Greata Enterprises and Developers Private Ltd., CHENNAI V. ACIT(OSD), CHENNAI

ITA 3459/CHNY/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6575 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 23-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R ANITHA
• Assessee Lawyers: S SRIDHAR
• Keywords: Revenue expenditure; Capital expenditure; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , , & BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.3459/CHNY/2016 ) ) / ASSESSMENT YEAR : 2012-13 M/S GREATA ENTERPRISES AND DEVELOPERS PVT. LTD., 53, VEERABADRAN STREET, NUNGAMBAKKAM, CHENNAI - 600 034. PAN : AABCG 4171 E V. THE ASSISTANT COMMISSIONER OF INCOME TAX (OSD), CORPORATE CIRCLE 2, CHENNAI - 600 034. (-/ APPELLANT) (./-/ RESPONDENT) - 0 / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ./- 0 / RESPONDENT BY : MS. R. ANITHA, JCIT 0 / DATE OF HEARING : 28.08.2019 0 / DATE OF PRONOUNCEMENT : 25.10.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -6, CHENNA I, DATED 11.11.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THERE ARE THREE DISALLOWANCES MADE BY THE ASSE SSING OFFICER, 2 I.T.A. NO.3459/CHNY/16 WHICH WERE CLAIMED AS REVENUE EXPENDITURE. ACCORDI NG TO THE LD. COUNSEL, THE ASSESSEE HAS STARTED A NEW DIVISION FO R INTERIOR DESIGNING AND DECORATION. THE ASSESSEE HAS INCURRE D CERTAIN EXPENDITURE. IN THE COURSE OF BUSINESS, ACCORDING TO THE LD. COUNSEL, THE ACTING SENIOR EXECUTIVE FOR THE NEW IN TERIOR DESIGNING DIVISION HAS SENT QUOTATIONS TO THE PROSPECTIVE CUS TOMERS FOR DOING INTERIOR PROJECTS. HOWEVER, NO WORK WAS AWARDED TO THE ASSESSEE- COMPANY. ULTIMATELY, THE NEW DIVISION ESTABLISHED BY THE ASSESSEE WAS DISCONTINUED. ACCORDING TO THE LD. COUNSEL, TH E BUSINESS OF THE ASSESSEE IS CONSTRUCTION AND REAL ESTATE. INTERIOR DECORATION AND DESIGNING IS PART OF THE CONSTRUCTION BUSINESS. TH EREFORE, ACCORDING TO THE LD. COUNSEL, THE LOSS SUFFERED IN THE INTERI OR DESIGNING AND DECORATION DIVISION HAS TO BE ALLOWED AS BUSINESS L OSS WHILE COMPUTING THE TOTAL INCOME. 3. ON THE CONTRARY, MS. R. ANITHA, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED LOSS IN THE INTERIOR DECORATION AND DESIGNING PROJECT TO THE EX TENT OF 20,14,843/-. ACCORDING TO THE LD. D.R., THE ASSESS ING OFFICER FOUND THAT THIS IS A CAPITAL EXPENDITURE. THEREFOR E, THE LOSS, IF ANY, 3 I.T.A. NO.3459/CHNY/16 SUFFERED IS A CAPITAL LOSS. HENCE, ACCORDING TO TH E LD. D.R., IT CANNOT BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND REA L ESTATE. INTERIOR DECORATION AND DESIGNING IS PART OF CIVIL CONSTRUCT ION. WHEN THE ASSESSEE HAS ESTABLISHED A NEW DIVISION FOR INTERIO R DECORATION AND DESIGNING, IT IS AN EXTENDED ARM OF THE CONSTRUCTIO N BUSINESS. IT CANNOT BE CONSTRUED AS A NEW BUSINESS OR NEW ASSET FOR EARNING PROFIT. THE EXPENDITURE INCURRED BY THE ASSESSEE I S FOR APPOINTING THE SENIOR EXECUTIVE AND ISSUE OF QUOTATIONS TO THE PROSPECTIVE CUSTOMERS. IN VIEW OF THE ADMITTED FACT, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE REVENUE NATURE. SUCH A KIND OF EXPENDITURE CANNOT BE CONSTRUED AS CAPITAL EXPENDITURE. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. ACC ORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE AD DITION OF 20,14,843/- IS DELETED. 5. NOW COMING TO NEXT DISALLOWANCE OF 1,59,60,849/-, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE 4 I.T.A. NO.3459/CHNY/16 ASSESSEE ADVANCED MONEY TO GOLDEN ACADEMY OF HIGHER EDUCATION PVT. LTD. FOR DEVELOPING A REAL ESTATE PR OJECT. ACCORDING TO THE LD. COUNSEL, THE MONEY INVESTED IN THE BUSIN ESS FOR DEVELOPING THE PROJECT PERTAINING TO GOLDEN ACADEMY OF HIGHER EDUCATION PVT. LTD. SUFFERED A LOSS, THEREFORE, IT HAS TO BE ALLOWED AS BUSINESS LOSS. HOWEVER, ACCORDING TO THE LD. COUNS EL, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THIS IS A CAPITAL LOSS. 6. ON THE CONTRARY, MS. R. ANITHA, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT GOLDEN ACADEMY OF HI GHER EDUCATION PVT. LTD. IS ENGAGED ITSELF IN THE FIELD OF EDUCATION. THE BUSINESS OF THE ASSESSEE IS NOT EDUCATION. IT IS A DMITTEDLY REAL ESTATE AND CONSTRUCTION. THEREFORE, THE INVESTMENT MADE IN A REAL ESTATE PROJECT PERTAINING TO GOLDEN ACADEMY OF HIGH ER EDUCATION PVT. LTD. CANNOT BE CONSTRUED AS BUSINESS EXPENDITU RE OR INVESTMENT IN BUSINESS. HENCE, ACCORDING TO THE LD . D.R., THE LOSS SAID TO BE SUFFERED BY THE ASSESSEE HAS TO BE CONST RUED AS CAPITAL LOSS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE 5 I.T.A. NO.3459/CHNY/16 CLAIMS THAT THE INVESTMENT WAS MADE FOR DEVELOPING A PROJECT PERTAINING TO GOLDEN ACADEMY OF HIGHER EDUCATION PV T. LTD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT INVESTED A NY MONEY WITH GOLDEN ACADEMY OF HIGHER EDUCATION PVT. LTD. THE I NVESTMENT WAS MADE FOR DEVELOPMENT OF A PROJECT PERTAINING TO GOL DEN ACADEMY OF HIGHER EDUCATION PVT. LTD. IT IS NOT IN DISPUTE TH AT THAT THE INVESTMENT MADE BY THE ASSESSEE RESULTED IN LOSS. WHEN THE ASSESSEE INVESTED IN THE PROJECT IN PURSUANCE TO IT S BUSINESS ACTIVITY IN A PROJECT PERTAINING TO GOLDEN ACADEMY OF HIGHER EDUCATION PVT. LTD., THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT THE LOSS SUFFERED BY THE ASSESSEE HAS TO BE CONSTRUED AS BUSINESS LOS S. MERELY BECAUSE, GOLDEN ACADEMY OF HIGHER EDUCATION PVT. LT D., BEING A RELATED ENTITY, THE ACTUAL LOSS SUFFERED BY THE ASS ESSEE IN THE BUSINESS CANNOT BE DISALLOWED. THEREFORE, IT HAS T O BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. IN VIEW OF THE A BOVE OBSERVATION, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET AS IDE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELET ED. 8. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF 53,14,308/- AS BAD DEBT. 6 I.T.A. NO.3459/CHNY/16 9. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT IN THE COURSE OF REAL ESTATE BUSINESS, THE ASS ESSEE ADVANCED MONEY TO VARIOUS PERSONS FOR PURCHASING LAND. SINC E THE BUSINESS OF THE ASSESSEE IS REAL ESTATE, I.E. PURCHASING AND SELLING OF LAND, THE LAND WOULD BE STOCK-IN-TRADE. ACCORDING TO THE LD. COUNSEL, THE MONEY ADVANCED BY THE ASSESSEE TO VARIOUS PERSONS F OR ACQUIRING STOCK-IN-TRADE IN THE COURSE OF BUSINESS HAS TO BE CONSTRUED AS REVENUE EXPENDITURE AND WHEN THE ASSESSEE SUFFERED A LOSS IN THE PROCESS, IT HAS TO BE CONSTRUED AS BUSINESS LOSS AN D DEFINITELY NOT AS CAPITAL LOSS. 10. ON THE CONTRARY, MS. R. ANITHA, THE LD. DEPARTM ENTAL REPRESENTATIVE, SUBMITTED THAT ADMITTEDLY AMOUNT WA S ADVANCED FOR PURCHASING LAND TO VARIOUS PERSONS, THEREFORE, THE LOSS SUFFERED BY THE ASSESSEE HAS TO BE CONSTRUED AS CAPITAL LOSS, H ENCE IT CANNOT BE ALLOWED. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE BUSINESS OF THE ASSESSEE IS REAL E STATE AND CONSTRUCTION. WHEN THE ASSESSEE ADVANCED MONEY FOR ACQUIRING STOCK-IN-TRADE, WHICH IS LAND IN THIS CASE, THE LOS S SAID TO BE SUFFERED 7 I.T.A. NO.3459/CHNY/16 BY THE ASSESSEE IN THE COURSE OF ACQUISITION HAS TO BE TREATED AS BUSINESS LOSS, HENCE, IT MAY NOT BE CORRECT TO SAY THAT THE LOSS SUFFERED BY THE ASSESSEE IN THE COURSE OF ACQUISITI ON OF LAND BEING STOCK-IN-TRADE AS CAPITAL LOSS. THEREFORE, THIS TR IBUNAL IS UNABLE TO UPHOLD THE ORDERS OF BOTH THE AUTHORITIES BELOW. A CCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25 TH OCTOBER, 2019 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 25 TH OCTOBER, 2019. KRI. 0 .89 :9 /COPY TO: 1. - /APPELLANT 2. ./- /RESPONDENT 3. ; () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT- 2, CHENNAI 5. 9 . /DR 6. ) /GF.