OBEROI MALL P. LTD, MUMBAI V. DCIT CE CIR 23, MUMBAI

ITA 3723/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9302 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: K S KARTIKEYAN
• Keywords: Depreciation

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R. K. GUPTA , JM ITA NO. 3722 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 200 7 - 20 0 8 ) M/S OBEROI MALL PVT. LTD. COMMERZ, 3 RD FLOOR, INTERNAL BUSINESS PARK, OBEROI GARDEN ESTATE, OFF WESTERN EXPRESS HIGHWAY, GOREGAON (EAST) , MUMBAI - 400 063 VS. DCIT CE CIR 23 , MUMBAI PAN/GIR NO. : AAACO 6944 Q ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 3723 /MUM/20 1 1 ( ASSESSMENT YEAR :200 8 - 200 9 ) M/S OBEROI MALL PVT. LTD. COMMERZ, 3 RD FLOOR, INTERNAL BUSINESS PARK, OBEROI GARDEN ESTATE, OFF WESTERN EXPRESS HIGH WAY, GOREGAON (EAST), MUMBAI - 400 063 VS. DCIT CE CIR 23, MUMBAI PAN/GIR NO. : AAACO 6944 Q ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. K. S.KARTIKEYAN / REVENUE BY : MR. SURINDER JIT SINGH DATE OF HEARING : 6 TH DEC . , 2012 DATE OF PRONOUNCEMENT : 12 TH DEC. ,2012 O R D E R TH ESE TWO APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 22 - 2 - 2011 OF LEANED CIT(A) - 40 , MUMBAI RELATING TO THE ASSESSMENT YEAR 2007 - 0 8 AND 2008 - 09 RESPECTIVELY. ITA NO S . 3722 & 3723 /20 1 1 2 2. SINCE, T HE COMMON ISSUE S ARE INVOLVED IN BOTH THESE APPEALS, THEREFORE, THEY ARE DISPOSED OF BY A SINGLE ORDER. IN BOTH THESE APPEALS, THE ASSE SSEE IS OBJECTING THE INACTION ON THE PART OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.5,03,199/ - AND RS.5,13,656/ - RESPECTIVELY, FOR BOTH THE ASSESSMENT YEARS I.E. 2007 - 08 & 2008 - 09. 3 . THE ASSESSEE WAS ENGAGED IN CONSTRUCTION OF MALL IN T HE NAME OF OBEROI AT GOREGAON , MUMBAI . THE AUDITED BOOK S OF ACCOUNTS WAS FILED AND ON EXAMINATION OF AUDITED BOOKS OF ACCOUNTS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS UNDER TAKEN CONSTRUCTION ACTIVITY AND HAS INCURRED VARIOUS EXPENSES, WHICH HAS BEEN SHOWN AS CAPITAL WORK - IN - PROGRESS. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS OFFERED INTEREST AT RS. 11,061/ - , HOWEVER, THE SAME WAS ADDED AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS PURCHASED A SEPAR ATE OFFICE, WHICH WAS USED FOR THE ACTIVITY OF THE CONSTRUCTION OF MALL. THE DEPRECIATION CLAIMED OF THAT OFFICE BUILDING WAS DENIED AS IN HIS VIEW ON THE INVESTMENT OF CAPITAL HAS TO BE TREATED AS WORK - IN - PROGRESS. THEREFORE, SEPARATE DEPRECIATION IS NOT ALLOWABLE. 4 . BEING AGGRIEVED WITH THE ACTION OF THE ASSESSING OFFICER, THE ASSESSEE HA S PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A) . IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE ASSET HAS BEEN PURCHASED INDEPENDENTLY OF THE MALL AND USED FOR BUSINESS PU RPOSE, THEREFORE, ITA NO S . 3722 & 3723 /20 1 1 3 DEPRECIATION ON THIS ASSET IS ALLOWABLE SEPARATELY. HOWEVER, LEARNED CIT(A) WAS ALSO NOT SATISFIED. IN HIS VIEW THE ATTEMPT BY THE ASSESSEE TO SEPARATE THE OFFICE AND RELATED ASSETS WITH THE ASSETS OF MALL IS AT BEST ARTIFICIAL. THEREFORE , HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR BOTH THE ASSESSMENT YEARS. 5 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD , I FOUND THAT THE ASSESSEE DESERVE S TO SUCCEED ON TH IS ISSUE FOR BOTH OF THE YEARS. THE ASSET HAS BEE N PURCHASED SEPARATELY AND HAS SHOWN SEPARATELY WHICH HAS BEEN USED FOR BUSINESS PURPOSES. THE COST OF THE ASSET HAS BEEN CAPITALIZED AND SHOWN IN THE BALANCESHEET SEPARATELY, THEREFORE, IN MY CONSIDERED VIEW, A SEPARATE TREATMENT HAS TO BE GIVEN TO THIS A SSET AS FROM THE MALL, WHICH IS UNDER CONSTRUCTION. THE DEPRECIATION IS ALLOWABLE ON BUSINESS ASSET WHICH IS CAPITALIZED. THEREFORE, I DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION AS PER THE PROVISION OF LAW FOR BOTH OF THE YEARS AS FACT ARE SIMI LAR FOR BOTH OF THE ASSESSMENT YEARS. 6 . THE REMAINING ISSUE RAISED FOR THE ASSESSMENT YEAR 2008 - 09 IS AGAINST REDUCING THE FOREIGN EXCHANGE GAIN AMOUNTING TO RS.76,010/ - FROM THE CAPITAL WORK - IN - PROGRESS. 7 . DURING THE YEAR THE ASSESSEE MADE A GAIN ON A CCOUNT OF FOREIGN EXCHANGE AMOUNTING TO RS. 76,010/ - . THE ASSESSING OFFICER HELD THAT THEY ARE REVENUE IN NATURE AND, THEREFORE, CANNOT BE DEDUCTED FROM THE ITA NO S . 3722 & 3723 /20 1 1 4 WORK - IN - PROGRESS. ACCORDINGLY, HE ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE. IT WAS SUBMITTED BEFORE THE CIT(A) THAT IN RESPECT OF FOREIGN EXCHANGE RATE GAIN OF RS. 76,010/ - , THE ACCOUNTING TREATMENT WAS GIVEN IN LINE WITH ACCOUNTING STANDARD 11 AS PRESCRIBED BY THE ICAI. THE ASSESSEE COMPANY REDUCED THE SAID AMOUNT OF EXCHANGE FLUCTUATION FROM THE CAPITAL WORK - IN - PROGRESS SINCE THE ORIGINAL COST AT THE TIME OF BOOKING THE COST WAS HIGHER DUE TO PREVAILING EXCHANGE RATE. RELIANCE WAS PLACED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ACT VS. ELECON ENGINEERING CO. LTD., PASSED IN CIVI L APPEAL NOS.2057 TO 2065 OF 2010, DECIDED ON 26 - 2 - 2010. 8 . LEARNED CIT(A) FOUND THAT THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ACT VS. ELECON ENGINEERING CO. LTD (SUPRA), IS NOT APPLICABLE IN THE PRESENT FACTS OF THE CASE AS THE SAME RELAT ES TO ROLL OVER CHARGES , WHICH IS CLEARLY IN RELATION TO FIXED ASSETS. THEREFORE, HE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 9 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, I FOUND THAT THE ASSESSEE DESERVES TO SUCCE ED ON THIS ISSUE ALSO . THE ASSESSEE HAS GIVEN TREATMENT IN RESPECT TO FOREIGN EXCHANGE RATE IN LINE WITH ACCOUNTING STANDARD 11 , WHICH IS ACCEPTABLE. IT IS FURTHER SEEN THAT WHILE COMPUTING THE ORIGINAL COST AT THE TIME OF BOOKING , THE COST WAS HIGHER DUE TO PREVAILING EXCHANGE RATE. NOW, THE ASSESSEE GAINED CERTAIN BENEFIT ON ACCOUNT OF FLUCTUATION OF RATE, WHICH HAS DIRECT NEXUS WITH THE COST OF THE PORTION WHICH WAS BOOKED AND ITA NO S . 3722 & 3723 /20 1 1 5 COST OF THE PORTION IS SHOWN AS WORK - IN - PROGRESS, THEREFORE, THE EFFECT HAS TO BE GIVEN TO THE WORK - IN - PROGRESS. ACCORDINGLY, I HOLD THAT THE ASSESSEE WAS CORRECT IN REDUCING THE SAME FROM THE WORK - IN - PROGRESS. ACCORDINGLY, I DELETE THE ADDITION. 10 . IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF DEC. 2012. 2012 SD/ - ( ) ( R.K.GUPTA ) / JUDICIAL MEMBER MUMBAI ; DATED : 12 /12 / 2012 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI