HCC REAL ESTATE LTD, MUMBAI V. ASST CIT 10(3), MUMBAI

ITA 2550/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3549 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B D NAIKDR
• Assessee Lawyers: VIMAL PUNAMIYAAR
• Keywords: Business income

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI H BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAM LAL NEGI,JUDICIAL MEMBER /.ITA NO.2550-51/MUM/2014, /ASSESSMENT YEAR-2009-10 & 2006-07 M/S. HCC REAL ESTATE LTD. 11 TH , FLOOE,247 PARK HINCON HOUSE, LBS MARG, VIKROLI (W) MUMBAI-400 083. PAN:AABCH 6060 P VS. ACIT-10(3) MUMBAI. ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : SHRI VIMAL PUNAMIYA-AR / REVENUE BY : SHRI B.D. NAIK-DR / DATE OF HEARING : 17.02.2016 / DATE OF PRONOUNCEMENT : 29.02.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH - CHALLENGING THE ORDERS,DATED 30.01.2014 OF CIT(A)-2 2,MUMBAI THE ASSESSEE HAS FILED APPEALS FOR THE ABOVE MENTIONED TWO AY.S.RAISING VARIOUS GR OUND OF APPEAL.DURING THE COURSE OF HEARING BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED T HAT ONLY GROUND NO.1 AND 7 FOR THE AY. 2006 -07 WERE TO BE DECIDED.HENCE,REST OF THE GROUNDS ST AND DISMISSED AS NOT PRESSED. ITA/2551/MUM/2014-AY.2006-07: ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF REAL ES TATE DEVELOPMENT,FILED ITS RETURN OF INCOME ON 27.10.2006,DECLARING TOTAL INCOME AT RS.(-)56.97 LAKHS.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESSMENT,U/S.143(3) OF THE ACT,ON 29.08.2008, ACCEPTING THE INCOME FILED BY IT.VIDE ORDER DATED 28.03.2011,PASSED U/S.263 OF THE ACT,THE CIT DIRECTED TO MAKE FURTHER INQUIRIES. WHILE COMPLETING THE ASSESSMENT U/S.143(3)R.W.S 263 OF TH E ACT,THE AO DETERMINED THE INCOME OF THE ASSESSEE AT RS.32,230/- AND CERTAIN ADDITIONS TO IT S INCOME. 2. EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE IS ABOUT COMMENCEMENT OF THE BUSINESS DURING THE YEAR UNDER APPEAL.DURING THE ASSESSMENT PROCEED INGS THE AO FOUND THAT THE ONLY INCOME RECEIVED BY THE ASSESSEE WAS INTEREST INCOME,AMOUNT ING TO RS.9.68 LAKHS,THAT IT HAD BOOKED EXPENSES AGAINST THE SAID INCOME.THE AO OBSERVED TH AT NO BUSINESS INCOME WAS FOUND TO BE CREDITED TO THE P&L A/C,THAT THE INTEREST INCOME WA S NOT DERIVED FROM ANY BUSINESS ACTIVITIES.HE DIRECTED THE ASSESSEE TO FURNISH EXPLANATION AS TO WHY THE EXPENDITURE CLAIMED BY IT SHOULD NOT BE TREATED AS PRE- OPERATIVE EXPENSES AND WHY SAME SHO ULD NOT BE CAPITALISED.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT IT WAS A S UBSIDIARY OF HINDUSTAN CONSTRUCTION COMPANY LIMITED (HCCL),THAT DURING THE YEAR IT HAD ENTERED INTO AGREEMENT WITH THE HOLDING COMPANY FOR DEVELOPING A PLOT OF LAND,THAT IT WAS THE ONLY BUSI NESS ACTIVITY THAT WAS UNDERTAKEN BY THE 2550-51/MUM/2014-HCCREPL 2 ASSESSEE DURING THE YEAR,THAT TILL MARCH,2006 NO CO NSTRUCTION OR RE-DEVELOPMENT ACTIVITY COULD HAVE BEEN COMMENCED.HE CAPITALISED THE EXPENSES TO THE EXTENT OF RS.56.92 LAKHS WITH WORK IN PROGRESS OF VIKHROLI PROJECT.HE TAXED THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. AGGRIEVED BY THE ORDER OF AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM DETAILED SUBMISSIONS WERE MADE AND STATED THE TRIBUNAL HAD WHILE DECIDING THE APPEAL FOR THE AY.2007-08,SENT BACK TH E ISSUE TO THE FILE OF THE AO FOR MAKING CERTAIN VERIFICATION.AFTER CONSIDERING THE ASSESSME NT ORDER AND THE ARGUMENTS OF THE ASSESSEE,HE HELD THAT NO SPECIFIC SUBMISSIONS WERE MADE BY THE ASSESSEE ABOUT COMMENCEMENT OF THE BUSINESS,THAT BUSINESS HAD NOT COMMENCED DURING THE YEAR,THAT THE INTEREST EARNED BY THE ASSESSEE WAS OUT OF PARKING SURPLUS FUND IN THE BAN KS,THAT IT WAS TO BE TREATED AS PRE- COMMENCEMENT INCOME,THAT THE TRIBUNAL HAD NOT GIVEN CLEAR FINDING ABOUT COMMENCEMENT OF THE PROJECT. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED T HAT THE ASSESSEE HAD ENTERED IN TO AN LAND DEVELOPMENT AGREEMENT WITH HCCL ON 29.09.2005 TO DE VELOP A PLOT AT VIKHROLI,THAT IT HAD APPOINTED ICICI PROPERTY SERVICES TO CONDUCT FEASIB ILITY REPORT,THAT ON 03.06.2006 AN APPLICATION WAS MADE TO MUNICIPAL CORPORATION FOR COMMENCEMENT CERTIFICATE,THAT BUSINESS HAD STARED IN THE YEAR UNDER APPEAL,THAT THE TRIBUNAL HAD (ITA/4224/M UM/2011 DTD.04.01.2013)WHILE ADJUDICATING THE APPEAL FOR THE AY.2007-08 HAD GIVEN A CLEAR FIN DING THAT THE BUSINESS HAD ALREADY TAKEN PLACE,THAT WHILE DECIDING THE APPEAL FOR THE AY.201 1-12,THE THE FAA HAD ALLOWED THE EXPENDITURE FOLLOWING THE ORDER OF THE TRIBUNAL OF AY.2007-08,THAT THE AO,WHILE PASSING ORDER U/S.143(3)R.W.S.254,HAD ACCEPTED THAT BUSINESS HAD COMMENCED AND ALLOWED THE EXPENDITURE ON SIMILAR FACT AND FOR THE SAME PROJECT,THAT BUSINESS WOULD COMMENCE FROM THE DATE OF SETTING UP OF BUSINESS AND FROM EARNING OF BUSINESS INCOME.DEP ARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO AND FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD ENTERED IN TO AN AGREEMENT WITH ITS HO LDING COMPANY TO DEVELOP A PLOT OF LAND,THAT THE AO AND FAA HAD HELD THAT BUSINESS HAD NOT COMME NCED DURING THE YEAR UNDER APPEAL.WE FIND THAT THE TRIBUNAL HAD RESTORED BACK THE MATTER TO THE FILE OF THE AO,WHILE ADJUDICATING THE APPEAL FOR THE AY.2007-08.WE WOULD LIKE TO REPRODUC E THE RELEVANT PART OF THE ORDER AND SAME READS AS UNDER: 5. AFTER CONSIDERING THE SUBMISSION AND PERUSING T HE MATERIAL ON RECORD, I FOUND THAT THIS ISSUE SHOU LD GO BACK TO THE FILE OF THE AO TO EXAMINE THE SAME AFRE SH. I NOTED THAT NO DOUBT, ONE PROJECT WAS GOING ON , HOWEVER, MANY PROJECTS WERE IN PIPE LINE. IN IS SEE N THAT THE ASSESSEE HAD ENTERED INTO VARIOUS AGREEM ENT OF URBAN DEVELOPMENT AND ENTERED INTO AN AGREEMENT WI TH THE LAND OWNER FOR REDEVELOPMENT OF A PRIME PROPERTY IN THE SUBURBS OF MUMBAI TO CONDUCT TABLE SURVEY, CENSUS OF THE OCCUPANTS ETC. AT VIKROLI. FO R THIS, VARIOUS ANALYSIS WERE CONDUCTED BY ICICI PROPERTY S ERVICES. THE ASSESSEE MADE AN APPLICATION TO MUNICI PAL CORPORATION OF GREATER MUMBAI ON 17.6.2006. IT WAS FURTHER SUBMITTED THAT OUT OF DEVELOPMENT EXPENSES OF RS.76 CRORES, THE EXPENSES RELATED TO DEVELOPMENT O F INDUSTRIAL PARK PROPERTY WERE CARRIED FORWARD UND ER WORK IN PROGRESS IN THE BALANCE SHEET AND WHICH WER E NOT DIRECTLY RELATED TO THE SAID DEVELOPMENT ACTI VITY WERE CHARGED TO PROFIT AND LOSS ACCOUNT. I FURTHER FOUND THAT BUSINESS WAS VERY MUCH IN EXISTING AND, THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO BUSI NESS ACTIVITY CARRIED OUT BY THE ASSESSEE . IF BY A NY REASON IN VARIOUS OTHER PROCEEDINGS, WHERE WORKING WAS IN PIPE LINE AND WORKING COULD NOT BE STARTED THEN ALS O THE EXPENSES CLAIMED ON THESE ACTIVITIES ARE TO BE ALLO WED IN ACCORDANCE WITH THE BUSINESS ACTIVITIES. HEN CE, I THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE AFRESH AFTER AFFORDING OPPORTUNITY OF B EING HEARD TO THE ASSESSEE . THE AO ALSO VERIFIED THAT SOFTWA RE EXPENSES CLAIMED BY THE ASSESSEE ARE INCURRED O N 2550-51/MUM/2014-HCCREPL 3 DEVELOPMENT OF SOFTWARE OR PURCHASING SOME PARTS OF SOFTWARE AND THEN WILL TAKE A VIEW THAT THOSE EXPE NSES ARE CAPITAL IN NATURE OR REVENUE IN NATURE. I ORDER ACCORDINGLY. AS THE FACTS AND CIRCUMSTANCE FOR THE YEAR UNDER AP PEAL ARE IDENTICAL TO THE FACTS OF AY.2007-08, SO,FOLLOWING THE ORDER FOR THAT YEAR,WE ARE REMANDI NG BACK THE MATTER TO THE FILE OF THE AO.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE BEFORE DECIDING THE ISSUE.GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSES SEE,IN PART. 6. SECOND EFFECTIVE GROUND OF APPEAL (GOA-7)DEALS WITH ASSESSING THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES.WE ARE OF THE OPINIO N,THAT THE ISSUE HAD TO BE DECIDED IN LIGHT OF THE DECISION OF THE FIRST GROUND OF APPEAL.THEREFOR E,WE ARE SETTING ASIDE THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION,WHO WOULD DECIDE THE MATT ER AFTER HEARING THE ASSESSEE.GROUND NO.2 IS PARTLY ALLOWED. DURING THE COURSE ITA/2550/MUM/2014-AY.2009-10: DURING THE COURSE OF HEARING THE AR STATED THAT GOA NOS. 1 AND 4 WERE THE EFFECTIVE GROUNDS.HENCE, REST OF THE GROUNDS ARE DISMISSED.B OTH THE GROUNDS DEAL WITH THE ISSUE THAT ARE SUBJECT MATTER OF THE APPEAL FOR THE AY.2006-07.FOL LOWING OUR ORDER FOR THAT YEAR,WE RESTORE BOTH THE ISSUES TO THE FILE OF THE AO FOR FRESH ADJ UDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.GROUNDS NO.1 AND 4 ARE PARTLY ALLOWED. AS A RESULT,APPEALS FILED BY THE ASSESSEE STAND PAR TLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY, 2016. 29 , 2016 SD/- SD/- ( /RAM LAL NEGI) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 29.02. 2016 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR H BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.