M/s. Shourya Towers Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1827/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4854 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RAMA
• Keywords: Earning of tax free income; Capital expenditure
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARRY, JUDICIAL MEMBER ITA NO. 1827/DEL/2017 ( ASSESSMENT YEAR: -2012-13) SHOURYA TOWERS PVT. LTD. C/O M/S RRA TAXINDIA, D-28, SOUTH EXTENSION PART-1, NEW DELHI. AAHCS9332F VS DCIT CIRCLE 23(1) NEW DELHI. ASSESSEE BY SH. ASHWANI TANEJA, ADV. SH. SHANTANU JAIN, ADV. REVENUE BY SH. S.S. RAMA, CIT DR ORDER PER SHRI K.N. CHARY, J.M. THIS IS AN APPEAL BY THE ASSESSEE CHALLENGING THE ORDER DATED 23.02.2017 IN APPEAL NO. 295/15-16/IT/DEL/2016-17 P ASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-14, NE W DELHI (FOR SHORT HEREINAFTER CALLED AS THE LD. CIT (A)). 2. BRIEFLY STATED FACTS RELATING FOR THE PURPOSE OF THIS APPEAL ARE THAT ACCORDING TO THE ASSESSEE THERE WERE TWO PARTN ERS IN THE DATE OF HEARING 23.08.2017 DATE OF PRONOUNCEMENT 29.08.2017 2 ITA NO. 1827/DEL/2017 COMPANY I.E. ONE ANIL JAIN AND ONE K.N. SHUKLA. TH EY WERE DEVELOPING A PROJECT AT AMRITSAR ON WHICH ABOUT 70 CRORES WERE SPENT TILL MARCH, 2007. HOWEVER, THERE AROSE CERTA IN BUSINESS DISPUTE RESULTING IN SOME ARBITRATION PROCEEDINGS A ND CONSEQUENT SETTLEMENT RESULTING IN DIVISION OF THE ASSETS OF T HE COMPANY BY WAY OF SETTLEMENT DEED DATED 26.04.2007, UNDER WHIC H THE AMRITSAR PROJECT HAD FALLEN TO THE SHARE OF MR. K.N . SHUKLA. ASSESSEES CONTENTION HAS BEEN THAT SINCE MR. K.N. SHUKLA USED THE CLAUSES OF THE SETTLEMENT DEED TO HIS ADVANTAGE , IN A DISPUTE THE AMRITSAR COURT PASSED AN ORDER DATED 11.02.2009 AND WHEN THE MATTER WAS CARRIED TO THE PUNJAB & HARYANA HIGH COURT, BY ORDER 14.07.2011 THE HONBLE HIGH COURT DECIDED THE MATTER AGAINST THE ASSESSEE. IN THE CIRCUMSTANCES, ACCORD ING TO THE ASSESSEE THEY HAD WRITTEN OFF RS. 64,72,52,645/- AS COST/EXPENSES INCURRED ON SUCH PROJECT UNDER THE HEAD OTHER EXPE NSES (ADMINISTRATIVE EXPENSES) AS LOSS ON AMRITSAR PROJE CT, IN THE BOOKS OF SHOURYA TOWERS (P) LTD BY TREATING THE SAM E AS BAD DEBT AS WELL AS LOSS ARISING OUT OF AN ABUNDANT PROJECT. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE AY 2012-13 ON 30 .09 2012 AND DECLARED THE TOTAL LOSS OF RS. 17,30,06,103/-. HOW EVER, DURING THE 3 ITA NO. 1827/DEL/2017 143(3) PROCEEDINGS UNDER THE INCOME TAX ACT, 1961, THE ASSESSING OFFICER OPINED THAT THE LOSS OF AMRITSAR PROJECT BO OKED FOR THE AY 2012-13 DOES NOT BELONG TO SUCH ASSESSMENT YEAR AND EVEN OTHERWISE SUCH EXPENDITURE BEING COMPENSATORY IN NA TURE, AMOUNTS TO CAPITAL EXPENDITURE. HE, THEREFORE, DIS ALLOWED A SUM OF RS. 66,72,52,645/- ON THAT COUNT. HE FURTHER DISAL LOWED A SUM OF RS. 2,84,430/- BY INVOKING THE PROVISIONS U/S 14A O F THE ACT READ WITH 8D OF THE INCOME TAX RULES, 1962. 3. ASSESSEE CHALLENGED THESE TWO ADDITIONS BEFORE T HE LD. CIT(A) AND THE LD. CIT (A) BY WAY OF IMPUGNED ORDER REJECT ING THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL , WHILE CONFIRMING THE ADDITIONS. 4. THE ASSESSEE IS, THEREFORE, BEFORE US IN THIS AP PEAL ON THE FOLLOWING GROUNDS: 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN FRAMING THE IMPUGNED ASSESSMENT ORDER AND THA T TOO WITHOUT ASSUMING JURISDICTION AS PER LAW, MORE SO IN TERMS OF SECTION 143(2). 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIR MING THE ACTION OF LD. AO IN MAKING AGGREGATE DISALLOWANCE OF RS. 64,7 2,52,645/- ON ACCOUNT OF EXPENSES SHOWN UNDER THE HEAD OTHER EXP ENSES (ADMINISTRATIVE EXPENSES) AS LOSS ON AMRITSAR PROJE CT WRITTEN OFF AND THAT TOO BY RECORDING INCORRECT FACTS AND FINDI NGS AND IN VIOLATION OF PRINCIPLES OF NATURE JUSTICE. 4 ITA NO. 1827/DEL/2017 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACT ION OF LD. CIT (A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING AGGREG ATE DISALLOWANCE OF RS. 64,72,52,645/- ON ACCOUNT OF EXPENSES SHOWN UNDER THE HEAD OTHER EXPENSES (ADMINISTRATIVE EXPENSES) AS LOSS O N AMRITSAR PROJECT WRITTEN OFF IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD.AO IN MAKING DISALLOWANCE OF RS. 2,84,430/- U/S 14A R.W.R. 8D, MORE SO WHEN THERE IS NO EXEMPT INCOME. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERS ING THE ACTION OF LD. AO IN CHARGING INTEREST U/S 234B, 234C AND 234D OF INCOME TAX ACT, 1961. 6. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 5. GROUNDS ONE AND SIX ARE GENERAL IN NATURE AND GR OUND NO. 5 RELATES TO INTEREST WHICH IS CONSEQUENTIAL IN NATUR E. 6. IN SO FAR AS GROUNDS NO. 2 & 3 ARE CONCERNED, IT RELATES TO THE DISALLOWANCE OF OTHER EXPENSES (ADMINISTRATIVE EXP ENSES) AS LOSS ON AMRITSAR PROJECT WRITTEN OFF IN THE BOOKS BY TH E ASSESSEE FOR THE AY 2012-13. IT IS THE ARGUMENT OF THE LD. AR T HAT THOUGH THE SETTLEMENT WAS REACHED BETWEEN THE PARTIES ON 26.04 .2007 BY WAY OF SETTLEMENT DEED PURSUANT TO THE ARBITRATION, STI LL THE DISPUTES CONTINUE NECESSITATING THE ORDER DATED 11.02.2009 B Y THE ADDITIONAL DISTRICT COURT, AMRITSAR AND ORDER DATED 14.07.2011 BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIVIL RE VISION NO. 3081/2009, AND FINALLY A COMPROMISE BEFORE THE ADDI TIONAL 5 ITA NO. 1827/DEL/2017 DISTRICT COURT ON 17.8.2012 AS SUCH, THE ASSESSEE C ONCLUDED THAT THE COST/EXPENSES INCURRED ON THE AMRITSAR PROJECT HAVE BECOME IRRECOVERABLE ONLY DURING THE AY 2012-13, AND THEY WRITTEN THEM OFF IN THEIR BOOKS OF ACCOUNT IN THAT THAT YEAR ONL Y. BASING ON THIS HE SUBMITS THAT THE LOSS WAS CRYSTALLIZED ONLY IN T HE AY 2012-13, AS SUCH, THE SAME HAD TO BE ALLOWED AS EXPENDITURE. FURTHER HE SUBMITS THAT IN A REAL ESTATE PROJECT THE STOCK-IN- TRADE IS THE IMMOVABLE PROPERTY, AS SUCH, THE PROFIT OR LOSS WHI CH IS OTHERWISE CAPITAL IN NATURE WOULD BE REVENUE IN THIS PECULIAR BUSINESS. 