The ITO, Ward-9(2), Ahmedabad V. M/s. J.K. Corporation, Ahmedabad

ITA 3156/AHD/2009

• Counselvise Citation: 315620514 RSA 2009
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR; DINESHCHANDRA SHARMA
• Assessee Lawyers: PRITESH SHAH A R
• Keywords: Business income

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER 1. ./ I.T.A.NO.3156/AHD/2009 - & ' & ' & ' & '/ // / A.Y. 2005-06 2. ./ I.T.A.NO.3157/AHD/2009 - & ' & ' & ' & '/ // / A.Y. 2006-07 INCOME TAX OFFICER WARD-9(2) AHMEDABAD & & & & / VS. M/S.J.K.CORPORATION S.NO.210, SAVAN BUNGALOWS GST ROAD, NEW RANIP AHMEDABAD ( '# ./)* ./ PAN/GIR NO. : AAEFJ 5234 H ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . '/ APPELLANT BY : SHRI DINESHCHANDRA SHARMA, AND SHRI RAHUL KUMAR SR.DR ,-(+ / . ' / RESPONDENT BY : SHRI PRITESH SHAH, A.R. &0 / # / / / / DATE OF HEARING : 01/08/2012 12' / # / DATE OF PRONOUNCEMENT : 24/08/12 '3 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : BOTH THESE APPEALS ARE FILED BY THE REVENUE ARISI NG FROM THE ORDERS OF LEARNED CIT(APPEALS)-XV, AHMEDABAD BOTH I DENTICALLY DATED 30/09/2009 PASSED FOR AYS 2005-06 & 2006-07 AND THE VERBATIM COMMON GROUNDS RAISED BY THE REVENUE ARE AS UNDER ( EXTRACTED FROM A.Y. 2005-06):- 1) THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHM EDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.62,63,832/- (FOR A.Y. 2006-07- RS.6,11,400/-) MADE BY THE ASSESSING OFFICER BY REJECTING ASSESSEES BOOK PROF IT & ADOPTING DEVELOPMENT/ORGANIZING FEES @ 15% OF MEMBERS COLLEC TION AS PER CLAUSE 5 OF ORIGINAL DEVELOPMENT AGREEMENT. ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE LEAD A.Y. 200 5-06 CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) O F THE I.T. ACT, 1961 DATED 12/12/2007 WERE THAT THE ASSESSEE-FIRM WAS E NGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION, SALE PURCHASE OF LAND, ETC. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS UNDERTAK EN THE CONSTRUCTION ACTIVITY OF RESIDENTIAL BUILDING AT R.S.NO.210, RAN IP, NAMELY, SAVAN BUNGALOWS FOR THE SOCIETY VIZ.SAMRAT CO-OP.HOUSING SOC.LTD., AHMEDABAD. IT WAS NOTED BY THE AO THAT THE SAID SAMRAT CO- OP.HOUSING SOC. HAD ENTERED INTO AN AGREEMENT DATED 14/06/2001 WITH THE ASSESSEE TO CARRY OUT THE DEVELOPMENT AND CONST RUCTION FOR THE SAID SOCIETY. AS PER THE SAID AGREEMENT, THERE WAS A CO NDITION THAT THE MEMBERS OF THE SOCIETY SHOULD PAY DEVELOPMENT FEES @ 15% OF THE TOTAL COLLECTION TO THE ASSESSEE. HOWEVER, IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD NOT DISCLOSED THAT INCOME IN ACCORDANC E TO THE TERMS AND CONDITIONS OF THE SAID AGREEMENT. THEREFORE, A SHO W-CAUSE WAS ISSUED BY THE AO AS TO WHY AN AMOUNT OF RS.68,76,450/-, BEING 15% OF THE AMOUNT COLLECTED FROM THE MEMBERS TOTALLING TO RS.4,58,43, 000/- SHOULD NOT BE ADDED IN THE ASSESSED INCOME OF THE ASSESSEE. IN C OMPLIANCE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE AFORESAID AGREEM ENT DATED 14/06/2001 WAS LATER ON RECTIFIED BY THE MEMBERS. THE ASSESS EE HAS INFORMED THAT A SECOND AGREEMENT WAS MADE BETWEEN THE ASSESSEE ON O NE HAND AND THE MEMBERS OF THE SOCIETY ON THE OTHER HAND DATED 26.0 9.2003. IT WAS REQUESTED TO THE AO TO CONSIDER THE AMENDED DEVELO PMENT AGREEMENT TO ARRIVE AT THE CORRECT FIGURE OF THE TOTAL INCOME . BUT THE AO WAS NOT CONVINCED AND REJECTED THE SECOND REVISED AGREEMENT ON THE GROUND THAT THE REVISED DEVELOPMENT AGREEMENT WAS PRODUCED ONLY AFTER THE ISSUANCE ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 3 - OF SHOW-CAUSE NOTICE. ACCORDING TO AO, IT WAS WOR THWHILE TO NOTE THAT THE REVISED DEVELOPMENT AGREEMENT WAS SIGNED BY THO SE MEMBERS WHO WERE THE PRESENT MEMBERS OF THE SAID SOCIETY, BUT I T WAS NOT INFORMED THAT WHEN THOSE MEMBERS HAD JOINED THE SOCIETY. T HE SECOND AGREEMENT WAS NOT ACCEPTABLE TO THE AO, THEREFORE THE IMPUGNE D AMOUNT OF RS.62,63,832/- WAS TAXED IN THE HANDS OF THE ASSESS EE. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE CIT(A). 3. BEFORE LD.CIT(A), BOTH THE AGREEMENTS HAVE AGAIN BEEN PRODUCED. AFTER RECEIVING THE EXPLANATION OF THE ASSESSEE IN COMPLIANCE OF A QUERY LETTER ISSUED BY A LD.CIT(A), IT WAS DECIDED TO CAL L FOR A REMAND REPORT. FINALLY, AFTER EXAMINING THE FACTS OF THE CASE AND THE REMAND REPORT, LD.CIT(A) HAS DECIDED IN ASSESSEES FAVOUR AS FOLLO WS:- 10. IT IS SEEN THAT THROUGH THE ABOVE SUBMISSIONS IT HAS BEEN EXPLAINED THAT LAND WAS PURCHASED BY SAMRAT COOPERA TIVE HOUSING SOCIETY (SHOWN AS SECOND PARTY IN BOTH THE ORIGINAL AND REVISED AGREEMENTS FOR CONSTRUCTION OF SAWAN BUNGAL OWS) FROM THE 11 MEMBERS APPEARING IN THE FIRST AGREEMENT DAT ED 17.6.2001. THESE 11 MEMBERS ENTERED INTO AGREEMENT TO SELL WIT H SAMRAT COOPERATIVE HOUSING SOCIETY VIDE AGREEMENT DATED 14 .6.2011. IT WAS EXPLAINED THAT THESE 11 MEMBERS DID APPEAR I N THE AGREEMENT DATED 17.6.2001 AS THIRD PARTY, BUT THEY DID NOT APPEAR IN THE SECOND AGREEMENT WHICH WAS TERMS AS REVISED DEVELOPMENT AGREEMENT DATED 23.9.2003 BECAUSE TILL THAT TIME MA NY MEMBERS WHO WANTED HOUSES IN SAWAN BUNGALOWS HAD BEEN REGIS TERED, IT IS THESE 62 MEMBERS WHO APPEAR IN THE REVISED AGREEMEN T BECAUSE THEY HAD SHAKE IN THE CONSTRUCTION WORK, WHEREAS TH E 11 MEMBERS HAD NO MORE STAKE BECAUSE THEY WERE SIMPLY SELLERS OF LAND AND NOT PURCHASER OF BUNGALOWS. IT WAS ALSO INFORMED T HAT FORMAL SALE DEED OF LAND WAS SIGNED ON 5.4.2004, THAT IS IN THE BEGINNING OF THE FINANCIAL YEAR IN QUESTION WHICH PROVES THAT THE 11 MEMBERS HAD NO MORE STAKE IN SAWAN BUNGALOWS ONCE THEY HAD SOLD THE LAND AND HAD BEEN PAID THE CONSIDERATION FOR THE LAND. ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 4 - IT WAS PLEADED THAT REVISED DEVELOPMENT AGREEMENT W AS ENTERED INTO ON 23.9.2003 THAT IS MUCH BEFORE THE INITIATIO N OF SCRUTINY ASSESSMENT PROCEEDINGS, AND IT WAS AN AUTHENTIC DOC UMENT ON STAMP PAPER DULY NOTARIZED. IT WAS ARGUED THAT THI S IS ALSO UNDISPUTED BY THE AO THAT THE APPELLANT BUILDER CO NSTRUCTED THE RESIDENTIAL COMPLEX ON THE GIVEN LAND AS AUTHORIZED BY SAMRAT COOPERATIVE HOUSING SOCIETY AND THE SAME PERSON HAD SIGNED THE REVISED AGREEMENT ON BEHALF OF THE HOUSING SOCIETY WHO HAD SIGNED THE ORIGINAL AGREEMENT DATED 17.6.2001, THER EFORE THERE WAS NO QUESTION OF ANY SORT OF DOUBT. 11. THUS FROM THE ABOVE IT IS CLEAR THAT IT IS NOT DISPUTED BY THE AO THAT LAND WAS SOLD BY 11 MEMBERS TO THE COOPERA TIVE HOUSING SOCIETY AND THE SOCIETY ENTERED INTO DEVELOPMENT AG REEMENT WITH THE APPELLANT BUILDER FOR CONSTRUCTION OF SAWAN BUN GALOWS ON THE SAID LAND. THE ARGUMENT THAT THE 11 MEMBERS APPEAR ING AS THIRD PARTY IN THE ORIGINAL DEVELOPMENT AGREEMENT HAD NO MORE STAKE / INTEREST IN THE CONSTRUCTION PROCEDURE OR TERMS AND CONDITIONS ONCE THE SALE WAS AGREED AND THEY HAD BEEN PAID THE REMUNERATION IS CONVINCING. THE 62 MEMBERS WHO APPEAR IN THE RE VISED AGREEMENT ARE THE ACTUAL STAKE HOLDERS AND THE SOCI ETY AUTHORIZED THE BUILDER TO BEAR PROFIT OR LOSS FROM CONSTRUCTIO N WHATEVER IT MAY BE, AND WITHDREW THE CONDITION OF 15% REMUNERATION OF COLLECTION TO THE BUILDER/APPELLANT. ALSO THE ARGUMENT THAT ONLY REAL INCOME CAN BE TAXE D AND NOT HYPOTHETICAL TILTS THE BALANCE IN FAVOUR OF THE APP ELLANT, BECAUSE REVISED AGREEMENT DOES CONTAIN BOTH BUILDER APPELLA NT AND THE HOUSING SOCIETY AS TWO PARTIES JUST LIKE THE ORIGIN AL AGREEMENT. IN THIS BACKGROUND THE AO IS DIRECTED TO TAKE THE PROF IT SHOWN BY THE APPELLANT AT RS.9,69,097 FOR FURTHER COMPUTATION OF INCOME. 4. NOW THE REVENUE IS IN APPEAL AND LD.DRS MR.DINES HCHANDRA SHARMA AND MR.RAHUL KUMAR APPEARED. IT WAS VEHEMEN TLY ARGUED THAT THE SUBSEQUENT AGREEMENT WAS NOTHING BUT A DEVICE T O AVOID THE TAX ON 15% INCOME ON THE TOTAL RECEIPTS COLLECTED FROM THE MEMBERS. PLACING RELIANCE ON THE ORDER OF THE AO, LD.DR HAS PLEADED THAT, AT THE TIME OF ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 5 - SIGNING OF THE FIRST AGREEMENT, THE SOCIETY HAD ONL Y 11 MEMBERS, WHEREAS WHEN THE SECOND AGREEMENT WAS SIGNED THERE WERE 62 MEMBERS. IT WAS ARGUED THAT THE CHANGE OF THE TERMS AND CONDITIONS SHOULD HAVE BEEN GIVEN CONSENT BY THOSE 11 MEMBERS FIRST AND THEN TH E REST OF THE MEMBERS WOULD BE ENTITLED TO CHANGE THE TERMS AND CONDITION S. ACCORDING TO LD.DR NO SUCH DOCUMENT TO ESTABLISH THE CONSENT OF THE ORIGINAL MEMBERS WAS PLACED ON RECORD, THEREFORE THE CORRECTNESS OF THE SECOND AGREEMENT WAS RIGHTLY DOUBTED BY THE AO. 5. FROM THE SIDE OF THE RESPONDENT-ASSESSEE, LD.AR MR.PRITESH SHAH APPEARED AND INFORMED THAT IT WAS IN THE INTEREST O F THE MEMBERS NOT TO PAY 15% OVER AND ABOVE THE COST, THEREFORE THE MEMB ERS HAVE DECIDED UNANIMOUSLY TO DELETE THE CONDITION OF PAYMENT OF 1 5% MORE TO THE ASSESSEE-DEVELOPER. THE LD.AR HAS PLACED ON RECORD DATE-WISE SUMMARY AS FOLLOWS:- SR. NO. DATE OF EVENT PARTICULARS 1. 14/08/2001 BANAKHAT CREATED BETWEEN -11 LAND OWN ERS & SAMRAT CO.OP.HOUSING SCY.LTD. PAGE NO.64 2. 17/06/2011 ORIGINAL DEVELOPMENT AGREEMENT MADE BETWEEN J.K. CORPORATION, SAMRAT CO.OP.HOU.SCY LTD. AND 11 LAND OWNERS. PAGE NO.82 3. CONDITION NO.2: DEVELOPER WILL BE GIVEN 15% REM UNERATION OF TOTAL COLLECTION FROM MEMBERS EVERY YEAR. 4. 31/07/2011 PLOTS WERE ALLOTTED TO 62 MEMBERS BY SAMRAT CO.OP.HOUSING SOCIETY LTD. 5. MEMBERS STUDIED DEVELOPMENT AGREEMENT AND THEY O PPOSED FOR CONDITION NO.2 WHICH STATES THAT DEVELOPER WILL BE PAID 15% ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 6 - REMUNERATION OF TOTAL COLLECTION FROM MEMBERS EVERY YEAR. 6. 30/06/2002 RESOLUTION PASSED FOR CHANGE IN CONDI TION NO.2 OF ORIGINAL DEVELOPMENT AND IF SUCH CONDITION WILL NOT BE CHANGED, THEN CONSTRUCTION SHOULD BE STOPPED. PAGE NO.122. ENGLISH VERSION-124. 7. MEMBERS STARTED INTERNAL MEETINGS, DISCUSSION ET C. AND DECIDED TO GIVE LETTER TO ASSESSEE DEVELOPER EITHER CHANG E 15% REMUNERATION CLAUSE OR STOP CONSTRUCTION. 8 11/08/2003 ALL MEMBERS MET TOGETHER, WROTE A LETT ER TO DEVELOPER OPPOSING CONDITION NO.2 OF 15% REMUNERATION CLAUSE. THEY MENTIONED IN LETTER THAT IF THE CONDITION OF 15% REMUNERATION WILL NOT BE CHANGED, THEN STOP CONSTRUCTION. ALL 62 MEMBERS SIGNED SUCH LETTER AND GAVE THE SAME TO DEVELOPER (ASSESSEE). WE PRODUCE ORIGINAL LETTER FOR YOUR HONOURS REFERENCE. PAGE NO.125-ENGLISH VERSION-P.130. 9. DEVELOPER (ASSESSEE FIRM) AGREED TO CHANGE SUCH CLAUSE OF REMUNERATION. 10 26/09/2003 STAMP PAPER PURCHASED ON 26/09/2003. ON 26/09/2003, REVISED DEVELOPMENT AGREEMENT WAS PRINTED AND SIGNED BY ASSESSEES FIRMS PARTNER AND ALL 62 MEMBERS IN PRESENCE OF NOTARY. THUS THIS IS PURELY AN AUTHENTIC DOCUMENT. WE PRODUCE ORIGINAL DOCUMENTS FOR YOUR HONOURS REFERENCE. PAGE NO.131. ENGLISH VERSION P.137 5.1. LD.AR HAS ALSO PLACED RELIANCE ON FEW CASE-LAW S IN SUPPORT OF THE THEORY OF REAL INCOME AND THE NOTED ONE ARE AS FOLL OWS:- SR.NO. DECISION CASE LAW NAME(S) REPORTED AT 1. SUPREME COURT CIT VS. SHOORJI VALLABHDAS & CO. 46 ITR 0144 2. SUPREME COURT CIT VS. CHAMNLAL MANGALDAS & CO. 39 ITR 0008 ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 7 - 3. SUPREME COURT CIT VS. A.RAMAN & CO. 67 ITR 0011 4. SUPREME COURT GODHARA ELECTRICITY CO.LTD. VS. CIT 225 ITR 0746 5. SUPREME COURT POONA ELECTRIC SUPPLY CO.LTD. VS. CIT 57 ITR 0521 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND ALSO CAREFULLY PERUSED THE COMPILATION FILED BEFORE US IN THE LIGH T OF THE PRECEDENTS CITED. IN THE COMPILATION, THE ASSESSEE HAS PLACE D THE COPY OF THE DEVELOPMENT AGREEMENT DATED 17/06/2001IN GUJARATI L ANGUAGES ON PAGES 82 TO 96. ITS ENGLISH VERSION HAS ALSO BEEN PLACE D ON RECORD. IT IS TRUE THAT AS PER ONE OF THE TERMS; THE ASSESSEE WAS AUTH ORIZED TO COLLECT THE MEMBER-SHIP FEES AND CONSTRUCTION FUND FROM THE MEM BERS. OVER AND ABOVE THE SAID COLLECTION, AS PER THE TERMS, THE SO CIETY HAS GRANTED 15% MORE TO BE COLLECTED FROM THE MEMBERS. WE HAVE B EEN INFORMED THAT THE SAID EXTRA 15% PAYMENT WAS OBJECTED WHEN THE SO CIETY HAD GROWN AND MORE MEMBERS HAVE JOINED THE SOCIETY. DUE TO T HE SAID REASON, A REVISED LAND DEVELOPMENT AGREEMENT WAS MADE ON 26.0 9.2003, COPY IN GUJARATI LANGUAGE ON PAGES 131 TO 136 AND ITS ENGLI SH VERSION ON PAGES 137 TO 146. AS PER THE REVISED TERMS AND CONDITIO NS, IT WAS AGREED UPON THAT THE MEMBERS HAVE DECIDED TO PAY ONLY CONSTRUC TION FUND AND DENIED TO PAY ANY OTHER TYPE OF CONSIDERATION TO THE DEVEL OPERS. THIS SECOND AGREEMENT IS SIGNED BY 62 MEMBERS WHICH WAS DULY NO TARIZED AND THE ORIGINAL HAS ALSO BEEN SHOWN TO US DATED 26/09/200 3. AFTER EXAMINING BOTH THE AGREEMENTS, ONE THING IS SURE THAT THE SAM E WERE NOT AN AFTER- THOUGHT BECAUSE THE ASSESSMENT PROCEEDINGS WERE STA RTED BY ISSUANCE OF NOTICE U/S.142 OF THE IT ACT DATED 28/06/2006 AND T HE SHOW-CAUSE NOTICE ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 8 - WAS ISSUED ON 23/11/2007, I.E. MUCH AFTER THE SIGNI NG OF THE AGREEMENTS. OTHERWISE ALSO, THERE WAS NO APPARENT LOGIC IN THE FIRST AGREEMENT TO GRANT AN EXTRA 15% AMOUNT OVER AND ABOVE THE CONSTR UCTION FUND, ETC. COLLECTED BY THE ASSESSEE-DEVELOPER FROM THE MEMBER S OF THE SOCIETY. WHEN THE STRENGTH OF THE MEMBERS HAD GROWN, THEN TH E SAID CLAUSE WAS OBJECTED AND THE ASSESSEE AS A PRUDENT BUSINESS MAN THOUGHT IT PROPER TO CONCEDE TO THE SAID DEMAND OF REMOVAL OF 15% CLAUSE FROM THE AGREEMENT. THERE WAS NOTHING ON RECORD TO CHALLENG E THE BUSINESS DECISION OF THE ASSESSEE. IT WAS FOR A BUSINESS-MA N TO DECIDE THE MANNER IN WHICH A BUSINESS IS TO BE CARRIED OUT AND WHAT T ERMS ARE BENEFICIAL FOR RUNNING A SMOOTH BUSINESS. ACCOUNTS OF THE ASSESSE E HAVE DEMONSTRATED THAT THE TOTAL AMOUNT OF RS.4,58,43,000/- WAS CREDI TED UNDER THE HEAD BUILDING SALES. AFTER DEBITING THE EXPENDITURE, THE ASSESSEE HAS DISCLOSED A NET PROFIT OF RS.9,69,097/-. BECAUSE OF THE AFORESAID FACTS THE LEGAL ASPECT OF THIS SITUATION IS COVERED BY THE R EAL INCOME THEORY. IN THE CASE OF SHOORJI VALLABHDAS & CO. 46 ITR 144(SUP RA), THE FACTS BEFORE THE HONBLE SUPREME COURT WERE THAT AN AGREEMENT WA S REPLACED AND A LESSER COMMISSION WAS GIVEN. THE HONBLE COURT HA S OPINED THAT THE INCOME-TAX CAN BE LEVIED AT TWO POINTS, FIRST AT TH E TIME WHEN THE INCOME HAS ACCRUED OR AT THE TIME THE INCOME IS RECEIVED, BUT THE SUBSTANCE OF THE MATTER IS THAT IT SHOULD BE AN INCOME OF THE ASSESS EE. ACCORDING TO THE HONBLE COURT IF A RECEIPT DID NOT RESULT INTO AN I NCOME, THEN COULD NOT BE TAXED. IN THAT CASE, THE ASSESSEE WAS THE MANAGIN G AGENT OF SEVERAL SHIPPING COMPANIES AND ENTITLED TO RECEIVE COMMISSI ON UNDER THE MANAGING AGENCY AGREEMENT. THERE WAS A CHANGE IN THE MANAGING AGENCY, THEREFORE THE COMMISSION WAS REDUCED IN TER MS OF A SUBSEQUENT ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 9 - AGREEMENT. FACTS HAVE REVEALED THAT THE ASSESSEE H AD ACTUALLY RECEIVED LESSER INCOME. IT WAS HELD THAT LESSER COMMISSION ACCRUED TO THE ASSESSEE AND THUS ONLY LESSER COMMISSION WAS HELD AS TAXABLE . EVEN IN THE CASE OF POONA ELECTRIC SUPPLY CO.LTD.(SUPRA), THE HONBLE S UPREME COURT HAS ARRIVED AT THE CONCLUSION THAT THE MEANING OF PROF ITS AND GAINS IS TO BE CONSTRUED IN ITS COMMERCIAL SENSE. WHERE ELECTRICI TY DISTRIBUTION COMPANY RETURNS PART OF THE EXCESS OVER CLEAR PROFI TS AS REBATE TO ITS CONSUMERS AS A MEASURE OF RATIONALIZATION OF ITS R ATES, HELD THAT THE SAME WOULD NOT FORM PART OF ITS TAXABLE BUSINESS INCOME. THEREFORE, UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WHEN THE DOCUMENTS, SUCH AS, AGREEMENT AND REVISED AGREEMENT,ETC. HAVE DEMONSTRATED THAT THE IMPUGNED 15% COLLECTION HAS ACTUALLY NOT BEEN EARNE D BY THE ASSESSEE, THEN IT WAS WRONG ON THE PART OF THE AO TO IMPOSE T HAT INCOME ON THE ASSESSEE. RESULTANTLY, WE HEREBY CONFIRM THE FACTU AL AS WELL AS LEGAL VIEW TAKEN BY LD.CIT(A) AND DISMISS THIS GROUND OF THE REVENUE IN BOTH THE YEARS. 7. THE SECOND GROUND OF REVENUE RAISED IN A.Y. 200 5-06 READS AS UNDER: 2) THE LD. COMMISSIONER OF INCOME-TAX (A)-XV, AHM EDABAD HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALL OWANCE TO RS.52,638/- AGAINST RS.2,82,584/- ON ACCOUNT OF ELECTRICITY EX PENSES. 7.1. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED ELECTRICITY EXPENSES OF RS.2,82,584/- IN THE PROFIT AND LOSS ACCOUNT. TO VERIFY THE RELATION OF THE SAID EXPENDITURE VIS--V IS ITS CONSTRUCTION INCOME, A SHOW-CAUSE NOTICE DATED 23/11/2007 WAS IS SUED TO THE ASSESSEE. BUT, THE ASSESSEE HAS FAILED TO GIVE REP LY TO THE SHOW-CAUSE ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 10 - NOTICE AND IN VIEW OF THIS, ASSESSING OFFICER PRESU MED THAT THE ASSESSEE HAS NOTHING TO SAY IN THIS REGARD AND, THEREFORE, A N AMOUNT OF RS.2,82,584/- HAS BEEN DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. WHEN THE MATTER REACHED BEFORE THE LD.CI T(A), THE LEARNED CIT(APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 12. WITH RESPECT TO GROUND NO.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS ARGUED THAT THE AO HAD NOT BEE N ABLE TO DISPROVE THE INTEREST EXPENSES CLAIMED AT RS.20,84,476 DEB ITED IN THE P&L ACCOUNT. IT WAS PLEADED THAT INTEREST HAD BEEN INC URRED ON FUNDS BORROWED FOR THE BUSINESS OF THE ASSESSEE WHICH WAS CONSTRUCTION OF HOUSING PROJECTS ALLOTTED BY THE SOCIETY AD WITHOUT DISPROVING THE EXPENSES CLAIMED THE AO WAS WRONG IN NOT ALLOWING THEM. THIS CONTENTION IS FOUND TRUE. COPIES OF ELECTRICITY BILLS SUBMITTED BEFORE THE AO WERE ALSO SUBMITTED TO THIS OFFICE. SCRUTINY OF ELECTRICITY BILLS SHOW ED THAT THE ELECTRICITY BILLS WERE IN THE NAME OF RAMANLAL VITTHALBHAI PATEL. IT WAS EXPLAINED THAT RAMANLAL VITTHALBHAI PATEL IS ONE OF THE ORIGINAL O WNERS OF THE LAND AND ELECTRICITY CONNECTION STOOD IN HIS NAME AND ELECTR ICITY CONNECTIONS CONTINUED STANDING IN HIS NAME, WHICH IS THE NORMAL PRACTICE ADOPTED BY THE BUILDER WHEN LAND IS PURCHASED AND PROJECT I S BEING CONSTRUCTED BY THE BUILDER. SCRUTINY OF THESE ELECTRICITY BILLS SHOWED THAT BIL LS OF RS.31,046 DID NOT PERTAIN TO RELEVANT FY, BILLS OF AMOUNT TOTALLING T O RS.2,29,946 ONLY WERE SUBMITTED PERTAINING TO THE RELEVANT FY. THE AO IS THEREFORE DIRECTED TO ALLOW ELECTRICITY EXPENSE DEDUCTION OF RS.2,29,946 TO THE APPELLANT AND THE BALANCE AMOUNT OF RS.52,638 (RS.2 ,82,584 RS.2,29,946) STANDS CONFIRMED. 8. WE HAVE HEARD BOTH THE SIDES. LOOKING TO THE TO TALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO FALLACY I N THE ORDER OF THE ITA NOS.3156 & 3157/AHD/2009 ITO VS. M/S.J.K.CORPORATION ASST.YEARS 2005-06 & 2006-07 - 11 - LEARNED CIT(APPEALS) AND AFFIRM THE FININGS OF LD. CIT(A) FOR THE YEAR UNDER CONSIDERATION AS WELL AND DISMISS THIS GROUND OF THE REVENUE. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENU E ARE DISMISSED. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 24/ 08 /2012 ..&, .&../ T.C. NAIR, SR. PS '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-XV, AHMEDABAD 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER 02/08/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 02/08/2012 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S24.08.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24.08.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER