Deputy Commissioner of Income Tax, Circle-1, Jodhpur V. M/s. Marudhar Hotels Pvt. Ltd. , Jodhpur

ITA 177/JODH/2018

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9716 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 18-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S YADAV LD
• Assessee Lawyers: RAJIV PANDEY; DAKSHYANI PANDEY LD ARS
• Keywords: Business income; Cost of acquisition; Fair market value; Capital Gains
• Section: 143(3); 201; 113

Judgement Text

1 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR , , BEFORE HONBLE SHRI SANDEEP GOSAIN, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) 1. ./ I.T.A. NO.177/JODH/2018 ( / ASSESSMENT YEAR: 2013-14) & 2. ./ I.T.A. NO.140/JODH/2019 ( / ASSESSMENT YEAR: 2014-15) D CIT - CIRCLE - 1 JODHPUR. / VS. M/S. MARUDHAR HOTELS PVT. LTD. UMAID BHAWAN PALACE JODHPUR, RAJASTHAN. ./ ./PAN/GIR NO. AABCM-0773-G ( /APPELLANT ) : ( / RESPONDENT ) & 3. C.O. NO.02/JODH/2018 (ARISING OUT OF ITA NO.177/JODH/2018) ( / ASSESSMENT YEAR: 2013-14) & 4. C.O. NO.14/JODH/2019 (ARISING OUT OF ITA NO.140/JODH/2019) ( / ASSESSMENT YEAR: 2014-15) M/S. MARUDHAR HOTELS PVT. LTD. UMAID BHAWAN PALACE JODHPUR, RAJASTHAN. / VS. DCIT - CIRCLE - 1 JODHPUR. ./ ./PAN/GIR NO. AABCM-0773-G ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI RAJIV PANDEY (CA) & MS. DAKSHYANI PANDEY- LD. ARS REVENUE BY : SHRI A.S. YADAV - LD. SR. DR / DATE OF HEARING : 04/11/2020 2 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 / DATE OF PRONOUNCEMENT : 21/12/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEA RS [IN SHORT REFERRED TO AS AY] 2013-14 AND 2014-15 CONTEST SE PARATE ORDERS OF FIRST APPELLATE AUTHORITY. THE ASSESSEE HAS FILED C ROSS-OBJECTIONS AGAINST THE SAME. FACTS AS WELL AS ISSUES ARE IDENT ICAL IN BOTH THE YEARS AND THEREFORE, THE APPEALS ARE BEING DISPOSED -OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE & BRE VITY. FIRST, WE TAKE UP APPEAL AS WELL AS CROSS-OBJECTION OF THE AS SESSEE FOR AY 2013-14 WHICH IS AGAINST THE ORDER DATED 16/02/2018 PASSED BY LD. COMMISSIONER OF INCOME-TAX(APPEALS)-1, JODHPUR, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO.277E/2016-17. 1.2 THE GROUNDS RAISED BY THE REVENUE READ AS UNDER :- 1. WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) IS RIGHT IN LAW IN HOLDING THAT SURPLUS ON SALE OF PLO T OF RS.7,03,86,970/- IS ASSESSABLE AS CAPITAL GAIN, IGNORING THE VARIOUS PA TENT FACTS OF THE CASE EMERGING OUT OF VARIOUS CLAUSES OF THE DEVELOPMENT AGREEMENT ENTERED INTO WITH M/S ESS GEE REAL ESTATE DEVELOPERS PVT. LTD. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) IS CORRECT IN FACTS AND LAW IN DELETING THE DISALLOWANCES OUT OF INTEREST EXPENSES OF RS.4,29,07,571/- ON ACCOUNT OF INTEREST FREE LOANS/ ADVANCES GIVEN TO ASSOCIATES ENTITIES AND CLOSE RELATIVE OF THE DIREC TOR OF THE COMPANY. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CIT(A) IS CORRECT IN FACTS AND LAW IN DIRECTING TO ADOPT FAIR MARKET VALUE OF RS.250/- SQ YD AS DETERMINED BY THE REGISTERED VALUER INSTEAD OF RS.4/- SQ YD TA KEN BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT REGISTERED VALUE R HAS TAKEN FAIR MARKET VALUE AS ON 01.04.1981 ON ESTIMATE BASIS WITHOUT QUOTING AN ACTUAL INSTANCE OF SELLING PRICE OF SIMILAR LAND IN NEARBY AREAS. 1.3 THE ASSESSEES CROSS-OBJECTIONS ARE PRIMARILY I N SUPPORT OF THE IMPUGNED ORDER. THE GROUNDS READ AS UNDER: - 3 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 THE RESPONDENT SUBMITS THAT THE DELETION BY ID. CIT (A) ARE CORRECT AND AS PER LAW NAMELY - I) FOLLOWING THE FINDING GIVEN BY HON'BLE ITAT, JOD HPUR BENCH, JODHPUR IN ASSESSEE'S OWN CASE BY ORDER DT. 15.2.2013 AND 24.6 .2013 FOR AYRS. 2006-07 TO 2008-09 AND 2009-10 AND SUBSEQUENTLY IN AYS. 201 0-11 AND 2011-12. II) IN CONFIRMING THAT INCOME ARISING FROM SALE OF PLOTS IS LONG TERM CAPITAL GAINS AND NOT BUSINESS INCOME AND FURTHER UPHOLDING THE WORKING OF CAPITAL GAINS DECLARED BY THE ASSESSEE AND DELETING ADDITIO N OF RS.7,03,86,9707- AND ACCEPTING THE CAPITAL GAIN DECLARED BY THE ASSE SSEE COMPANY. III) IN CONFIRMING THE ISSUE OF ADOPTION OF COST OF ACQUISITION OF LAND @ RS.250/- PER QQ. YD. INSTEAD OF RS.8/- ADOPTED BY ID. AO. IV) LD. CIT(A) ERRED IN NOT GIVING FINDING RELATING TO LEAVING OUT OF UTILITY AREA FOR PARK, DRAINAGE, CULVERT, PATHWAYS ETC. WHICH ARE RE GULATORY REQUIREMENT AND NOT INCLUDING THE SAME IN DEVELOPMENT EXPENSES. V) IN DELETING THE ADDITION MADE ON ACCOUNT OF INTE REST AMOUNTING TO RS.4,29,07,571/-. AS EVIDENT FROM CROSS-OBJECTIONS, THE LD. CIT(A) HA S SUBSTANTIALLY FOLLOWED THE TRIBUNAL ORDERS IN ASSESSEES OWN CASE IN EARLIER AYS. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING WRITTEN SUBMI SSIONS AND DOCUMENTS PLACED IN THE PAPER BOOK. THE JUDICIAL PR ECEDENTS AS RELIED UPON DURING THE COURSE OF HEARING HAVE DULY BEEN DELIBERATED UPON. OUR ADJUDICATION TO THE SUBJECT MATTER WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN HOTEL BUSINESS WAS ASSESSED FOR THE YEAR UNDER CONSIDERATION U/S 143(3) VIDE ORDER DATED 30/03/201 6 WHEREIN THE INCOME WAS DETERMINED AT RS.10.54 CRORES AFTER CERT AIN ADDITIONS /ADJUSTMENT. 3.2 IT TRANSPIRED THAT THE ASSESSEE AS VENDOR ENTER ED INTO JOINT VENTURE DEVELOPMENT AGREEMENT WITH AN ENTITY NAMELY M/S ESS GEE REAL ESTATE DEVELOPER PRIVATE LTD. AS BUILDER TO DE VELOP A SCHEME OF BUNGALOWS NAMED UMAID HERITAGE AT THE FOOTHILLS OF CHITTAR HILLS. 4 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 ACCORDING TO THE TERMS OF THE AGREEMENT, THE ASSESS EE WAS ENTITLED TO RECEIVE CERTAIN PERCENTAGE OF SALE CONSIDERATION OF EVERY PLOT BASED ON RATE AT WHICH THE PLOT WAS SOLD. DURING TH E YEAR, THE ASSESSEE REFLECTED SALE OF 2905 SQUARE FT. OF PLOT AT SALE CONSIDERATION OF RS.7.62 CRORES. THE SAME WAS OFFER ED TO TAX UNDER THE HEAD LONG-TERM CAPITAL GAINS (LTCG). HOWEVER, AS HELD IN ASSESSMENT ORDER FOR AY 2012-13 , LD. AO CHOSE TO TREAT THE SALE CONSIDERATION AS BUSINESS INCOME AND ACCORDINGLY, WORKED OUT BUSINESS INCOME OF RS.7.03 CRORES. THE PLEA THAT THE TRIBUNAL ALREADY ACCEPTED THE SAME AS CAPITAL GAINS WAS REJECTED SINCE THE DEPARTMENT WAS IN FURTHER AP PEAL BEFORE HONBLE HIGH COURT. 3.3 ALTERNATIVELY, EVEN IF THE GAINS WERE TO BE TRE ATED AS CAPITAL GAINS, THE COST OF ACQUISITION AS ON 01/04/1981 AS TAKEN BY THE ASSESSEE @RS.250/- PER SQUARE YARDS WAS HIGHLY EXCE SSIVE. FOLLOWING AYS 2011-12 & 2012-13, THE COST WAS TO BE TAKEN AS RS.8/- PER SQUARE YARDS WHICH WOULD YIELD LTCG OF R S.5.82 CRORES IN THE HANDS OF THE ASSESSEE. 3.4 ANOTHER ADDITION WAS INTEREST DISALLOWANCE U/S 36(1)(III) FOR RS.4.29 CRORES SINCE THE ASSESSEE HAD ADVANCED INTE REST FREE LOANS FOR RS.60.47 CRORES. THE DISALLOWANCE SO MADE WAS IN ACCORDANCE WITH ASSESSMENT ORDER FOR AY 2012-13. 3.5 UPON FURTHER APPEAL, LD. CIT(A), FOLLOWING TRIB UNALS COMMON ORDER DATED 15/02/2013 FOR AYS 2006-07 TO 2008-09 H ELD THAT THE GAINS WERE TO BE COMPUTED UNDER THE HEAD CAPITAL GA INS. IT WAS NOTED THAT THIS ORDER OF TRIBUNAL WAS SUBSEQUENTLY FOLLOWED BY THE 5 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 COORDINATE BENCHES IN AYS 2009-10 TO 2011-12. SIMIL ARLY, FOLLOWING THE ORDER OF THE TRIBUNAL FOR AY 2009-10, ITA NO.34 /JODH/2013 DATED 24/06/2013, THE COST OF ACQUISITION WAS DIREC TED TO BE TAKEN AS RS.250/- PER SQUARE YARDS AS ADOPTED BY THE ASSE SSEE. 3.6 REGARDING INTEREST DISALLOWANCE, IT WAS SUBMITT ED THAT LOANS WERE NOT GIVEN OUT OF BORROWED FUNDS. THE LD.CIT(A) , FOLLOWING THE FINDINGS GIVEN BY TRIBUNAL FOR AYS 2006-07 TO 2008- 09 AS WELL AS FOR AYS 2009-10 TO 2011-12 AND FOLLOWING THE BINDING DE CISION OF HONBLE RAJASTHAN HIGH COURT IN CIT V/S VIJAY SOLVEX LTD. 113 DTR 382 DATED 10/12/2014, OBSERVED THAT INTEREST FREE FUNDS OF RS.6047 LACS WERE SUBSTANTIALLY HIGHER THAN THE INT EREST FREE ADVANCES MADE TO RELATED PARTIES AND THEREFORE, THE DISALLOWANCE WAS TO BE DELETED. AGGRIEVED AS AFORESAID, THE REVENUE IS IN FURTHER A PPEAL BEFORE US. 4. WE HAVE DULY CONSIDERED THE FACTUAL MATRIX AS EN UMERATED IN THE PRECEDING PARAGRAPHS. IT IS QUITE EVIDENT THAT THE ISSUE OF HEAD UNDER WHICH THE SALE OF PLOTS WOULD BE ASSESSABLE A S WELL AS THE ISSUE OF COST OF ACQUISITION AS ON 01/04/1981 STOOD SQUARELY COVERED IN ASSESSEES FAVOR BY THE EARLIER DECISION S OF THIS TRIBUNAL. THE LD. CIT(A) HAS MERELY FOLLOWED THE SAME WHICH I S THE CORRECT APPROACH. THERE IS NOTHING ON RECORD WHICH WOULD SH OW THAT THE AFORESAID DECISIONS HAVE SUBSEQUENTLY BEEN REVERSED , IN ANY MANNER. NO CHANGE IN FACTS HAS BEEN DEMONSTRATED BE FORE US. THEREFORE, WE FIND NO FAULT IN THE APPROACH OF LD.C IT(A) IN PROVIDING RELIEF TO THE ASSESSEE, ON THIS ACCOUNT. 6 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 5. SO FAR AS INTEREST DISALLOWANCE IS CONCERNED, IT IS ADMITTED FACT THAT THE ASSESSEES OWN FUNDS FAR EXCEEDED THE INTE REST FREE ADVANCES GIVEN BY THE ASSESSEE. THEREFORE, THE DECI SION OF TRIBUNAL IN EARLIER YEARS AS WELL AS THE RATIO OF C ITED DECISION OF HONBLE HIGH COURT WAS CLEARLY APPLICABLE TO THE FA CTS OF THIS YEAR. THIS BEING THE CASE, NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER, ON THIS ISSUE ALSO. WE ORDER SO. 6. IN THE RESULT, REVENUES APPEAL STAND DISMISSED. THE CROSS- OBJECTIONS ARE SUBSTANTIALLY IN SUPPORT OF IMPUGNED ORDER. OUR AFORESAID ADJUDICATION HAS RENDERED GROUND NO. (IV) OF THE CROSS- OBJECTIONS MERELY ACADEMIC IN NATURE AND HENCE, NOT SPECIFICALLY DEALT WITH. THE CROSS-OBJECTION ALSO STAND DISMISSE D. ASSESSMENT YEAR 2014-15 7. IN THIS YEAR, AN ASSESSMENT HAS BEEN FRAMED AGAI NST THE ASSESSEE ON 29/12/2016 ON MORE OR LESS SIMILAR LINE S AS IN AY 2013-14. THE INCOME EARNED ON SALE OF PLOTS HAS BEE N ASSESSED AS BUSINESS INCOME. THE ASSESSEE HAS BEEN SADDLED WITH INTEREST DISALLOWANCE U/S 36(1)(III) ON SIMILAR LOGIC AND RE ASONING. THE LD. FIRST APPELLATE AUTHORITY, FOLLOWING EARLIER ORDERS OF TRIBUNAL, HAS PROVIDED RELIEF TO THE ASSESSEE. AGGRIEVED, THE REV ENUE IS IN FURTHER APPEAL BEFORE US WITH IDENTICAL GROUNDS OF APPEAL. THE ASSESSEES CROSS-OBJECTIONS ARE MERELY IN SUPPORT OF IMPUGNED ORDER. FACTS AND ISSUES BEING IDENTICAL, OUR ADJUDICATION AS FOR AY 2013- 14 SHALL MUTATIS MUTANDIS APPLY TO THIS YEAR ALSO. THE REVENUES APPEAL AS WELL AS CROSS-OBJECTIONS ST ANDS DISMISSED. 7 MARUDHAR HOTELS PRIVATE LIMITED ASSESSMENT YEARS: 2013-14 & 2014-15 CONCLUSION 8. BOTH APPEALS AS WELL AS CROSS-OBJECTIONS STAND D ISMISSED. ORDER PRONOUNCED U/R 34(4) OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. SD/- SD/- (SANDEEP GOSAIN) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 21/12/2020 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$' / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. &'#( ) , ) , ) / DR, ITAT, JODHPUR 6. '+,-! / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, JODHPUR.