LODHA LAND DEVELOPMENT P. LTD, MUMBAI V. ADDL CIT CIR 6(3), MUMBAI

ITA 2819/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2275 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI A BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 2819/MUM/2012 (ASSESSMENT YEAR:2008-09) LODHA LAND DEVELOPMENT PRIVATE LIMITED 216, SHAH & NAHAR INDUSTRIAL ESTATE, OFF. DR. E. MOSES ROAD, WORLI, MUMBAI 400018. APPELLANT VS. ADDL. CIT, CIRCLE 6(3), MUMBAI RESPONDENT PAN: AABCL2223J /BY APPELLANT : SHRI VIJAY MEHTA, A.R. /BY RESPONDENT : SHRI A. RAMACHANDRAN, CIT D.R. /DATE OF HEARING :19.11.2015 /DATE OF PRONOUNCEMENT :07.12.2015 ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 2 ORDER PER RAJESH KUMAR, A.M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-38, MUMBAI, DA TED 31.01.2012 FOR A.Y. 2008-09 ON FOLLOWING GROUNDS: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(APPEALS) -38, MUMBAI ERRED IN LAW AND IN FACTS IN NOT ADJUDICATING ON DOUBLE DISALLOWANCE OF EXPENSES OF RS.12,15,060/- MADE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) AS SAME HAD BEEN ALREADY DISA LLOWED IN THE COMPUTATION AND IT IS MENTIONED IN THE WRITTEN SUBM ISSION. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(APPEALS) -38, MUMBAI ERRED IN LAW AND IN FACTS IN NOT ADJUDICATING ON DOUBLE DISALLOWANCE OF EXPENSES OF RS.5,300/- MADE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) AS SAME HAD BEEN ALREADY DISALLOWED IN THE CO MPUTATION AND IT IS MENTIONED IN THE WRITTEN SUBMISSION. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(APPEALS) ERRED IN LAW AND IN FACTS IN REJECTING CLAIM OF YOUR APPELLANT FOR SET-OFF OF BROUGHT FORWARD LOSSES OF RS.63,902/- ALTHOUGH THERE IS NO CHANGE IN BENEFICIAL SHAREHOLD ING CONSEQUENT TO CHANGE IN SHAREHOLDING OF APPELLANT COMPANY. 2. GROUND NO.1 & 2 RELATE TO DOUBLE DISALLOWANCE OF RS.12,15,060/- AND RS.5,300/- U/S.40(A)(IA) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS RETURN OF INCOME ON 19.07.2009 DECLARING AN INCOME OF RS.5,74,28,135/- WHILE FILING THE RETURN THE ASSESS EE SUO MOTTO DISALLOWED AND ADDED BACK RS.12,15,060/- ON THE BAS IS OF QUALIFICATION BY THE TAX AUDITORS OF THE ASSESSEE G IVEN IN CLAUSE 17(F) OF THE TAX AUDIT REPORT WHICH PERTAIN TO NON DEDUCTION OF TDS ON AUDIT FEES OF RS.2,23,223/-, MACHINERY HIRE CHARGES ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 3 9,71,463/- AND TESTING CHARGES RS.20,374/-. THE EX PENSES DISALLOWED BY THE ASSESSEE ARE AS UNDER: TABLE A SL. NO. PARTICULARS AMOUNT 1 AUDIT FEE 2,23,223/ - 2 MACHINERY HIRE CHARGES 9,71,463/ - 3 TESTING CHARGES 20,374/ - TOTAL A. 12,15,060/ - BROKERAGE ON SALE OF FLAT 10,2 73/ - INTEREST ON DELAYED PAYMENT OF TDS 5,041/ - TOTAL B. 15,314/ - TOTAL (A + B) 12,30,374/ - 3.1 THE LD. A.O. WHILE FRAMING THE ASSESSMENT AGAIN DISALLOWED THE VARIOUS EXPENSES ON WHICH NO TDS WAS DEDUCTED A S DISCUSSED IN PARA 6 OF THE ASSESSMENT ORDER THEREBY RESULTING INTO DOUBLE DISALLOWANCE OF THE SAME EXPENSES ON AC COUNT OF NON DEDUCTION OF TDS AMOUNTING TO RS.17,97,259/- AND RS.13,54,417/- ARE AS UNDER: TABLE B SL. NO. PARTICULARS AMOUNT 1 AUDIT FEE 2,23,223/ - 2 MACHINERY HIRE CHARGES 9,71,463/ - 3 TESTING CHARGES 20,374/ - TOTAL A. 12,15,060/ - ITEM DEBITED TO THE WORK IN PROGRESS AUDIT FEE 68,913 / - MACHINERY HIRE CHARGES 5 , 00 ,4 50 / - TESTING CHARGES 7,536 / - TOTAL B . 5,76,899/ - MACHINERY HI RE CHARGES ON WHICH TDS NOT DEDUCTED 5,300/ - TOTAL (A+B+C) 17,97,259 / - ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 4 TABLE C SL. NO. PARTICULARS AMOUNT 1 MACHINERY HIRE CHARGES 13,49,117/ - 2 HIRE CHARGES ON WHICH TDS NOT DEDUCTED 5,300/ - TOTAL 13,54,417/ - 4. THE LD. CIT(A) DID NOT ALLOW ANY RELIEF ON ACCOU NT OF DOUBLE DEDUCTION OF RS.12,30,374/- AS CLAIMED BY THE ASSES SEE AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 5. LD. A.R. SUBMITTED BEFORE US THAT THE ASSESSEE I N THE COMPUTATION OF INCOME ITSELF DISALLOWED RS.12,30,37 4/- ON ACCOUNT OF NON DEDUCTION OF TDS, WHEREAS, THE SAME AMOUNT WAS AGAIN DISALLOWED BY THE A.O. RESULTING INTO DOUBLE DISALLOWANCE ON ACCOUNT OF NON DEDUCTION OF TDS IN RESPECT OF SA ME EXPENSES AND THEREFORE, SUBMITTED THAT THE RELIEF MAY BE ALL OWED TO ASSESSEE ON THIS POINT BY DELETING THE ADDITION. O N THE OTHER HAND, LD. D.R. RELIED ON THE ORDERS PASSED BY AUTHO RITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND MATERIA L ON RECORD. WE FIND THAT THE ASSESSEE HAS ITSELF DISAL LOWED AND ADDED TO ITS INCOME RS.12,30,374/- WHILE FILING THE RETUR N OF INCOME ON THE BASIS OF NOTE IN CLAUSE 17(F) OF THE TAX AUDIT REPORT AS PER TABLE A (SUPRA). WE FURTHER NOTE FROM THE COMPARAT IVE STATEMENT OF DISALLOWANCE U/S.40(A)(IA) OF THE ACT THAT THE A .O. AGAIN DISALLOWED AND ADDED RS.17,97,259/- TO THE INCOME O F ASSESSEE AS STATED IN PARA 6 OF THE A.O. ORDER, THE BREAK UP OF WHICH IS GIVEN IN TABLE B (SUPRA). THE LD. CIT(A) WHILE DIS POSING OF THE APPEAL BEFORE HIM ALLOWED RELIEF IN RESPECT OF RS.5 ,76,899/-AS MENTIONED IN TABLE B (TOTAL B) MEANING THEREBY THAT DOUBLE ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 5 DISALLOWANCE IN RESPECT OF RS.12,20,360/- (RS.12,15 ,060 + 5300) AS WHICH STANDS ADDED TO THE TOTAL INCOME OF THE AS SESSEE SUO MOTTO ON THE BASIS OF TAX AUDIT REPORT. ON THE BAS IS OF THESE FACTS, IT IS APPARENT THAT THE DISALLOWANCE IN RESP ECT OF RS.12,20,360/- HAS BEEN MADE TWICE, FIRST BY THE AS SESSEE ON HIS OWN AND SECONDLY BY THE A.O. WE, THEREFORE, DELETE THE DISALLOWANCE/ADDITION OF RS.12,20,360/- BY ALLOWING THE GROUND NO.1 & 2 IN FAVOUR OF ASSESSEE. 7. THE THIRD GROUND RELATES TO CONFIRMATION OF REJE CTION OF ASSESSEES CLAIM FOR SETTING OFF OF BROUGHT FORWARD LOSSES OF RS.63,209/- BY CIT(A), WHEREAS THERE IS NO CHANGE I N THE BENEFICIAL SHAREHOLDING CONSEQUENT TO CHANGE IN SHA REHOLDING OF THE ASSESSEE COMPANY. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CLAIMED RS.63,902/- ON ACCOUNT OF BROUGHT FORWARD LOSSES. THE LD. A.O. DID NOT ALLOW THE CLAIM BY HOLDING THAT THERE WAS A CHANGE OF MORE THAN 51% IN THE SHAREHOLDING OF THE ASSESSEE D URING THE PREVIOUS YEAR AND THEREFORE, THE LOSSES INCURRED PR IOR TO PREVIOUS YEAR WERE NOT ALLOWED TO BE CARRY FORWARD U/S.79 OF THE ACT. THE LD. CIT(A) CONFIRMED THE STAND OF THE A.O. ON THIS POINT BY HOLDING THAT THE APPELLANT HAD NOT SUBMITTED THE EVIDENCES OF SHAREHOLDING PATTERNS AS FILED BEFORE ROC FOR THE Y EAR 31.03.2007 AND 31.03.2008 IN RESPECT OF TRANSFEROR AND TRANSFEREE COMPANIES TO SUBSTANTIATE THAT THE VOTIN G RIGHTS IN EXCESS OF 51% VOTING POWER WERE HELD BY SAME PERSON S. ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 6 8.1 THE LD. A.R. SUBMITTED BEFORE US THAT THERE WAS NO CHANGE IN THE BENEFICIAL SHAREHOLDING OF THE COMPANY BY FI LING DETAILS OF SHAREHOLDING PATTERN AS ON 31.03.2007 BEFORE TRANSF ER OF SHARES AND SHAREHOLDING PATTERN AFTER TRANSFER OF SHARES A S UNDER: LODHA DEVELOPERS P VT. LTD. HOLDING 9,994 SHARES OUT OF 10,000 SHARES HOLDING 9,994 OUT OF 10,000 SHARES LODHA LAND DEVELOPERS P. LTD. (ASSESSEE) LODHA ATTENTIVE DEVELOPERS & FARMS PVT. LTD. SHAREHOLDING PATTERN AFTER TRANSFER OF SHARES LODHA DEVELOPERS PVT. LTD. HOLDING 9,994 SHARES OUT OF 10,000 SHARES LODHA ATTENTIVE DEVELOPERS & FARMS PVT. LTD. HOLDING 9,994 SHARES OUT OF 10,000 SHARES LODHA LAND DEVELOPERS P. LTD. (ASSESSEE) THE LD. A.R. SUBMITTED THAT SINCE THE SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY REMAINED IN THE SAME GROUP AS IS C LEAR FROM ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 7 THE ABOVE TABLE I.E. BEFORE TRANSFER M/S. LODHA DEV ELOPERS P. LTD. WAS HOLDING 9,994 SHARES OUT OF 10,000 SHARES IN EA CH OF THE COMPANY M/S. LODHA LAND DEVELOPERS P. LTD. (ASSESSE E) AND LODHA ATTENTIVE DEVELOPERS & FARMS PVT. LTD. AFTER THE TRANSFER OF SHAREHOLDING PATTERN THE OWNERSHIP OF SHARE HOLD ING ALSO REMAINED WITH LODHA DEVELOPERS P. LTD. WHICH WAS HO LDING 9,994 SHARES OUT OF 10,000 SHARES IN LODHA ATTENTIVE DEVE LOPERS & FARMS PVT. LTD. AND LODHA ATTENTIVE DEVELOPERS & FA RMS PVT. LTD. WAS HOLDING 9,994 SHARES OUT OF 10,000 SHARES IN THE ASSESSEE COMPANY. THUS, IT IS CLEAR THAT THE OVERA LL SHAREHOLDING REMAINED WITHIN THE GROUP AND THEREFORE, THE ASSESS EE IS ENTITLED TO CLAIM THE SET OFF OF THE BROUGHT FORWARD LOSSES U/S.79 OF THE ACT AMOUNTING TO RS.63,902/-. THE LD. A.R. PLACED THE RELIANCE ON A NUMBER OF DECISIONS, NAMELY, DCIT VS. SELECT HOLIDAY RESORT P. LTD., ITAT BENCH G DELHI IN ITA NO.1184 /DEL/2008, A.Y. 2004-05, WHICH WAS CONFIRMED BY HONBLE DELHI HIGH COURT AND REPORTED IN (2013) 35 TAXMANN.COM 368 (DELHI), CIT VS. AMCO POWER SYSTEM LTD. IN ITA NO.766 OF 2009 & OTHE RS, ORDER DATED 07 TH OCTOBER, 2015 AND AMCO POWER SYSTEM LTD. VS. ITO, ITAT, B BENCH, BANGALORE IN ITA NO.889/BANG/2007, A.Y. 2003- 04. 8.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND MATERI AL ON RECORD. WE FIND THAT SHAREHOLDING PATTERN OF THE A SSESSEE COMPANY REMAINED IN THE SAME GROUP AS IS CLEAR FROM THE ABOVE TABLE I.E. BEFORE TRANSFER M/S. LODHA DEVELOPERS P. LTD. WAS HOLDING 9,994 SHARES OUT OF 10,000 SHARES IN EACH O F THE COMPANY M/S. LODHA LAND DEVELOPERS P. LTD. (ASSESSE E) AND LODHA ATTENTIVE DEVELOPERS & FARMS PVT. LTD. AFTER THE TRANSFER ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 8 OF SHAREHOLDING PATTERN THE OWNERSHIP OF SHAREHOLDI NG ALSO REMAINED WITH LODHA DEVELOPERS P. LTD. WHICH WAS HO LDING 9,994 SHARES OUT OF 10,000 SHARES IN LODHA ATTENTIVE DEVE LOPERS & FARMS PVT. LTD. AND LODHA ATTENTIVE DEVELOPERS & FA RMS PVT. LTD. WAS HOLDING 9,994 SHARES OUT OF 10,000 SHARES IN THE ASSESSEE COMPANY. THUS, IT IS CLEAR THAT THE OVERA LL SHAREHOLDING REMAINED WITHIN THE GROUP. IN THE CASE OF DCIT VS . SELECT HOLIDAY RESORT P. LTD., ITAT BENCH G DELHI IN ITA NO.1184/DEL/2008, A.Y. 2004-05, WHICH WAS CONFIRMED BY HONBLE DELHI HIGH COURT AND REPORTED IN (2013) 35 TAXMANN.COM 368 (DELHI), IT WAS HELD THAT THERE WAS NO CHANGE I N THE MANAGEMENT OF THE COMPANY WHICH REMAINED WITH THE S AME FAMILY (SET OFF PERSONS) WHO WAS EARLIER EXERCISING CONTROL AND THEREFORE SECTION 79 WAS NOT APPLICABLE AND ASSESSE E COMPANY IS ELIGIBLE FOR SET OFF OF BROUGHT FORWARD LOSSES AGAI NST THE CURRENT YEAR INCOME. IN THIS CASE THE HOLDING COMPANY OF A SSESSEE WAS AMALGAMATED WITH THE ASSESSEE COMPANY AND THE SHARE HOLDER OF THE HOLDING COMPANY WERE ALSO SHAREHOLDER OF THE AS SESSEE COMPANY AND UPON AMALGAMATION THE SAME SET OFF INDI VIDUAL WERE ALLOTTED SHARE IN THE ASSESSEE COMPANY. THE S AID ORDER OF THE ITAT, DELHI BENCH WAS CONFIRMED BY DELHI HIGH C OURT ALSO AS REPORTED IN (2013) 35 TAXMANN.COM 368 (DELHI) AND T HE HONBLE COURT HAS HELD THAT IT IS EVIDENT THAT DURING THE EARLIER PERIOD 98% OF THE ASSESSEES SHARE WERE HELD BY IIPL THE H OLDING COMPANY, WHICH WAS AMALGAMATED WITH THE ASSESSEE CO MPANY. HOWEVER, AFTER MERGER OF THE SHAREHOLDER OF THE IIP L CONTINUED TO BE SHAREHOLDER IN THE ASSESSEE COMPANY. THUS, THE SHAREHOLDERS BENEFICIALLY ENTITLED TO 98% OF THE SHARES CONTINUE D TO BE SAME. IN THESE CIRCUMSTANCES, PROHIBITION OF CARRYING FOR WARD LOSSES ITA NO.2819/MUM/12 A.Y. 08-09 [LODHA LAND DEVELOPME NT PVT. LTD. VS. ADDL.CIT] PAGE 9 PLACED BY SECTION 79 DOES NOT OPERATE. THE SAME ISS UE WAS ALSO COME UP BEFORE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. AMCO POWER SYSTEM LTD. IN ITA NO.766 OF 2009 & OTHE RS, ORDER DATED 07 TH OCTOBER, 2015 AND THE HONBLE HIGH COURT HAS AFFIRMED THE SAME. 8.3 THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE ABOVE DECISIONS AND WE, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISION, ALLOW THE GROUND NO.3 I N FAVOUR OF THE ASSESSEE. THE A.O. IS DIRECTED ACCORDINGLY. 9. AS A RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS THE 7 TH DAY OF DECEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: DATED 07/12/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $ %&%'( ) / CONCERNED CIT 4 )- / CIT (A) ,-./00'(1 '( 1 %& / DR, ITAT, MUMBAI 3/4567 / GUARD FILE. BY ORDER / 1 / % 1 '( 1 %&