INDRAPRASTHA PREMISES P.LTD, MUMBAI V. ACIT CEN CIR 15 & 16, MUMBAI

ITA 2952/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71326 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 05-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Capital asset; Search and seizure
• Section: 143(3); 153A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL I II I BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T I.TI.T I.T.A. NO. .A. NO. .A. NO. .A. NO.1491/MUM/2011 1491/MUM/2011 1491/MUM/2011 1491/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR :2006-07) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.2952/MUM/2011 2952/MUM/2011 2952/MUM/2011 2952/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR :2007-08) M/S INDRAPRASTHA PREMISES PVT. LTD., 17/18, JESHTHARAM BAUG, T. T. CIRCLE, DADAR, MUMBAI-400014 / VS. ACIT, CENTRAL CIRCLE- 15&16, 4 TH FLOOR, AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400020 $' ' ./ ( ./ PAN/GIR NO. : AAACI3367D ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.978 978 978 978/MUM/2011 /MUM/2011 /MUM/2011 /MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR :2006-07) ACIT, CENTRAL CIRCLE- 15&16, 4 TH FLOOR, AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S INDRAPRASTHA PREMISES PVT. LTD., 17/18, JESHTHARAM BAUG, T. T. CIRCLE, DADAR, MUMBAI-400014 $' ' ./ ( ./ PAN/GIR NO. : AAACI3367D ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') , , , , / APPELLANT BY : SHRI RAJIV KHANDELWAL *+') *+') *+') *+') - -- - , , , , /RESPONDENT BY : SHRI O. P. SINGH - -- - .' .' .' .' / DATE OF HEARING : 5 TH SEPTEMBER 2013 /0& /0& /0& /0& - -- -.' .' .' .' /DATE OF PRONOUNCEMENT: 25 TH SEPTEMBER 2013 #1 / O R D E R PER : , . . / VIJAY PAL RAO, JM THESE CROSS APPEALS FOR THE ASSESSMENT YEAR 2006-07 ARE DIRECTED AGAINST THE ORDER DATED 26.11.2010 OF COMM ISSIONER OF INCOME TAX(APPEALS) AND APPEAL BY THE ASSESSEE FOR THE ASSESSMENT ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 2 YEAR 2007-08 IS DIRECTED AGAINST THE ORDER DATED 17 .1.2011 OF COMMISSIONER OF INCOME TAX(APPEALS). 2. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THE AP PEALS FOR BOTH THE YEARS. THE GROUNDS RAISED FOR THE ASSESSMENT YE AR 2006-07 ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 12 ,39,223/- MADE BY THE AO ON ACCOUNT OF PROFIT FROM SALE OF PL OT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 1, 50,036/- MADE BY THE AO ON ACCOUNT OF MSEB & SOCIETY DEPOSIT AND MAINTENANCE CHARGES ETC. 3. GROUND NO. 1 REGARDING ADDITION ON ACCOUNT OF PR OFIT FROM SALE OF PLOTS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF D EVELOPMENT AND SALE OF PLOTS. THE SEARCH AND SEIZURE ACTION U/S 13 2(1) OF THE ACT WAS CONDUCTED ON 22.9.2005 IN THE CASE OF THE ASSESSEE AS WELL AS IN THE GROUP CONCERNS OF THE ASSESSEE. THE ASSESSMENT UP T O THE ASSESSMENT YEAR 2005-06 HAVE BEEN COMPLETED U/S 143(3) R.W.S 1 53A OF THE INCOME TAX ACT. FOR THE ASSESSMENT YEAR UNDER CONSI DERATION THE ASSESSEE FILED RETURN OF INCOME ON 29.10.2007 ADMIT TING TOTAL INCOME OF ` 12,34,918/-. DURING THE YEAR THE ASSESSEE HAS SHOWN TO HAVE SOLD PLOTS OF LAND AT PUNE FOR ` 37,79,000/-, THE DETAIL S OF WHICH HAVE BEEN GIVEN BY THE AO AS UNDER: ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 3 NAME DESCRIPTION OF PLOT AREA (IN SQ. FT) SALE CONSIDERATION (IN `) OTHER DUES TO MSEB SOCIETY & MAINTENANCE GULAB RAO SHAH 23.3.2006 PLOT NO. 600 215/1/218/219/277/1 3009 2,50,000 37,509 BHALEKAR POPAT 18.7.2006 PLOT NO. 647 215/1/218/219/277/1 3008.51 6,17,000 37,509 NITIN BARAI 1.4.2005 PLOT NO. 52 215/1/218/219/277/1 HADAPSAR TALUKA, HARACHI, PUNE 12200 24,40,000 37,509 TOTAL 18217.51 33,07,000 1,12,527 4. THE AO NOTED THAT THE ASSESSEE WORKED OUT THE CO ST OF THESE PLOTS SOLD AS PER SCHEDULE K OF THE BALANCE SHEET AT ` 21,76,558/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE FILED THE DETAILS OF COST OF PLOTS WHEREIN THE ASSESSEE CALCU LATED THE COST OF THE PLOTS SOLD @ ` 40.24 PER SQ.FT. ON AREA OF 18217.51 SQ.FT. THE ASSESSEE HAS ALSO ADDED 10% OF THE AMOUNT RECEIVED DURING TH E YEAR IN THE COST OF PLOTS. THE ASSESSEE HAS SUBMITTED THAT THE 10% O F THE SALE PROCEEDS TO BE PAID BY THE ASSESSEE THE ASSIGNOR AS PER THE AGREEMENT DATED 30.10.1991. THE ASSESSING OFFICER HAS OBSERVED THAT THE COST HAS BEEN CALCULATED BY THE ASSESSEE BY ADDING 10% OF THE SAL E PROCEEDS REALISED DURING THE YEAR WHEREAS THE PROFIT ON SALE OF LAND WHICH TOOK PLACE DURING THE YEAR HAS TO BE CALCULATED BY DEDUC TING THE COST OF THAT LAND FROM THE SALE PROCEEDS. THE AO ESTIMATED THE C OST OF LAND @ ` 20 PER SQ.FT. AND FURTHER 10% OF SALE PROCEEDS IN RESP ECT OF THE PLOTS SOLD DURING THE YEAR. ACCORDINGLY, THE AO CALCULATED THE COST OF THE LAND SOLD DURING THE YEAR AT ` 26,11,960/- AND CONSEQUENTLY AN ADDITION OF ` ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 4 12,39,223/- WAS MADE. ON APPEAL, THE CIT(A) HAS CON FIRMED THE ACTION OF THE AO. 5. BEFORE US THE LD. AR HAS SUBMITTED THAT THE COST OF THE LAND HAS BEEN WORKED OUT BY THE ASSESSEE AS PER THE WORKING GIVEN AT PAGE 1 OF THE PAPER BOOK. HE HAS POINTED OUT THAT THE COST OF THE PLOT COMPRISES TWO COMPONENTS I.E: I) THE DEVELOPMENT COST AS IT I S THE OPENING BALANCE OF STOCK OF PLOTS II) 10% OF THE RECEIPTS D URING THE YEAR AS PER THE AGREEMENT DATED 30.10.1991. 6. THE LD. AR HAS FURTHER SUBMITTED THAT THE COST O F THE PLOTS @ ` 40.24 PER SQ.FT. HAS BEEN TAKEN BY THE ASSESSEE AS PER THE OPENING STOCK WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER FOR ALL THE ASSESSMENT YEARS FROM 2000-01 TO 2005-06 FRAMED U/S 153A. AS REGARDS THE 10% OF THE RECEIPTS DURING THE YEAR THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT AS PER THE AGREEMENT TH E ASSESSEE HAS TO PAY 10% OF THE REALISATION OF THE SALE PROCEEDS WHI CH MEANS ANY ADVANCE RECEIPT IN RESPECT OF FUTURE SALE AS WELL A S THE RECEIPT IN RESPECT OF PREVIOUS SALE HAS TO BE TAKEN INTO CONSI DERATION FOR CALCULATING THE PAYMENT OF 10% OF THE RECEIPT AS PE R THE AGREEMENT. THUS, THE LD. AR HAS CONTENDED THAT WHEN THE COST O F THE LAND HAS BEEN ACCEPTED BY THE AO FOR ALL SIX YEARS COMPLETED PRIOR TO THIS ASSESSMENT YEAR THEN THE AO CANNOT DISTURB THE SAME IN THE YEAR UNDER CONSIDERATION. THE LD. AR HAS FILED THE COPY OF THE ASSESSMENT ORDERS FOR ALL SIX ASSESSMENT YEARS FRAMED U/S 153A . HE HAS REFERRED ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 5 THE ACKNOWLEDGEMENT OF RETURN OF INCOME FOR EARLIER YEARS AND SUBMITTED THAT THE COST OF LAND CALCULATED BY THE A SSESSEE AT ` 40.24 PER SQ.FT. HAS BEEN ACCEPTED BY THE ASSESSING OFFIC ER IN THE EARLIER SIX YEARS. HE HAS FURTHER CONTENDED THAT THE COST OF LA ND HAS BEEN WORKED OUT BY THE ASSESSEE ON THE BASIS OF OPENING STOCK W HICH WAS ACCEPTED BY THE REVENUE IN THE EARLIER YEARS. 7. THE LD. AR HAS REFERRED CLAUSE 10.3 OF THE AGREE MENT DATED 30.10.1991 AND SUBMITTED THAT THE ASSESSEE HAD TO P AY TO THE ASSIGNOR AN AMOUNT EQUAL TO 10% OF THE SALE PROCEEDS THAT MA Y BE REALISED BY THE ASSESSEE FROM THE PROSPECTIVE BUYERS OF PLOTS, BUNGALOW, SHOPS ETC. THE ASSESSEE IS FOLLOWING THIS METHOD OF 10% O F THE TOTAL RECEIPTS DURING THE YEAR TO CALCULATE THE COST OF LAND FOR T HE PURPOSE OF WORKING OUT THE PROFIT FROM THE SALE OF PLOTS AND SHOP ETC. HE HAS REFERRED THE TOTAL RECEIPTS DURING THE YEAR AT ` 1,20,11,910/- A T PAGE 1 AND DETAILS OF THE RECEIPT AT PAGE 57-62 OF THE PAPER BOOK AND SUB MITTED THAT THE ASSESSEE HAS RECEIVED THESE PAYMENTS DURING THE YEA R UNDER CONSIDERATION AND AS PER THE TERMS OF THE AGREEMENT 10% OF THE SAID AMOUNT COMES TO ` 12,01,191/-. THUS, THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE COMPUTATION OF COST OF LAND WHICH HAS BEEN ACCEPTED BY THE AO IN THE EARLIER YEARS. 8. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER FURNISH THE DETAIL OF PURCHASE AND SALE OF LAND FOR WORKING OUT THE COST OF THE LAND. HE HAS FURTHER SUBMITTED THAT IN THE ABSENCE OF ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 6 THE NECESSARY DETAILS THE AUTHORITIES BELOW ARE JUS TIFIED IN ADOPTING THE COST OF LAND AT ` 20 SQ.FT. AS REGARDS THE 10% OF THE SALE DURING TH E YEAR THE LD. DR HAS SUBMITTED THAT FOR COMPUTATION OF PROFIT FROM THE SALE OF PLOTS, THE COST OF 10% OF SALE PROCEEDS CAN BE TAKEN INTO ACCOUNT ONLY IN RESPECT OF THE SALE AFFECTED DURING THE YEAR. THE SALE FOR THE EARLIER YEAR AND SUBSEQUENT YEAR CANNOT BE TAKEN INTO ACCOUNT FOR COST AGAINST THE SALE OF THE YEAR UNDER CONSIDE RATION. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE WAS A SEARCH AND SEIZURE ACTION ON 29.9.2005 IN THE CASE OF THE ASSESSEE AND OTHER GRO UP CONCERNS. THEREFORE, THE ASSESSMENT FOR THE SIX YEARS UP TO T HE ASSESSMENT YEAR 2005-06 WERE FRAMED U/S 153A R.W.S 143(3) OF THE IN COME TAX ACT. THERE ARE TWO ASPECTS OF THIS ISSUE VIZ. (I) THE CO ST OF LAND AND (II) THE LIABILITY OF 10% OF THE REALISATION OF SALE PROCEED S AS PER CLAUSE 10(3) OF THE AGREEMENT DATED 30.10.1991. THE ASSESSEE WORKED OUT THE COST OF PLOT BY TAKING THE OPENING STOCK OF PLOTS. THE AO R EJECTED THE DEVELOPMENTS COST @ ` 40.24 PER SQ.FT. ADOPTED BY T HE ASSESSEE. INSTEAD THE AO TOOK DEVELOPMENT COST OF LAND AT ` 2 0 PER SQ.FT. THE ASSESSEE HAS GIVEN THE WORKING OF COST OF PLOTS AT PAGE NO. 1 OF THE PAPER BOOK AS UNDER: STOCK OF PLOTS AS ON 31 STOCK OF PLOTS AS ON 31 STOCK OF PLOTS AS ON 31 STOCK OF PLOTS AS ON 31 ST STST ST MARCH, 2006 MARCH, 2006 MARCH, 2006 MARCH, 2006 PARTICULARS AREA VALUE OPENING STOCK PLOTS 49840 2005615 40.2 4107143 ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 7 SHOPS 278.5 242295 870 2247910 LESS: SALES OF PLOT 18217.5 733073 (WORKING) SALE OF SHIP 278.5 242295 ___________________________ CLOSING STOCK 31622.5 1272542 WORKINGS WORKINGS WORKINGS WORKINGS TOTAL COST 2005615 40.24 TOTAL AREA 49840 SALE VALUE AT COST 40.24*18217.51 __________ 733073 COGS COGS COGS COGS 10% RECEIPTS DURING THE YEAR TAKEN TO COGS AS PER A GREEMENT COST OF PLOTS SLD 733,073.00 ADD: 10% OF RECEIPTS DURING THE YEAR ON PLOTS 1,201,191.00 ADD: SHOPS 2,176,559.00 10. IT IS CLEAR FROM THE DETAILS OF THE WORKING ABO VE THAT THE ASSESSEE TOOK THE OPENING STOCK OF THE PLOTS AS THE BASIS FO R COST OF PLOTS SOLD DURING THE YEAR. THE AO HAS NOT POINTED OUT ANY DEF ECT OR THE OPENING STOCK TAKEN IN THE WORKING IS INCORRECT AND NOT ACC EPTED IN THE EARLIER YEARS. WHEN THE PLOTS AND SHOPS SOLD DURING THE YEA R ARE ONLY FROM THE OPENING STOCK THEN IN VIEW OF THE FACT THAT THE COS T OF PLOT ACCEPTED IN ALL SIX YEARS PRIOR TO THIS YEAR IN THE ASSESSMENT U/S 153A, THE SAME CANNOT BE DISTURBED IN THIS YEAR. EVEN OTHERWISE TH E AO ADOPTED THE COST OF PLOT ON ESTIMATION AT ` 20 PER SQ.FT. WITHO UT ANY BASIS. THIS ESTIMATION OF THE AO IS NOT JUSTIFIED WHEN THE ASSE SSEE HAS GIVEN A WORKING AND TAKEN THE COST AS PER OPENING STOCK. 11. AS REGARDS THE LIABILITY OF 10% OF REALISATION DURING THE YEAR IS CONCERNED IT IS PERTINENT TO NOTE THAT AS PER CLAUS E 10(3) OF THE ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 8 AGREEMENT DATED 30.10.1991, THE ASSESSEE IS REQUIRE D TO PAY 10% OF REALISATION OF SALE PROCEEDS. IN OTHER WORDS IF A S ALE TOOK PLACE DURING THE YEAR BUT THE AMOUNT HAS NOT BEEN FULLY RECEIVED THEN ONLY THAT PART OF THE SALE CONSIDERATION WHICH HAS BEEN RECEIVED D URING THE YEAR COULD BE TAKEN INTO CONSIDERATION FOR THIS PURPOSE. SIMILARLY, AS IT IS CLEAR FROM THE LANGUAGE OF THE AGREEMENT THAT THE R EALISATION FROM THE PROSPECTIVE BUYERS WOULD BE TAKEN INTO CONSIDERATIO N FOR CALCULATING 10% OF THE SALE PROCEEDS. THUS, WHAT IS TO BE CONSI DERED IS THE TOTAL REALISATION DURING THE YEAR AND NOT THE SALE ALONE DURING THE YEAR AS TAKEN BY THE AO. IF THE ACTION OF THE AO IS ACCEPTE D IT WOULD LEAD TO DISTURB THE UNIFORM AND CONSISTENT METHOD OF COMPUT ATION OF INCOME AND WILL RESULT IN DOUBLE ADDITION IN RESPECT OF TH E AMOUNT RECEIVED IN THE EARLIER YEAR BUT THE SALE TOOK PLACE IN THIS YE AR. WHEN THE ASSESSEE IS FOLLOWING THE CONSISTENT METHOD OF COMPUTATION T HE COST AS PER THE AGREEMENT THEN AFTER ACCEPTING THE SAME FOR LAST SI X YEARS IT CANNOT BE DISTURBED IN THIS YEAR. ACCORDINGLY WE SET ASIDE TH E ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE AND CONSEQUENTLY T HE ADDITION MADE ON ACCOUNT OF COST OF PLOTS IS DELETED. 12. GROUND NO. 2 REGARDING ADDITION ON ACCOUNT OF R ECEIPT FOR MSEB DEPOSITS, SOCIETY DEPOSIT AND MAINTENANCE CHARGES E TC. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESS EE HAS TAKEN MAHARASHTRA STATE ELECTRICITY BOARD (MSEB) DEPOSITS , SOCIETY DEPOSIT AND MAINTENANCE CHARGES OF ` 37,509/- FROM EACH PAR TY TO WHOM IT HAD ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 9 SOLD LAND DURING THE YEAR. SINCE THE ASSESSEE HAS N OT ACCOUNTED THESE RECEIPTS WHILE WORKING OUT THE PROFITS FROM THE LAN D SOLD, THE AO HAS MADE AN ADDITION OF ` 1,50,036/- AS INCOME FROM OTH ER SOURCES. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SHOW THAT TH E MONEY COLLECTED WERE SPENT FOR THE STATED PURPOSE. 13. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE IS RESPONSIBLE FOR COMPLETING LEGAL FORMAL ITIES, SOCIETY FORMATION, ELECTRICITY AND WATER CONNECTION FOR THE PROPOSED SOCIETY AND ALSO RESPONSIBLE FOR MAINTENANCE AND PAYMENT OF CHARGES AND TAXES ON BEHALF OF THE SOCIETY AS PER THE TERMS OF THE AGREEMENT. FOR THESE PURPOSES THE ASSESSEE ACCEPTED THE DEPOSITS F ROM THE BUYERS OF PLOT. THE LD. AR HAS FURTHER POINTED OUT THAT THE A SSESSEE HAS CATEGORICALLY SUBMITTED BEFORE THE AUTHORITIES BELO W THAT IT IS MAINTAINING A SEPARATE BANK ACCOUNT WHEREIN THE DEP OSITS RECEIVED FROM THE BUYERS HAVE BEEN DEPOSITED AND THE EXPENSE S RELATING TO THE LEGAL CHARGES, SOCIETY FORMATION, ELECTRICITY CONNE CTION, WATER CONNECTION AND MAINTENANCE CHARGES ARE ALSO INCURRE D FROM THE SAID BANK ACCOUNT. THE LD. AR HAS CONTENDED THAT ON COMP LETION OF THE PROJECT AND ON FORMATION OF THE SOCIETY, THE ASSESS EE IS REQUIRED TO HANDOVER THE BALANCE AMOUNT, IF ANY, LYING IN THE A FORESAID ACCOUNT TO THE SOCIETY AND SHORT FALL, IF ANY, MAY BE RECOVERE D FROM THE SOCIETY. THUS, THE LD. AR HAS SUBMITTED THAT THE DEPOSITS RE CEIVED FROM THE ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 10 BUYERS ARE NOT INCOME IN THE HANDS OF THE ASSESSEE AND THAT THE ASSESSEE HAS RECEIVED THE DEPOSIT FROM THE BUYERS/P URCHASERS FOR DISCHARGING THEIR OBLIGATIONS. IN SUPPORT OF HIS CO NTENTION HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN CASE OF SURES H KUMAR KHURANA VS DCIT 15 SOT 486 AND SUBMITTED THAT THE AMOUNT RECEI VED FROM THE PURCHASERS BY THE ASSESSEE FOR DISCHARGING OBLIGATI ONS AND KEPT IN SEPARATE ACCOUNT IS NOT A ASSESSABLE INCOME OF THE ASSESSEE. 14. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDER OF THE CIT(A) AND SUBMITTED THAT WHEN THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE TO SHOW THAT THE COLLECTED AMOUNT WERE SPE NT FOR THE STATED PURPOSE THEN THE SAME IS RIGHTLY TREATED AS INCOME OF THE ASSESSEE. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE AMOUNT OF ` 37,509/- HAS BE EN RECEIVED BY THE ASSESSEE FROM EACH OF THE BUYER/PARTY ON ACCOUNT OF ELECTRICITY, LEGAL CHARGES, SHARE APPLICATION MONEY, ENTRANCE FEE, REG ISTRATION FEE OF NEW SOCIETY AND MAINTENANCE CHARGES. THUS, IT IS CLEAR THAT THESE AMOUNTS WERE RECEIVED BY THE ASSESSEE FOR DISCHARGING THE O BLIGATIONS OF THE BUYERS IN RESPECT OF FORMATION OF SOCIETIES AND OTH ER EXPENDITURE IN THIS CONNECTION. THE ASSESSEE IS MAINTAINING A SEPARATE BANK ACCOUNT FOR KEEPING THE DEPOSIT RECEIVED FROM THE BUYERS TO SPE ND TOWARDS THE DEPOSITS WITH MSEB FOR ELECTRICITY CONNECTION, LEGA L EXPENSES FOR FORMATION OF SOCIETY, APPLICATION MONEY, ENTRANCE F EE AND MAINTENANCE CHARGES ETC. THESE AMOUNTS HAVE BEEN RECEIVED BY TH E ASSESSEE AS ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 11 PER THE TERMS OF THE AGREEMENT STIPULATED IN CLAUSE 14 AND 15 AS UNDER: 14. PAYMENT OF DEPOSIT AND OTHER AMOUNTS: THE PLOT PURCHASER SHALL ON OR BEFORE TAKING DELIVE RY OF POSSESSION OF THE SAID PLOT KEEP DEPOSITED WITH THE PROMOTER THE AMOUNTS AS MENTIONED IN CLAUSE NO.1 OF THIS AGR EEMENT FOR KEEPING THE FOLLOWING EXPENSES: (A) FOR LEGAL CHARGES, SHARE MONEY, APPLICATION AND ENTRANCE FEES AND FOR FORMATION, REGISTRATION OF A NEW SOCIETY/ OR SUB SOCIETY OR DIVISION OR CONVERSION O F EXISTING SOCIETY ETC. AND/OR FOR ALL ITEMS WHICH ARE MORE PARTICULARLY DESCRIBED IN THE SCHEDULE IV HEREUNDER GIVEN. (B) THE PROJECTED MAINTENANCE CHARGES IN ADVANCE TOWARDS PROPORTIONATE SHARE IN TAXES, MAINTENANCE CHARGES, AND EXPENSES AND/OR ALL ITEMS MENTIONED IN SCHEDULE IV HEREUNDER1 GIVEN. (C) THE PROJECTED CHARGES TOWARDS MSEB DEPOSITS, INCIDENTAL EXPENSES ETC. AND/ OR FOR ALL ITEMS MENT IONED IN SCHEDULE IV HEREUNDER GIVEN. THE PURCHASES IS AWARE THAT THE PROMOTER HAS ALREAD Y INCURRED EXPENSES FROM TIME TO TIME TOWARDS MEETING THE EXPENSES AS ABOVE WHICH SHALL ALSO BE ACCOUNTED AND BE REIMBURSED TO THE PROMOTERS AND THE PURCHASE SHALL NOT CLAIM ANY INTEREST ON THE DEPOSIT SO PAID BY HIM/ H ER WHICH SHALL REMAIN WITH THE PROMOTERS TILL THE ENTI RE PROJECT IS COMPLETED IN ALL RESPECTS. AFTER PAYING ALL THE, ABOVE EXPENSES TO ABOVE REFER RED HEADS, THE PROMOTERS WILL TRANSFER THE BALANCE AMOU NT TO THE SOCIETY OR MAY DEMAND DIFFERENCE BETWEEN ACTUAL EXPENSES AND THE DEPOSIT PAID BY PURCHASER FROM THE SOCIETY. 15. MAINTENANCE OF ACCOUNTS OF SUMS RECEIVED AS ADV ANCE OR DEPOSIT FROM THE PLOT PURCHASER. THE PROMOTER SHALL MAINTAIN SEPARATE ACCOUNTS IN RE SPECT OF SUMS RECEIVED BY THE PROMOTER FROM THE UNIT PURC HASER AS ADVANCE OR DEPOSITS, SUMS RECEIVED ON ACCOUNT OF THE SHARE CAPITAL FOR THE PROMOTION OF THE COOPERATIVE SOCIETY OR A COMPANY OR TOWARDS THE OUTGOING LEGAL CHARGES AND ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 12 SHALL UTILIZE THE AMOUNTS FOR THE PURPOSES FOR WHIC H THEY HAVE BEEN RECEIVED. 16. IT IS CLEAR FROM THE TERMS OF THE AGREEMENT THA T THE ASSESSEE HAS RECEIVED THIS AMOUNT UNDER THE OBLIGATION OF AGREEM ENT AND IN THE CAPACITY OF TRUSTEE. THE BALANCE IF ANY AT THE COMP LETION OF PROJECT AND FORMATION OF SOCIETY SHALL BE REFUNDED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE TREATED AS I NCOME OF THE ASSESSEE. THIS AMOUNT IS REQUIRED TO BE SPENT FOR S PECIFIC PURPOSES AND BALANCE IS REFUNDABLE, THEREFORE, THE ACTUAL EXPEND ITURE WOULD NOT CHANGE THE CHARACTER OF THE RECEIPT/DEPOSIT KEPT IN SEPARATE BANK ACCOUNT. IN CASE OF SURESH KUMAR KHURANA VS DCIT (S UPRA) THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN PARA 7 AND 8 HAS DECIDED A SIMILAR ISSUE AS UNDER: 7. LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT BEE N ABLE TO PRODUCE ANY MATERIAL WHICH CONTROVERTS THE FACTU AL ASPECTS, OR OTHER MATERIAL WITH REGARD TO THE NATURE OF TRAN SACTION, EMBEDDED IN THE ABOVE LETTER. IN ANY EVENT, IT WAS ALL ALONG THE CASE OF THE ASSESSEE THAT THE MONEY RECEIVED BY HIM FROM THE ASSESSEE IS A CONDITIONAL RECEIPT WITH CORRESPO NDING OBLIGATION TO ACCOUNT FOR THE SAME TO THE PRINCIPAL . NOT ONLY THAT THERE WAS NO MATERIAL BEFORE ANY OF THE AUTHOR ITIES BELOW TO GIVE FINDINGS TO THE CONTRARY OF ASSESSEES CONT ENTIONS, THE CIT(A) HAS GONE TO THE EXTENT OF HOLDING THAT THE A SSESSEE WILL BE ENTITLED TO THE DEDUCTION IN THE YEAR IN WHICH H E ACTUALLY MAKES PAYMENTS IN RESPECT OF THE RELATED LIABILITIE S, AS AND WHEN THEY SO ARISE. THERE ARE TWO SIGNIFICANT ASPEC TS OF THE MATTER. FIRST THAT THE CIT(A) PROCEEDS ON THE FALLA CY THAT A RECEIPT, EVEN IF IT IS ATTACHED WITH AN OBLIGATION TO ACCOUNT FOR THE SAME TO HIS PRINCIPAL, CAN BE TREATED AS INCOME . IT IS ELEMENTARY THAT WHAT CAN BE TERMED AS AN INCOME IS ONLY SUCH A RECEIPT WHICH COMES WITHOUT ANY CORRESPONDIN G OBLIGATIONS TO US IT IN A PARTICULAR MANNER OR TO R EFUND THE SAME. UNLESS A GAIN IS EARNED OR ACCRUED, IN MONEY OR ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 13 MONEYS WORTH, IT CANNOT BE SAID TO BE AN INCOME. I N THE CASE BEFORE US, THE GAIN HAS NOT CRYSTALLIZED BECAUSE TH E MONEY RECEIVED BY THE ASSESSEE, AS AT THE MATERIAL POINT OF TIME, WAS NOT EARNED OR ACCRUED BY THE ASSESSEE. THERE IS NO MATERIAL ON RECORD, SAVE AND EXCEPT FOR THE INFERENCES DRAWN BY THE ASSESSING OFFICER, TO EVEN SUGGEST THAT THE ASSESSE E HAD A RIGHT TO KEEP THE BALANCE MONEY WITH HIM IN HIS OWN RIGHT. AS A MATTER OF FACT, THE EVIDENCE FILED BEFORE US SHOW S THAT THE ASSESSEE DID NOT HAVE ANY RIGHT TO KEEP THE BALANCE , BUT HE HAD AN OBLIGATION TO REFUND THE BALANCE TO THE PRIN CIPAL. SECOND IMPORTANT ASPECT OF THE MATTER IS THAT THE A UTHORITIES BELOW HAVE CLEARLY ERRED IN HOLDING THAT HONBLE SU PREME COURTS JUDGMENT IN THE CASES OF CHOWRINGHEE SALES BUREAU (P.) LTD. V. CIT [19731 87 ITR 542 AND INDIAN MOLAS SES CO. LTD. V. C1T [1959] 37 ITR 66 APPLY ON THE FACTS OF THE P RESENT CASE. IN THE CASE OF CHOWRINGHEE SALES BUREAU (P.) LTD. ( SUPRA), HONBLE SUPREME COURT WAS IN SEISIN OF A SITUATION IN WHICH WHILE THE AUCTIONEER WAS ISSUING CASH MEMOS BY INCL UDING THE AMOUNT OF SALES TAX, BUT DECLINING TO PAY THE SAME TO THE EXCHEQUER OR TO REFUND THE SAME TO THE SELLER. IT W AS THE CONTENTION OF THE ASSESSEE THAT HE IS NOT LIABLE TO PAY THE SAME AS HE WAS NOT THE SELLER, BUT ONLY AN AUCTIONE ER, AND YET HE COLLECTED THE SALES TAX FROM THE PERSONS TO WHOM THE AUCTIONED GOODS WAS SOLD. IT WAS ON THE FACTS THAT THEIR LORDSHIPS HELD