M/S Ujjain Vikas Pradhikaran, Ujjain V. The ACIT, Ujjain

ITA 335/IND/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7136 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: SSH H P VERMA
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Revenue expenditure; Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS.334 & 335/IND/2010 AYS: 2005-06 & 2006-07 M/S. UJJAIN VIKAS PRADHIKARAN, UJJAIN PAN AAALU 0067 H ..APPELLANT V/S. ACIT-2(1), UJJAIN ..RESPONDENT ASSESSEE BY : S/SH. H.P. VERMA & ASHISH GOYAL DEPARTMENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 18.8.2011 DATE OF PRONOUNCEMENT : 15.9.2011 ORDER PER JOGINDER SINGH, JUDICIAL MEMBER THESE APPEALS ARE BY THE ASSESSEE FOR AYS 2005-06 AND 2006-07 AGAINST THE DIFFERENT ORDERS OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS)-UJJAIN, DATED 19.3.2010. 2 2. FIRST WE SHALL TAKE UP APPEAL FOR ASSESSMENT YEA R 2005-06 (I.T.A.NO.334/IND/2010), WHEREIN FIRST GROU ND RAISED IS THAT THE LD. FIRST APPELLATE AUTHORITY ER RED IN CONFIRMING THE ADDITION OF RS.4,39,993/- ( RS. 93,3 41/- - VYAS NAGAR AND RS. 3,46,652/- - KABEER NAGAR ), UND ER THE HEAD EXPENDITURE ON OLD SCHEMES, WHICH IS WRO NG AND BAD IN LAW, THEREFORE, LIABLE TO BE DELETED. TH E CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASS ESSEE DEVELOPED THESE COLONIES IN 1997-98 AND THE HOUSES IN THE COLONIES WERE ITS STOCK IN TRADE AND THE SAME W ERE SOLD IN THE EARLIER YEARS. IN THE CURRENT YEAR, THE ASSESSEE CLAIMED TO HAVE INCURRED ELECTRICITY EXPENSES ON PA RK TO THE TUNE OF RS.4,526/-, RS.88,515/- ON MAINTENANCE OF PARK AND THE ENTIRE PROPERTY WAS CLAIMED TO BE TRANSFERRED TO MUNICIPAL CORPORATION SUBSEQUENTLY. THE EXPENSES ON ROAD WORK AMOUNTING TO RS. 3,24,627/- A ND RS. 22,028/- ON OTHER WORK WERE CLAIMED TO BE INCUR RED IN CURRENT YEAR. THE PROPERTY WAS TRANSFERRED TO MUNICIPAL CORPORATION ON 14.2.2008 ( PAPER BOOK PAG E 3 42) SUBSEQUENTLY. THE EXPENDITURE WAS ARGUED TO BE NOT RESULTED IN TO ANY CAPITAL ASSET. IT WAS SPECIFICAL LY CONTENDED THAT THE ASSESSEE IS A COLONIZER AND AS S UCH EXPENSES ARE OF REVENUE IN NATURE. THIS FACTUAL MAT RIX WAS NOT CONTROVERTED BY THE REVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS ARE THAT THE ASSESSEE AUTHORITY WAS CONSTITUTED UNDER THE M. P. NAGAR TATHA GRAM NIVESH ADHINIYAM, 1973, AND ITS MAIN OBJECTS ARE TO PREPARE CERTAIN SCHEMES AND TO ACQUIRE AND DEVELOP THE LAND AS PROVIDED U/S 38 OF THE AFORESAID ACT . AS PER ITS OBJECTS, THE ASSESSEE WA S TO ACQUIRE, DEVELOP AND SALE OR LEASING OF LAND, CONST RUCTION WORK AND ALSO TO PROVIDE HOUSING, SHOPPING, COMMERC IAL AND OTHER ACTIVITIES. THE BUSINESS OF THE ASSESSEE WAS CLAIMED TO BE CONSTRUCTION AND SALE OF REAL ESTATE PROPERTIES. DURING HEARING, THE LD. COUNSEL FOR ASS ESSEE INVITED OUR ATTENTION TO THE DECISION OF INDORE 4 DEVELOPMENT AUTHORITY, 15 ITJ 405,WHEREIN THE BUSIN ESS OF THE LIKE ASSESSEES/DEVELOPMENT AUTHORITY WAS CLA IMED TO BE HELD AS ENGAGED IN REAL ESTATE ACTIVITIES AS A BUILDER OR COLONIZER. SINCE THE EXPENDITURE WAS CLAIMED TO BE INCURRED FOR MAINTAINING THE HOUSES IN THE COLONY W HICH WAS DEVELOPED IN 1997-98 AND WAS SUBSEQUENTLY TRANSFERRED TO MUNICIPAL CORPORATION, THE ASSESSEE HAS SHOWN THE COST OF LAND AND OTHER DEVELOPMENT COST A S STOCK-IN-TRADE (PAPER BOOK PAGE 42 ASSESSMENT YEA R 2005-06) IN THE INCOME & EXPENDITURE ACCOUNT SHOWIN G OPENING WIP AND SALEABLE ASSET, CONSTRUCTION EXPENS ES (AS REVENUE EXPENDITURE) CONSEQUENTLY, THE CLAIMED EXPENSES ARE IN THE NATURE OF REVENUE, ESPECIALLY W HEN SUCH EXPENDITURE DOES NOT RESULT IN GENERATION OF A NY CAPITAL ASSET, THUS, THIS GROUND OF APPEAL IS ALLOW ED. 4. THE NEXT GROUND PERTAINS TO CONFIRMING THE ADDIT ION OF RS.61,09,602/- UNDER THE HEAD EXPENDITURE ON DEVELOPMENT OF CITY. THE CRUX OF THE ARGUMENTS ON 5 BEHALF OF THE ASSESSEE IS THAT SIMHASTHA DEVELOPMEN T AUTHORITY WAS CLAIMED TO BE CONSTITUTED AS A SEPARA TE AUTHORITY BY THE STATE GOVT. AND IN THE ABSENCE OF ANY FUNDING BY THE GOVT., THE ASSESSEE WAS DIRECTED TO FUND RS.10 LACS FOR WHICH OUR ATTENTION WAS INVITED TO M INUTES OF THE MEETING (PAPER BOOK PAGE 52 & 53). THE PAYME NT WAS CLAIMED TO BE WITHIN THE OBJECTS OF THE ASSESSE E. NO CAPITAL ASSET WAS CLAIMED TO BE GENERATED. THE AMOU NT OF RS. 4488/- WAS CLAIMED TO BE INCURRED ON RENOVATION OF RAJIV GANDHI STATUE AND PLANTATION AT BIJASAN TEKRI . THE LD. CIT DR DEFENDED THE IMPUGNED ORDER. 5 ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS, THE AMOUNT OF RS.8,103/- WAS CLAIMED T O BE INCURRED ON RENOVATION OF JIVAJIRAO VEDHSHALA. A FTER GOING THROUGH THE RECORD, WE FIND THAT THE FACTS AR E NOT CLEAR, THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE VOUCHERS OF EXPENSES AND ITS NATURE IN THE LIGH T OF THE OBJECTS OF THE ASSESSEE ALONGWITH OWNERSHIP OF JIVAJI 6 RAO VEDHSHALA AND THEN DECIDE IN ACCORDANCE WITH LA W. THEREFORE, THIS ISSUE IS ALLOWED FOR STATISTICAL PU RPOSES AND REMANDED BACK TO THE FILE OF LD. ASSESSING OFFI CER. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WI TH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUP PORT OF ITS CLAIM. 5.1 SO FAR AS RS.1,71,396/- TO SIMHASTHA DEVELOPME NT AUTHORITY (IN SHORT S.D.A.) IS CONCERNED, THE CLAIM OF THE ASSESSEE IS THAT S.D.A. WAS CONSTITUTED AS A SEPARA TE AUTHORITY AND THE FUNDING WAS DONE AS PER THE DIREC TION OF THE STATE GOVERNMENT. ON PERUSAL OF THE RECORD, AFTER HEARING THE RIVAL SUBMISSIONS, WE FIND THAT THE PUR POSE OF DONATION AND APPLICATION OF THE IMPUGNED AMOUNT HAS NOT BEEN EXPLAINED, THEREFORE, THE ASSESSING OFFICE R IS DIRECTED TO VERIFY WHETHER THE DONATION TO SDA WAS MADE AS PER THE OBJECTS OF THE ASSESSEE AND SECONDLY THE APPLICATION OF THE IMPUGNED AMOUNT BY S.D.A. AND T HEN THE ASSESSING OFFICER IS DIRECTRED TO, DECIDE IN AC CORDANCE 7 WITH LAW. THEREFORE, THIS ISSUE IS ALSO REMANDED BA CK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OF FICER IS DIRECTED TO PROVIDE A DUE OPPORTUNITY OF HEARING WI TH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUP PORT OF ITS CLAIM, BE ALLOWED TO THE ASSESSEE. THIS ISSUE I S ALLOWED FOR STATISTICAL PURPOSES. 5.2 SO FAR AS THE EXPENDITURE OF RS.4,488/- INCURR ED ON THE RENOVATION OF RAJIV GANDHI STATUE IS CONCERN ED, THE ASSESSING OFFICER IS DIRECTED TO VERIFY FROM TH E VOUCHERS AND IF FIND THAT THE RENOVATION WAS MADE F OR REPAIR, THEN IT CAN BE ALLOWED AND IF IT IS FOUND T HAT ANY ASSET IS GENERATED, THEN IT MAY NOT BE ALLOWABLE. THEREFORE, THIS GROUND IS ALSO ALLOWED FOR STATISTI CAL PURPOSES. 5.3 SO FAR AS PLANTATION AT BIJASEN TEKRI OF RS. 64 ,628/- IS CONCERNED, IT IS A REVENUE EXPENDITURE, AS PLANT ATION HELPS IN PRESERVATION OF ENVIRONMENT AND PUBLIC AT LARGE IS BENEFITTED. OUR VIEW IS SUPPORTED BY THE DECISIO N IN 8 HINDUSTAN ELECTRO GRAPHITE, 171 ITR 163 (MP) AND 21 8 ITR 688 (MP). THEREFORE, THIS ISSUE IS ALLOWED AS T HE EXPENDITURE IS OF REVENUE IN NATURE. , ITON A AND O N PLANTATION AT BIJASAN TEKRI. SINCE NO CAPITAL ASSET CAME INTO EXISTENCE, THEREFORE, KEEPING IN VIEW THE DECI SION IN THE CASE OF HINDUSTAN ELECTROGRAPHITES LTD. VS. CIT , 218 ITR 688 (MP); 171 ITR 163 (MP), THESE EXPENDITURES DESERVE TO BE ALLOWED AS REVENUE EXPENDITURE. 5.4 SO FAR AS THE AMOUNT OF RS. 50,00,994/- IS EXPENDED ON SPORTS ERENA IS CONCERNED, THE CLAIM OF THE ASSESSEE IS THAT THE SPORTS ERENA WAS DEVELOPED FOR THE SPORTS AND YOUTH WELFARE DEPARTMENT FOR GOVERNMENT OF MADHYA PRADESH, WHEREIN THE CENTRAL GOVERNMENT GAVE GRANT AROUND 50 %. ABOUT THE OWNERSHIP OF THE SPORT S ERENA, A QUESTION WAS RAISED BY THE BENCH, IT WAS F AIRLY AGREED THAT IT IS STILL WITH THE ASSESSEE AND POSSE SSION HAS NOT BEEN GIVEN TO THE SPORTS DEPARTMENT. 9 ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SU BMISSIONS, WE DIRECT THE ASSESSING OFFICER TO ASCERTAIN THE OWNERSHIP OF THE SPORTS ARENA AND ALSO TO VERIFY WHETHER THE POSSESSION IS WITH T HE ASSESSEE OR THE SAME HAS BEEN TRANSFERRED. IF IT IS FOUND THAT THE POSSESSION HAS BEEN TRANSFERRED TO THE SPORTS DEPARTMENT ALONGWITH OWNE RSHIP, THEN IT MAY BE CONSIDERED AS REVENUE EXPENDITURE, OTHERWISE IT MAY BE DECIDED IN ACCORDANCE WITH LAW. 5.5 SO FAR AS CONSTRUCTION OF RANO KI CHHATRI IS CONCERNED AND INCURRING OF RS. 8,59,993/- IS CONCER NED, THE CLAIM OF THE ASSESSEE IS THAT THIS PROPERTY BEL ONGS TO SCINDIA TRUST ( PAGES 45 & 46 OF THE PAPER BOOK ). THUS, IT WAS CLAIMED THAT NO ASSET WAS GENERATED BY THE EXPENDITURE. WE ARE NOT AGREEING WITH THIS ARGUMENT OF THE ASSESSEE, BECAUSE ,FIRSTLY, WHAT IS THE INTERES T OF THE ASSESSEE TO CONSTRUCT RANO KI CHHATRI, WHICH IS OWN ED BY A DIFFERENT TRUST AND WHAT INTEREST THE ASSESSEE IS HAVING IN INCURRING SUCH A HUGE EXPENDITURE ON THIS CHHATRI. THEREFORE, IT IS NOT A REVENUE EXPENSES. 10 CONSEQUENTLY, THE STAND OF THE LD. COMMISSIONER, ON THIS ISSUE, IS AFFIRMED. 6. THE LAST GROUND PERTAINS TO CONFIRMING THE ADDIT ION OF RS.8,23,267/-, UNDER THE HEAD EXPENDITURE FOR R EPAIR AND MAINTENANCE. THE CLAIM OF THE ASSESSEE IS THAT THE AMOUNT OF RS.47,693/- WAS INCURRED ON ATM CHAMBER, RS.6,77,774/- ON REPAIR OF ROADS AND RS.97,800/- ON BOARDS PLACED BY UDA ON VARIOUS SCHEMES. 6.1 WE FIND THAT SO FAR AS ATM CHAMBER IS CONCERNED , AND AS ADMITTED BY THE ASSESSEE, IT IS PURELY A CAP ITAL EXPENDITURE, THEREFORE, ONLY DEPRECIATION IS ALLOWA BLE. CONSEQUENTLY, THIS ISSUE IS PARTLY ALLOWED. 6.2 SO FAR AS INCURRING OF RS. 6,77,774/- ON REPAIR ING OF ROAD IS CONCERNED, SINCE THE EXPENDITURE PERTAINS T O REPAIR EXPENDITURE, THEREFORE, IT IS ALLOWABLE AS R EVENUE EXPENDITURE, THE ASSESSEE BEING A BUILDER. 6.3 SO FAR AS EXPENDITURE OF RS. 97,800/- IS CONCER NED, IT REPRESENTS EXPENDITURE ON BOARDS PLACED BY ASSES SEE 11 ON VARIOUS SCHEMES DEVELOPED BY THE ASSESSEE UDA. CONSEQUENTLY, IT IS STOCK IN TRADE, HENCE IT IS OF REVENUE NATURE, THEREFORE, ALLOWED. FINALLY, THIS APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 7. SO FAR AS ASSESSMENT YEAR 2006-07 (ITA NO.335/IND/2010) IS CONCERNED, THE ONLY GROUND RAIS ED IS THAT THE LD. FIRST APPELLATE AUTHORITY ERRED IN CONFIRMING THE ADDITION OF RS.43,89,747/- UNDER THE HEAD DISALLOWANCES ON CONSTRUCTION EXPENSES. 7.1 AFTER HEARING THE RIVAL SUBMISSIONS, AS WE HAV E DISCUSSED IN I.T.A.NO. 334/IND/2010, WE FIND THAT T HE AMOUNT OF RS. 43,89,747/- IS TOTAL SUM OF VARIOUS EXPENSES UNDER VARIOUS HEADS, THEREFORE, WE ARE SUPPOSED TO EXAMINE EACH AND EVERY HEAD SEPARATELY. 7.2 SO FAR AS THE AMOUNT OF RS. 7,31,115/- AND RS. 9,31,957/- INCURRED FOR VYAS NAGAR AND KABEER NAGAR IS CONCERNED, AS DISCUSSED ABOVE, SINCE THE PROPERTY S TOCK 12 IN TRADE AND WAS TRANSFERRED TO MUNICIPAL CORPORATI ON, THEREFORE, IT IS AN ALLOWABLE REVENUE EXPENDITURE, AS THE EXPENDITURE HAS NOT RESULTED INTO ANY CAPITAL ASSET . 7.3 SO FAR AS THE AMOUNT OF RS. 50,000/- INCURRED O N MAHAKAL GATE IS CONCERNED, IT WAS CLAIMED THAT MAHA KAL PROPERTY IS OWNED BY A TRUST OF THE GOVERNMENT AND THE EXPENSES WERE INCURRED FOR RENOVATION/BEAUTIFICATIO N OF MAHAKAL TRUST. NO ASSET OF ENDURING NATURE WAS GENERATED TO THE ASSESSEE, THEREFORE, IT IS AN ALLO WABLE REVENUE EXPENDITURE. 7.4 SO FAR AS THE EXPENDITURE OF RS. 1,75,425/- ON PURCHASING OF BOAT AT THE DIRECTION OF HOUSING AND ENVIRONMENT DEPARTMENT IS CONCERNED AND SUCH BOATS WERE TRANSFERRED TO MUNICIPAL CORPORATION, THEREFOR E, NO ASSET OF ENDURING NATURE WAS GENERATED TO THE ASSES SEE, CONSEQUENTLY, IT IS AN ALLOWABLE REVENUE EXPENDITUR E. 7.5 THE NEXT AMOUNT INCURRED IS RS. 5,87,770/- ON KOTHI PARKING AREA AT THE COLLECTORATE PREMISES, IT WAS 13 CLAIMED THAT THE LAND ON WHICH CONSTRUCTION WAS DON E DID NOT BELONG TO THE ASSESSEE (PAPER BOOK PAGE 34 ) AND THE CONSTRUCTION WAS DONE AS PER NOTE SHEET ENTRY ( PAPER BOOK PAGE 35 & 36) AND THE EXPENDITURE DID NOT RESU LT INTO CAPITAL ASSET OF THE ASSESSEE, THEREFORE, IN P RINCIPLE, IT IS AN ALLOWABLE REVENUE EXPENDITURE. HOWEVER, SI NCE THE AREA BELONGED TO THE MUNICIPAL CORPORATION AND THE MUNICIPAL CORPORATION ITSELF IS HAVING OWN INFRASTR UCTURE TO CONSTRUCT/REPAIR THE ROADS, WHY IT WAS NOT DONE BY THE MUNICIPAL CORPORATION, THEREFORE, THE LD. ASSESSING OFFICER IS DIRECTED TO EXAMINE THIS ISSUE IN ACCORD ANCE WITH LAW, AFTER ASCERTAINING THE TRUE FACTS, THEREF ORE, THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 7.6 SO FAR AS INCURRING THE EXPENDITURE OF RS. 16,26,324/- ON SWIMMING POOL (SPORTS ERENA) IS CONCERNED, THIS ISSUE IS SET-ASIDE TO THE FILE OF T HE LD. ASSESSING OFFICER TO EXAMINE THE FACTUM OF INCURRIN G OF EXPENSES WITH THE HELP OF VOUCHERS/ANY OTHER DOCUME NTS 14 AND FURTHER TO VERIFY THE OWNERSHIP OF THE SWIMMING POOL, AS WE HAVE DISCUSSED WHILE DISPOSING OF THIS ISSUE FOR ASSESSMENT YEAR 2005-06, THEREFORE, THIS ISSUE IS REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFI CER, CONSEQUENTLY ALLOWED FOR STATISTICAL PURPOSES. 7.7 SO FAR AS INCURRING OF EXPENDITURE OF RS. 1,87, 156/- ON M.C.C. SHOPS IS CONCERNED, IT WAS FAIRLY ADMITTE D THAT IT IS A CAPITAL EXPENDITURE, THEREFORE, ONLY DEPREC IATION MAY BE ALLOWED AS PER RULES. 7.8 SO FAR AS THE AMOUNT OF RS. 1 LAKH TO SIMHASTHA MELA OFFICE IS CONCERNED, THIS ISSUE IS SET-ASIDE T O THE FILE OF THE LD. ASSESSING OFFICER WHO WILL EXAMINE THE PURPOSE/OBJECT AND APPLICATION OF THE AMOUNT BY THE MELA OFFICE AND THEN AFTER ASCERTAINING THE TRUE FA CTS MAY DECIDE IN ACCORDANCE WITH LAW, THEREFORE, THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. FINALLY, THIS APPEAL OF THE ASSESSEE IS ALSO PARTL Y ALLOWED FOR STATISTICAL PURPOSES. 15 ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER 2011. (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER 15 TH SEPTEMBER, 2011 COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR/GUARD F ILE CPU*