ITO 5(2)(1), NAVI MUMBAI V. OM CONSTRUCTION P. LTD, MUMBAI

ITA 2550/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8498 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVJIT SINGH ARNEJA
• Assessee Lawyers: MARLON REGO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2550/MUM/2010 (ASSESSMENT YEAR: 2006-07) ITO-12(3)(4), ROOM NO.567, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI ....REVENUE VS M/S. OM CONSTRUCTION PVT. LTD., 205, OM CHAMBERS, OM CORNER, KEMPS CORNER, MUMBAI -400 036 ASSESSEE PAN: AAACO 1791 P ASSESSEE BY: SHRI MARLON REGO REVENUE BY: SHRI RAVJIT SINGH ARNEJA O R D E R IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-IX MUMBAI DATED 25.01.2010 FOR THE A.Y. 2006-07. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN APPLYING DECISION OF EARLIER Y EARS HOLDING THAT THE OM RATAN PROJECT WAS COMPLETED IN A.Y. 200 7-08 AND ALLOWING EXPENSES OF ` 10,21,036/- TO BE CAPITALIZED WHICH ITA 2550/M/2010 M/S. OM CONSTRUCTION PVT. LTD. 2 WERE TREATED AS INCOME FROM OTHER SOURCES AS AGAINS T THE ASSESSEES CLAIM OF INCOME FROM BUSINESS AND PROFES SION. 2. THE FACTS PERTAINING TO THE ISSUE BEFORE ME, WHI CH REVEAL FROM THE RECORD, ARE AS UNDER. THE ASSESSEE-COMPANY IS A BU ILDER AND DEVELOPER. THE ASSESSEE HAS UNDERTAKEN A BUILDING PROJECT KNOW N AS OM RATAN AT POCHKHANWALA ROAD, WORLI, MUMBAI. THE RETURN OF IN COME FILED BY THE ASSESSEE FOR THE A.Y. 2006-07 IN WHICH THE TOTAL IN COME WAS DECLARED AT ` 16,600/-, WAS SELECTED FOR SCRUTINY. THE A.O. HAS NOTED THAT IN THE BALANCES AS ON 31.3.2005, CLOSING STOCK AND WORK-IN -PROGRESS (WIP) WAS SHOWN AT ` 5,59,09,399/- AND OPENING BALANCE OF WIP WAS SHOWN AT ` 5,48,88,363/-. THE ASSESSEE HAS INCURRED EXPENDITU RE OF ` 10,21,036/- DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07. THE ASSESSEE CAPITALIZED THE ENTIRE DIRECT AND INDIRECT EXPENSES TO THE WORK-IN- PROGRESS ACCOUNT. THE A.O. MADE A REFERENCE OF THE DVOS VIDE LETTER DATED 21.8.2008 UNDER SEC. 142(2A) OF THE ACT FOR D ETERMINING THE VALUE OF THE WORK-IN-PROGRESS SHOWN BY THE ASSESSEE AS ON 31.3.2004 AND 31.3.2005 AND WORK CARRIED OUT BY THE ASSESSEE. TH E A.O. HAS NOTED THAT AFTER 31.3.2007 NO EXPENDITURE WAS INCURRED TO WARDS CONSTRUCTION WORK AND THE PROJECT I.E. OM RATAN BUILDING MAY B E TREATED AS COMPLETED AS ON 31.3.1997 (CONSTRUCTION WORK). THE A.O. HAS NOTED THAT AS PER THE DVOS REPORT OM RATAN PROJECT WAS COMP LETED IN THE YEAR 1997 ITSELF AND HENCE, THE EXPENSES CLAIMED BY THE ASSESSEE HAS SHOWN THE PROJECT COMPLETED IN THE A.Y. 2007-08. THE ASS ESSEE CHALLENGED THE ACTION OF THE A.O. FOR DISALLOWING THE EXPENDITURE TO THE EXTENT OF ` 10,21,036/- BY FILING THE APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING THE FOL LOWING REASONS:- 1.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. IT IS AN ADMITTED FACT THAT THE APPELLANT HAS FOLLOWED PROJE CT COMPLETION METHOD FOR COMPUTING ITS INCOME AND IT C OMPLETED ITA 2550/M/2010 M/S. OM CONSTRUCTION PVT. LTD. 3 THIS PROJECT IN ASSESSMENT YEAR 2007-08. THE APPEL LANT HAS NOT CLAIMED ANY DEDUCTION FOR THE EXPENSES INCURRED IN THE CURRENT YEAR. THE ASSESSING OFFICER DISALLOWED EXP ENSES ON THE GROUND THAT THE PROJECT OF THE APPELLANT IS COM PLETED IN THE ASSESSMENT YEAR 2007-08 AND HENCE NO EXPENSES CAN B E ALLOWED IN THE CURRENT YEARS 1998-99 TO 2001-02 AND ALSO IN VIEW OF THE DECISION OF BOMBAY HIGH COURT DATED 3.1 2.2007 IN THE CASE OF THE APPELLANT ITSELF IN ITA NO.868 OF 2 004, THE PROJECT IS TAKEN TO HAVE BEEN COMPLETED IN THE ASSE SSMENT YEAR 2007-08. ACCORDINGLY, THE ALLOWABILITY AND DISALLOWABILITY OF THE EXPENSES HAS TO BE LOOKED IN TO IN THAT ASSESSMENT YEAR. IT IS FURTHER SEEN THAT THE ASSES SING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO THE APPELLANT BEFO RE MAKING THE DISALLOWANCE. ACCORDINGLY, THE ACTION OF THE A SSESSING OFFICER IS NOT UPHELD. NOW, THE REVENUE IS IN APPEAL BEFORE ME. 3. I HAVE HEARD THE PARTIES AND PERUSED THE RECORDS . THE LD. COUNSEL SUBMITS THAT THE ASSESSEE IS FOLLOWING PROJECT COMP LETION METHOD FOR RECOGNIZING THE REVENUE AND HAS OFFERED THE ENTIRE PROFIT OF THE PROJECT IN THE A.Y. 2007-08. IT IS ARGUED THAT IN ALL THE PRE VIOUS YEARS, THE A.O. MADE DISALLOWANCE @ OF 15% OF THE ADMINISTRATIVE EX PENSES AND THE SAID DISALLOWANCE WAS DELETED BY THE LD. CIT (A) AND THE ORDERS OF THE LD. CIT (A) WERE UPHELD BY THE TRIBUNAL AND APPEALS FILED B Y THE REVENUE CHALLENGING THE IMPUGNED ORDERS OF THE TRIBUNAL WER E DISMISSED BY THE HONBLE HIGH COURT OF MUMBAI. THE LD. COUNSEL FILE D A COPY OF THE ORDER OF THE HONBLE HIGH COURT IN THE ASSESSEES OWN CAS E, WHICH IS PLACED ON RECORD. HE, THEREFORE, PLEADED THAT THE ASSESSEE H AS DECLARED THE COMPLETION OF PROJECT IN THE YEAR 2007-08 AND ENT IRE PROFIT IS ALSO ITA 2550/M/2010 M/S. OM CONSTRUCTION PVT. LTD. 4 DECLARED, HENCE, THE ORDER OF THE LD. CIT (A) MAY B E CONFIRMED. PER CONTRA, THE LD. D.R. RELIED ON THE ON THE ORDER OF THE A.O. 4. ON THE PERUSAL OF THE ORDER OF THE HONBLE HIGH COURT OF THE BOMBAY, IT IS SEEN THAT CATEGORICAL OBSERVATION HAS BEEN MADE, THAT THE LD. COUNSEL PRODUCED THE RETURN FILED FOR THE A.Y. 2007-08 IN WHICH ALL THE INCOME HAS BEEN DISCLOSED AND THE REVENUE WAS P ERMITTED TO WITHDRAW THE APPEALS. THE ASSESSEE HAS ALSO FILED COPY OF THE ASSESSMENT ORDER FOR THE A.Y. 2007-08. ON THE PERU SAL OF THE SAID ASSESSMENT ORDER IT IS SEEN THAT THE ASSESSEE HAS D ECLARED THE COMPLETION OF THE SAID PROJECT IN THE A.Y. 2007-08. I AM OF THE OPINION THAT, AS THE PROJECT ITSELF IS ACCEPTED TO BE COMPL ETED IN THE A.Y. 2007-08 THE LD. CIT (A) WAS JUSTIFIED IN ALLOWING THE EXPEN DITURE CAPITALIZED TO THE WIP IN THIS YEAR. I FIND NO REASON TO INTERFERE WI TH THE ORDER OF THE LD. CIT (A) ACCORDINGLY, THE SAME IS CONFIRMED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH FEBRUARY 2011. SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 15TH FEBRUARY 2011 ITA 2550/M/2010 M/S. OM CONSTRUCTION PVT. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 9, MUMBAI. 4) THE CIT 5, MUMBAI. 5) THE D.R. SMC BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 2550/M/2010 M/S. OM CONSTRUCTION PVT. LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 07.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 15.02.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER