Dy.CIT, Circle-16(3), Hyderabad V. M/s Omega Shelter Pvt Ltd., Hyderabad

ITA 1244/HYD/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3025 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 25-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MYTHLI RANI
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1244/HYD/2014 : ASSESSMENT YEARS 2010- 11 DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(3), HYDERABAD V/S M/S. OMEGA SHELTERS PVT. LTD., HYDERABAD. (PAN - AAACO 8221 A ) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MYTHLI RANI RESPONDENT BY : NONE DATE OF HEARING 16.12.2015 DATE OF PRONOUNCEMENT 03.02.2016 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APP EALS) V HYDERABAD, DATED 13 TH JANUARY, 2014 FOR THE ASSESSMENT YEAR 2010- 11. 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL- 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH IN LA W AND IN FACTS OF THE CASE . 2. THE CIT(A) ERRED IN HOLDING THAT THE SECURITY DE POSIT OF RS.13 CRORES IS INCLUSIVE OF RS.7 . 57 CRORES OF EXPENDITURE ON DEVELOPMENT. 3. THE CIT(A) ERRED IN APPRECIATING THE FACT THAT T HE ASSESSING OFFICER HAS BROUGHT THE FACTS ON RECORD T HAT AS PER PAGE-4, PARA-3 OF SUPPLEMENT DEVELOPMENT AGREEMENT DATED 7-1-2010 ENTERED BY M/S. FORTUNE CONSTRUCTIONS & THE ASSESSEE, CLEARLY SAYS THAT THE SECURITY DEPOSIT OF RS.13 CRORES IS INCLUS IVE OF COSTS. 4. THE CIT(A) ERRED IN HOLDING THAT THE ADDITION MA DE BY THE ASSESSING OFFICER IS CORRECT AS WHATEVER EXPENDITURE THE ASSESSEE INCURRED TOWARDS ITA NO.1244/HYD/2014 M/S. OMEGA SHELTERS PVT. LTD., HYDERABAD. 2 'NEIGHBOURHOOD APARTMENTS' HAS BEEN REPAID BY M/S FORTUNE CONSTRUCTIONS AS PER THE AGREEMENT. 5. THE CIT(A) ERRED IN ALLOWING THE PLEA OF THE ASS ESSEE THAT THE DEVELOPMENT OF PROJECT OF 'NEIGHBOURHOOD APARTMENTS' IN 13.25 ACRES WAS RELINQUISHED BECAUSE OF THE TIME FRAME AND DOWNFALL IN REAL ESTATE. 6. THE CIT(A) IGNORED THE FACT THAT THE ASSESSEE RE TAINED THE PROJECT OF 'THE NEIGHBOURHOOD' ON 35.42 ACRES O UT OF THE TOTAL PROJECT OF 49.111 ACRES, (WHICH IS A BIGGER PROJECT) IN SPITE OF ALL ODDS OF TIME FRAME AND DOWNFALL IN REAL ESTATE, WHICH IS CONTRAR Y TO ITS CLAIM. 7. THE CIT(A) ERRED IN ADJUDICATING THE ISSUE THAT THE RELINQUISHMENT OF PROJECT AND FOREGOING THE EXPENDITURE AND THEN WRITING OFF THE SAME IN HIS BOOKS OF A/C IS ONLY A COLOURFUL DEVISE ADOPTED BY THE ASSESSEE FOR ITS TAX PLANNING. 8. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. BRIEFLY, THE FATS OF THE CASE ARE THAT THE RES PONDENT- ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVIS IONS OF THE COMPANIES ACT, 10956. IT IS ENGAGED IN THE BUSINES S OF REAL ESTATE DEVELOPMENT. RETURN OF INCOME FOR THE ASSESSMENT YE AR 2010-11 WAS FILED ON 15.10.2010 DECLARING NIL INCOME, AFTER S ETTING OFF BROUGHT FORWARD LOSSES OF RS.3,43,74,506. THE RETURN WAS TA KEN UP FOR SCRUTINY, AND ASSESSMENT WAS ULTIMATELY COMPLETED B Y DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 2, HYDER ABAD DETERMINING THE TOTAL INCOME AT RS.8,22,43,220, AFTER SETTING O FF BROUGHT FORWARD LOSSES OF RS.6,15,10,019. WHILE DOING SO, THE ASSE SSING OFFICER MADE ADDITION ON ACCOUNT OF CHANGE IN THE METHOD OF RECO GNITION OF INCOME OF RS.3,36,54,704 AND BY WAY OF DISALLOWANCE OF EXP ENDITURE WRITTEN OFF OF RS.7,57,24,129 IN RESPECT OF PROJECT CALLED NEIGHBOURHOOD APARTMENTS, WHICH WERE SURRENDERED IN FAVOUR OF M /S. FORTUNE CONSTRUCTIONS LTD. ITA NO.1244/HYD/2014 M/S. OMEGA SHELTERS PVT. LTD., HYDERABAD. 3 4. BEING AGGRIEVED BY THE SAID ADDITIONS, THE RE SPONDENT ASSESSEE COMPANY FILED AN APPEAL BEFORE THE CIT(A) V, HYDERABAD, WHO VIDE THE IMPUGNED ORDER ALLOWED THE APPEAL HOLD ING THAT THE EXPENDITURE INCURRED ON THE ABANDONED PROJECT CALL ED NEIGHBOURHOOD APARTMENTS IS REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE. BEING AGGRIEVED BY THIS ACTION OF THE CIT(A), REVEN UE IS IN APPEAL BEFORE US. 5. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. NONE APPEARED ON BEHALF OF THE ASSESSEE, COMPANY, DESPITE SERVICE OF NOTICE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIA L ON RECORD. GROUNDS RAISED BY THE REVENUE CHALLENGE THE DIRECTI ON OF THE CIT(A) DELETING ADDITION OF RS.7,57,24,129. WE FIND FROM T HE ORDER OF THE CIT(A) THAT WHILE DELETING THE IMPUGNED ADDITION, T HE COMMISSIONER HAD NOT REFERRED TO ANY MATERIAL BROUGHT ON RECORD IN SUPPORT OF THE CONTENTION THAT REFUND OF SECURITY DEPOSIT OF RS.1 3 CRORES BY M/S. FORTUNE CONSTRUCTIONS HAS NOTHING TO DO WITH THE EX PENDITURE INCURRED ON THE PROJECT, WHICH IS ABANDONED IN FAVOUR OF M/S . FORTUNE CONSTRUCTIONS LTD. THE CIT(A) HAD NOT DISCUSSED THE CIRCUMSTANCES UNDER WHICH THE PROJECT WAS ABANDONED IN FAVOUR OF THE SAID COMPANY. FURTHERMORE, THE CIT(A) ALSO FAILED TO EXAMINE WHET HER THE REFUND OF DEPOSIT OF RS.13 CRORES HAD ANYTHING TO DO WITH THE EXPENDITURE INCURRED. WITHOUT DISCUSSING ANY MATERIAL, HE SIMPL Y ACCEPTED THE WRITTEN SUBMISSIONS FILED BY THE RESPONDENT-ASSESSE E BEFORE HIM, WHICH AMOUNTS TO TOTAL NON-APPLICATION OF MIND, AND THEREFORE, FAILS TO FULFIL THE REQUIREMENTS OF A REASONED/SPEAKING ORDE R. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT INTERESTS OF JUSTICE WOULD BE MET, IF THE MATTER IS RESTORED TO THE FILE OF THE CIT(A) FOR DE NOVO DISPOSAL OF THE ITA NO.1244/HYD/2014 M/S. OMEGA SHELTERS PVT. LTD., HYDERABAD. 4 APPEAL IN ACCORDANCE WITH LAW. WE DO SO ACCORDIN GLY AND DIRECT THE LEARNED CIT(A) TO DISPOSE OF THE APPEAL BEFORE HIM AFRESH IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OP PORTUNITY OF HEARING TO THE ASSESSEE AND BY PASSING A SPEAKING O RDER. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3.2.2016 SD/- SD/- (D.MANMOHAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT M EMBER. DT/- 3 RD FEBRUARY, 2016 COPY FORWARDED TO: 1. M/S. OMEGA SHELTERS PVT. LTD., INRHYTHM BUILDING 1 ST PLOT NOS.1023, GURUKUL SOCIETY, KHANAMET VILLAGE, NEAR MERIDIAN SCHOOL, MADHAPUR, HYDERABAD 500 081 2. DY. COMMISSIONER OF INCOME - TAX CIRCL E 16 ( 3 ), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD PR. COMMISSIONER OF INCOME - TAX IV , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.