THAT THE RECEIPT IN QUESTION WAS A T RADING RECEIPT. WHILE HOLDING SO, THEIR LORDSHIPS OBSERVED AS FOLLOWS: IT IS APPARENT FROM THE ORDER OF THE AAC AND HAS N OT BEEN DISPUTED BEFORE US IN THE PRESENT CASE THAT TH E CASH MEMOS ISSUED BY THE APPELLANT TO THE PURCHASER S IN THE AUCTION SALE THAT IT WAS APPELLANT WHO WAS SHOW N AS THE SELLER. THE AMOUNT REALIZED BY THE APPELLANT FR OM THE PURCHASER INCLUDED SALES TAX. THE APPELLANT, HOWEVE R, DID NOT PAY THE SALES TAX TO THE ACTUAL OWNER OF TH E GOODS AUCTIONED BECAUSE STATUTORY LIABILITY TO PAY THE SALES TAX WAS OF THE APPELLANT. THE APPELLANT COMPA NY DID NOT ALSO DEPOSIT THE AMOUNT REALIZED BY IT AS S ALES TAX IN THE STATE EXCHEQUER BECAUSE IT TOOK THE POSI TION THAT THE STATUTORY PROVISION CREATING THAT LIABILIT Y UPON IT WAS NOT VALID. AS THE AMOUNT OF SALES TAX WAS RECEI VED BY THE APPELLANT IN ITS CHARACTER AS AUCTIONEER, TH E AMOUNT IN OUR VIEW, SHOULD BEHELD AS TRADING OR BUS INESS RECEIPT. THE APPELLANT WOULD, OF COURSE, BE ENTITLE D TO CLAIM DEDUCTION OF THE AMOUNT AS AND WHEN IT PAYS I T TO THE STATE GOVERNMENT. ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 14 IT IS DIFFICULT TO COMPREHEND AS TO HOW THE ABOVE S TATED VIEWS OF THE HONBLE SUPREME COURT CAN BE PERCEIVED AS AN AUTHORITY OF THE PROPOSITION THAT, IRRESPECTIVE OF ASSESSEES OBLIGATION AND WILLINGNESS TO ACCOUNT FOR A RECEIPT , THE SAME CAN BE TREATED AS OF INCOME NATURE. IN THE CASE BEF ORE THEIR LORDSHIPS, IT WAS THE STAND OF THE ASSESSEE THAT HE IS NOT LIABLE TO PAY THE AMOUNT COLLECTED FROM THE CUSTOMERS. IN THE CASE BEFORE US, IT IS CONSISTENT STAND OF THE ASSESSEE T HAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS A RECEIPT IN TR UST AND FOR A SPECIFIC PURPOSE. WE, THEREFORE REJECT THE RELIAN CE OF THE AUTHORITIES BELOW ON THE HONBLE SUPREME COURTS JU DGMENT IN THE CASE OF CHOWRINGHEE SALES BUREAU (P.) LTD. (SUP RA). SIMILARLY, AS FAR AS INDIAN MOLASSESS CO. LTD.S CA SE (SUPRA) IS CONCERNED, THE SAME HAS NO APPLICATION IN THE MATTE R EITHER. THIS CASE DEALS WITH THE QUESTION WHETHER OR NOT DE DUCTION OF A LIABILITY, WHICH WAS HELD TO BE A CONTINGENT LIAB ILITY ON THE FACTS OF THAT CASE, CAN BE ALLOWED AS A DEDUCTION. WE ARE NOT REALLY CONCERNED WITH THE DEDUCTIBILITY OF EXPENDIT URE BECAUSE THE EXPENDITURE, IN RESPECT OF THE DISBURSEMENTS MA DE BY THE ASSESSEE BEFORE US, WILL IN FACT BE EXPENDITURE OF THE PRINCIPAL AND NOT THE ASSESSEE. 8. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CON SIDERED VIEW THAT THE AUTHORITIES BELOW DID NOT HAVE COGENT BASIS FOR COMING TO THE CONCLUSION THAT RS. 18,18,228 LYING T O THE CREDIT OF THE ASSESSEES PRINCIPAL CONSTITUTED INCOME OF T HE ASSESSEE. AS THE ASSESSEE WAS ACCOUNTABLE TO HIS PRINCIPAL IN RESPECT OF THIS AMOUNT, AND AS THIS AMOUNT WAS NOT AN UNFETTER ED RECEIPT IN THE HANDS OF THE ASSESSEE, IT COULD NOT BE SAID TO BE INCOME OF THE ASSESSEE. THE ADDITION SUSTAINED BY THE CIT( A), THEREFORE, DESERVES TO BE DELETED. HOWEVER, THE ASS ESSING OFFICER IS AT LIBERTY TO TAX THE SAME IN CASE THIS AMOUNT WAS SUBSEQUENTLY, IF SO, THE PRINCIPAL WAIVED THE LIABI LITY OF THE ASSESSEE TO ACCOUNT FOR OR REFUND THE SAME. SUBJECT TO THESE OBSERVATIONS, THE GRIEVANCE OF THE ASSESSEE IS UPHE LD. THE ASSESSING OFFICER IS, ACCORDINGLY, DIRECTED TO DELE TE THE IMPUGNED ADDITION. 17. IN VIEW OF THE ABOVE DISCUSSION WE HOLD THAT TH E AMOUNT RECEIVED BY THE ASSESSEE IN THE CAPACITY OF TRUSTEE FOR CARR YING OUT THE EXPENDITURE ON BEHALF OF THE BUYERS/SOCIETY CANNOT BE TREATED AS INCOME. ACCORDINGLY, THE ADDITION MADE ON THIS ACCO UNT IS DELETED. ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 15 IN APPEAL ITA NO. 978/M/2009 IN APPEAL ITA NO. 978/M/2009 IN APPEAL ITA NO. 978/M/2009 IN APPEAL ITA NO. 978/M/2009 18. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE AD DITION OF ` 37,12,439/- MADE ON ACCOUNT OF DISALLOWANCE INTERES T HOLDING THAT SINCE SIMILAR DISALLOWANCE HAS NOT MADE FOR TH E EARLIER YEARS, NO DISALLOWANCE CAN BE MADE IN THE CURRENT Y EAR WITHOUT APPRECIATING THE LEGAL POSITION THAT EVERY ASSESSMENT YEAR IS AN INDEPENDENT ASSESSMENT YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE AB OVE DISALLOWANCE WITHOUT APPRECIATING THE FACT THAT THE RE IS NO EVIDENCE THAT ADVANCES WERE GIVEN FOR THE PURPOSES OF BUSINESS, AS PER PROVISO TO SECTION 36(1)(III), INT EREST IS REQUIRED TO BE CAPITALIZED SINCE THE ADVANCES WERE GIVEN FOR ACQUISITION FOR CAPITAL ASSET. 19. DURING THE YEAR THE ASSESSEE HAS DEBITED INTERE ST ON UNSECURED LOAN TO THE TUNE OF ` 37,12,439/-. THE AO NOTED THA T THIS INTEREST HAS BEEN PAID TO UNSECURED LOAN OF ` 2.51 CRORES TAKEN FROM SHRI V. T. GALA AND VIJAY GRIHANIRMAN PVT. LTD. THE AO DISALLOWED T HE INTEREST ON THE GROUND THAT THE ASSESSEE HAS UTILISED THIS AMOUNT F OR GIVING ADVANCES FOR PURCHASE OF PLOTS FOR FUTURE PROJECTS. ON APPEA L, THE CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THESE LOANS WERE NOT TAKEN DURING THE YEAR BUT THESE LOANS WERE TAKEN IN THE E ARLIER YEARS AND THE INTEREST EXPENSES ON THESE LOANS WERE ALLOWED AS BU SINESS EXPENDITURE IN THE EARLIER YEARS. 20. BEFORE US THE LD. DR HAS STRONGLY RELIED UPON T HE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. AR HA S SUBMITTED THAT NO ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 16 LOAN HAS BEEN TAKEN DURING THE YEAR UNDER CONSIDERA TION. FURTHER THE AMOUNT HAS BEEN UTILISED FOR THE PURPOSE OF THE BUS INESS OF THE ASSESSEE AND THEREFORE, IT IS AN ALLOWABLE EXPENDIT URE U/S 36(1)(III) OF THE INCOME TAX ACT. HE HAS SUPPORTED THE ORDER OF T HE CIT(A) AND SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE OUTSTANDING UNSECURED LOAN HAS BEEN REDUCED FROM 2.97CRORES TO 2.51 CRORES THEREFORE, THE ASSESSEE HAS REPAID THE LOAN AND NOT TAKEN ANY FRESH LOAN. THE LD. AR HAS FURTHER SUBMITTED THAT THE ASS ESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER U/S 153A FOR THE ASSES SMENT YEARS 2000- 01 TO 2005-06 HAS ALLOWED THE CLAIM OF THE ASSESSEE U/S 36(1)(III) OF THE INCOME TAX ACT. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT NO NEW LOAN WAS TAKEN BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR UNDER CONSIDERATION. FURTHER WE NOTE THAT THE AO DI SALLOWED THE INTEREST ON THE GROUND THAT THE ADVANCES WERE GIVEN BY THE ASSESSEE FOR THE PURPOSE OF PURCHASE OF PLOTS FOR FUTURE PRO JECTS. THIS GROUND OF THE ASSESSING OFFICER ON THE FACE OF IT IS NOT SUST AINABLE BECAUSE THE ADVANCES WERE GIVEN FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE BEING PURCHASE AND SALE OF PLOTS. IF THE GROUND OF THE AO FOR REJECTING THE INTEREST EXPENDITURE IS ACCEPTED THEN ALL PAYME NTS GIVEN IN ADVANCE FOR PURCHASE OF GOODS WOULD NOT BE TREATED AS EXPENDITURE FOR BUSINESS PURPOSE. EVEN IF THE REASONING OF THE AO I S ACCEPTED THEN THE ITA NO.1491, 978 & 2952/M/2011 INDRAPRASTHA PREMISES 17 AMOUNT WHICH IS KEPT IDLE WOULD ALSO NOT ILLEGIBLE FOR INTEREST EXPENDITURE. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) QUA THIS ISSUE. 22. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 25 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI