Tirupati Tower Pvt. Ltd., , Kolkata V. DCIT, Circle - 4(2), Kolkata , Kolkata

ITA 1475/KOL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3949 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 09-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAJIT MONDAL
• Assessee Lawyers: S K AGARWAL
• Keywords: Earning of tax free income; Revenue expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, HONBLE VICE - PRESIDENT] I.T.A. NO. 1475/KOL/2018 ASSESSMENT YEAR : 2013-14 TIRUPATI TOWER PVT. LTD................................APPELLANT 1, GARSTIN PLACE, KOLKATA 700 001. [PAN : AABCT 0495 N] DCIT CIRCLE 4(2).................................................RESPONDENT KOLKATA 700 069. APPEARANCES BY: SHRI S.K. AGARWAL, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI SATYAJIT MONDAL, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : OCTOBER 16, 2018 DATE OF PRONOUNCING THE ORDER : OCTOBER 31, 2018 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS) 2, KOLKATA DATED 11.05.2018. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPEAL IS GENERAL WHICH DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 26.09.2013 DECLARING A TOTAL INCOME OF RS. 31,54,860/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS. 202/- RECEIVED BY THE ASSESSEE WAS CLAIMED TO BE EXEMPT FROM TAX AND THE EXPENSES OF RS. 17,935/- INCURRED IN RELATION TO THE SAID EXEMPT INCOME WERE DISALLOWED U/S 14A OF THE ACT. THE AO HOWEVER WORKED OUT SUCH EXPENSES BY APPLYING RULE 8D AT RS. 1,71,890/- AND SINCE THE DISALLOWANCE OF RS. 17,935/- WAS ALREADY OFFERED BY THE ASSESSEE, THE 2 I.T.A. NO. 1475/KOL/2018 A.Y. 2013-14 TIRUPATI TOWER PVT. LTD. BALANCE AMOUNT OF RS. 1,53,955/- WAS DISALLOWED BY HIM. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE PROVISIONS OF SUB-SECTION 2 OF SECTION 14A ARE VERY CLEAR AND AS PER THE SAID PROVISION, IF A CERTAIN CLAIM IS MADE BY THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME, THE AO CANNOT VARY THE AMOUNT OF SUCH EXPENDITURE FOR THE PURPOSE OF MAKING A DISALLOWANCE U/S 14A UNLESS AND UNTIL HE, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. A PERUSAL OF THE ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSESSEE SHOWS THAT THE AO HAS NOT RECORDED ANY SUCH DISSATISFACTION IN RESPECT OF THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND IN THE ABSENCE OF THE SAME, I FIND MYSELF IN AGREEMENT WITH THE LEARNED COUNSEL FOR THE ASSESSEE THAT DISALLOWANCE MADE BY THE AO U/S 14A BY INVOKING RULE 8D IS NOT SUSTAINABLE AND THE SAME IS LIABLE TO BE DELETED. I ORDER ACCORDINGLY AND ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL. 5. THE ISSUE INVOLVED IN GROUND NO. 3 RELATES TO THE DISALLOWANCE OF THE FOLLOWING EXPENSES MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A): (I) PUJA CHANDA RS. 1,85,500/- (II) SECURITY DEPOSIT RS. 1,65,530/- (III) CESC AND POST DELIVERY EXPENSES RS. 8,01,921/- 3 I.T.A. NO. 1475/KOL/2018 A.Y. 2013-14 TIRUPATI TOWER PVT. LTD. 6. UNDER THE MISCELLANEOUS EXPENSES, PUJA CHANDA EXPENSES OF RS. 1,85,500/- WERE CLAIMED BY THE ASSESSEE. ACCORDING TO THE AO, THE SAID EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS AND HE ACCORDINGLY DISALLOWED THE SAME. HE ALSO DISALLOWED SECURITY DEPOSIT OF RS. 1,65,530/- PAID BY THE ASSESSEE TO CESC AND POST DELIVERY EXPENSES OF RS. 8,01,921/-. IN THIS REGARD, HE REJECTED THE EXPLANATION OF THE ASSESSEE THAT THE SAID EXPENSES WERE INCURRED IN CONNECTION WITH ITS BUSINESS OF DEVELOPMENT, CONSTRUCTION AND SALE OF APARTMENTS BY TREATING THE SAME AS UNSATISFACTORY. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE. 7. I HAVE HEARD THE ARGUMENTS OF THE BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS THE PUJA CHANDA EXPENSES OF RS. 1,85,500/-, I FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PUJA CHANDA EXPENSES WERE REQUIRED TO BE INCURRED BY THE ASSESSEE ON ACCOUNT OF PAYMENT TO VARIOUS SANGHAS AND CLUBS ON THE OCCASION OF PUJA AT THE LOCATIONS WHERE THE PROJECTS OF THE ASSESSEE WERE BEING DEVELOPED. MOREOVER, THE DETAILS OF SUCH EXPENSES PLACED AT PAGE NO 42 SHOW THAT THE SAME WERE INCURRED BY THE ASSESSEE BY CHEQUES I THEREFORE HOLD THAT THE DISALLOWANCE OF PUJA CHANDA EXPENSES MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS NOT SUSTAINABLE. AS REGARDS THE DISALLOWANCE MADE ON ACCOUNT OF SECURITY DEPOSIT PAID TO CESC AND POST DELIVERY EXPENSES, I FIND THAT THE EXPLANATION OFFERED BY THE ASSESSEE IN THIS REGARD DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS NOT APPRECIATED BY THE ASSESSING OFFICER IN THE LIGHT OF THE NATURE OF THE 4 I.T.A. NO. 1475/KOL/2018 A.Y. 2013-14 TIRUPATI TOWER PVT. LTD. BUSINESS CARRIED ON BY THE ASSESSEE. SINCE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT, CONSTRUCTION AND SALE OF APARTMENTS ON OWNERSHIP BASIS, THE SECURITY DEPOSIT PAID TO CESC WAS IN THE NATURE OF REVENUE EXPENDITURE INCURRED BY THE ASSESSEE FOR ITS PROJECT AND THE SAME THEREFORE WAS ALLOWABLE AS DEDUCTION AS CLAIMED BY THE ASSESSEE. SIMILARLY, THE POST DELIVERY EXPENSES WERE DULY EXPLAINED BY THE ASSESSEE AS THE EXPENSES FOR DOING SOME FINISHING WORK WHICH HAD REMAINED INCOMPLETE MAINLY FOR THE COMMON AREA FACILITIES AFTER DELIVERY OF FLATS AND THIS EXPLANATION OFFERED BY THE ASSESSEE WAS REJECTED BY THE AO WITHOUT GIVING ANY REASONS WHATSOEVER. KEEPING IN VIEW THE NATURE OF THE EXPENDITURE AS WELL AS THE NATURE OF ASSESSEES BUSINESS, I AM OF THE VIEW THAT THE EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF SECURITY DEPOSIT PAID TO CESC AS WELL AS POST DELIVERY WORK REPRESENTED PART OF THE PROJECT EXPENSES INCURRED BY THE ASSESSEE AND THE SAME WERE ALLOWABLE AS DEDUCTION AS RIGHTLY CLAIMED BY THE ASSESSEE. I, THEREFORE, DELETE THE ENTIRE DISALLOWANCE OF EXPENSES MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) AND ALLOW GROUND NO. 3 OF THE ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2018. SD/- (P.M. JAGTAP) VICE - PRESIDENT DATED: 31/10/2018 BISWAJIT, SR. PS 5 I.T.A. NO. 1475/KOL/2018 A.Y. 2013-14 TIRUPATI TOWER PVT. LTD. COPY OF ORDER FORWARDED TO: 1. TIRUPATI TOWER PVT. LTD., 1, GARSTIN PLACE, KOLKATA 01. 2. DCIT, CIRCLE 4(2), KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES KOLKATA