW THAT SUCH DEVELOPMENT CHARGES WERE PAID. (C) THE CALCULATIONS OF THE PAYMENT MADE AS DEVELO PMENT CHARGES IN RESPECT OF PLOT NUMBERS IS PLACED AT PAGE 202 OF THE PAPER BOO KS, DETAILS ARE DESCRIBED AS UNDER: PLOT NO. NAME OF THE PARTY AREA (IN SQ.FT.) DEVELOP MENT CHARGES. JADE GARDEN 424 HARISH BIJOOR 5980 299000.00 JADE GARDEN 50 ACRES 130 BIPIN JOHNY 12965 648250.00 139 KRISHNAN ADVANEY 9550 477500.00 140 KRISHNAN ADVANEY 9550 477500.00 JADE GARDEN 40 ACRES 654 SUNIL B. PEEVEKAR 5325 266250.00 786 PRIYA ALEX 5985 299250.00 714 KISHORE RAO 4700 235000.00 715 KISHORE RAO 5100 255000.00 657 RADHIKA SUBHASH 3815 190750.00 725 SHOBHA SUNDER 5630 281500.00 716 PETER RODRIGUES 5100 255000.00 778 SUBHA HARI 4565 228250.00 723 ANANDA MOHAN 3925 196250.00 775 KSHITJA KRISHNASWAMY 4575 228750.00 638 JAYANTA MAJUMDAR 5390 269500.00 712 V KRISHNAN 4700 235000.00 768 ASHUTOSH PUJARI 4560 228000.00 784 BIJENDRA SINGH VERMA 4665 233250.00 653 SONIA DEWAN 4200 210000.00 628 ANITA GURBAXANI 4940 247000.00 785 BIJENDRA SINGH VERMA 4665 233250.00 TOTAL 119885 599425.00 ITA NO.107/MUM/2004(A.Y. 2000-01) 9 5.1 THUS, IT WAS PLEADED BY LD. AR THAT RELIEF HAS RIGHTLY BEEN GIVEN BY LD. CIT(A) AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WE HAVE ALSO GONE THROUGH THE RELEVAN T PAGES OF THE PAPER BOOK REFERRED TO BY LD. AR AND REFERRED BY LD. CIT(A) IN HIS ORDER. AFTER CAREFUL ANALYSIS, WE ARE OF THE OPINION THAT ALL THESE ADDI TIONS HAVE BEEN RIGHTLY DELETED BY LD. CIT(A). 6.1 SO FAR AS IT RELATES TO RS.7,22,250/-, THE RELE VANT CLAUSES WHICH ARE REPRODUCED EARLIER ARE FOUND IN THE SALE AGREEMENT. TO FULFILL OBLIGATION OF THOSE CLAUSES THE ASSESSEE HAS MADE PAYMENT TO THE BUYERS . THUS, THE PAYMENT OF THIS AMOUNT CANNOT BE SAID TO GRATUITOUS IN NATURE AS HELD BY AO AND LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION ON THE BASIS OF DOCUME NTARY EVIDENCES AND WE FIND NO INFIRMITY IN SUCH DELETION AND WE DECLINE TO INTERF ERE. 6.2 SO FAR AS IT RELATES TO DISALLOWANCE OF RS.1,46 ,910/-, IT IS OBSERVED THAT IN THE LETTER WRITTEN BY BMP IT HAS CLEARLY BEEN MENTIONED THAT IS TOWARDS TAXES AND THE CONTENTS OF THE SAID LETTER ARE REPRODUCED IN THE E ARLIER PART OF THIS ORDER. THUS, THIS PAYMENT ALSO CANNOT BE SAID TOWARDS PENALTY OR VIOL ATION OF ANY PROVISION OF THE ACT. IT WAS IN THE NATURE OF TAX. THEREFORE, WE S EE NO INFIRMITY IN THIS DELETION AND WE DECLINE TO INTERFERE. 6.3 SO FAR AS IT RELATES TO DISALLOWANCE OF RS.55,9 4,000/-, FOR THIS ALSO, AFTER GOING THROUGH THE DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE BEFORE AO AS WELL AS LD. CIT(A), LD. CIT(A) HAS GRANTED RELIEF A S THIS AMOUNT WAS TOWARDS THE DEVELOPMENT CHARGES PAID TO R&M TRUST AND THUS, FOR THIS DELETION ALSO, WE ARE OF ITA NO.107/MUM/2004(A.Y. 2000-01) 10 THE OPINION THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). WE DECLINE TO INTERFERE. 7. IN THE RESULT, GROUND NO.1 & 2 ARE DISMISSED. 8. APROPOS GROUND NO.3; THIS ISSUE HAS BEEN DISCU SSED BY LD. CIT(A) IN PARA-5 OF HIS ORDER. THE ASSESSEE HAD RECEIVED OP TION MONEY OF RS.19,56,000/- FROM FIVE PARTIES. AS PER OPTION AGREEMENTS THESE PARTIES HAD GIVEN A SUM OF RS.19,56,000/- AS OPTION DEPOSIT AGAINST PURCHASE OF PROPERTY. ACCORDING TO AO SUCH MONEY RECEIVED BY THE ASSESSEE REPRESENTED SAL E CONSIDERATION AGAINST SALE OF PROPERTIES AND REQUIRES TO BE TAXED AS INCOME. ACC ORDINGLY, HE BROUGHT THE AMOUNT OF RS.19,56,000/- TO TAX AS INCOME OF THE A SSESSEE. BEFORE LD. CIT(A), IT WAS PLEADED THAT WHILE MAKING THE ADDITION THE AO D ID NOT APPLY HIS MIND AS THESE DEPOSITS DO NOT CONSTITUTE RECEIPTS. VIDE LETTE R DATED 17/2/2003, WHICH WAS SUBMITTED TO AO, IT WAS EXPLAINED THAT THE ASSESSE E HAS RECEIVED A SUM OF RS.19,56,000/- FROM FIVE PARTIES OUT OF WHICH DEPOS IT RECEIVED FROM THREE PARTIES WERE REFUNDED BACK IN SUBSEQUENT YEAR AS THOSE PART IES DID NOT EXERCISE THEIR OPTION FOR PURCHASE OF FLATS. THE BALANCE TWO PARTIES RET AINED THE AMOUNT UPTO THE YEAR 2003 AS OPTION DEPOSIT AND DUE TO NON-EXERCISE OF O PTION TO PURCHASE ANY FLATS, THE SAID AMOUNT WAS HELD IN THE ACCOUNT AS OPTION DEPO SIT. THUS, IT WAS PLEADED THAT THE SAID AMOUNT COULD NOT BE CONSIDERED TO BE INCOM E OF THE ASSESSEE. WITH THE FOLLOWING OBSERVATIONS LD. CIT(A) HAS DELETED THE A DDITION. 5.3 I HAVE CAREFULLY CONSIDERED SUBMISSION OF AUTH ORISED REPRESENTATIVE OF THE APPELLANT, ORDER OF AO AND OTHER MATERIAL AVAIL ABLE ON RECORD. THE APPELLANT HAS ENTERED INTO OPTION AGREEMENTS WI TH THE FOLLOWING FIVE PARTIES BEAUTIFUL REALTORS P. LTD. ITA NO.107/MUM/2004(A.Y. 2000-01) 11 BEAUTIFUL REALTORS P. LTD. JETHI J ADVANI M.L. HIRNANDANI P.L. MAHTANI AS PER AGREEMENTS THE PARTIES WERE ENTITLED TO GET BACK THEIR OPTION MONEY AND GIVE OVER THEIR RIGHT TO PURCHASE THE PROPERTY. THESE OPTION MONEY ARE NOT RECEIVED DURING THE YEAR BUT THEY WERE RECEIVED IN EARLIER YEAR AGAINST PLOTS OF LAND OF JADE GARDEN COMPLEX AT BANGALORE. SO THIS OPTION MONEY CANNOT BE CONSIDERED AS A SALE CONSIDERATION AGAINS T THE INTENDED PURCHASE OF VARIOUS PROPERTIES AS NO SALE AGREEMENTS HAVE BE EN EXECUTED NOR POSSESSION OF PLOTS HAVE BEEN GIVEN. THREE PARTIES NAMELY J.J ADVANI, M.L.HIRANANDANI AND P.L.MAHTANI HAVE BEEN REPAID OP TION MONEY IN AY.2001-02. IN RESPECT OF THESE PARTIES SINCE THERE IS NO SALE OF THE PLOT THEN THERE IS NO QUESTION OF TAXING THE SAME AS AN INCOM E OF THE APPELLANT. SIMILARLY BEAUTIFUL REALTORS P. LTD. HAS ALSO ENTER ED INTO OPTION AGREEMENTS IN RESPECT OF TWO PLOTS OF LAND AT JADE GARDEN PROP ERTY AND RECEIVED RS.II,78,400/- AND RS.5,27,6U0/-. THE APPELLANT ACC OUNTS THE PROFIT ON SALE OF PLOT ONLY WHEN FINAL AGREEMENTS ARE SIGNED AND R ECEIVES FULL CONSIDERATION. IN RESPECT OF PLOTS OF LAND OF JADE GARDEN APPELLANT HAS RECEIVED ONLY PART AMOUNT. BALANCE AMOUNTS OF RS.1, 74,400/- AND OF RS.6,59,500/- ARE STILL NOT RECEIVED BY THE APPELLA NT. EVEN OTHERWISE THIS BEING THE OPTION AGREEMENT AND PARTY HAS NOT STILL OPTED FOR PURCHASE OF THE PLOTS AND POSSESSION OF PLOTS ARE ALSO NOT GIVEN SO SAME CANNOT BE CONSIDERED FOR THE PURPOSE OF BOOKING THE PROFIT FR OM PROPERTY. AO HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE SAID PROPERTIES ARE PURCHASED BY THE BUYERS AND PROPERTIES ARE HANDED OVER TO PAR TIES. IN VIEW OF THESE FACTS AND IN LIGHT OF DECISION OF THE HONBLE SUPRE ME COURT IN CASE OF DLF UNIVERSAL, CITED SUPRA, IN MY OPINION THERE IS NO T AX PLANNING DEVICE AS ARGUED BY AO AND THERE IS NO JUSTIFICATION IN TAXIN G THE ENTIRE DEPOSIT AS INCOME OF THE APPELLANT. AS A RESULT I HEREBY DELE TE THE ADDITION MADE BY THE AO. 8.1 RELYING UPON THE ORDER PASSED BY AO, IT WAS PLE ADED BY LD. DR THAT THE ADDITION WAS RIGHTLY MADE BY AO AND LD. CIT(A) HAS WRONGLY DELETED THE SAME. 8.2 ON THE OTHER HAND, LD. AR PLEADED THAT IT HAS B EEN CLEARLY BROUGHT OUT BY LD. CIT(A) THAT THIS AMOUNT WAS RECEIVED BY THE ASS ESSEE AGAINST THE RIGHT GIVEN TO ITA NO.107/MUM/2004(A.Y. 2000-01) 12 PURCHASE THE PROPERTY AND EVEN THE MONEY WAS NOT RE CEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION BUT IT WAS RECEIVED I N EARLIER YEARS. IT HAS ALSO BEEN FOUND BY LD. CIT(A) THAT THE MONEY WAS REFUNDED TO THREE PARTIES IN ASSESSMENT YEAR 2001-02. IN RESPECT OF BALANCE TWO PARTIES, S INCE NO PROPERTY WAS ALLOTTED AND NO SALE AGREEMENT WAS EXECUTED, THEREFORE, THERE WA S NO QUESTION OF CONSIDERING THE AMOUNT RECEIVED AS SALE CONSIDERATION. THUS, I T WAS PLEADED BY LD.AR THAT ADDITION HAS RIGHTLY BEEN DELETED BY LD. CIT(A) AND HIS ORDER SHOULD BE UPHELD. 8.3 WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. THE AMOUNT RECEIVED BY THE ASSESSEE W AS AGAINST THE RIGHT OF OPTION GIVEN TO THE RESPECTIVE PARTIES AND EVEN ACCORDING TO THE FINDINGS OF LD. CIT(A) THESE AMOUNTS WERE NOT RECEIVED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. OUT OF FIVE PARTIES, THREE PARTIES REFUNDED BACK TH E AMOUNTS. REGARDING BALANCE TWO PARTIES, THEY STILL DID NOT OPT FOR PURCHASE OF PLOTS. IN THESE CIRCUMSTANCES, IN ABSENCE OF ANY CONTRARY MATERIAL, WE DO NOT FIND AN Y FAULT IN THE RELIEF GIVEN BY LD. CIT(A). WE DECLINE TO INTERFERE AND THIS GROUN D OF THE REVENUE IS ALSO DISMISSED. 9. APROPOS GROUND NO.4; THIS ISSUE IS DISCUSSED BY LD. CIT(A) IN PARA-7 OF THE IMPUGNED ORDER. THE ASSESSEE HAD PAID A SUM O F RS.20,19,974/- TOWARDS SERVICE CHARGES TO ITS SISTER CONCERN NAMELY M/S. P ROFESSIONAL MANAGEMENT SERVICES AND M/S.ASSOCIATED BUSINESS SERVICES. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AND JUSTIFY THE INCURRENCE OF SUCH EXPENDI TURE. IT WAS SUBMITTED THAT TRUST DID NOT HAVE STAFF OF ITS OWN ON THEIR PAY ROLL AND FOR THE PURPOSE OF CARRYING OUT BUSINESS THE ASSESSEE HAS UTILIZED PROFESSIONAL S ERVICES OF THESE TWO CONCERNS AND SUCH SERVICES WERE ALSO AVAILED IN EARLIER YEARS. HOWEVER, AO DID NOT ACCEPT SUCH SUBMISSION AND DISALLOWED 50% OF THE EXPENDITU RE UNDER THE PROVISIONS OF ITA NO.107/MUM/2004(A.Y. 2000-01) 13 SECTION 40A(2)(B) OF THE ACT. DURING THE COURSE O F PROCEEDINGS BEFORE LD. CIT(A) IT WAS SUBMITTED THAT BEFORE AO ASSESSEE HAD FILED LETTER DATED 12/3/2003, IN WHICH ALL THESE DOCUMENTS WERE MENTIONED. IT WAS SUBMITT ED THAT IN A.Y 1998-99 NO SUCH DISALLOWANCE WAS MADE BY THE AO FOR SIMILAR EX PENDITURE AND IN A.Y 1999- 2000 DISALLOWANCE WAS MADE ON THE GROUND THAT AUDIT REPORT UNDER SECTION 44AB WAS NOT SUBMITTED. COMPARATIVE FIGURES WERE SUBMIT TED TO SHOW THAT THERE WAS NO INCREASE IN SUCH EXPENDITURE. IT WAS SUBMITTED TH AT SINCE PAYMENT DID NOT EXCEED MARKET RATE PROVISIONS OF SECTION 40A(2)(B) COULD NOT BE APPLIED. THE LD. CIT(A) HAS ACCEPTED SUCH SUBMISSIONS OF THE ASSESSEE AND R EFERRING TO A.Y 1999-2000 IT WAS OBSERVED THAT AO HAD DISALLOWED 10% OF THE SER VICE CHARGES ON THE GROUND THAT ASSESSEE FAILED TO GET ITS BOOKS OF ACCOUNTS A UDITED AND IN THIS YEAR THE AO HAD DISALLOWED 50% WITHOUT GIVING PROPER REASONS. IT IS ALSO OBSERVED BY LD. CIT(A) THAT TURNOVER FOR THE YEAR UNDER CONSIDERATION IS H IGHER. HOWEVER, LD. CIT(A) HAS HELD THAT PROVISIONS OF SECTION 40A(2)(B) WILL BE APPLICABLE AND CONSIDERING THE FACTS OF THE CASE AND THE FIGURES OF EXPENDITURE WH ICH IS A SUM OF RS.21.32 LACS AGAINST LAST YEARS EXPENSES OF RS.26.39 LACS, LD. CIT(A) HAS UPHELD THE DISALLOWANCE TO THE EXTENT OF 10% I.E. FOR A SUM O F RS.2,13,295/- AND BALANCE DISALLOWANCE OF RS.8,53,189/- IS DELETED. THE REVE NUE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUND OF APPEAL. 9.1 ON THIS ISSUE WE HAVE HEARD BOTH THE PARTIES. LD. CIT(A) HAS PASSED A SPEAKING ORDER. AS PER SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) NO DISALLOWANCE WAS MADE ON SIMILAR EXPENSES IN A.Y. 1998-99 AND FOR A.Y. 1999- 00 10% DISALLOWANCE WAS MADE ON THE GROUND THAT ASS ESSEE DID NOT GET ITS ACCOUNT AUDITED. HOWEVER, FOR THE YEAR UNDER CONSIDERATION THERE IS NO FAILURE OF THE ASSESSEE FOR GETTING ITS ACCOUNTS AUDITED. IN THE CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. C IT(A) VIDE WHICH HE HAS HELD ITA NO.107/MUM/2004(A.Y. 2000-01) 14 THAT 10% OF THE TOTAL EXPENDITURE WAS REQUIRED TO BE DISALLOWED AND SUCH DECISION OF LD. CIT(A) WILL BE IN ACCORDANCE WITH ACTION OF AO ADOPTED IN A.Y. 1999- 2000. THEREFORE, WE DECLINE TO INTERFERE IN THE R ELIEF GRANTED BY LD. CIT(A) AND THIS GROUND IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/03/2015 ! ' 03/03/2015 # $ SD/- SD/- ( . . /R.C.SHARMA ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; %& DATED 03/03/2015 '() '() '() '() *)!( *)!( *)!( *)!( / COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. '-+, / THE RESPONDENT. 3. . ( ) / THE CIT(A)- 4. . / CIT 5. )/# '(& , , / DR, ITAT, MUMBAI 6. #0 1 / GUARD FILE. & & & & / BY ORDER, -)( '( //TRUE COPY// 2 22 2 / 3 3 3 3 4 4 4 4 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . & . ./ VM , SR. PS