Dy.Commissioner of Income Tax, Circle-3(3), Ahmedabad V. M/s. Anshul Associates, Ahmedabad

ITA 3063/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8396 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 3063/AHD/2015 (ASSESSMENT YEAR: 2011-12) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(3), AHMEDABAD V/S M/S. ANSHUL ASSOCIATES, 4 TH FLOOR, COMMERCE HOUSE, NR. JUDGES BUNGLOW CROSS ROAD, BODAKDEV, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAKFA9509N APPELLANT BY : SHRI MUDIT NAGPAL, SR. D. R. RESPONDENT BY : SHRI P.M. MEHTA, A.R. ( )/ ORDER DATE OF HEARING : 11 -04-201 8 DATE OF PRONOUNCEMENT : 16 -04-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-3, AHMEDABAD DATED 31.08.2015 PERTAINING TO A.Y. 2011- 12. ITA NO. 3063 /AHD/2015 . A.Y. 2011-12 2 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READ AS UN DER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 2,82,812/- MADE ON ACCOUNT OF DISALLOWANCE OF INTER EST EXPENSES. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 32,88,441/- MADE ON ACCOUNT OF WOODEN MATERIAL EXPE NSES. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 2,91,375/- MADE ON ACCOUNT OF DISALLOWANCE OF SOLAR WATER HEATING EQUIPMENTS. 3. GROUND NOS. 4 TO 10 ARE EXTENSION OF THE GRIEVANCES RAISED VIDE GROUND NOS. 1, 2 & 3. 4. REPRESENTATIVES OF BOTH SIDES WERE HEARD AT LENGTH. CASE RECORD CAREFULLY PERUSED AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE CAREFULLY GONE THROUGH THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE FORM OF A PAPER BOOK IN THE LIGHT OF RULE 18(6) OF THE ITAT RULES. 5. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS DEVELOPER OF PROJECT AND IS ALSO A CONTRACTOR. DURING THE YEAR UNDER CON SIDERATION, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT DATED 18.01.20 08 WITH M/S. GOYAL & CO. (CONST) PVT. LTD. WHEREIN THE ROLES OF BOTH THE PAR TIES WERE DEFINED. THE OWNERSHIP OF THE LAND WAS VESTED WITH GOYAL & CO. A ND THE ASSESSEE WAS CONCERNED WITH THE EXECUTION OF ACTIVITIES AS DEFIN ED IN THE JOINT DEVELOPMENT AGREEMENT. THE ASSESSEE WAS MAINLY ENGAGED IN RCC W ORKS, BRICK WORK AND PLASTER WORK. 6. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS INCURRED AND CLAIMED EXPENSES OF RS. 22,83,441/- BEING WOODEN MATERIAL EXPENSES AND RS. 8,00,000/- BEING W OODEN LABOUR EXPENSES. THE A.O. WAS OF THE OPINION THAT THE AS SESSEE HAS EXECUTED THESE ITA NO. 3063 /AHD/2015 . A.Y. 2011-12 3 WORKS BEYOND THE SCOPE OF WORK ASSIGNED TO IT BY VI RTUE OF THE DEVELOPMENT AGREEMENT ENTERED WITH GOYAL & CO. THE ASSESSEE W AS ASKED TO JUSTIFY THE CLAIM OF EXPENDITURE. THE ASSESSEE FILED A DETAILED REPLY AND IN SUPPORT OF THE CLAIM OF EXPENDITURE, SUPPORTING BILLS/INVOICES WER E FURNISHED. 7. AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE A SSESSEE, THE A.O. STILL WAS UNDER THE OPINION THAT THE ASSESSEE HAS DONE WORK W HICH WAS NOT ALLOTTED TO IT. THE A.O. ACCORDINGLY DISALLOWED THE TOTAL EXPENDITU RE OF RS. 30.83 LACS. PROCEEDING FURTHER, THE A.O. NOTICED THAT THE ASSES SEE HAS CLAIMED EXPENDITURE OF RS. 2,91,375/- BEING INCURRED ON TUBE WELL. ON GOING THROUGH THE BILL, THE A.O. NOTICED THAT THE SAID EXPENDITURE WAS PURCHASE D OF SOLAR WATER HEATING EQUIPMENTS. THE A.O. WAS OF THE OPINION THAT THE EX PENSES ON BORE WELL, TUBE WELL HAS ALREADY BEEN CLAIMED SEPARATELY BY TH E ASSESSEE. THE A.O. ONCE AGAIN FORMED A BELIEF THAT THE SAID EXPENDITURE WAS INCURRED BY THE ASSESSEE BEYOND THE SCOPE OF WORK ALLOTTED TO IT IN THE DEVE LOPMENT AGREEMENT. THE A.O. DISALLOWED RS. 2,91,375/-. 8. ON FURTHER PROBE, THE A.O. FOUND THAT THE ASSESSEE HAS DEBITED INTEREST EXPENSES OF RS. 25,89,150/- ON THE LOAN FACILITY AV AILED FROM THE PUNJAB NATIONAL BANK. THE A.O. NOTICED THAT THE SALE RECEI PTS WERE FIRST RECEIVED BY GOYAL & CO. AND LATER ON TRANSFERRED TO THE ASSESSE E. THE A.O. WAS OF THE OPINION THAT ONCE IT WAS AGREED WITH GOYAL & CO. TH AT THE UNITS SOLD BY RESPECTIVE PARTIES, THE SALE CONSIDERATION OF THE S AME SHALL BE COLLECTED BY THE RESPECTIVE PARTIES. THE A.O. WAS OF THE OPINION THA T SINCE THE SALE RECEIPTS WERE FIRST COLLECTED BY GOYAL & CO. AND THEREAFTER TRANS FERRED TO THE ASSESSEE, THE TIME LAG BETWEEN THE TWO TRANSACTIONS HAVE RESULTED INTO THE PAYMENT OF INTEREST ON LOAN FACILITIES WHICH THE ASSESSEE COUL D HAVE EASILY AVOIDED HAD THE ITA NO. 3063 /AHD/2015 . A.Y. 2011-12 4 SALE CONSIDERATION WAS RECEIVED BY IT DIRECTLY. THE A.O. DISALLOWED PROPORTIONATE INTEREST EXPENSES AMOUNTING TO RS. 2, 82,812/-. 9. ASSESSEE ASSAILED THE ASSESSMENT ORDER BEFORE THE L D. CIT(A) AND VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS DONE THE WORK JOINT LY WITH GOYAL & CO. AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS I NCURRED EXPENDITURE ON THE WORK DONE BY IT WHICH WAS BEYOND THE SCOPE OF THE D EVELOPMENT AGREEMENT. 10. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) WAS CONVINCED WITH THE CLAIM OF EXPENDITURE AND ON FINDING THAT B OTH THE ASSESSEE AND GOYAL & CO. ARE TAXED AT THE MAXIMUM RATE OF TAX, THERE W OULD BE NO REVENUE LEAKAGE IF THE EXPENDITURE ARE CLAIMED BY EITHER OF THE TWO . DRAWING SUPPORT FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F EXCEL INDUSTRIES LTD. 219 TAXMANN.COM 379 AND GLAXO SMITHKLINE ASIA (P) L TD. 195 TAXMANN.COM 35, THE LD. CIT(A) DIRECTED THE A.O. TO DELETE THE IMPUGNED ADDITIONS. 11. THERE IS NO DISPUTE THAT THE ASSESSEE HAS IN FACT I NCURRED THE EXPENDITURES WHICH HAVE BEEN DISALLOWED BY THE A.O. IT IS EQUALL Y TRUE THAT NOWHERE THE A.O. HAS MENTIONED THAT THE EXPENDITURES WERE NOT R ELATED TO THE BUSINESS OF THE ASSESSEE. IT IS ALSO TRUE THAT QUANTITATIVE SPE CIFICATION OF WORKS ALLOTTED TO ASSESSEE HAS NOT BEEN MENTIONED IN THE SAID AGREEME NT BUT AT THE SAME TIME, THE A.O. HAS ACCEPTED THE SAID AGREEMENT WITHOUT QU ESTIONING ITS LEGALITY OR ENFORCEABILITY. WE FIND THAT THE SALE CONSIDERATION WAS FIRST RECEIVED BY GOYAL & CO. AND THEREAFTER AFTER THE GAP OF 4 TO 6 DAYS, TH E SAME WAS TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE. ON SUCH FACT, IT CANNOT BE SAID THAT THE ASSESSEE HAS DELIBERATELY PASSED ON SOME FAVOUR TO GOYAL & CO. THEREFORE, IT CANNOT BE SAID THAT BY DOING SO, THE ASSESSEE HAS UNNECESSARI LY INCURRED INTEREST ITA NO. 3063 /AHD/2015 . A.Y. 2011-12 5 EXPENDITURE ON LOANS FROM PUNJAB NATIONAL BANK. MOR EOVER, THE ASSESSEE IS ALSO HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABL E WITH IT. THE DISALLOWANCE OF PROPORTIONATE INTEREST IS UNCALLED FOR. EXPENDITURE ON TUBE WELL WAS INCURRED FOR THE CONSTANT AVAILABILITY OF FLOW OF WATER FOR RCC WORK AND PLASTER WORK. AS MENTIONED ELSEWHERE, A.O. HAS NOT DISPUTED THAT SUCH EXPENDITURE WAS NEVER INCURRED FOR THE PURPOSE OF THE BUSINESS. SIM ILARLY, EXPENDITURE ON WOODEN WORK IS ALSO NOT IN DISPUTE. THE ONLY REASON FOR MAKING THE DISALLOWANCES IS THAT THE ASSESSEE HAS DONE SOME WO RK BEYOND THE SCOPE OF WORK ALLOTTED TO IT. ASSUMING, YET NOT ACCEPTING, T HE CONTENTION OF THE A.O. IS CORRECT THEN ALSO IF THE ASSESSEE HAS DONE SOME WOR K WHICH WAS NOT ALLOTTED TO IT, THE SAME WOULD BE A MATTER OF DISPUTE BETWEEN T HE ASSESSEE AND GOYAL & CO. BY NO STRETCH OF IMAGINATION, THE EXPENDITURE INCURRED CAN BE DISALLOWED. 12. ON A CONSPECTUS READING OF THE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLATE AUTHORITY VIS--VIS THE FACTS IN ISSUES R ELATING TO THE IMPUGNED EXPENDITURES, WE DO NOT FIND ANY MERIT IN THE DISAL LOWANCES MADE BY THE A.O. AND THEREFORE DECLINE TO INTERFERE WITH THE FINDING S OF THE LD. CIT(A). ALL THE GROUNDS TAKEN TOGETHER ARE ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 04- 20 18 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER AHMEDABAD: DATED 16/04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) ITA NO. 3063 /AHD/2015 . A.Y. 2011-12 6 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD