M/s. Silverwoods, Mumbai V. Additional Commissioner of Income-tax,

ITA 1588/PUN/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6708 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-05-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 04-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF DATED PASSED
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / ITA NO.1588/PUN/15 / ASSESSMENT YEAR : 2006-07 M/S. SSILVERWOODS, 125, ATLANTA, NARIMAN POINT, MUMBAI 400 021 PAN : AASFS9706P VS. ACIT, RANGE-15(1), MUMBAI (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER DATED 07-08-2015 PASSED BY THE CIT(A)-12, PUNE IN RELATION TO TH E ASSESSMENT YEAR 2006-07. 2. THOUGH THE ASSESSEE HAS CHALLENGED CONFIRMATION OF DISALLOWANCE OF EXPENSES OF RS.78,30,000/- IN THE MEMORANDUM OF APPEAL, THE LD. AR LIMITED HIS ASSAIL ONLY TO TH E DISALLOWANCE OF RS.59,43,452/-, BEING, PAYMENTS MADE TO P UNE MUNICIPAL CORPORATION AND RS.2,36,780/- TOWARDS FURNITURE. APPELLANT BY SHRI DHARMESH SHAH RESPONDENT BY SHRI N.ASHOK BABU DATE OF HEARING 06-05-2019 DATE OF PRONOUNCEMENT 07-05-2019 ITA NO.1588/PUN/2015 M/S. SSILVERWOODS 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS A DEVELOPER AND BUILDER. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION, THE ASSESS EE FILED A REVISED CLAIM OF INCURRING OF FURTHER EXPENSES OF RS. 78.30 LAKH TOWARDS THE PROJECT COMPLETED IN THE INSTANT YEAR. SUCH EXPENSES WERE ACTUALLY INCURRED IN A LATER YEAR IN WHICH THE SE WERE SHOWN AS PREPAID EXPENSES AS RELATING TO THE INSTANT YE AR. THE ASSESSING OFFICER (AO) DID NOT ACCEPT THE REVISED CLAIM MADE BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCE EDINGS. OUT OF TOTAL EXPENSES OF RS.59,43,452/- PAID TO PUNE MUN ICIPAL CORPORATION (PMC), THE ASSESSEE CLAIMED THAT A SUM OF RS.27,77,074/- WAS PAID TO PUNE MUNICIPAL CORPORATION AS PREMIUM CHARGES FOR EXTRA FSI IN LIEU OF STAIRS CASE, BALCO NY AND TERRACE FOR THE PROJECT COMPLETED IN THE YEAR UNDER CONSIDERATION; A SUM OF RS.27,51,578/- WERE CHARGES PAID TO PUNE MUNICIPAL CORPORATION TO COMPOUND THE OFFENCE OF EXCE SS CONSTRUCTION IN VIOLATION OF THE PLAN APPROVED BY THE PMC; AND THE REMAINING SUM WAS TOWARDS DEVELOPMENT CHARGES ETC. TH E AO OBSERVED THAT SUCH EXPENSES CLAIMED TO HAVE BEEN INCUR RED BY THE ASSESSEE WERE NOT IN RELATION TO THE PROJECTS WHICH WE RE COMPLETED DURING THE YEAR UNDER CONSIDERATION. HE, THEREF ORE, ITA NO.1588/PUN/2015 M/S. SSILVERWOODS 3 MADE DISALLOWANCE, INTER ALIA, OF RS.59,43,452/-. THE LD. CIT(A) FOUND THAT THE EXPENDITURE OF RS.27,54,578/-, BEIN G, COMPOUNDING CHARGES WAS NOT ALLOWABLE IN TERMS OF EXPLANATION (1) TO SECTION 37. THE OTHER EXPENSES WERE ALS O HELD TO BE NOT ALLOWABLE BECAUSE THE ASSESSEE COULD NOT CO- RELATE SUCH EXPENSES WITH THE PROJECT COMPLETED DURING THE YEA R UNDER CONSIDERATION AND SHOWN AS PREPAID IN A LATER ASSESS MENT YEAR 2009-10. AGGRIEVED BY SUCH AN ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IN SOFARAS THE FIRST PAYME NT OF RS.27,51,578/- IS CONCERNED, THE LD. CIT(A) HAS INVOKED THE PROVISIONS OF EXPLANATION (1) TO SECTION 37(1). SUCH CHARGE S WERE PAID TO PUNE MUNICIPAL CORPORATION AS COMPOUNDING FEE FOR OFFENCE OF EXCESS CONSTRUCTION IN VIOLATION OF THE PLAN APPROVED BY THE PMC. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MODI BUILDERS (ITA NO.1728/PUN/2013), A COPY OF WHICH HAS BEEN PLACED ON RECORD, HAS HELD THAT COMPOUND ING CHARGES PAID UNDER SIMILAR CIRCUMSTANCES ARE HIT BY THE EXP L. TO SECTION 37(1) OF THE ACT. THE TRIBUNAL WHILE SUSTAINING THE DISALLOWANCE, HAS RELIED ON A DIRECT JUDGMENT OF THE HONBLE ITA NO.1588/PUN/2015 M/S. SSILVERWOODS 4 KARNATAKA HIGH COURT IN CIT VS. MAMTA ENTERPRISES (2004) 264 ITR 356 (KAR.), IN WHICH IT HAS BEEN HELD THAT COMPOUNDING FINE FOR OFFENCE OF UNAUTHORIZED CONSTRUCTION IS NOT ALLOWABLE IN TERMS OF EXPLANATION (1) TO SECTION 37. IN VIE W OF THE DIRECT JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN CIT VS. MAMTA ENTERPRISES (SUPRA) , WE ARE INCLINED TO FOLLOW THE VIEW CANVASSED BY THE PUNE BENCH OF THE TRIBUNAL IN PREFERENCE TO ANOTHER ORDER PASSED BY THE HYDERABAD B ENCHES OF THE TRIBUNAL IN WHICH THE ISSUE HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE. ON A SPECIFIC QUERY, THE LD. AR COULD NOT P OINT OUT ANY DIRECT JUDGMENT OF ANY HIGH COURT IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE POSITION AND RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MAMTA ENTERPRISES (SUPRA), WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION TO THIS EXTENT. 5. THE OTHER AMOUNT OF RS.27,77,074/- WAS CLAIMED TO HA VE BEEN PAID BY THE ASSESSEE TO PMC ON 06-05-2008, BEING, PREMIUM CHARGES FOR EXTRA FSI IN LIEU OF STAIRS CASE, BALCO NY AND TERRACE RELATING TO PROJECT WHICH WAS COMPLETED IN THE YEAR UNDER CONSIDERATION. THE AO HAS CATEGORICALLY RECORDED IN PARA NO.7 OF HIS ORDER THAT THE PLOTS FOR THE PROJECT COMPLETED BY THE ITA NO.1588/PUN/2015 M/S. SSILVERWOODS 5 ASSESSEE DURING THE YEAR WERE DIFFERENT FROM THOSE GIVEN IN RESPECT OF WHICH THE ASSESSEE HAD CLAIMED TO HAVE PAID SU CH AMOUNT. THE AO HAS GIVEN PLOT NOS. AND THE NAME OF THE OWNER FOR THE PROJECT COMPLETED DURING THE YEAR AND THE PLOT NO. AND NAME OF THE OWNER FOR WHICH SUCH PAYMENT WAS M ADE AND FOUND THE SAME TO BE DIFFERENT. ON A SPECIFIC QUERY , THE LD. AR COULD NOT PLACE ON RECORD ANY NOTICE OF DEMAND ISSUED BY THE PMC TO CO-RELATE THIS PAYMENT WITH THE PROJECT COMPLETED TWO YEARS AGO. IT IS A KNOWN FACT THAT MUNICIPAL CHARGES RELATABLE TO A PARTICULAR BUILDING ARE TO BE PAID BEFORE THE OBTAINING A POSSESSION CERTIFICATE. WITHOUT CLEARING ALL THE MUNICIPAL CHARGES IN RESPECT OF ANY BUILDING, NO NOC IS ISSUE D. OBVIOUSLY THE AMOUNT PAID TO PMC IN FINANCIAL YEAR 2008-09 CANNOT ORDINARILY RELATE TO A BUILDING WHERE THE POSSESSION CERTIFICATE WAS GIVEN IN THE FINANCIAL YEAR 2005-06, UNLESS AN EVIDENCE TO THIS EXTENT IS ADDUCED. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE SATISFIED THAT THE ASSESSEE COULD NOT CORR ELATE THIS EXPENDITURE WITH THE PROJECT COMPLETED DURING THE YEAR UNDER CONSIDERATION. AS SUCH, NO DEDUCTION CAN BE ALLOW ED FOR THIS EXPENDITURE. ITA NO.1588/PUN/2015 M/S. SSILVERWOODS 6 6. THE REMAINING AMOUNT OUT OF TOTAL SUM OF RS.59,43,452/- BEING THE AMOUNT PAID TO PMC HAS BEEN DISALLOWED BY THE AO BY SPECIFICALLY OBSERVING THAT THE PLOTS ON WHICH PROJECT WAS COMPLETED DURING THE YEAR WAS DIFFERENT FROM THOSE IN RESPE CT OF WHICH SUCH EXPENSES WERE PAID. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO CONTROVERT SUCH A VIEW. WE, THEREFOR E, UPHOLD THE DISALLOWANCE OF RS.59,43,452/-. 7. THE ONLY OTHER DISALLOWANCE CHALLENGED IN THIS APPEAL IS A SUM OF RS.2,36,780/-, BEING, THE AMOUNT OF PREPAID EXPE NSES TOWARDS PURCHASE OF FURNITURE. THE FACTS OF THIS DISALLOWA NCE AND ITS CONFIRMATION BY THE LD. CIT(A) ARE SIMILAR TO THOSE O F THE EARLIER EXPENSE. HERE AGAIN, THE ASSESSEE COULD NOT SHOW THAT THE PURCHASE OF FURNITURE AFTER TWO YEARS PERTAINED TO THE PROJECT COMPLETED BY THE ASSESSEE DURING THE YEAR. WE, THEREFORE, UPHOLD THE DISALLOWANCE. 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH MAY, 2019. SD/- SD/- (VIKAS AWASTHY) (R.S.SYAL ) JUDICIAL MEMBER VICE PRESIDENT PUNE; DATED : 07 TH MAY, 2019. ITA NO.1588/PUN/2015 M/S. SSILVERWOODS 7 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-12, PUNE 4. 5. THE CIT CENTRAL, PUNE , , / DR A, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 06-05-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06-05-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *