HAWARE INFRASTRUCTURE PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 15(2)(1), MUMBAI

ITA 2543/MUM/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1397 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 24-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Deemed to accrue or arise in india; Competent authority; Commercial expediency; Revenue expenditure; Capital expenditure; Set aside; Capital Gains
• Section: 143(3); 133A; 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , H BENCH MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2543/MUM/2019 FOR ASSESSMENT YEARS: 2013-20 14 HAWARE INFRASTRUCTURE PVT. LTD. 413-416, VARDHAMAN MARKET, SECTOR-17, VASHI, NAVI MUMBAI-400705. PAN : AABCH3852R VS ITO- 15(2)(1), ROOM NO. 452, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO. 4021/MUM/2019 FOR ASSESSMENT YEARS: 2013-20 14 ITO- 15(2)(1), ROOM NO. 452, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS HAWARE INFRASTRUCTURE PVT. LTD. 413-416, VARDHAMAN MARKET, SECTOR-17, VASHI, NAVI MUMBAI-400705. PAN : AABCH3852R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.P. BAIRAGRA (AR) RESPONDENT BY : SHRI B. SRINIVAS (CIT-DR) & CHAUDHARY ARUN KUMAR SINGH SR DR DATE OF HEARING : 26/08/2019 DATE OF PRONOUNCEMENT : 30/08/2019 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE CROSS APPEAL ARE DIRECTED AGAINST THE ORDER O F LD. COMMISSIONER OF INCOME TAX (APPEALS)-24, [CIT(A)], MUMBAI DATED 18. 03.2019 FOR ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: ON FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, TH E CIT(A) HAS ERRED IN: ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 2 1) UPHOLDING THE DISALLOWANCE OF RS.59.15 CRORES PA ID BY THE APPELLANT DURING THE YEAR TO THE REDDY FAMILY IN RESPECT OF DEVELOPM ENT OF THE PROJECT -FANTASIA BUSINESS PARK AT PLOT NO.47, SECTOR 30-A, VASHI, NA VI MUMBAI. 2) UPHOLDING THAT THE AMOUNT PAID OF RS.59.15 CRORE S BY THE APPELLANT WAS TOWARDS PURCHASE OF EQUITY SHARES OF THE COMPANY MO HAN ENTERTAINMENT CO. LTD. (MECL) FROM THE REDDY FAMILY AND NOT AS PART OF THE PROJECT COST AS CLAIMED BY THE APPELLANT FOR IMPROVING & BETTERMENT OF ITS DEV ELOPMENT RIGHTS OF THE PROJECT FANTASIA BUSINESS PARK AT PLOT NO.4 7, SECTOR 30-A, VASHI, NAVI MUMBAI. THE CIT(A) HAS FURTHER ERRED IN NOT ACCEPTING THE APPEL LANT'S PLEA THAT THE VALUE OF PURCHASE CONSIDERATION PAID IN RESPECT OF THE EQUIT Y SHARES OF MECL, ACQUIRED FROM THE REDDY FAMILY WAS RS.39,99,000/- ONLY, AND THAT THE AMOUNT OF RS.59.15 CRORES PAID TO THE REDDY FAMILY BY THE APPELLANT WA S FOR IMPROVING & BETTERMENT OF ITS DEVELOPMENT RIGHTS OF THE PROJECT FANTASIA B USINESS PARK AT PLOT NO.47, SECTOR 30-A, VASHI, NAVI MUMBAI. THE PAYMENT OF RS. 59.15 CRORES BEING PART OF THE PROJECT COST SHOULD HAVE BEEN ALLOWED. 3) UPHOLDING THE DISALLOWANCE OF EXPENDITURE OF RS. 3.07 CRORES PERTAINING TO CERTAIN FINISHING WORK AND ADDRESSING GRIEVANCES OF THE CUSTOMERS POST RECEIPT OF OCCUPANCY CERTIFICATE (OC) VIDE LETTER DTD. 29/10/2 011 FOR THE PROJECT 40 / 30A, VASHI SITE FANTASIA. 2. THE REVENUE IN ITS CROSS APPEAL HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF NOTIONAL RENT AL INCOME ON UNSOLD FLATS BEING STOCK IN TRADE, STATING THAT IDENTICAL ISSUES FOR A .Y 2009-10, 2010-11 & 2011-12 HAD BEEN DECIDED IN THE FAVOUR OF THE ASSESSEE COMP ANY, WITHOUT APPRECIATING THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISIONS OF LD . CIT(A) IN EARLIER ASSESSMENT YEARS AND APPEAL HAS BEEN FILED BEFORE THE HON'BLE ITAT.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF NOTIONAL RENT AL INCOME ON UNSOLD FLATS, WITHOUT APPRECIATING THAT AS PER THE PROVISIONS OF SECTION 22 OF THE IT ACT, 1961, THE NOTIONAL RENTAL INCOME FROM UNSOLD PROPERTIES O UGHT TO HAVE BEEN BROUGHT TO TAX AS INCOME FROM HOUSE PROPERTY AND THIS POSITION HAS BEEN UPHELD IN THE CASE OF CIT VS ANSAL HOUSING FINANCE & LEASING CO. LTD. BY THE HON'BLE DELHI HIGH COURT.' ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 3 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND CONSTRUCTIO N, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 30.11.2013 DE CLARING TOTAL INCOME AT RS. 3,96,673/- UNDER THE NORMAL PROVISIONS OF T HE ACT AND RS. 18,96,884/- UNDER THE PROVISIONS OF SECTION 115JB. SUBSEQUENTLY, THE ASSESSEE REVISED ITS RETURN OF INCOME 01.03.2014. T HE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.03.2016 ASSESS ING TOTAL INCOME AT RS. 68,66,28,860/-. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE ADDITION/DISALLOWANCE ON ACCOUNT OF EXPENSES O F RS. 59,15,26,586/-. THE ASSESSING OFFICER ALSO ADDED NOTIONAL RENT ON C LOSING STOCK OF UNSOLD UNITS AT RS. 6,39,66,266/- AND ADDITION OF OTHER EX PENSES OF RS. 3,07,43,337/-. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DIRECT EXPENSES OF RS. 59.15 CRORE AND OTHER EXPENSES OF RS. 3.07 CRORE WAS UPHELD, HOWEVER, THE ADDITION ON ACC OUNT OF NOTIONAL RENT ON CLOSING STOCK OF UNSOLD UNITS AT RS. 6.39 CRORE WAS DELETED. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), BOTH THE PART IES HAVE FILED THEIR RESPECTIVE APPEAL BY RAISING THE GROUNDS OF APPEAL AS REFERRED ABOVE. 4. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 4 5. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT GROUND NO.1 & 2 RAISED BY ASSESSEE ARE COVERED IN ASSESSEES OW N CASE FOR A.Y. 2012-13 IN ITA NO. 1208/MUM/2018 DATED 31.05.2019. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE WAS DEVELOPING A COMMERCI AL PROJECT FANTASIA BUSINESS PARK, PLOT NO. 47, SECTOR 30A, VASHI, NAV I MUMBAI. THE ASSESSEE ACQUIRED DEVELOPMENT RIGHT IN THE PROJECT FROM MOHAN ENTERTAINMENT COMPANY LTD. (MECL) IN THE YEAR 2003. THE MECL GROUP WAS CONTROLLED BY REDDY FAMILY. THE REDDY GROUP, WH O OWNED MECL ENTERED INTO SERIES OF AGREEMENT WITH ASSESSEE GROU P THROUGH LATE SATISH KASHINATH HAWARE (PROMOTER OF ASSESSEE). DURING TH E PROGRESS OF PROJECT THE PROMOTER OF BOTH THE GROUP DIED. AFTER DEATH OF PROMOTER DIRECTORS OF BOTH THE GROUP, THE SUCCESSOR DIRECTORS OF BOTH THE GROUPS STARTED CLAIMING CONTROL ON THE MANAGEMENT OF MECL THROUGH BOARD WHI CH WERE DISPUTED BY THE OTHER GROUP I.E. MECL WAS CLAIMED BY REDDY G ROUP AND HAWARE GROUP. SUBSEQUENTLY, WITH THE INTERVENTION OF WELL- WISHER AND COMMON FRIENDS, THE ENTIRE DISPUTE AND DIFFERENCE BETWEEN HAWARE GROUP AND REALITY GROUP WERE RESOLVED AS PER THE AGREEMENT OF SETTLEMENT/ SUBSTITUTED AGREEMENT FOR SETTLEMENT DATED 05.02.2012 WITH ADDE NDUM DATED 18.03.2012 AND FURTHER ADDENDUM DATED 18.05.2012. A S PER THE SUBSTITUTED AGREEMENT FOR SETTLEMENT DATED 15.02.2012, THE ASSE SSEE GROUP AGREED TO PAY A LUMP SUM COMPENSATION OF RS. 110 CRORE FOR (I) TR ANSFER OF SHARE OF REAL OPTIMIST INDIA LTD. (EARLIER KNOWN AS MECL), (II) S ETTLEMENT OF ALL PENDING ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 5 ISSUES IN VARIOUS FORUMS, (III) ACQUISITION OF ACQU IRE DEVELOPMENT RIGHT REGARDING THE PLOT IN ORDER TO BUY PEACE. AS A RESU LT OF SETTLEMENT, THE RATIO OF OBLIGATION AND RETENTION OF 60:40 BETWEEN THE AS SESSEE AND MECL WERE CHANGED TO 90:10. UNDER THESE CIRCUMSTANCES, THE TO TAL COMPOSITION OF COST UNDERWENT CHANGED RETROSPECTIVELY AND THEREFORE, TH E LOAN OF RS. 60 LAKHS FROM ASSESSEE, WHICH WAS UTILIZED FOR INCURRING THE COST THEN BY MECL IS NOW TRANSFER IN THE BOOKS OF ASSESSEE. SIMILARLY, A S A RESULT OF 40% CONTRIBUTION, RS. 9.48 CRORE WERE ATTRIBUTED TO MEC L AND ITS BOOKS, THE SAME HAS TO BE CHANGED IN CONSONANCE WITH 90:10 RAT IO AND THEREFORE, BROUGHT INTO COST OF THE ASSESSEE-COMPANY. THE ASSE SSEE-COMPANY MADE THE FOLLOWING PAYMENTS TO FAMILY MEMBERS OF REDDY FAMIL Y MENTIONED AS BELOW: SR.NO. NAME OF PERSON ASSESSMENT YEAR 2012-13 ASSESSMENT YEAR 2013-14 TOTAL I HARISHVARDHAN REDDY 20,90,50,000 - 20,90,50,000 II MUTHU PRATIMA REDDY 11,25,00,000 15,00,00,000 26,25,00,000 III MUTHUROHIT REDDY 17,44,23,414 44,15,26,586 61,5 9,50,000 IV NITYA REDDY 1,25,00,000 - 1,25,00,000 TOTAL 50,84,73,414 59,15,26,586 110,00,00,000 6. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE HAS PAID RS. 50.84 CRORE DURING THE RELEVANT PERIOD OF AY 2012-1 3 AND REMAINING OF RS. 59.15 CRORE WAS PAID IN AY 2013-14. THE TRIBUNAL I N ASSESSEES OWN CASE FOR A.Y. 2012-13 HAS ALLOWED RELIEF IN RESPECT OF R S. 50.84 CRORE AND GIVEN CLEAR FINING THAT THE PAYMENT MADE TO REDDY FAMILY WAS FOR REMOVING ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 6 ENCUMBRANCE/SETTLEMENT OF PENDING ISSUES AND FOR AC QUISITION OF CLEAR TITLE AND REVENUE IN NATURE. THEREFORE, THE REMAINING PAY MENT OF RS. 59.15 CRORE PAID DURING THE ASSESSMENT YEAR 2013-14 IS LIABLE T O BE ALLOWED AS REVENUE EXPENDITURE. THE LD AR FOR THE ASSESSEE ACCORDIN GLY CLAIMED THAT THE GROUND OF APPEAL RAISED BY THE ASSESSEE COVERED IN FAVOUR OF ASSESSEE AND IS LIABLE TO BE ALLOWED. 7. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FOR THE REVENUE SUBM ITS THAT THE TRIBUNAL IN EARLIER YEAR HAS GIVEN FINDING IN RESPECT OF RS. 50 .84 CRORE ONLY AND THERE IS NO FINDING FOR ALLOWANCE OF RS.59.15 CRORE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT T HE ASSESSING OFFICER DISALLOWED THE EXPENSES OF RS. 59.15 CRORE, WHICH W AS BALANCE AMOUNT OF TOTAL AGREED COMPENSATION OF RS. 110 CRORE PAID IN EARLIER YEARS TO REDDY FAMILY. IT IS AN ADMITTED FACT THAT THE ASSESSING O FFICER DISALLOWED A SUM OF RS. 50.84 CRORE IN A.Y. 2012-13 AND REMAINING AMOUN T OF RS. 59.15 CRORE IN A.Y. 2013-14. WE HAVE FURTHER NOTED THAT THE AMOUNT OF RS. 50.84 CRORE OUT OF RS. 110 CRORE PAID IN A.Y. 2012-13 WAS ALLOWED A S REVENUE EXPENDITURE IN APPEAL FOR A.Y. 2012-13. THE RELEVANT PART OF OR DER OF TRIBUNAL FOR A.Y. 2012-13 IS EXTRACTED BELOW: 29. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE INCOME TAX ACT DOES NOT DEFINE THE TERMS CAPITAL EXPENDITURE AND REVENUE EXPENDITURE, ON E HAS TO DEPEND UPON THEIR ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 7 NATURE MEANING AS WELL AS DECIDED CASES. IT IS SETT LED POSITION THAT CAPITAL EXPENDITURE IS INCURRED FOR EXTENDING OR IMPROVING ITS FIXED ASSETS, WHEREAS REVENUE EXPENDITURE IS INCURRED IN THE NORMAL COURS E OF BUSINESS AS A ROUTINE EXPENDITURE. CAPITAL EXPENDITURE PROVIDES BENEFIT F OR SEVERAL PREVIOUS YEARS, WHEREAS REVENUE EXPENDITURE IS CONSUMED WITHIN A PR EVIOUS YEAR. SIMILARLY CAPITAL EXPENDITURE MAKES IMPROVEMENT IN EARNING CA PACITY OF A BUSINESS AND ON THE OTHER HAND, THE REVENUE EXPENDITURE, MAINTAINS THE PROFIT MAKING CAPACITY OF BUSINESS. FOR DETERMINING WHETHER EXPENDITURE IS OF CAPITAL OR REVENUE IN NATURE, IT IS IMMATERIAL HOW THE RECIPIENT TREATED THE MONE Y IN THEIR HAND. THOUGH, THE DIVIDING LINE BETWEEN THE CAPITAL AND REVENUE EXPEN DITURE IS REAL, YET SOME TIME IT BECOME DIFFICULT TO DRAW THAT LINE. THEREFORE, A DE CISION HAS TO BE TAKEN IN EACH CASE ON THE FACTS AND SURROUNDING CIRCUMSTANCES. 30. DURING THE ASSESSMENT, THE ASSESSING OFFICER RECEIV ED LETTER FROM DIT (INV.)/133A/2014-15 DATED 05.03.2015 THAT ASSESSEE HAS CLAIMED REVENUE EXPENDITURE OF RS. 109.60 CRORE AS REVENUE EXPENDIT URE (FOR F.Y. 2011-12 RS. 49.65 CRORE AND F.Y. 2012-13 RS. 59.94 CRORE) TOWAR D PROJECT COST. IT WAS NOTED BY ASSESSING OFFICER THAT THE SAID PAYMENTS WERE MA DE FOR ACQUISITION OF SHARE OF MECL. ON VERIFICATION OF BREAK-UP OF WORK-IN-PROGRE SS FURNISHED DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER RECORDE D THAT ASSESSEE CLAIMED PAYMENT OF RS. 50.84 CRORE FOR PAYMENT OF DEVELOPME NT RIGHTS FROM REDDY GROUP. THE ASSESSEE WAS ISSUED SHOW-CAUSE NOTICE AS TO WHY THE CLAIM OF RS. 50.84 CRORE SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED ITS DETAILED REPLY DATED 25.03.2015. THE SUM AND SUBSTANCE OF REPLY IS THE S AME AS EXPLAINED BY LD. AR OF THE ASSESSEE IN HIS SUBMISSION. THE ASSESSEE CLAIME D THAT THE EXPENSES WERE INCURRED EXCLUSIVELY, SOLELY AND ONLY FOR THE PURPO SE OF BETTERMENT OF ITS DEVELOPMENT RIGHT WHICH WERE WRONGFULLY DENIED BY R EDDYS AFTER THE DEATH OF THEIR FOUNDER DIRECTOR. THE ASSESSEE UNDER DURESS A ND TO GET RID OF VARIOUS CASES AS WELL AS PROHIBITORY ORDER PASSED BY CIVIL COURT AND OCCUPANCY CERTIFICATE WAS STAYED BY ADMINISTRATOR OF NAVI MUMBAI, THE PAYMENT S WERE MADE, IT WAS NOTHING BUT REVENUE EXPENDITURE. THE EXPLANATION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT IN THE SURVEY CONDUCTED UNDER SECTION 133A ON THE REDDY GROUP, THE INVESTIG ATION WING CAME TO CONCLUSION THAT THE PAYMENT IS NOTHING BUT PAYMENT MADE FOR ACQUISITION OF SHARE OF MECL. THE ASSESSING OFFICER ALSO RECORDED THE BI FURCATION OF PAYMENTS ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 8 RECEIVED BY VARIOUS FAMILY MEMBERS WAS DISALLOWED. THE ASSESSING OFFICER REDUCED THE SAID EXPENSES FROM THE WORK-IN-PROGRESS SHOWN BY THE ASSESSEE. 31. DURING FIRST APPELLATE STAGE THE ASSESSEE FILED DET AILED WRITTEN SUBMISSIONS, WHICH ARE RECORDED BY LD. CIT(A)IN HIS ORDER. IT WA S EXPLAINED THAT THAT THE ASSESSEE PAID COMPENSATION OF RS. 110 CRORE TO REDD Y GROUP. THE ENTIRE PAYMENTS CONSIST ON ACCOUNT OF TRANSFER OF SHARE OF MECL, SE TTLEMENT OF ALL PENDING ISSUES IN VARIOUS COURTS, ACQUISITION OF CLEAR DEVELOPMENT RIGHTS REGARDING THE PLOT WHERE THE ASSESSEE WAS UNDERTAKING DEVELOPMENT PROJECT AN D FOR THE SMOOTH FUNCTIONING OF ITS PROJECT. THE PAYMENTS TO REDDY GROUP WERE MA DE IN VARIOUS TRENCHES, AS EXPLAINED IN THE SUBSTITUTED AGREEMENT AND WERE SHO WN TO LEARNED CIT(A). IT WAS CLAIMED THAT ON PAYMENT OF COMPENSATION THE ASSESSE E WOULD GOT THE RIGHT TITLE OF THE PROJECT ALONG WITH THE SHAREHOLDING OF MECL. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE WAS IN RECEIPT OF ADVANCE OF RS. 8090 CRORES FROM VARIOUS CUSTOMERS FOR PROJECT IT HAD COMPLETED WORK OF RS. 38.90 CROR ES. HAD THE ASSESSEE NOT ENTERED INTO SETTLEMENT AGREEMENT, IT WOULD HAVE A LONG RUN DISPUTE AND WOULD HAVE CREATED A HUGE FINANCIAL LOSSES TO THE ASSESSE E. THE ASSESSEE ALSO EXPLAINED THAT ONLY RS. 39,90,9000/-WAS PAID FOR ACQUISITION OF SHARES AND THE BALANCE CONSIDERATION OF RS. 109,60,01,000/-WAS EFFECTIVELY AND ESSENTIALLY FOR THE PROJECT FANTASIA, WITHOUT PAYMENT OF THIS MONEY THE ASSES SEE WAS NOT IN A POSITION TO CARRY OUT FURTHER DEVELOPMENT AT SITE. ALL DETAILS OF CRIMINAL COMPLAINTS, CIVIL SUITS AND OTHER LITIGATION PENDING IN VARIOUS OTHER LEGAL FORUMS WERE ALSO EXPLAINED. AFTER CONSIDERING THE SUBMISSION AND EXP LANATIONS FURNISHED BY ASSESSEE, THE LEARNED CIT(A) APPEAL CONCLUDED THAT ONCE THE PAYMENT IS MADE FOR ACQUISITION OF SHARES, IT IS THE PAYMENT FOR CAPITA L INVESTMENT AND THEREFORE, CAPITAL IN NATURE. THE ASSESSEE EXPLAINED THAT COMP ENSATION OF RS. 110 CRORE WAS PAID TO ENSURE THAT IT RUN THE PROJECT FANTASIA SMO OTHLY AND TO ACQUIRE THE SHARE OF MECL AND THAT ALL COMPLAINTS LODGED AGAINST THE ASS ESSEE WERE WITHDRAWN. THE RELIANCE BY ASSESSEE ON CASE LAW OF HONBLE BOMBAY HIGH COURT IN CHEMOSYN LTD. (APPEAL NO. 361 OF 2013) WAS ALSO DISTINGUISHE D BY LD. CIT(A) HOLDING THAT FACTS OF THE SAID CASE ARE DIFFERENT. ISSUES INVOLV ED IN THE SAID CASE WERE OF FAMILY SETTLEMENT, HOWEVER, IN THE PRESENT CASE, THE ADDIT IONAL AMOUNT INCURRED TO ACQUIRE FURTHER STEP IN MECL. THE OTHER CASE LAW RELIED BY ASSESSEE IN EMPIRE JUTE COMPANY LTD. (1980) 3 TAXMAN 69 (SC) WAS ALSO DISTI NGUISHED. THE LD. CIT(A) CONCLUDED THAT ISSUE IN THAT CASE WAS THE NATURE OF PURCHASE OF LOOMS WAS CAPITAL ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 9 OR REVENUE, WHEREAS IN THE PRESENT CASE, THE ISSUE IS COMPLETE ACQUISITION OF SHARE OF ANOTHER GROUP IN ASSESSEES FAVOUR. THUS, THE LD . CIT(A) CONCURRED WITH THE FINDING OF ASSESSING OFFICER. 32. NOW LET US EXAMINE THE FACTS OF THE CASE AND THE CI RCUMSTANCES UNDER WHICH ASSESSEE PAID/INCURRED THE EXPENSES OF RS. 50.84 CR ORE WAS MADE BY THE ASSESSEE. FROM THE FACTS AS NARRATED ABOVE, IT IS BROUGHT ON RECORD THAT COMPLETE PROJECT NAMELY FANTASIA ON THE PLOT WAS HANDLED INCLUDING F INANCIAL, CONTRACTUAL, LEGAL AND OTHER TECHNICAL INPUTS. THERE WAS NO SIGNIFICAN T VALUE REMAINED WITH MEPL. DUE TO DISPUTE BETWEEN THE REDDY GROUP AND ASSESSEE GROUP, CIVIL COURT RESTRAINED THE ASSESSEE FROM SELLING UNIT OR CREATI NG ANY THIRD PARTY INTEREST. THE DISPUTES WERE ULTIMATELY SETTLED ON PAYMENT OF RS. 110 CRORE BY ASSESSEE GROUP TO REDDY GROUP. THE REDDY GROUP WHILE ACKNOWLEDGING THE RECEIPT OF, PART OF SETTLEMENT AMOUNT CLEARLY MENTIONED ON THE RECEIPT THAT THE PAYMENTS WERE MADE TOWARDS DEVELOPMENT RIGHT. THE ASSESSEE HAS APPROPR IATED A SUM OF RS. 39.99 LAKHS AS PAID TO REDDY FAMILY ON ACCOUNT OF ACQUISI TION OF SHARES. THE BALANCE AMOUNT OF RS. 109.06 CRORE WAS CLAIMED BY THE ASSES SEE AS PAID ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND CLAIM EXCLUSIVELY INCURRE D FOR THE PURPOSE OF BUSINESS. AS WE HAVE NOTED EARLIER THAT DURING THE SURVEY ACTION ON THE REDDY GROUP. THE REDDY GROUP CLAIMED THAT THE SAID AMOUNT WAS RECEIVED ON ACCOUNT OF TRANSFER OF SHARES. AS PER THE SUBSTITUTED AGREE MENT EXECUTED ON 15.02.2012, THE ASSESSEE AGREED TO PAY RS. 110 CRORE TO REDDY G ROUP AGAINST TRANSFER OF EQUITY SHARE OF MEPL, SETTLEMENT OF ALL PENDING LIT IGATION BEFORE VARIOUS FORUMS, ACQUISITION OF CLEAR DEVELOPMENT RIGHT AND TO BUY P EACE. THE LD. AR OF THE ASSESSEE ALSO VEHEMENTLY SUBMITTED THAT THE ASSESSE E HAS MADE HUGE INVESTMENT IN THE PROJECT AND A NUMBER OF INVESTOR INVESTED SU BSTANTIAL INVESTMENT. THE ASSESSEE UNDER THE COMPELLING CIRCUMSTANCES HAS NO OPTION EXCEPT TO ACCEPT THE UNREASONABLE DEMAND AND PAYMENT OF RS. 110 CRORE, O UT OF WHICH ONLY RS. 39.90 LAKHS WAS PAID FOR TRANSFER OF SHARES. THE AMOUNT W AS INCURRED FOR COMMERCIAL EXPEDIENCY AND ALLOWABLE AS BUSINESS EXPENSES FOR T HE PREVIOUS YEAR. 33. THE HONBLE SUPREME COURT IN SHAHAZADA NAND & SONS (SUPRA) HELD THAT IF THE PAYMENT IS MADE THROUGH COMMERCIAL EXPEDIENCY, THE SAME WOULD BE ALLOWED AS BUSINESS EXPENDITURE. FURTHER HONBLE SUPREME CO URT IN MALAYALAM PLANTATION (SUPRA) HELD THAT THE EXPRESSION WHOLLY AND EXCLUSI VELY LAID OUT OR EXPENDED FOR THE PURPOSE OF BUSINESS NEED NOT NECESSARILY BE CON STRUED FOR THE PURPOSES OF ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 10 EARNING PROFITS. FOR THE PURPOSE OF BUSINESS IS WID ER THAN THE SCOPE OF EXPRESSION FOR THE PURPOSES OF EARNING PROFITS. ITS RANGE IS S O WIDE, IT MAY TAKE IN NOT ONLY THE DAY TO DAY RUNNING OF A BUSINESS AND FOR PROTECTION OF ITS ASSETS AND PROPERTY FROM EXPROPRIATION COERCIVE PROCESS OR ASSERTION OF HOST ILE TITLE. 34. FURTHER, IN MEENAKSHI MILLS LTD. (SUPRA) THE HONBL E SUPREME COURT HELD THAT THE EXPRESSION FOR THE PURPOSES OF BUSINESS IS WIDE R THAN THE PURPOSE OF EARNING INCOME. THE FORMER WOULD INCLUDE WITHIN ITS SCOPE E XPENDITURE INCURRED ON THE GROUNDS OF COMMERCIAL EXPEDIENCY. 35. IN DALMIA JAIN CO. LTD. (SUPRA), THE HONBLE SUPREM E COURT HELD THAT WHERE LITIGATION EXPENSES ARE INCURRED BY AN ASSESSEE FOR THE PURPOSES OF CREATING, CURING OR COMPLETING THE ASSESSEE'S TITLE TO CAPITAL, THEN THE EXPENDITURE INCURRED MUST BE CONSIDERED AS CAPITAL BUT IF LITIGATION EXPENSES AR E INCURRED TO PROTECT THE BUSINESS OF THE ASSESSEE THEY MUST BE CONSIDERED AS REVENUE EXPENDITURE. 36. THE HONBLE DELHI HIGH COURT IN SOUTH ASIA INDUSTRI ES PVT. LTD. (SUPRA) HELD THAT EXPENDITURE INCURRED TO PROTECT BUSINESS AND R EPUTATION OF THE COMPANY IS A AMOUNTS SPENT FOR SAFEGUARDING AND SAVING THE ASSET S OF THE ASSESSEE'S BUSINESS AND KEEPING IT ON A SOUND FOOTING EXPENDITURE INCUR RED FOR THIS PURPOSE IS ALLOWABLE EXPENDITURE. 37. FURTHER, HONBLE DELHI HIGH COURT IN GOPALDASS ESTA TES & HOUSING PVT. LTD. (SUPRA) HELD THAT COMPENSATION PAID BY THE ASSESSEE DEVELOPER TO ALLOTEES OF COMMERCIAL SPACES FOR SURRENDER OF THEIR RIGHTS, TH EREIN COULD NOT BE SET TO BE DISALLOWED ON THE GROUNDS OF SUCH PAYMENTS HAVING B EING MADE FOR EXTRANEOUS CONSIDERATIONS. ASSESSEE HAS A PLAUSIBLE EXPLANATIO N FOR MAKING SUCH PAYMENTS OF COMPENSATION TO PROTECT ITS BUSINESS INTEREST. WHIL E IT IS TRUE THAT THERE WAS NO CONTRACTUAL OBLIGATION TO MAKE PAYMENT, IT IS PLAIN THAT THE ASSESSEE WAS ALSO LOOKING TO BUILD ITS OWN REPUTATION IN THE REAL EST ATE MARKET. THE COURT FURTHER HELD THAT THE RECIPIENTS TREATED THE SAID PAYMENTS AS CAPITAL GAINS IN THEIR HANDS IN THEIR RETURNS WOULD NOT BE RELEVANT IN DECIDING THE ISSUE WHETHER THE PAYMENT BY THE ASSESSEE SHOULD BE TREATED AS BUSINESS EXPENDIT URE. THE HONBLE DELHI HIGH COURT RELIED ON THE DECISION OF SHAHAZADA NAND & SO NS (SUPRA), NAINITAL BANK LTD. (62 ITR 638), SHARADA BINDING WORKS (102 ITR 1 87). 38. IN CIT VS. NAINITAL BANK LTD. (SUPRA) THE HON'BLE S UPREME COURT HELD THAT 'A LARGE QUANTITY OF JEWELLERY PLEDGED WITH ASSESSEE B ANK BY ITS CONSTITUENTS WERE STOLEN BY DACOITS FROM PREMISES OF BANK. BANK PAID THE MARKET VALUE OF THE ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 11 JEWELLERY PLEDGED BY THE CONSTITUENTS AND CLAIMED T HE SAME AS EXPENDITURE WHICH IS ALLOWED' 39. THE HONBLE SUPREME COURT IN CIT V/S. PANBARI TEA C O. LTD. (SUPRA) HELD THAT 'IT IS NOT THE FORM BUT THE SUBSTANCE OF THE T RANSACTION THAT MATTERS. THE NOMENCLATURE USED MAY NOT BE DECISIVE OR CONCLUSIVE BUT IT HELPS THE COURT, HAVING REGARDING TO THE OTHER CIRCUMSTANCES, TO ASC ERTAIN THE INTENTION OF THE PARTIES.' 40. IN SUMATI DAYAL V/S. CIT, (SUPRA), THE HONBLE APEX COURT HELD THAT THAT APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT APPARENT IS NOT REAL AND THAT TAXING AUTHORITI ES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY A ND THE MATTER HAS TO BE CONSIDERED BY APPLYING REAL TEST OF HUMAN PROBABILI TIES. 41. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/ S. CHEMOSYN LTD. (371 ITR 427), HELD THAT 'DUE DIFFERENCE BETWEEN GROUPS, ASSESSEE COMPANY WAS DIRECTED TO BUY 34 PER CENT OF SHAREHOLDING OF ONE OF WARRING GROUP, AS SAID EXPENDITURE WAS INCURRED ONLY TO ENABLE SMOOTH RUNN ING OF BUSINESS, IT WAS A DEDUCTIBLE EXPENDITURE'. 42. KEEPING IN VIEW THE ABOVE REFERRED CASE LAW VIS A V IS THE FACTS AND SURROUNDING CIRCUMSTANCES OF THE PRESENT CASE. WE A RE OF THE VIEW THAT ASSESSEE INCURRED/PAID EXPENSES OF RS. 50.84 CRORE FOR REMOV ING ENCUMBRANCES, SETTLEMENT OF PENDING ISSUES IN VARIOUS LEGAL FORUMS, ACQUISIT ION OF CLEAR DEVELOPMENT RIGHT PERTAINING TO CLOCK UNDERNEATH THE PROJECT FANTASIA . THEREFORE, THE DISALLOWANCE MADE BY ASSESSING OFFICER AND REDUCING THE SAME FRO M WORK-IN-PROGRESS WAS NOT JUSTIFIED. THUS, HE WE SET-ASIDE THE ORDER OF LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO TREAT THE EXPENSES AS REVENUE EXPENDITURE. IN THE RESULT, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. 43. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 9. CONSIDERING THE ABOVE FACTUAL DISCUSSION THAT OUT O F TOTAL COMPENSATION OF RS. 110 CRORE, THE ASSESSEE HAS PAID RS. 50. 84 CRO RE IN AY 2012-13 AND REMAINING OF RS. 59.15 CRORE WAS PAID IN RELEVANT P ERIOD OF AY 2013-14. WE HAVE NOTED THAT THE TRIBUNAL HAS ALREADY ALLOWED RELIEF TO THE ASSESSEE IN APPEAL FOR AY 2012-13, THUS, RESPECTFULLY FOLLOWING THE DECISION OF CO- ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 12 ORDINATE BENCH OF TRIBUNAL, THE GROUND NO. 1 & 2 OF THE APPEAL ARE ALLOWED IN FAVOUR OF ASSESSEE WITH SIMILAR DIRECTIONS. 10. GROUND NO.3 RELATES TO DISALLOWANCE OF EXPENSES OF RS 3.07 CRORE. THE LD. AR OF THE ASSESSEE DURING THE COURSE OF SUBMISSION, MADE HIS SUBMISSION THAT HE IS NOT PRESSING THIS GROUND OF APPEAL. THER EFORE, THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 4021/MUM/2019 BY REVENUE 12. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT GROUNDS OF APPEAL RAISED BY REVENUE ARE COVERED IN ASSESSEES GROUP IN CASE FOR A.Y. 2009-10 & 2011-12 IN ITA NO. 3172/MUM/2016 DATED 31 .08.2018, COPY OF WHICH IS PLACED ON RECORD. THE LD. AR OF THE ASSESS EE FURTHER SUBMITS THAT SIMILAR ISSUE WAS DECIDED IN ASSESSEES OTHER GROUP CASE FOR A.Y. 2012-13 IN ITA NO. 7155/MUM/2016 DATED 10/10/2018. 13. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF ASSESSING OFFICER. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDER OF THE LOWER AUTHORITIES. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES GROUP CASE IN A CIT VS. M/S HAWARE CONSTRUCTIONS PVT. LTD. FOR AY 2009-10 & 2011-12 IN ITA NO.3321/MUM/2016 DATED 31.08.2018. WE HAVE ALSO PER USED THE ORDER OF TRIBUNAL IN ASSESSEES GROUP CASE IN M/S HAWARE ENG INEERS PVT LTD. VS. ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 13 DCIT IN ITA NO. 7155/MUM/2016 DATED 10.10.2018 FOR AY 2012-13 WHEREIN THE ORDER OF M/S HARWARE CONSTRUCTIONS PVT. LTD. (SUPRA) IN ITA NO. 3321/MUM/2016 DATED 31.08.2018 WAS FOLLOWED. WE HAVE NOTED THE COORDINATE BENCH OF TRIBUNAL IS ASSESSEES GROUP CA SE IN M/S HAWARE CONSTRUCTIONS PVT. LTD. FOR IN APPEAL FOR AY 2009-1 0 HAS PASSED THE FOLLOWING ORDER: 4. THE 2ND GROUND OF APPEAL RAISED BY THE REVENUE IS THAT THE LD. CIT(A) ERRED IN HOLDING THE UNSOLD FLATS AS STOCK-IN-TRADE USED FOR PURPOSE OF BUSINESS RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S. CHENNAI PROPERTIES AND INVESTMENT LTD. VS.CIT ,231 TAXMAN 336. IT IS STATED THAT THE ABOVE DECISION PERTAINS TO ASSESSEE IS ENGAGED IN T HE BUSINESS OF LETTING OUT PROPERTIES. 4.1. AS STATED EARLIER, THE ASSESSEE IS A BUILDER A ND DEVELOPER AND AT THE END OF THE YEAR IT HAD INVENTORY OF STOCK-IN-TRADE WHICH A RE NOT SOLD AND LYING VACANT OF RS.12,10,05,508/-. THE AO RELIED UPON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN CIT VS. ANSAL HSG . FINANCE & LEASING CO. LTD., (ITA NO.18/1999 DTD. 31/10/2012) AND COMPUTED DEEMED INCOME FROM HOUSE P ROPERTY BY ESTIMATING @8.5% OF COST OF CONSTRUCTION AND AFTER ALLOWING TH E DEDUCTIONS OF 30%, COMPUTED THE INCOME. 4.2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A), RELYING ON THE DECISION IN SHYAM BURLAP CO. LTD. VS. CIT , 61 TAXMANN.COM 121 (CALCUTTA HIGH COURT), M/S. CH ENNAI PROPERTIES AND INVESTMENT LTD. (SUPRA) AND THE ORDE R OF THE TRIBUNAL IN C.R. DEVELOPMENT PVT. LTD. (ITA NO.4277/MUM/2012 DTD. 13 /05/2016), DELETED THE ADDITION AS PER PARA 2.4.60 OF HIS APPELLATE ORDER DTD.01/02/2016. 4.3. THE LD. DR RELIES ON THE DECISION IN ANSAL HSG . FINANCE & LEASING CO. LTD., (SUPRA), AND SUBMITS THAT THE ORDER PASSED BY THE AO MAY BE RESTORED. ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 14 4.4. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSE SSEE RELIES ON THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT IN CIT VS. NEHA BUILDERS PVT. LTD . 296 ITR 661 (GUJ.) AND THE ORDER OF THE TRIBUNAL IN M/S. RUNWAL CONSTRUCTIONS VS. ACIT (ITA NO.5408/MUM/2016 DTD.22/ 02/2018) AND PROGRESSIVE HOMES VS. ACIT (ITA NO .5082/MUM/2016 DTD. 16/05/2018). 4.5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIALS ON RECORD. ON THE ABOVE ISSUE, WE COME ACROSS ONE DECI SION FOR THE ASSESSEE AND ANOTHER DECISION FOR THE REVENUE. THE DECISION IN N EHA BUILDERS PVT. LTD.(SUPRA) IS FOR THE ASSESSEE, WHEREAS THE DECISION IN ANSAL HSG. FINANCE & LEASING CO. LTD., (SUPRA) IS FOR THE REVENUE. THE HON'BLE SUPRE ME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS 88 ITR 192 (SC) HAS HELD THAT 'IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISIONS ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE TAX PAYER MUST BE ADOPTED.' IN VIEW OF THE ABOVE POSITION OF LAW, WE SHALL FOLL OW THE DECISION IN NEHA BUILDERS PVT. LTD.(SUPRA). 4.5.1. WE NOW COME TO THE RELEVANT PROVISIONS IN TH E ACT. THE FOLLOWING SUB- SECTION (5) HAS BEEN INSERTED AFTER SUB-SECTION (4) OF SECTION 23 BY THE FINANCE ACT , 2017, W.E.F. 01.04.2018: '(5) WHERE THE PROPERTY CONSISTING ANY BUILDING OR LAND APPURTENANT THERETO IS HELD AS STOCK-IN-TRADE AND THE PROPERTY OR ANY P ART OF THE PROPERTY IS NOT LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YE AR, THE ANNUAL VALUE OF SUCH PROPERTY OR PART OF THE PROPERTY, FOR THE PERI OD UP TO ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE CERTIFICATE OF COMPLETION OF CONSTRUCTION OF THE PROPERTY IS OBTAINED FROM THE C OMPETENT AUTHORITY, SHALL BE TAKEN TO NIL.' THUS, IN ORDER TO GIVE RELIEF TO REAL ESTATE DEVELO PERS, SECTION 23 HAS BEEN AMENDED W.E.F. AY 2018-19 (FY 2017-18). BY THIS AME NDMENT, IT IS PROVIDED THAT IF THE ASSESSEE IS HOLDING ANY HOUSE PROPERTY AS HIS STOCK-IN- TRADE WHICH IS NOT LET OUT FOR THE WHOLE OR PART OF THE YEAR, THE ANNUAL VALUE OF SUCH PROPERTY WILL BE CONSIDERED AS NIL FOR A PERIOD UP TO ONE YE AR FROM THE END OF THE ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 15 FINANCIAL YEAR IN WHICH A COMPLETION CERTIFICATE IS OBTAINED FROM THE COMPETENT AUTHORITY. IN VIEW OF THE ABOVE AMENDMENT TO SECTION 23 , WE ARE NOT ADVERTING TO THE OTHER CASE LAWS RELIED ON BY THE LD. COUNSEL. IN THE INSTANT CASE, THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ISSUE OF TAXABILITY IS WITH REGARD TO UNSOLD FLATS. THE AY I S 2009-10. IN VIEW OF THE INSERTION OF SUB-SECTION (5) IN SECTION 23 BY THE FINANCE ACT , 2017, W.E.F. 01.04.2018 NARRATED HEREINBEFORE, WE UPHOLD THE ORD ER OF THE LD. CIT(A) AND DISMISS THE 2ND GROUND OF APPEAL FILED BY THE REVEN UE. 15. THE SIMILARLY IN ASSESSEES OTHER GROUP CASE IN M/S HAWARE INFOTECH LTD. VS. ACIT IN ITA NO. 281 & 291/MUM/2018 FOR AY 2013-14 & 2014-15 THE TRIBUNAL VIDE ORDER DATED 08.05.2019 ON SIMILAR GRO UNDS OF APPEAL PASSED THE FOLLOWING ORDER; 7. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FO R BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD AND JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. AD MITTEDLY, THE ASSESSEE WHO IS A DEVELOPER OF REAL ESTATE HAD DEVELOPED A PROPE RTY VIZ. PROJECT AT PLOT NO. 16- 30-A, VASHI, UNDER THE NAME AND STYLE OF VASHI INFO TECH PARK. AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE ASSES SEE WAS HOLDING CLOSING STOCK OF FINISHED UNSOLD UNITS IN VASHI INFOTECH PARK OF RS.87,46,129/-. IN SUM AND SUBSTANCE, THERE IS NO DISPUTE ON THE FACT THAT THE FINISHED UNSOLD UNITS IN VASHI INFOTECH PARK WERE HELD BY THE ASSESSEE AS THE CLO SING STOCK OF ITS BUSINESS AS THAT OF A DEVELOPER OF REAL ESTATE. 8. WE FIND THAT OUR INDULGENCE IN THE PRESENT APPEA L HAS BEEN SOUGHT BY THE ASSESSEE FOR ADJUDICATING, AS TO WHETHER THE CI T(A) IS RIGHT IN LAW AND THE FACTS OF THE CASE IN CONCURRING WITH THE A.O THAT T HE ANNUAL LETTABLE VALUE OF THE VACANT UNSOLD UNITS HELD BY THE ASSESSEE AS STO CK-IN-TRADE OF ITS BUSINESS OF A REAL ESTATE DEVELOPER, WERE LIABLE TO BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY, OR NOT. ADMITTEDLY, THE ASSES SEE ON 31.03.2013 WAS HOLDING STOCK-IN-TRADE OF VACANT UNSOLD COMPLETED F LATS/SHOPS OF RS.87,46,129/-. ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 16 THE A.O DRAWING SUPPORT FROM THE JUDGMENT OF THE HO NBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ANSAL HOUSING FINANCE AND LE ASING COMPANY LTD. (2013) 354 ITR 180 (DEL), HAD CONCLUDED THAT THE ALV OF THE AFORESAID VACANT PROPERTIES HELD BY THE ASSESSEE AS STOCK-IN-TRADE O F ITS BUSINESS OF REAL ESTATE DEVELOPER, WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS THE ASSESSEE FAILED TO FURNISH THE DE TAILS AS REGARDS THE ANNUAL RATEABLE VALUE OF THE AFOREMENTIONED PROPERTIES, T HEREFORE, THE A.O ESTIMATED THE ALV OF THE SAID PROPERTIES @ 8.5% OF THE AGGR EGATE COST OF THEIR CONSTRUCTION AND WORKED OUT THE SAME AT RS.7,43,420 /- (I.E 8.5% OF 87,46,129/-). FURTHER, AFTER ALLOWING THE STATUTORY DEDUCTION UND ER SEC. 24(B) @ 30% OF THE ALV OF RS. 7,43,420/-, THE A.O BROUGHT THE BALANCE AMOUNT OF RS.5,20,394/- TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 9. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION, IN THE BACKDROP OF THE OBSERVATIONS OF THE LOWER AUTHORITI ES. WE FIND THAT THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. NEHA BUILDERS (P) LTD. (2008) 296 ITR 661 (GUJ) , HAD OBSERVED THAT IF THE BUSINESS OF THE ASSESSEE IS TO CONSTRUCT PROPERTY AND SELL IT OR TO CONSTRUCT AND LET OUT THE SAME, THEN ANY INCOME DERIVED FROM THE IMMOVABLE PROPERTIES HELD B Y IT AS ITS STOCK-IN-TRADE CANNOT BE ASSESSED UNDER THE HEAD INCOME FROM HOUS E PROPERTY. THE HONBLE HIGH COURT WHILE CONCLUDING AS HEREIN ABOVE, HAD OB SERVED AS UNDER: 8. TRUE IT IS, THAT INCOME DERIVED FROM THE PROPER TY WOULD ALWAYS BE TERMED AS INCOME FROM THE PROPERTY, BUT IF THE PROPERTY IS USED AS 'STOCK-IN- TRADE', THEN THE SAID PROPERTY WOULD BECOME OR ' PA RTAKE THE CHARACTER OF THE STOCK, AND ANY INCOME DERIVED FROM THE STOCK, W OULD BE 'INCOME' FROM P THE BUSINESS, AND NOT INCOME FROM THE PROPERTY. IF THE BUSINESS OF THE ASSESSEE IS TO CONSTRUCT THE PROPERTY AND SELL IT O R TO CONSTRUCT AND LET OUT THE SAME, THEN THAT WOULD BE THE 'BUSINESS' AND THE BUS INESS STOCKS, WHICH MAY INCLUDE MOVABLE AND IMMOVABLE, WOULD BE TAKEN TO BE STOCK-IN-TRADE, AND ANY INCOME DERIVED FROM SUCH STOCKS CANNOT BE TERME D AS 'INCOME FROM PROPERTY'. EVEN OTHERWISE, IT IS TO BE SEEN THAT TH ERE WAS DISTINCTION BETWEEN THE 'INCOME FROM BUSINESS' AND 'INCOME FROM PROPERT Y' ON ONE SIDE, AND 'ANY INCOME FROM OTHER SOURCES'. THE TRIBUNAL, IN OUR CO NSIDERED OPINION, WAS ABSOLUTELY UNJUSTIFIED IN COMPARING THE RENTAL INCO ME WITH THE DIVIDEND INCOME ON THE SHARES OR INTEREST INCOME ON THE DEPO SITS. EVEN OTHERWISE, THIS QUESTION WAS NOT RAISED BEFORE THE SUBORDINATE TRIB UNALS AND, ALL OF SUDDEN, THE TRIBUNAL STARTED APPLYING THE ANALOGY. 10. FURTHER, WE FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PCIT, CENTRAL-1 VS. M/S CLASSIQUE ASSOCIATE LTD. (I TA NO.1216 OF 2016, DATED 28.01.2019) CONCURRING WITH THE VIEW TAKEN BY THE HONBLE HIGH COURT OF ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 17 GUJARAT IN THE CASE OF CIT VS. NEHA BUILDERS PVT. L TD. (2008) 296 ITR 661 (GUJ), AND FURTHER RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LTD. VS. CIT (2015 ) 377 ITR 673 (SC), HAD OBSERVED, THAT THE INCOME GENERATED BY AN ASSESSEE WHO WAS ENGAGED IN THE BUSINESS OF ACQUIRING AND HOLDING PROPERTIES FROM S UCH SOURCE WOULD BE ITS BUSINESS INCOME AND NOT ITS INCOME UNDER THE HEAD HOUSE PROPERTY. ALSO, WE FIND THAT THE TRIBUNAL WHILE DISPOSING OFF THE APPE AL IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE IN HAWARE ENGINEERS AND BU ILDERS PVT. LTD. VS. DCIT, CENTRAL CIRCLE-4(2), MUMBAI [ITA NO. 7155/MUM/2016, DATED 10.10.2018], HAD CONCLUDED THAT IF AN IMMOVABLE PROPERTY IN THE SHAP E OF FLATS/SHOPS IS HELD BY THE ASSESSEE AS STOCK-IN-TRADE OF ITS BUSINESS, THE N IT BECOMES PART OF ITS TRADING OPERATIONS, AND ANY INCOME DERIVED THERE FROM WOULD BE ITS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. ON THE BASIS OF THE AFORESAID DELIBERATIONS, THE TRIBUNAL WHILE DISPOSING OFF THE AFORESAID APPEAL HAD VACATED THE ADDITION OF THE ALV THAT WAS MADE BY THE LOWE R AUTHORITIES IN RESPECT OF THE FLATS/SHOPS WHICH WERE HELD BY THE ASSESSEE BEF ORE THEM AS STOCK-IN-TRADE OF ITS BUSINESS OF A REAL ESTATE DEVELOPER. IN FACT, T HE TRIBUNAL WHILE CONCLUDING AS HEREINABOVE, HAD PRIMARILY RELIED ON THE VIEW EARLI ER TAKEN BY IT IN THE CASE OF ANOTHER SISTER CONCERN OF THE ASSESSEE VIZ. ACIT VS. HAWARE CONSTRUCTION PVT. LTD. [ITA NO.3321/MUM/2018 & 3172/MUM/2016, DATED 3 1.08.2018]. APART THERE FROM, THE TRIBUNAL HAD ALSO DRAWN SUPPORT FRO M THE ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNAL VIZ. (I) M/S RUN WAL CONSTRUCTION VS. ACIT [ITA NO. 5408/MUM/2016, DATED 22.02.2018]; AND (II) . PROGRESSIVE HOMES VS. ACIT [ITA NO.5082 /MUM/2016, DATED 16.05.2018]. IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. IT MAY ALSO BE RELEVANT AND PERTINENT TO POINT OUT THAT THE TRIBUN AL WHILE DISPOSING OFF THE APPEAL IN THE CASE OF THE SISTER CONCERN OF THE A SSESSEE VIZ. ACIT VS. HAWARE CONSTRUCTION PVT. LTD. [ITA NO.3321/MUM/2018 & 3172 /MUM/2016, DATED 31.08.2018] HAD DULY CONSIDERED THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN CIT VS. ANSAL HOUSING FINANCE & LEASING CO MPANY LTD. (2013) 354 ITR 180 (DEL). 11. WE THUS IN THE BACKDROP OF OUR AFORESAID DELIBE RATIONS, RESPECTFULLY FOLLOWING THE AFORESAID SETTLED POSITION OF LAW, VA CATE THE ADDITION OF ITA NO. 2543 & 4021 MUM 2019-HAWARE INFRASTRUCTURE PVT. LTD. 18 RS.5,20,394/- (I.E NET ALV) MADE BY THE A.O TOWAR DS DEEMED INCOME FROM HOUSE PROPERTY, WHICH THEREAFTER WAS SUSTAINED BY THE CIT(A). THE ORDER OF THE CIT(A) IS SET ASIDE IN TERMS OF OUR AFORESAID OBSER VATIONS. 12. THE APPEAL OF THE ASSESSEE IS ALLOWED. 16. FURTHER, WE HAVE NOTED THAT THE LD. CIT(A) WHILE GR ANTING RELIEF TO THE ASSESSEE FOLLOWED THE DECISION OF ASSESSEES GROUP CASE IN HAWARE CONSTRUCTION PVT. LTD. FOR A.Y. 2010-11 IN APPEAL N O. CIT(A)-24/ACIT- 15(2)(1)/IT-435/2015-16 ALLOWED RELIEF TO THE ASSES SEE, WHICH HAVE BEEN CONFIRMED BY THE CO-ORDINATE BENCH OF TRIBUNAL AS R EFERRED ABOVE. THEREFORE, CONSIDERING THE ABOVE FACTUAL AND LEGAL DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A ), WHICH WE AFFIRMS. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N THIS 30/08/2019. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATE: 30.08.2019 SK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER ASSISTANT REGISTRAR IT AT MUMBAI