ACIT, Panchkula V. M/s Housing Board Haryana, Panchkula

ITA 246/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90167 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: B K NOHRIA
• Keywords: Revenue expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A & B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 246/CHD/2014 ASSESSMENT YEAR: 2010-11 (BENCH A) THE ACIT, VS. HOUSING BOARD HARYANA, PANCHKULA CIRCLE, PANCHKULA PANCHKULA PAN NO. AAALH0022P APPELLANT BY : SHRI JYOTI KUMARI RESPONDENT BY : SHRI B.K. NOHRIA & ITA NO. 741/CHD/2014 ASSESSMENT YEAR: 2010-11 (BENCH B) THE DCIT, VS. HOUSING BOARD HARYANA, PANCHKULA CIRCLE, PANCHKULA PANCHKULA PAN NO. AAALH0022P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JYOTI KUMARI RESPONDENT BY : SHRI HARISH NAYYAR DATE OF HEARING : 27/05/2015 DATE OF PRONOUNCEMENT : 05.06.2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE S EPARATE ORDERS DATED 27.12.2013 AND 18.7.2014 RESPECTIVELY OF CIT(A), PA NCHKULA. 2. SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS IDENTICAL, THEREFORE, THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER. 2 3. WE SHALL DEAL WITH THE GROUNDS RAISED IN ITA NO. 246/CHD/2014 WHEREIN REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENSE INCUR RED BY THE ASSESSEE ON MAINTENANCE OF COLONIES AMOUNTING TO RS. 3,25,96,429/-. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T-ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS INC URRED VARIOUS EXPENSES FOR MAINTENANCE OF VARIOUS COLONIES. ACCORDING TO ASSE SSING OFFICER SUCH EXPENSES COULD NOT BE SAID TO BE INCURRED FOR THE PURPOSE OF BUSINESS AND, THEREFORE, THE SAME WAS DISALLOWED. 4. ON APPEAL, IT WAS MAINLY SUBMITTED THAT ASSESSEE PROCURED LAND FROM VARIOUS GOVERNMENT AGENCIES AND AFTER CONSTRUCTION OF HOUSE S; THE COLONIES WERE HANDED OVER TO THE CONCERNED MUNICIPAL COMMITTEE OR LOCAL AUTHORITY FOR FUTURE MAINTENANCE. SINCE THE COLONIES AT CHAKKPARPUR (GUR GAON) DID NOT FALL IN THE MUNICIPAL LIMIT, THEREFORE, BOARD HAS TO MAINTAIN T HE SAME. THE SAME WAS IN THE NATURE OF REVENUE EXPENDITURE AS ASSESSEE HAS NOT A CQUIRED ANY FIXED ASSETS BY INCURRING SUCH EXPENSES. IT IS FURTHER NOT CLEAR HO W ASSESSING OFFICER CAN SAY THAT ASSESSEE WOULD OBTAIN ENDURING BENEFIT OUT OF SUCH EXPENDITURE. THE LD. CIT(A) AGREED WITH THESE SUBMISSIONS AND DELETED THE ADDIT ION. 5. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER. 6. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE BENCH IN THE CASE OF PUNJAB URBAN DEVELOPMENT 3 AUTHORITY, MOHALI V ACIT, CHANDIGARH IN ITA NO. 759 /CHD/2008 FOR ASSESSMENT YEAR 2004-05 WHEREIN IT WAS HELD THAT EXPENSES INCU RRED ON MAINTENANCE OF COLONIES IS OF REVENUE NATURE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT IDENTICAL ISSUE CAME UP BEFORE THE CONSIDERATION OF THE TRIBU NAL IN THE CASE OF PUNJAB URBAN DEVELOPMENT AUTHORITY, MOHALI V ACIT, CHANDIGARH IN ITA NO. 759/CHD/2008 THIS ISSUE WAS DECIDED VIDE PARAS 110 TO 115, WHICH READS AS UNDER:- 110 GROUND NO. 4 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED T HAT THE ASSESSEE AUTHORITY WAS IN THE BUSINESS OF ACQUIRING LAND AND DEVELOPING IT AND AFTER DEVELOPMENT THE LAND, S AME WAS SOLD IN AUCTION. IT WAS MAINTAINING VARIOUS SE CTORS EVEN AFTER COMPLETION, FOR DIFFERENT TIME PERIOD RA NGING FROM 5-13 YEARS DEPENDING ON THE SAME. THAT MEANS THAT MAINTENANCE AND DEVELOPMENT IN RESPECT OF DEVELOPED SECTORS AND UNDEVELOPED SECTORS WAS BEING DONE BY PUDA. STAFF AND INFRASTRUCTURE AVAILABLE WITH THE PUDA WA S JOINTLY SHARED BY THE DEVELOPED AND UNDEVELOPED SEC TORS. THE ASSESSEE HAD DEBITED ENTIRE COST IN RESPECT OF THIS EXPENDITURE AND CLAIMED THE SAME AS REVENUE EXPENDI TURE. THE ASSESSEE WAS ASKED TO BIFURCATE THESE EXPENSES INTO TWO PARTS I.E. THE EXPENDITURE ON DEVELOPED AND DEV ELOPING SECTOR. IT WAS SUBMITTED THAT AS PER ACCOUNTING STA NDARD AS7, GENERAL ADMINISTRATION COST AND FINANCE COST W ERE TO BE ALLOWED AS REVENUE EXPENDITURE. THE ASSESSING O FFICER NOTED THAT IF THE ASSESSEE WAS FOLLOWING CASH SYSTE M OF ACCOUNTING WHEREAS AS7 PROVIDES THAT ACCOUNTING FOR SUCH CONTRACT HAS TO BE ON ACCRUAL SYSTEM. THEREFORE, ACCORDING TO HIM THE EXPENSES IN RELATION TO DEVEL OPING THE SECTORS WERE TO BE CAPITALIZED. HE FURTHER OBS ERVED THAT THE TOTAL ADMINISTRATIVE EXPENSES WERE 34,40,0 2,391/-. SINCE A SEPARATE ADDITION ON ACCOUNT OF CPF CONTRIB UTION WAS MADE AND THIS AMOUNT WAS REDUCED FROM TOTAL 4 EXPENDITURE AND OUT OF BALANCE AMOUNT 50% EXPENDITU RE WAS DISALLOWED BEING OF CAPITAL NATURE. 111 ON APPEAL BEFORE THE LD. CIT(A) IT WAS MAINLY SUBMITTED THAT ADDITION MADE BY THE ASSESSING OFFIC ER WAS NOT IN ACCORDANCE WITH AS7 AS WELL AS GENERAL ACCOU NTING PRINCIPLES. IT WAS SUBMITTED THAT ADMINISTRATIVE E XPENSES WHICH COULD NOT BE IDENTIFIED WERE REQUIRED TO BE S HOWN IN THE PROFIT AND LOSS ACCOUNT AND SHOULD NOT BE MADE AS PART OF THE CONTRACT. 112 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OBSERVED THAT AS PER THE DECISION OF HON'BLE SUPRE ME COURT IN CASE OF TUTICORIN ALKALI CHEMICALS AND FER TILIZERS LTD. VS. CIT, 227 ITR 172 (S.C) ACCOUNTING STANDARD WERE MADE FOR GENERAL GUIDELINES AND ACCOUNTING PURPOSES AND THE SAME CAN NOT BE USED FOR DETERMINING TAX LIABIL ITY. HE FURTHER OBSERVED THAT NO PROJECT CAN BE COMPLETED W ITHOUT GENERAL ADMINISTRATION EXPENSES AND ACCORDINGLY CONFIRMED THE ADDITION. 113 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). HE FURT HER SUBMITTED THAT THE ASSESSEE WAS FOLLOWING CASH SYST EM OF ACCOUNTING AND THE ASSESSING OFFICER HAS HIMSELF HE LD THAT INSTALLMENTS RECEIVED IN CASH ON ACCOUNT OF SALE O F HOUSES AND FLATS UNDER HIRE PURCHASE AGREEMENT WERE TAXABL E WHICH MEANS HE HAS TOTALLY FOLLOWED CASH SYSTEM OF ACCOUNTING AND THEREFORE, HE CANNOT TAKE A U TUR N AND DENY THE DEDUCTION ON ACCOUNT OF ADMINISTRATIVE EX PENSES WHICH HAVE BEEN INCURRED IN CASH. ALTERNATIVELY IT WAS SUBMITTED THAT IF THESE EXPENSES ARE HELD TO BE ON CAPITAL ACCOUNT THEN VALUE OF THE OPENING STOCK AND CLOSING STOCK SHOULD BE ADJUSTED ACCORDINGLY . 114 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMITTED THAT ADMINISTRATIVE EXPENSES WERE INCURRE D JOINTLY FOR DEVELOPED AND DEVELOPING SECTORS. THE ASSESSING OFFICER HAS ASKED FOR BIFURCATION OF THE SAME WHICH WAS NOT GIVEN. SHE FURTHER SUBMITTED THAT EV EN IF THE 5 ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AN D WHEN THE ASSESSEE WAS NOT SHOWING RECEIPT FROM A PARTICU LAR PROJECT THEN THE EXPENSES AGAINST THE SAME COULD NO T BE ALLOWED. 115 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. WE HAVE ALREADY DISCUSSED THE IMPLICATIONS OF CASH SYS TEM OF ACCOUNTING WHILE ADJUDICATING GROUND NO. 5 OF REVEN UES APPEAL IN ITA NO. 762/CHD/2008. BASICALLY ONCE THE CASH SYSTEM OF ACCOUNTING IS FOLLOWED THEN ALL RECEIPTS WHICH RELATE TO THE REVENUE FILED, HAVE TO BE TAXED. SIMI LARLY ALL CASH OUTGOINGS WHICH ARE IN THE REVENUE FIELD, HAD TO BE ALLOWED AS EXPENDITURE. SINCE THE ASSESSEE IS IN TH E BUSINESS OF PURCHASE AND DEVELOPING THE LAND AND SE LLING THE SAME AFTER THE DEVELOPMENT OF THE SAME AND THER EFORE, ADMINISTRATIVE EXPENSES INCURRED IS CLEARLY IN THE FIELD OF REVENUE. FURTHER THE ASSESSEE WAS FOLLOWING CASH S YSTEM OF ACCOUNTING, THEREFORE, ONCE CASH HAS BEEN SPENT OR OUTGONE FROM THE ASSESSEE SAME HAS TO BE TREATED AS EXPENDITURE. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION. 8. THOUGH IN THAT CASE THE ISSUE WAS MAINLY DECIDE D ON THE BASIS THAT ASSESSEE HAS FOLLOWED CASH SYSTEM OF ACCOUNTING, THEREFORE, ALL EXPENSES ARE TO BE ALLOWED. THERE IS FURTHER AN OBSERVATION THAT EXPENSES INVOL VED ARE OF REVENUE NATURE. IN THE PRESENT CASE ALSO THE NATURE OF EXPENSES IS UPL IFTMENT OF STREET LIGHTING, DEVELOPMENT AND LAYING OF ROADS, UNDERGROUND TANKS ETC. THESE ASSETS WOULD NEVER BELONG TO THE ASSESSEE BUT WOULD BELONG TO THE COMM UNITY LIVING IN THE COLONY AND THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS DERI VED ENDURING BENEFIT FROM SUCH EXPENSES, THEREFORE, IN OUR OPINION, THE ASSESSEE W AS UNDER OBLIGATION TO MAINTAIN THIS COLONY FOR WHICH SUCH EXPENSE IS A NECESSITY. THEREFORE, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 6 8. ITA NO. 741/CHD/2014 IN THIS CASE, THE FACTS AND ISSUES INVOLVED ARE IDENTICAL TO THE FACTS IN THE CASE OF REVENUE FOR A SSESSMENT YEAR 2010-11 IN ITA NO. 246/CHD/2014 WHICH WE HAVE ADJUDICATED ABOVE. F OLLOWING THE ABOVE ORDER, WE DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/06/2015. SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5 TH JUNE, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR