VSL Builders Pvt. Ltd., Hyd, Hyderabad V. DCIT, Circle-3(3), Hyderabad, Hyderabad

ITA 21/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6468 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 20-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 08-01-2016
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Revenue expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 21/HYD/2016 ASSESSMENT YEAR: 2006-07 M/S. VSL BUILDERS PRIVATE LIMITED, HYDERABAD [PAN: AABCV6340E] VS THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR FOR REVENUE : SHRI M. SITARAM, DR DATE OF HEARING : 20-06-2016 DATE OF PRONOUNCEMENT : 24-06-2016 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-5 HYDERABAD DA TED 31-08-2015 AGAINST THE DISALLOWANCE OF RS. 2,64,200/- MADE BY THE ASSESSING OFFICER (AO) AND CONFIRMED BY THE CIT(A ). 2. BRIEFLY STATED, ASSESSEE IS IN THE BUSINESS OF CONS TRUCTION OF RESIDENTIAL FLATS AND AS PART OF P&L A/C CLAIMED REVE NUE EXPENDITURE. ONE SUCH ITEM OF REVENUE EXPENDITURE, BE ING PART OF CONSTRUCTION EXPENDITURE IN SCHEDULE 8, WAS AN AMOUNT OF RS. 2,64,200/- CLAIMED TOWARDS LIFT. AO WAS OF THE OPINIO N THAT THIS EXPENDITURE CANNOT BE ALLOWED. HIS REASONING CAN AT B EST BE EXTRACTED AS UNDER: 4. ON VERIFICATION OF THE CONSTRUCTION EXPENDITUR E DEBITED TO THE P&L ACCOUNT, IT IS OBSERVED THAT THE ASSESSEE H AS DEBITED AN I.T.A. NO. 21/HYD/2016 M/S. VSL BUILDERS PRIVATE LIMITED :- 2 -: AMOUNT OF RS. 2,64,200/- TOWARDS LIFT. AS PER SECT ION 37 OF THE IT ACT ANY EXPENDITURE NOT BEING EXPENDITURE OF THE NA TURE DESCRIBED IN SEC. 30 TO 36 AND NOT BEING IN THE NATURE OF CAP ITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE, LAID OUT OR EXPE NDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PRO FESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE ASSES SEES CASE, ASSESSEE HAS SPENT ABOVE AMOUNT TOWARDS LIFT WHICH IS IN CAPITAL NATURE. HENCE, THE SAME IS DISALLOWED AND ADDED TO THE TOTAL INCOME AND ALLOW THE DEPRECIATION @15% ON THE ABOVE AMOUNT. 3. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE ASSESSEES NATURE OF BUSINESS IS DEVELOPMENT OF RESIDENTIAL UNITS AND THE RESIDENTIAL UNITS FORMS PART OF STOCK-IN-TRADE TO THE AS SESSEE COMPANY AND NOT A FIXED ASSET. AS A RESULT. THE EXPEN DITURE SO INCURRED IN CONSTRUCTING SUCH RESIDENTIAL UNITS IS REV ENUE EXPENDITURE, THEREFORE, EXPENDITURE INCURRED TOWARDS TH E LIFT AMOUNTING TO RS. 2,64,200/- WAS CLAIMED AS REVENUE E XPENDITURE. THE BUILDING ALONG WITH LIFTS AND OTHER FITTINGS ARE ALL TRADABLE COMMODITY WHICH IS STOCK-IN-TRADE. THE CONTENTION OF THE ASSESSEE WAS THAT THE EXPENDITURE WAS INCURRED IN THE NORMAL CO URSE OF BUSINESS AND HENCE TO BE ALLOWED AS BUSINESS EXPENDI TURE. 4. LD. CIT(A) HOWEVER, PECULIARLY CONFIRMED THE SAME BY STATING AS UNDER: 6. THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT OF RESIDENTIAL UNITS. BY HIS OWN ADMISSION, RESIDENTI AL UNITS FORM PART OF THE STOCK-IN-TRADE OF THE ASSESSEE COMPANY. THE RESIDENTIAL UNITS I.E., FLATS, ETC., WERE SOLD TO INDIVIDUAL CUSTOMER S. THE LIFT WAS NEVER PART OF THOSE SALE PROCEEDS. NONE OF THE FLAT OWNE RS HAVE THE RIGHT OVER THE LIFT. HENCE, I AGREE WITH THE ASSESSING O FFICER THAT EXPENDITURE INCURRED FOR LIFT IS A CAPITAL EXPENDIT URE AND THE ASSESSEE IS ENTITLED FOR DEPRECIATION ONLY. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT THE CLAIM OF ASSESSEE IS ALLOWABLE AS REVENUE EX PENDITURE. PROVISION OF LIFT IN A RESIDENTIAL APARTMENT COMPLEX B EING CONSTRUCTED BY ASSESSEE IS PART OF THE CONSTRUCTION EXPE NDITURE I.T.A. NO. 21/HYD/2016 M/S. VSL BUILDERS PRIVATE LIMITED :- 3 -: AND IS BEING PROVIDED TO THE RESIDENTS OF THE APARTMENT AS A COMMON FACILITY/PROVISION. EVEN THOUGH INDIVIDUAL A PARTMENTS ARE SOLD TO THE INDIVIDUAL FLAT OWNERS, THERE WILL BE CE RTAIN COMMON PROVISIONS LIKE LIFT, WATER, PARKING, PARKS AND ENTE RTAINMENT AREA, CLUB HOUSE ETC., WHICH ARE NOT OWNED BY THE INDIVIDUA L FLAT OWNERS, BUT ARE PROVIDED TO THE RESIDENTS AS A WHOLE. LIFT IS ONE SUCH EXPENDITURE WHICH IS NECESSARY IN THE CONSTRUCTION OF B UILDING FOR COMMON USE OF RESIDENTS AND ASSESSEE BEING IN DEVELO PMENT OF RESIDENTIAL UNITS, THE CLAIM OF LIFT AS REVENUE EXPEN DITURE AS PART OF CONSTRUCTION EXPENDITURE IS ADMISSIBLE. I AM OF THE O PINION THAT BOTH AO AND CIT(A) ERRED IN TREATING IT AS CAPITAL EX PENDITURE AS THEY MISUNDERSTOOD THE NATURE OF ASSESSEES BUSINESS AN D CLAIM OF EXPENDITURE. FOR THESE REASONS, I ALLOW ASSESSEES G ROUNDS AND DIRECT THE AO TO ALLOW THE LIFT EXPENDITURE, WHILE WITH DRAWING DEPRECIATION SO ALLOWED BY HIM IN THE COMPUTATION OF I NCOME. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 24 TH JUNE, 2016 TNMM I.T.A. NO. 21/HYD/2016 M/S. VSL BUILDERS PRIVATE LIMITED :- 4 -: COPY TO : 1. M/S. VSL BUILDERS PRIVATE LIMITED, HYDERABAD. C/O . P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3- 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3( 3 ), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-5, HYDERABAD 4. THE PR. COMMISSIONER OF INCOME TAX-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.