7. PER CONTRA, IT IS THE ARGUMENT OF THE LD. DR THA T THE RIGHTS AND LIABILITIES OF THE PARTIES WERE CRYSTALLIZED IN THE SETTLEMENT DEED DATED 26.04.2007 RELEVANT FOR THE AY 2008-09 A ND NOTHING NEW AFFECTING OR IMPACTING THESE RIGHTS OR LIABILIT IES HAPPENED SUBSEQUENTLY. EVEN IF WE TAKE THE ORDER OF THE HON BLE HIGH COURT AS THE DATE FOR CRYSTALLIZATION OF THESE RIGHTS AND LIABILITIES IT WAS BY WAY OF ORDER DATED 14.07.2009 IN CIVIL REVISION NO. 3081/2009 EVERYTHING WAS SETTLED, AS SUCH, BY NO STRETCH OF I MAGINATION COULD IT BE PLEADED BY THE ASSESSEE THAT MERELY BECAUSE T HE CERTIFIED COPY OF THE HIGH COURT ORDER WAS OBTAINED AT A LATE R POINT OF TIME, 6 ITA NO. 1827/DEL/2017 THE CAUSE OF ACTION FOR WRITING OFF OF THE LOSS ARI SES. HE SUBMITTED THAT THE SUBSEQUENT SETTLEMENT PLEADED BY THE ASSES SEE ON 17.08.2012 HAS NOTHING TO DO WITH THE AMRITSAR PROP ERTY, BUT IT RELATES TO THE IMPLEMENTATION OF THE EARLIER SETTLE MENT IN RESPECT OF JALANDHAR PROPERTY AND IT CLEARLY SHOWS THAT IT WAS MADE IN RESPECT OF THE PAYMENT OF COMPENSATION MADE BY THE LAND ACQUISITION COLLECTOR. ACCORDING TO THE LD. DR THE EXPENDITURE OF RS. 64,72,52,645/- CLAIMED BY THE ASSESSEE DOES NOT RELATE TO THE AY 2012-13, EVEN OTHERWISE, HE PLEADS THAT THE EXPE NDITURE WAS CAPITAL IN NATURE AND CANNOT BE ALLOWED AS DEDUCTIO N. 8. WE HAVE CAREFULLY GONE THROUGH THE RECORD. BY W AY OF SETTLEMENT DEED DATED 26.04.2007 PURSUANT TO THE AR BITRATION PROCEEDINGS, THE PARTIES REACHED SOME TERMS OF UNDE RSTANDING AS TO THE DIVISION OF THE PROPERTY BETWEEN MR. ANIL JA IN AND MR. K.N. SHUKLA. SUBSEQUENT LITIGATION ON THIS ASPECT AT TH E INSTANCE OF THE ASSESSEE WAS PUT TO REST BY THE HONBLE PUNJAB & HA RYANA HIGH COURT IN CIVIL REVISION NO. 308/2009 BY WAY OF ORDE R DATED 14.07.2009. AS A MATTER OF FACT, THE ORDER OF THE HONBLE HIGH COURT ONLY CONFIRMED THE STATE OF AFFAIRS EVIDENCED BY THE 7 ITA NO. 1827/DEL/2017 SETTLEMENT DEED DATED 26.04.2007 AND IT DOES NOT AP PEAR FROM THE RECORD THAT ANYTHING NEW THAT HAD HAPPENED EITHER B Y WAY OF VOLUNTARY AGREEMENT BETWEEN PARTIES OR BY ANY COURT OF COMPETENT JURISDICTION IMPACTING OR ALTERING THE RIGHTS, LIAB ILITIES OR DISABILITIES OF THE PARTIES CRYSTALLIZED UNDER THE SETTLEMENT DEED DATED 26.04.2007. EVEN THE ALLEGED COMPROMISE ON 1 7.08.2012 REACHED BY THE PARTIES BEFORE THE DISTRICT JUDGE, J ALANDHAR BY WAY OF COMPROMISE DEED DATED 20.07.2012 ONLY RELIES ON THE SETTLEMENT DEED DATED 26.04.2007 AND DEALS WITH THE IMPLEMENTA TION OF SUCH DEED IN RESPECT OF THE PAYMENT OF COMPENSATION BY T HE LAND ACQUISITION COLLECTOR TO THE ASSESSEE. IN NO WAY T HIS COMPROMISE ALTERED, SUPERSEDED OR IMPACTED IN ANY WAY THE EARL IER SETTLEMENT DEED NOR AFFECTED ANY RIGHTS OR LIABILITIES CRYSTAL LIZED UNDER THE SETTLEMENT DEED DATED 26.04.2007. EVEN IF WE GO BY THE PLEA OF THE ASSESSEE IN RESPECT OF HIGH COURT LITIGATION, AT TH E LATEST FINALITY WAS ATTAINED BY 14.07.2009 WITH THE ORDER OF THE HO NBLE HIGH COURT AND NOTHING MORE WAS REQUIRED FOR THE ASSESSE E TO TREAT THE EXPENDITURE OR LOSS AS BAD DEBT TO BE WRITTEN OFF A FTER SUCH DATE. WE CAN, THEREFORE, SAFELY CONCLUDE THAT SUBSEQUENT TO THE AY 2010-11 NOTHING NEW HAPPENED GIVING RISE TO A CAUSE OF ACTION IN 8 ITA NO. 1827/DEL/2017 FAVOUR OF THE ASSESSEE TO WRITE OFF THE SO CALLED C OST/EXPENDITURE/ LOSS TREATING IT AS BAD DEBT. WE, THEREFORE, HAVE NO HESITATION TO HOLD THAT THE ASSESSING OFFICER IS PERFECTLY JUSTIF IED IN REACHING THE CONCLUSION THAT THE AMOUNT OF RS. 64,72,52,645/- WR ITTEN OFF UNDER THE HEAD OTHER EXPENSES (ADMINISTRATIVE EXPE NSES) AS LOSS OF AMRITSAR PROJECT WRITTEN OFF WAS DISALLOWABLE A S THE SAME DOES NOT RELATE TO THE AY 2012-13. 9. IN VIEW OF THIS CONCLUSION, WE DEEM IT NOT NECES SARY TO DEAL WITH THE NATURE OF EXPENDITURE. ON THIS PREMISE, W E CONFIRM THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE ADDITI ON. 10. NOW COMING TO THE ADDITION OF RS. 2,84,430/- BY INVOKING THE PROVISIONS U/S 14A READ WITH RULE 8D OF THE RULES, THE CONTENTION OF THE ASSESSEE IS THAT DURING THE RELEVANT ASSESSM ENT YEAR THERE WAS NO EXEMPT INCOME, AS SUCH, NO ADDITION COULD BE MADE BY INVOKING SECTION 14A OF THE ACT. RELIANCE IS BASED ON THE DECISION REPORTED IN CIT VS. HOLCIM INDIA PVT. LTD. 90 CCH 8 1 (DEL) (HC), WHEREIN IT WAS HELD THAT SECTION 14A CANNOT BE INVO KED WHEN NO EXEMPT INCOME WAS EARNED. ON THIS ASPECT IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE EARNED ANY EXEMPT INCOME. WE, 9 ITA NO. 1827/DEL/2017 THEREFORE, WHILE RESPECTFULLY FOLLOWING THE DECISIO N IN CIT VS. HOLCIM INDIA P. LIMITED (SUPRA) DIRECT THE AO TO DE LETE THE ADDITION OF RS. 2,84,430/- ON ACCOUNT OF INVOCATION OF SECTI ON 14A OF THE ACT READ WITH RULE 8D OF THE RULES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 29.08.2017 SD/- SD/- (G.D. AGRAWAL) (K.N. CHARY) PRESIDENT JUDICIAL ME MBER DATED: 29.08.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED ON 24.08.2017 DRAFT PLACED BEFORE AUTHOR 25.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 29.8.17 APPROVED DRAFT COMES TO THE SR.PS/PS 29.8.17 KEPT FOR PRONOUNCEMENT ON 29.8.17 FILE SENT TO THE BENCH CLERK 30.8.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.