SKYLINE PRASHASTI, MUMBAI V. ACIT 27(3), MUMBAI

ITA 1413/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5483 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: S NEHA ANC HLIA
• Keywords: Business income; Proportionate interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1413/MUM/2017 ASSESSMENT YEAR: 2012 - 13 M/S SKYLINE PRASHASTI SKYLINE OASIS, PREMIER ROAD, NR. VIDYAVIHAR STATION, GHATKOPAR (W) MUMBAI - 400086. VS. ACIT - 27(3), 4 TH FLOOR, TOWER 6, VASHI, NAVI MUMBAI - 400703 PAN NO. ABCF0618M APPELLANT RESPONDENT ASSESSEE BY : MR S . NEHA ANC HLIA, AR REVENUE BY : MR. RAM TIWARI, DR DATE OF HEARING : 09/07/2018 DATE OF PRONOUNCEMENT : 18/07/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2012 - 13. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 25 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF T HE INCOME TAX ACT 1961, (THE ACT). 2. AT THE BEGINNING OF HEARING, LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE APPELLANT WOULD NOT PRESS THE 3 RD GROUND OF APPEAL BECAUSE OF SMALL AMOUNT OF RS.37,636/ - BROUGHT TO TAX BY THE ASSESSING OFFICER M/S SKYLINE PRASHASTI ITA NO. 1413/MUM/2017 2 (AO) AS INCO ME FROM OTHER SOURCES. HENCE, WE TREAT THE 3 RD GROUND OF APPEAL AS DISMISSED BEING NOT PRESSED. 3. THE 1 ST GROUND OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF ASSESSING OFFICER FOR DISALLOWING PROPORTIONATE INTEREST EXPENDITURE AND MUNICIPAL TAXES WHICH ARE IN PROPORTION TO THE NON - LET OUT AREA TO TOTAL CONSTRUCTED AREA, WHILE CALCULATING 'INCOME FORM HOUSE PROPERTY'. 4. THE APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN THE DEVELOPM ENT OF REAL ESTATE PROJECTS. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2012 - 13 ON 27.09.2012 DECLARING INCOME OF RS.4,94,54,315/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE APPELLANT HAD LEASED OUT 66.43% OF THE TOTAL CONSTRUCTED AREA WHEREAS IT DEDUCTED THE ENTIRE INTEREST AMOUNT. THE AO WAS OF THE VIEW THAT AS MUNICIPAL AND INTEREST RELATE D TO ENTIRE CONSTRUCTED AREA AND NOT LEASED OUT AREA ONLY, MUNICIPAL TAXES AND INTEREST TO THE EXTENT OF 66.43% ONLY WERE TO BE ALLOWED. IN RESPONSE TO A QUERY RAISED BY THE AO, THE APPELLANT FILED A WRITTEN SUBMISSION RELYING ON THE DECISION IN SARABHAI MANAGEMENT CORPORATION LTD. V. CIT 92 ITR 151 (SC). HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE REPLY OF THE ASSESSEE AS IN THE INSTANT CASE, THE QUESTION WA S NOT ABOUT TIMING OF THE COMMENCEMENT OF BUSINESS, BUT ABOUT CHARGEABILITY OF INTEREST AND OTHER EXPENSES PROPORTIONATELY TO THE AREA LET OUT (FROM WHICH THE INCOME WA S RECEIVED DURING THE YEAR). ACCORDINGLY, THE AO DIS ALLOWED THE PROPORTIONATE INTEREST EXPENDITURE AND MUNICIPAL TAXES WHICH WERE IN PROPORTION TO M/S SKYLINE PRASHASTI ITA NO. 1413/MUM/2017 3 THE NON - LET OUT AREA TO TOTAL CONSTRUCTED AREA, WHILE CALCULATING INCOME FROM HOUSE PROPERTY. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) FOLLOWED THE ORDER OF HIS PREDECESSOR FOR THE AYS 2009 - 10 AND 2010 - 11 AND HELD THAT THE AO WAS RIGHT IN ALLOWING MUNICIPAL TAXES AND INTEREST ON PROPORTIONATE BASIS. 6. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE AYS 2009 - 10 AND 2010 - 11 AND SUBMITS THAT THE ABOVE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. SIMILAR ISSUE AROSE BEFORE THE ITAT J BENCH MUMBAI IN THE CASE OF THE ASSESSEE FOR THE AY 2009 - 10 (ITA NO. 7741/M/2012). SIMILAR GROUND OF APPEAL WAS RAISED, AS MENTIONED B ELOW: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF ASSESSING OFFICER FOR DISALLOWING PROPORTIONATE INTEREST EXPENDITURE AND MUNICIPAL TAXES OF RS.2,04,11,342/ - AND RS.11,60,281/ - WHICH IS IN PROPOR TION TO THE NON - LET OUT AREA, WHILE CALCULATING INCOME FORM HOUSE PROPERTY. THE TRIBUNAL VIDE ORDER DATED 27.03.2018 HELD AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED CAREFULLY THE RELEVANT MATERIAL ON RECORD AS PLACED BEFORE US. THE UNDISPU TED FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF PROPERTIES FOR M/S SKYLINE PRASHASTI ITA NO. 1413/MUM/2017 4 THE PURPOSE OF LETTING OUT. TILL THE YEAR END 31.03.08 THE ASSESSEE CONSTRUCTED AND COMPLETED SIX FLOORS OUT OF TOTAL 8 FLOORS THEREBY COMPLETING CONST RUCTION OF 3,15,000 SQ. FT. TILL THE YEAR END. WHEREAS THE AREA LET OUT DURING THE YEAR WAS ONLY TO 2 PARTIES NAMELY M/S. VODAFONE ESSAR LTD. APPROXIMATELY 40,000 SQ. FT. AND M/S. INDUS TOWER LTD. OF 11,819 SQ. FT. THUS AGGREGATING TO 51,819 SQ. FT. WHICH WORKED OUT TO 16.45% OF THE TOTAL AREA CONSTRUCTED. WE FIND MERIT IN THE ARGUMENT OF THE LD. A.R. THAT EVEN IF THE NOTIONAL RENT IN RESPECT OF THE AREA WHICH IS NOT LET OUT DURING THE YEAR IS TAKEN, THE ASSESSEE WILL BE ENTITLED TO VACANCY ALLOWANCE AS PER SECTION 23 OF THE ACT AND PROVISO TO SECTION 23 PROVIDES FOR DEDUCTION OF MUNICIPAL TAXES UNDER THE HEAD INCOME FROM HOUSE PROPERTY ON PAYMENT BASIS. SIMILARLY, PROVISIONS OF SECTION 24 ,2ND PROVISO AND EXPLANATION TO SECTION 24 PROVIDED FOR DEDUCTION OF INTEREST INCURRED ON THE BORROWED CAPITAL FOR THE CONSTRUCTION OF THE PROPERTY AND NO RESTRICTION OF ANY KIND WHATSOEVER HAS BEEN PROVIDED IN THE SAID SECTION. AFTER CAREFULLY GOING THROUGH THE FACTS OF THE CASE AND ARGUMENTS OF BOTH THE PARTIES, WE ARE OF THE CONSIDERED VIEW THAT THE INTEREST AND MUNICIPAL TAXES HAVE TO BE ALLOWED IN TOTO AND CANNOT BE RESTRICTED IN PROPORTION TO THE AREA LET OUT DURING THE YEAR. THE INTENTION OF THE ASSESSEE IS VERY CLEAR THAT THE PROPERTY WAS CONSTRUCTED FOR THE PURPOSE OF LETTING OUT AND IN THE SUBSEQUENT YEAR THE ENTIRE PROPERTY WAS LET OUT. THE GROUND NO 1 RAISED BY THE ASSESSEE IS ALLOWED AND AO ID DIRECTED ACCORDINGLY . FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND ALLOW THE 1 ST GROUND OF APPEAL. 8. THE 2 ND GROUND OF APPEAL ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF TH E ASSESSING OFFICER FOR DISALLOWING PROPORTIONATE EXPENDITURE WHICH IS IN PROPORTION TO THE NON - LET OUT AREA TO TOTAL CONSTRUCTED AREA, WHILE CALCULATING BUSINESS INCOME. M/S SKYLINE PRASHASTI ITA NO. 1413/MUM/2017 5 9. IT IS FOUND THAT SIMILAR GROUND OF APPEAL WAS RAISED BEFORE THE TRIBUNAL BY THE ASSESSEE FOR AY 2009 - 10 WHICH READS AS UNDER: 3 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN AFFIRMING THE DECISION OF TH E ASSESSING OFFICER FOR DISALLOWING PROPORTIONATE EXPENDITURE OF RS. 2,65,79,851/ - WHICH IS IN PROPORTION TO THE NON - LET OUT AREA TO TOTAL CONSTRUCTED AREA, WHILE CALCULATING BUSINESS INC OME. 10. THE TRIBUNAL HELD AS UNDER: HAVING HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS DISALLOWED PROPORTIONATE EXPENSES EQUAL TO 83.55% WHICH REPRESENTED THE AREA NOT LET OUT DURING THE YEAR THEREBY DISALLOWING R S.2,65,79,851/ - BEING EXPENSES FROM DECEMBER 2008 TO MARCH 2009 IN RESPECT OF SKY LINE ICON BUILDING WHICH WAS COMPLETED ON 30.11.08. WE FIND THAT THE BUILDING HAS BEEN COMPLETED AND AVAILABLE FOR USE IN THE BUSINESS AND ONCE IT IS PROVED THAT THE ASSESSEE HAS COMMENCED ITS BUSINESS, THE PROPORTIONATE DISALLOWANCE ON THE BASIS OF AREA NOT LET OUT DURING THE YEAR IS NOT CORRECT. IN VIEW OF THE SAME, WE ARE INCLINED TO DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.2,65,79,851/ - . THE GROUND RAISED BY THE ASSE SSEE IS ALLOWED. 11. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND ALLOW THE 2 ND GROUND OF APPEAL. 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/07/2018. SD/ - SD/ - ( JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER M/S SKYLINE PRASHASTI ITA NO. 1413/MUM/2017 6 MUMBAI ; DATED: 18/07/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI