MOUNTAIN VIEW REALTORS P.LTD, MUMBAI V. ITO 1(2)(3), MUMBAI

ITA 1909/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93151 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Rule of consistency; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

MOUNTAIN VIEW REALTORS PVT LTD ITA NO. 1909 /M/201 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBER ITA NO. : 1909 /MUM/20 1 3 ( ASSESSMENT YEAR: 200 9 - 1 0 ) MOUNTAIN VIEW REALTORS PVT LTD , 1 & 2, WESTERN INDIA HOUSE, 1 ST FLOOR, SIR P M ROAD, FORT, MUMBAI - 400 001 .: PAN: AAFCM 1707 Q VS THE INCOME TAX OFFICER 1( 2 )(3 ), AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI YOGESH KAMAT /DATE OF HEARING : 13 - 05 - 2015 / DA TE OF PRONOUNCEMENT : 08 - 07 - 2015 ORDER PER AMIT SHUKLA , J.M. : THE A FORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 27.12 .201 2 , PASSED BY CIT(A) - II , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) R.W.S. 147 FOR THE ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF AO INVOKING OF PROVISIONS OF SECTION 147 R.W.S. 148 OF THE ACT. THE APPELLANT COMPANY PRAY S THAT THE REOPENING OF ASSESSMENT MAY BE TREATED AS BAD IN LAW. 2. WITHOUT PREJUDICE TO GROUND NO. 1, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INTEREST EXPENSES OF RS. 6,33,28,038/ - IS A CAPIT AL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE AND THE RELATED REIMBURSEMENT OF INTEREST EXPENSE AS CAPITAL RECEIPT AS AGAINST REVENUE RECEIPT. THE MOUNTAIN VIEW REALTORS PVT LTD ITA NO. 1909 /M/201 3 2 APPELLANT COMPANY PRAYS THAT THE SAID AMOUNT MAY BE HELD AS REVENUE EXPENDITURE AND INCOME RESPECTIVELY. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSES S EE SUBMITTED THAT GROUND NO. 1 CHALLENGING THE VALIDITY OF REOPENING U/S 147 IS NOT PRESSED. ACCORDINGLY, GROUND NO. 1 IS TREATED AS DISMISSED BEING NOT PRESSED. 3. REGARDING GROUND NO. 2, THE LD. COUNSEL S UBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008 - 09 WHEREIN THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. DR HAS ALSO ADMITTED THE ISSUE RAISED IN GROUND NO. 2 IS COVERED BY THE DECISIO N OF THE TRIBUNAL IN ASSESSEES OWN C ASE FOR THE EARLIER YEAR. 4. AFTER CONSIDERING THE IMPUGNED ORDER AND ALSO THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE, IT IS SEEN THAT THE ISSUE ARISING IN THE PRESENT ASSESSMENT YEAR ARE SIMILAR TO THE AY 2008 - 09, W HEREIN, THE TRIBUNAL HAS DELETED THE SAID ADDITION AFTER DETAILED DISCUSSION. THE RELEVANT FINDING AND THE OBSERVATION OF THE TRIBUNAL DELETING INTEREST ARE AS UNDER: 7. AFTER HEARING BOTH THE PARTIES, WE FIND THE ASSESSEE IS A COMPANY ENGAGED IN THE TRAD ING OF GOODS AND RAISED ADVANCED FROM COSMIC HOLDINGS PVT LTD AND WINRO COMMERCIAL (INDIA) LIMITED AND ADVANCED THE SAME TO PAYAL, WHO REPAID THE WHOLE ADVANCE ALONG WITH THE INTEREST IN THE SUBSEQUENT ASSESSMENT YEAR. AFTER EXAMINING THE FACTS OF THE CASE AND THE TRANSACTIONS INVOLVED THEREIN, WE FIND THERE IS NO DISCUSSION IN THE ORDER OF THE ASSESSING OFFICER AS WELL AS IN THE ORDER OF THE CIT (A) THAT THE ASSESSEE IS ENGAGED IN NEW BUSINESS TOWARDS ADVANCES AND THE INTEREST RECEIPTS AND INTEREST PAYMENT S ARE IN THE CAPITAL ZONE. CIT (A) AT PAGE 27 HAS HELD INITIALLY THESE ARE REVENUE RECEIPTS AND EXPENDITURES AND IN SUBSEQUENT PARAS HE VAGUELY MENTIONED THAT THE INTEREST EXPENDITURE AND INCOME FALLS IN CAPITAL FIELD. IN OUR MOUNTAIN VIEW REALTORS PVT LTD ITA NO. 1909 /M/201 3 3 OPINION, THE ORDER OF THE CIT (A) IS NOT WELL DRAFTED AND ITS SUFFERS FROM LACK OF CLARITY. WE DO NOT UNDERSTAND AS TO HOW INTEREST RECEIPTS ON ADVANCES GIVEN BY THE ASSESSEE BECOMES CAPITAL RECEIPTS AND THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE BECOMES A CAPITAL EXPENDITURE. I N OUR CONSIDERED OPINION, BOTH THE INTEREST INCOME AND THE INTEREST EXPENDITURE FALLS IN THE REVENUE FIELD ON THE GIVEN FACTS OF THE CASE ON HAND. REGARDING THE CHARGEABILITY OF THESE INTEREST INCOME AND ALLOWABILITY OF INTEREST EXPENDITURE, THE SAME REQUI RES TO BE DECIDED BASING ON THE ACCRUAL METHOD OF ACCOUNTING FOLLOWED THE ASSESSEE CONSISTENTLY. SINCE, THERE IS NO FINDING OF THE FACT THAT THE SAID INTEREST INCOME OF RS. 26,57,151/ - IS RELATABLE TO THE AY UNDER CONSIDERATION, ASSESSING OFFICER HAS RIGHT LY TAXED THE SAME IN THE AY 2008 - 2009. FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE INTEREST EXPENDITURE PAID TO WINRO IN THE AY 2009 - 2010 SHOULD BE ALLOWED AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN THAT YEAR. THEREFORE, WE ARE OF THE OPIN ION THAT THE INTEREST RECEIPT AND EXPENDITURE DO NOT CONSTITUTE CAPITAL RECEIPT AND EXPENDITURE. TO THAT EXTENT ASSESSEE GETS RELIEF. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 5. SINCE SIMILAR FACTS ARE PER ME A T ING IN THIS YEAR ALSO WHEREI N IDENTICAL ADDITION HAS BEEN MADE ON AMOUNT OF DISALLOWANCE OF EXCESS INTEREST ON THE GROUND THAT LD. CIT(A) HAS HELD THAT INTEREST EXPENSES OF RS. 6,33,28,038/ - AND THE RELATED REIMBURSEMENT OF INTEREST EXPENSE I S A CAPITAL RECEIPTS . ACCORDINGLY, RESPECT FULLY FOLLOWING THE EARLIER YEARS PRECEDEN CE , WE HOLD THAT INTEREST RECEIPTS AND THE EXPENDITURE DOES NOT CONSTITUTE EITHER CAPITAL RECEIPT OR CAPITAL EXPENDITURE . THUS, GROUND NO. 2, AS RAISED BY THE ASSESSEE, IS TREATED AS ALLOWED. 6. BESIDES THIS, THE ASSESSEE HAS RAISED FOLLOWING AS AN ADDITIONAL GROUND: MOUNTAIN VIEW REALTORS PVT LTD ITA NO. 1909 /M/201 3 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO REDUCE THE INTEREST INCOME OF RS. 26,57,151/ - FROM THE TOTAL INCOME OF THE CAP TIONED ASSESSMENT YEAR, AS THE SAME IS ALREADY TAXED IN AY 2008 - 09. 7. BEFORE US, THE LD. COUNSEL SUBMITTED THAT IN AY 2008 - 09, THE HONBLE ITAT VIDE ITS ORDER DATED 14.01.2015 HAS HELD THAT INTEREST INCOME OF RS. 26,57,151/ - IS TAXABLE IN THE ASSESSMENT Y EAR 2008 - 09 ON ACCRUAL BASIS OF ACCOUNTING. THE ASSESSEE HAS OFFERED THIS INCOME IN THE AY 2009 - 10, THEREFORE, THIS INCOME SHOULD BE REDUCED FROM THE TOTAL INCOME OF THE ASSES S EE FOR THE YEAR UNDER CONSIDERATION I.E. AY 2009 - 10. ACCORDINGLY, WE DIRECT THE AO THAT THE AMOUNT OF RS. 26,51,151/ - WHICH IS HELD TO BE TAXABLE IN THE AY 200 8 - 0 9 SHOULD BE REDUCED FROM THE TOTAL INCOME OF THE ASSESSEE FROM THE ASSESSMENT YEAR 2009 - 10, IF THE ASSESSEE HAS INCLUDED IT AS AN INCOME IN THE RELEVANT PREVIOUS YEAR. WITH T HIS DIRECTION, THE ASSESSEES ADDITIONAL GROUND IS TREATED AS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JU LY , 2015. SD/ - SD/ - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH JU LY , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 2 , MUMBAI 4) THE CIT 1 , MUMBAI . 5) , , / MOUNTAIN VIEW REALTORS PVT LTD ITA NO. 1909 /M/201 3 5 THE D.R. B BENC H, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDE R / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS