DCIT 24(3), MUMBAI V. GUNDECHA BUILDERS, MUMBAI

ITA 2087/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8885 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI PRAMOD KUMAR, AM AND SHRI V. DURGA RA O, JM I.T.A.NO. 2087/MUM/2010 ASSESSMENT YEAR : 2006-07 THE DY. COMMISSIONER OF INCOME- TAX-24(3), R.NO. 701, C-11, 7 TH FLOOR, B.K.C. BANDRA (E), MUMBAI 400 051. VS. M/S. GUNDECHA BUILDERS, 141, GUNDECHA HOUSE, JAWAHAR NAGAR, GOREGAON (W), MUMBAI 400 062. PAN: AAAFG 9848 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. NAYAK RESPONDENT BY : SHRI VIMAL PUNMIYA O R D E R PER V. DURAGA RAO, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-34, MUMBAI, DA TED 18.12.2009 FOR THE ASSESSMENT YEAR 2006-07 2. THE GROUNDS TAKEN IN THIS APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.80IB(10) ON THE SALE PROCEEDS OF THE STILT PARK ING. 2. ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY TH E A.O. ON ACCOUNT OF RE-ALLOCATION OF EXPENSES AS IN GENERAL P&L A/C. THE ASSESSEE HAS DEBITED EXPENSES AGAINST THE INCOME OF SAKI NAKA PR OJECT ONLY, WHICH IS FULLY TAXABLE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF REAL ESTATE PROJECTS. ASSESSEE HAS ONGOING PROJECTS IN HAND AT POISOR & SAKINAKA , ANDHERI, ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A SSESSEE WAS SPECIFICALLY ASKED TO SUBMIT THE DETAIL IN RESPECT OF INCOME DERIVED F ROM SALE OF STILT PARKING AND INCOME DERIVED FROM VARIOUS TYPES OF DEPOSITS RECEI VED FROM PURCHASES IN RESPECT OF SOCIETY FORMATION AND ELECTRICITY METERS ETC. DU RING THE COURSE OF ASSESSMENT, IT WAS OBSERVED BY THE A.O. THAT ASSESSEE HAD RECEIVE D AN AMOUNT OF RS. ITA NO.2087/M/2010 M/S.GUNDECHA BUILDERS . . 2 63,81,000/- AGAINST SALE OF STILT PARKING AREA SOLD TO THE FLAT OWNERS. AS THE SAID AMOUNT IS RECEIVED BY THE ASSESSEE FOR STILT PARKIN G , THE SAME CANNOT BE TREATED A RECEIVED AGAINST SALE OF RESIDENTIAL PREMISES AS PE R THE PROVISIONS OF SECTION 80IB(10) OF THE ACT. IT IS CONTENDED THAT AN AMOUNT OF RS. 33,92,778/- HAS BEEN INCURRED FOR CONSTRUCTION OF STILT PACKING WHICH AM OUNTS TO 53.17% OF THE TOTAL SALES VALUE. STILT PARKING CONSISTS OF ONLY COLUMN S AND IT IS NOT OUT OF PLACE TO MENTION THAT NO BUILDING CAN STAND WITHOUT HAVING C OLUMNS AT THE BASE. FURTHER THE CEILING OF THE STILT PARKING IS NOTING ELSE BUT THE FLOOR OF FIRST FLOOR FLATS AND THE FLOORING PROVIDED FOR STILT PARKING HAS TO BE THERE AND NO SPECIAL TREATMENT IS REQUIRED OR IN FACT GIVEN TO THE FLOORING OF STILT PARKING. THEREFORE, IT CAN BE VERY WELL SAID THAT NO EXTRA EXPENSE IS REQUIRED FOR CON STRUCTION OF STILT PARKING BUT THE SAME IS CONSTRUCTED AUTOMATICALLY, IF THERE IS NO R ESIDENTIAL FLAT CONSTRUCTED ON GROUND FLOOR. THE STILT IS SOLD OUT AS IT CAN BE US ED FOR ONLY PARKING VEHICLES. THE AO HELD THAT THE ENTIRE CONSIDERATION RECEIVED IN R ESPECT OF STILT PARKING IS THE INCOME OF THE ASSESSEE NOT EXIGIBLE TO DEDUCTION U/ S.80IB. THEREFORE, HE DENIED DEDUCTION OF RS. 63,81,000/- UNDER SECTION 80IB(10) OF THE ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A). 3. THE LEARNED CIT(A) HAS OBSERVED THAT PARKING I S PART AND PARCEL OF THE HOUSING PROJECT THAT IS THE FIRST AND FOREMOST REQU IREMENT OF THE RESIDENTS OF THE RESIDENTIAL UNITS. THEREFORE, IT CANNOT BE SAID TH AT SALE PROCEEDS OF STILT PARKING IS OUTSIDE THE PURVIEW OF SEC.80-IB(10) OF THE ACT. T HE PARKING ARE IN BUILT AND APPROVED IN THE RESIDENTIAL STRUCTURE OF THE RESIDE NTIAL BUILDING AND NO SUCH SEPARATE APPROVAL ARE TAKEN. THE AO HAS NOT BROUGHT ON RECORD THAT WHICH PART OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED FOR PARKI NG IS BOGUS. AFTER CONSIDERING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF BRAHMA ASSOCIATES V. JCIT, HE DIRECTED THE AO TO ALLOW THE DEDUCTION TO THE ASSESSEE U/S.80IB(10) ON ITA NO.2087/M/2010 M/S.GUNDECHA BUILDERS . . 3 SALE PROCEEDINGS OF STILT PARKING. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 7223/MUM/2008, ORDER DATED 30 TH APRIL, 2010. 5. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE INVOLV ED IS WHETHER THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION ON SALE PRO CEEDS OF THE STILT PARKING OUTSIDE THE PURVIEW OF SECTION 80IB(10). ADMITTEDLY, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS NOT ELIGIBLE OR DEDUCTION U/S.80IB( 10) OF THE ACT. THE PLAIN READING OF SECTION 80IB(10) HAD CLEARLY INDICATED THAT THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING P ROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH, 2007 BY A LOCAL AUTHORITY AND FU LFILLMENT OF OTHER CONDITIONS. IN THE PRESENT CASE, STILT PARKING IS PART AND PARCEL OF THE HOUSING PROJECT, WHICH WAS APPROVED BY THE COMPETENT AUTHORITY STILT PARKING W AS SOLD TO THE RESIDENTS FOR HOUSING PROJECTS TO WHOM THE FLATS WERE ALREADY SOL D AND THEREFORE, THERE IS NO CASE FOR DENYING THE CLAIM OF THE ASSESSEE. EVEN IN THE ASSESSEES OWN CASE, IN ITA NO. 7223/MUM/2008 FOR THE ASSESSMENT YEAR 2005- 06, THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE IN ISSUE OF STILT PARKING . WE, THEREFORE, IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL, FIND NO INFIRMITY I N THE ORDER OF THE CIT(A). 6. THE OTHER ISSUE RAISED IN THIS APPEAL RELATES TO THE EXPENSES DEBITED AGAINST INCOME FROM SAKI NAKA PROJECT WHICH IS FULL Y TAXABLE. THE FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT APART FROM RENT, DIVIDEND OR INTEREST ASSESSEE HAS CREDITED IN ITS PROFIT AND LOSS ACCOUNT, PROFIT FROM POISER PROJECT AND SAKI NAKA PROJECT WERE SHOWN AT RS. 25,94,15,536/- AND RS. 10,16,72,553/- RESPECTIVELY. FURTHER THE ASSESSEE HAS DEBITED SEVERAL EXPENSES AGAINST THIS INCOME. HOWEVER, THE ASSESSEE ITA NO.2087/M/2010 M/S.GUNDECHA BUILDERS . . 4 HAS CLAIMED DEDUCTION U/S.80IB @ 100% AT RS. 25,94, 15,536/- I.E. ENTIRE PROFIT OF POISER PROJECT AND ENTIRE EXPENSES ARE THEREFORE DE BITED AGAINST INCOME FROM SAKI NAKA PROJECT WHICH IS FULLY TAXABLE. IT IS ALSO NO TICED THAT AS PE THE PROFIT AND LOSS ACCOUNT, THE TOTAL EXPENDITURE DEBITED AGAINST THE INCOME FROM SAKI NAKA PROJECT IS T RS.39,03,533/-. AS THE SAME IS ATTRIBUTABLE TO BOTH THE PROJECTS, THE SAME IS DIVIDED AMONG BOTH THE PROJECTS IN THE RATIO OF THE IR PROFITS CREDITED TO PROFIT AND LOSS ACCOUNT TO MEET THE ENDS OF JUSTICE. THE PROFI T CREDITED TO PROFIT AND LOSS ACCOUNT IN RESPECT OF POISER PROJECT AND SAKI NAKA PROJECT AT RS. 25,94,15,536/- AND RS./10,16,72,553/- RESPECTIVELY. THEREFORE, THE RATIO BETWEEN THE TWO COMES TO 2.5514 : 1. THEREFORE, THE EXPENDITURE ALLOCATED TO POISER PROJECT IS CALCULATED AT RS. 28,08,690/- AND SAKI NAKA PROJECT AT RS. 11, 00,843/- RESPECTIVELY. IN VIEW OF THIS THE TOTAL INCOME IN RESPECT OF POISER PROJE CT IS COMPUTED AT RS. 25,66,06,846/- I.E. RS. 25,94,15,536/- - MINUS RS. 28,08,690/- AND INCOME FROM SAKI NAKA PROJECT IS TAKEN AT RS. 10,444,81,243/- I .E. RS. 10,16,72,553/- MINUS RS. 11,08,8943/-. 7. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE A ND DELETED THE ADDITION BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AS SESSING OFFICER AND SUB MISSIONS OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE CHART FURNISHED BY THE APPELLANT. IT IS CLEAR FROM THE DETAILS OF EXPENSES FURNISHED THAT SEPARATE EXPENDITURE WAS DE BITED UNDER ALL HEADS OF POISER PROJECT AND THE ASSESSING OFFICER H AS ALSO NOT POINTED OUT A SINGLE INSTANCE IN HIS ORDER AS TO WH ICH EXPENDITURE WAS RELATED TO POISER PROJECT BUT THE SAME WAS DIVE RTED TO SAKI NAKA PROJECT FOR REDUCING THE TAXABLE INCOME. HE HA S WORKED SIMPLY ON PRESUMPTION WITHOUT BRINGING ANY EVIDENCE ON REC ORD. ON THE OTHER HAND, THE APPELLANT HAS MAINTAINED SEPARATE B OOKS OF ACCOUNTS AND BANK ACCOUNT FOR THE POISER PROJECT WH EREIN NO DISCREPANCY WAS POINTED OUT BY THE ASSESSING OFFICE R. SO, IN THE ABSENCE OF ANY CONCLUSIVE EVIDENCE AND INVESTIGATIO N DONE BY THE ASSESSING OFFICER AND IN VIEW OF THE SUBMISSION AND VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ALLOCATING T HE EXPENDITURE OF RS.28,08,690/- TO POISER PROJECT WHEREIN EXPENDITUR E OF RS. 1,05,11,664/- WAS ALREADY DEBITED BY THE APPELLANT . BEFORE MAKING ITA NO.2087/M/2010 M/S.GUNDECHA BUILDERS . . 5 RE-ALLOCATION OF DISALLOWANCE, THE ASSESSING OFFICE R SHOULD HAVE POINTED OUT THE DEFECTS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND THE ITEMS OF EXPENDITURE WHICH WERE DIVERTED FO R REDUCING THE TAXABLE INCOME. INSTEAD OF THAT, THE ASSESSING OFF ICER HAS SIMPLY MADE REALLOCATION OF EXPENSES OF THE PROJECT WHICH CANNOT BE APPROVED AND CONFIRM IN THE ABSENCE OF ANY EVIDENCE . THEREFORE, THE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE AP PELLANT. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO ALLOW DEDUCTION AS CLAIMED BY THE APPELLANT. 8. ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATT ER IN APPEAL BEFORE THE TRIBUNAL. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDERS OF THE AUTHORITIES BELOW. 10. THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTE D OUT IN THE PAPER BOOK PAGE NO,. 36, 41 AND 61 AND SUBMITTED THAT EACH PR OJECT SEPARATE ACCOUNTS WERE MAINTAINED AND NO DEFECT WAS POINTED OUT BY THE AO AND IN ANY CASE THE EXPENSES INCURRED FOR THE POISER PROJECT WAS NOT DEBITED TO THE PROFIT & LOSS ACCOUNT OF SAKI NAKA PROJECT. HE RELIED ON THE ORDERS OF THE LEARNE D CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS PLACED BEFORE US. IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD MAINTAINED TWO SEPARATE ACCOUNTS FOR P OISER AS WELL AS SAKI NAKA PROJECTS AND THE CIT(A) GAVE A FINDING THAT THE ASS ESSEE HAD MAINTAINED TWO SEPARATE ACCOUNTS. THE LEARNED CIT(A) HAS GIVEN A F URTHER FINDING THAT THE A.O. PRESUMED THAT THE ASSESSEE MIGHT HAVE DEBITED THE E XPENDITURE RELATING TO POISER PROJECT TO SAKI NAKA PROJECT TO GET THE BENEFIT U/S .80IB(10) BECAUSE THE PROJECT IS FULLY ELIGIBLE FOR DEDUCTION. IT IS A FACT THAT THE ASSESSEE HAS ALREADY DEBITED EXPENSES FOR POISER PROJECT OF RS.1,05,11,664/- AND THE A.O. HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT SUBMITTED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE FIND ANY INFIRMITY IN THE ORDER OF THE C IT(A) AND UPHOLD THE SAME. ITA NO.2087/M/2010 M/S.GUNDECHA BUILDERS . . 6 12. IN THE RESULT, THE APPEAL FILED BY THE REVENU E IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY, 2011. SD. SD. (PRAMOD KUMAR) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED THE 21 ST JANUARY, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-24, MUMBAI 4. THE CIT(A)-34, MUMBAI 5. THE DR G BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI