ACIT, CIRCLE-1, VELLORE V. M/S. BROWNLAND PROPERTIES, VELLORE

ITA 3315/CHNY/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4918 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 03-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Gift; Business expenditure; Reasonable cause; Condonation of delay; TDS; Set aside
• Section: 43CA

Judgement Text

आयकर अपील सं./ITA No.3315/Chny/2019 िनधा रण वष /Assessment Year: 2016-17 The Asst. Commissioner- of Income Tax, Circle-1, Vellore. v. M/s.Brownland Properties, No.84/2, Arni Road, Kosapet, Vellore. [PAN: AAJFB 7669 R] (अपीलाथ /Appellant) ( यथ /Respondent) Department by : Mr.P.Sajit Kumar, JCIT Assessee by : Mr.T.Vasudevan, Adv. सुनवाई क तारीख/Date of Hearing : 15.09.2022 घोषणा क तारीख /Date of Pronouncement : 21.09.2022 आदेश / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-13, Chennai, dated 25.09.2019 and pertains to assessment year 2016-17. 2. We find that appeal filed by Revenue is barred by limitation for which necessary petition for condonation of delay explaining reasons for delay has been filed, for which, the ld.Counsel for the assessee did not raise any objection. Having heard both sides and considered petition filed by the Revenue for condonation of delay, we are of the considered view that reasons given by Revenue for not filing the appeal within the time allowed आयकर अपीलीय अिधकरण, ’सी’ यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI ी महावीर िसंह, माननीय उपा , एवं ी जी. मंजूनाथा, , माननीय लेखा सद के सम BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER ITA No.3315/Chny/2019 M/s.Brownland Properties :: 2 :: under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of above appeal is condoned and appeal filed by the Revenue is admitted for adjudication. 3. The Revenue has raised the following grounds of appeal: 1. Order of CIT(A) is erroneous both on law and facts. 2. Whether the CIT(A) is correct in holding that when income from sales received in excess of the registered sale consideration is offered to tax by the assessee is accepted by the Assessing Officer, the lower sale consideration should also be accepted for the reason that the project got delayed and the expenditure incurred by the assessee towards stamp paper etc., is allowable is correct? 3. Whether the CIT(A) is correct in holding that tax can be levied on real income and since the AO invoked the provisions of Sec. 43CA r.w.s.50C, the Assessing Officer ought to have referred the plots for valuation when there is no request from the assessee? 4. Whether the CIT(A) is correct in observing that it is not clear as to how the Assessing Officer arrived at the conclusion that the assessee declared the sale consideration as per Sec. 43CA as the said fact is evident from the records? 5. Whether the CIT(A) is correct in allowing the expenditure when the assessee declared the sale consideration as per the provisions of sec. 43CA but claimed an amount equivalent to the difference in sale consideration received as expenditure in all the cases where the consideration received is less than the value as per Sec. 43CA? 5. Whether the CIT(A) is correct in holding that the Assessing Officer did not question the genuineness of the expenses claimed when the very expenditure is not allowable at all? 7. Whether the CIT(A)is correct in remitting the matter back to the Assessing officer 'to verify and allow the expenditure relating to distribution of prizes without deducting tax at source u/s 194B when the assessee did not, furnish such details before either the Assessing Officer or the CIT(A)? 8. Any other ground that may be adduced at the time of hearing, the order of Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored. 4. The brief facts of the case are that the assessee is a partnership firm which is engaged in the business of real estate filed its return of income for the AY 2016-17 on 16.10.2016 declaring total income of Rs.59,05,500/-. ITA No.3315/Chny/2019 M/s.Brownland Properties :: 3 :: During the course of assessment proceedings, the AO noticed that during financial year relevant to AY 2016-17, the assessee had admitted gross turnover of Rs.14,51,75,018/-. The AO further noted that the assessee has followed unique method of accounting for accounting sales revenue from sale of plots. As per which, wherever consideration received for sale of plots is less than the amount of guideline value adopted for the purpose of stamp duty, the assessee has increased the sale value in terms of provisions of Sec.43CA of the Act, and at the same time, debited difference between actual consideration and stamp duty value to business development on sales expenses. Further, on perusal of P & L A/c, it is found that the assessee has debited Rs.1,83,11,675/- on account of business development on sales expenses. The AO called upon the assessee to explain the nature of expenses with necessary details. In response, the assessee submitted that the firm has incurred certain expenses on sales including stamp duty and registration fees payable on registration of site and the same has been debited to business development on sales expenses, because, the assessee has sold the site to poor people in installment basis over a period of 50 months and above, as and when they pay the last installment, the registration will be done in their name. In the meantime, wherever increase in rates for registration or any expenses and other incidental expenses, the firm incurred said expenses on behalf of the purchasers as per the oral commitment and thus, the same is claimed as business expenses. ITA No.3315/Chny/2019 M/s.Brownland Properties :: 4 :: 5. The AO, however, was not convinced with the explanation of the assessee and according to the AO, the assessee has followed a unique method of accounting, whereby, it had nullified the effect of provisions of Sec.43CA of the Act, which is evident from the fact that the difference between actual consideration received and guideline value of the property has been accounted in the books of accounts as sale consideration in terms of sec.43CA of the Act. However, a similar amount has been debited to business development on sales expenses, thereby, nullified the sales declared in terms of provisions of Sec.43CA of the Act. Therefore, rejected the arguments of the assessee and disallowed business development on sales expenses amounting to Rs.1,83,11,675/-. 6. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has reiterated its arguments and submitted that as per contractual obligation between the firm and buyers, certain expenses were borne by the firm and the same has been debited to business development on sales expenses. Therefore, the same needs to be allowed as deduction. The Ld.CIT(A) after considering relevant submissions of the assessee and also relied upon certain judicial precedents held that the assessee has accounted income towards difference in value to business development on sales income and also debited corresponding expenses to business development on sales expenses. If you see the details of income accounted by the assessee in terms of provisions of Sec.43CA of the Act, the assessee has accounted ITA No.3315/Chny/2019 M/s.Brownland Properties :: 5 :: income on sales at Rs.77.48 lakhs, whereas, total expenditure incurred towards business development on sales expenses is at Rs.1.83 Crs. Further, the assessee has given details of plots with discounts allowed, etc., if you consider all those aspects, there is no error in the method followed by the assessee to account income as well as expenses. Therefore, directed the AO to delete addition made towards disallowance on business development expenses amounting to Rs.1,83,11,675/-. 7. The Ld.DR submitted that the Ld.CIT(A) erred in not appreciating the fact that the income from sales received in excess of registered sale consideration is offered to tax by the assessee and is accepted by the AO. However, the lower sales consideration should also be accepted for the reason that the project got delayed and expenditure incurred by the assessee towards stamp paper, etc., is allowable is incorrect. The Ld.DR further submitted that the AO has disallowed expenses, whereas, the Ld.CIT(A) allowed relief by giving different reasons that provisions of Sec.43CA r.w.s.50C of the Act, cannot be invoked. Therefore, he submitted that the Ld.CIT(A) is completely erred in deleting the addition made towards disallowance of expenses. Therefore, the issue may be set aside to the file of the AO to verify the claim of the assessee with regard to certain expenses incurred on behalf of buyers and to decide the issue in accordance with law. ITA No.3315/Chny/2019 M/s.Brownland Properties :: 6 :: 8. The Ld.AR for the assessee, on the other hand, supporting the order of the Ld.CIT(A) submitted that the method of accounting followed by the assessee has been accepted by the Department in the past. Further, the assessee has accounted sales income towards difference between actual consideration and guideline value. The assessee had also debited certain expenses to business development on sales expenses, because, the firm has incurred various expenses as per oral understanding with purchasers. Therefore, the Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the AO and their orders should be upheld. 9. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The provisions of Sec.43CA of the Act, deals with full value of consideration to be adopted for the purpose of sale of immovable property, if such immovable property is in the nature of stock in trade or business asset. As per the said provisions, if guideline value of the property is higher than the actual consideration, then, the guideline value for the purpose of payment of stamp duty should be the full value of consideration. The assessee is in real estate business and formed residential and commercial plots and said plots are stock in trade for the purpose of business of the assessee. Therefore, the assessee needs to comply with provisions of Sec.43CA of the Act. In fact, the assessee has complied with provisions of Sec.43CA of the Act, as per which, wherever actual consideration received for transfer of property is less than the guideline value, the assessee has accounted ITA No.3315/Chny/2019 M/s.Brownland Properties :: 7 :: difference between actual consideration and guideline value as sales income. To this extent, there is no dispute. In fact, the AO has accepted the fact that the assessee has accounted income in the books of accounts. But, the only dispute is with regard to the corresponding debit to business development on sales expenses towards equal amount of difference between actual consideration and guideline value. The assessee has adopted a unique method of accounting, thereby, credited difference between guideline value and actual consideration to sales income and debited to business development on sales expenses. In other words, the net effect for the purpose of taxation was ‘zero’. The assessee explained that business development on sales expenses is nothing, but various expenses incurred by the assessee as per oral agreement with purchases like stamp duty and registration charges, incidental expenses, etc. As per contractual obligation, the assessee needs to incur these expenses and accordingly, it is in the nature of expenses incurred wholly and exclusively for the purpose of business. No doubt, the assessee must have incurred certain expenses as per contractual obligation with its customers and incurred those expenses. However, fact remains that except making an oral statement, no evidence was filed before the AO and before us to justify its case that the assessee has incurred such and such expenses on behalf of such and such party and such and such property sold during the relevant period. Unless, the assessee proves its case with necessary evidences, the claim of the assessee cannot be accepted, because, if you go through the ITA No.3315/Chny/2019 M/s.Brownland Properties :: 8 :: unique entry passed by the assessee in the books of accounts, in our considered view, the assessee has adopted a tool to nullify the effect of provisions of Sec.43CA of the Act. In one side, the assessee tried to comply with provisions of Sec.43CA of the Act, and on the other side nullified the effect with corresponding debit to expenses account without any details. The Ld.CIT(A) without appreciating these facts deleted the additions made by the AO on different grounds, although, the case of the AO was that the assessee has not substantiated expenses debited under the head ‘business development on sales expenses’. Therefore, we set aside the order of the Ld.CIT(A) and restored the issue to the file of the AO and direct the AO to re-examine the case of the assessee in light of claim of the assessee that it has incurred certain expenses as per oral understanding with purchasers. The assessee is directed to furnish necessary evidences before the AO to justify its case. 10. The next issue that came up for our consideration from Ground No.7 of the Revenue’s appeal is deletion of disallowance of gift on gold coins amounting to Rs.49,744/- & Rs.78,366/- respectively. The AO has disallowed gift expenditure u/s.40(a)(ia) of the Act, for non-deduction of TDS. The Ld.CIT(A) deleted the additions made by the AO on the ground that the prizes given by way of incentives to purchasers is below threshold limit of taxability at source and hence, needs to be allowed in terms of ITA No.3315/Chny/2019 M/s.Brownland Properties :: 9 :: provisions of Sec.40(a)(ia) of the Act, with a direction to AO to verify the claim of the assessee. 11. Having heard both the sides and considered the materials available on record, we find that the Ld.CIT(A) has set aside the issue to the file of the AO with a direction to re-examine the claim of the assessee in light of arguments of the assessee that prize money is in excess of Rs.10,000/- and above threshold of taxability at source in respect of Gadapam plots and same needs to be allowed in terms of Sec.40(a)(ia) of the Act, and if not suffered tax, the same should be then disallowed. In our considered view, there is no grievance for the Revenue to agitate the issue, because, the issue has been already set aside to the file of the AO for further verification and hence, rejected the ground taken by the Revenue. 12. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes. Order pronounced on the 21st day of September, 2022, in Chennai. Sd/- (महावीर िसंह) (MAHAVIR SINGH) उपा /VICE PRESIDENT Sd/- (जी. मंजूनाथा) ( G. MANJUNATHA) लेखा सद य/ACCOUNTANT MEMBER चे ई/Chennai, दनांक/Dated: 21 st September, 2022. TLN आदेश क ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant 4. आयकर आयु"/CIT 2. यथ /Respondent 5. िवभागीय ितिनिध/DR 3. आयकर आयु" (अपील)/CIT(A) 6. गाड फाईल/GF