Asst. Commissioner of Income tax, Panaji V. M/s Alcon Developers, Panaji

ITA 377/PAN/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2239 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KESHAV M DIXIT
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI, HON'BLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 377/PNJ/2013 : (A.Y 2009 - 10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA. (APPELLANT) VS. M/S. ALCON DEVELOPERS SUKERKER MANSION, 1 ST FLOOR, OPP. GOVERNMENT PRINTING PRESS, PANAJI, GOA (RESPONDENT) PAN : AACFA0290L ASSESSEE BY : SANDIP BHANDARE, CA REVENUE BY : KESHAV M. DIXIT , DR DATE OF HEARING : 24 /1 1 /2015 DATE OF PRONOUNCEMENT : 24 /1 1 /2015 O R D E R PER GEORGE MATHAN : 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), PANAJI IN ITA NO. 270/PNJ/2011 - 12 DT. 11.9.2013 FOR THE A.Y 2009 - 10. ORIGINALLY, THIS APPEAL WAS DISPOSED OFF BY AN ORDER DT. 23.1.2015 WHICH WAS SET ASIDE BY THE HON'BLE JURISDICTION HIGH COURT OF BOMBAY AT GOA IN TAX APPEAL NO. 42 OF 2015 DT. 2.9.2015 WHEREIN THE ORDER OF THE TRIBUNAL WAS SET ASIDE AND TRIBUNAL WAS DIRECTED TO DECIDE THE APPEAL AFRESH. CONSEQUENTLY, THE APPEAL CAME TO BE HEARD TODAY. SHRI KESHAV M. DIXIT, LD. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI SANDIP BHANDARE, CA REPRESENTED ON BEHALF OF THE ASSESSEE. 2 ITA NO. 377/PNJ/2013 (A.Y 2009 - 10) 2. GRO UND NOS. 1 AND 5 ARE GENERAL IN NATURE. 3. IN RESPECT OF GROUND NO. 2 IT WAS SUBMITTED BY THE LD. AR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO BY INVOKING THE PROVISIONS OF SEC. 14A R.W.R 8D OF THE ACT. IT WAS THE SUBMISSION THAT IN THE COURSE OF THE ASSESSMENT IT WAS NOTICED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF NEARLY RS. 80 LACS. IT WAS THE SUBMISSION THAT THE AO HAD APPLIED THE PROVISIONS OF SEC. 14A R.W.R 8D AND HAD MADE DISALLOWA NCE OF RS. 23,22,638/ - . IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE DISALLOWANCE BY HOLDING THAT THE ASSESSEE HAD SUFFICIENT SURPLUS FUNDS AVAILABLE TO MAKE THE INVESTMENTS AND CONSEQUENTLY NO DISALLOWANCE U/S 14A WAS CALLED FOR. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD RESTRICTED THE DISALLOWANCE TO RS. 1,53,662/ - . IT WAS THE SUBMISSION THAT AVAILABILITY OF SUFFICIENT SURPLUS FUNDS WOULD NOT ENTITLE THE ASSESSEE TO NON - DISALLOWANCE OR NON - APPLICABILITY OF PROVISIONS OF SEC. 14A. IT W AS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE REVERSED. 4. IN REPLY, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD TOTALLY 8 INVESTMENTS OUT OF WHICH 2 INVESTMENTS WERE NOT CAPABLE OF GIVING ANY INCOME WHICH WAS NOT LIABLE TO BE INCLU DED IN THE TOTAL INCOME. IT WAS THE SUBMISSION THAT OUT OF THE BALANCE 6 INVESTMENTS, INVESTMENT IN M/S. ALCON CEMENT COMPANY PVT. LTD. WHICH HAD OPENING BALANCE OF RS. 65,08,000/ - AND CLOSING BALANCE OF RS. 52.06 LACS HAD GIVEN DIVIDEND OF RS. 80 LACS. IT WAS THE SUBMISSION THAT THE LIST OF VARIOUS INVESTMENTS ARE GIVEN AT PARA 3.2, PAGE 8 OF THE ORDER OF THE LD. CIT(A). IT WAS THE SUBMISSION THAT THE INVESTMENT IN EQUITY SHARES OF M/S. ALCON CEMENT COMPANY PVT. LTD. WAS ALSO A VERY OLD INVESTMENT. IT WAS THE SUBMISSION THAT NO DISALLOWANCE U/S 3 ITA NO. 377/PNJ/2013 (A.Y 2009 - 10) 14A WAS CALLED FOR. THE LD. AR VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE ORDER OF THE LD. CIT(A) SHOWS THAT THE LD. CIT(A) HAS ERRONEOUSLY TAKEN SUPPORT OF THE ARGUMENT THAT THE ASSESSEE HAD SUFFICIENT SURPLUS FUNDS AVAILABLE FOR MAKING THE INVESTMENTS. THE PROVISIONS OF SEC. 14A DO NOT HAVE ANY RELATION TO THE AVAILABILITY OF SUFFICIENT SURPLUS FUNDS. THE PROVISIONS OF SEC. 14A SPECIFIES T HAT IF THERE IS ANY INCOME WHICH IS NOT LIABLE TO BE INCLUDED IN THE TOTAL INCOME, THEN, A PERCENTAGE OF THE EXPENDITURE COMPUTED IN LINE WITH THE PROVISIONS OF RULE 8D IS TO BE DISALLOWED. RULE 8D IS ALSO VERY SPECIFIC. THE DISALLOWANCE, IF ANY, IS TO B E MADE IN RELATION TO SUCH INVESTMENTS WHICH HAS GENERATED INCOME WHICH IS NOT LIABLE TO BE INCLUDED IN THE TOTAL INCOME. THUS, ALL INVESTMENTS ARE NOT TO BE CONSIDERED. THE INVESTMENTS WHICH HAVE GENERATED EXEMPT INCOME ARE ONLY TO BE CONSIDERED. WITH THIS DIRECTION, THIS ISSUE IS RESTORED TO THE FILE OF THE AO FOR RE - ADJUDICATION AND STRICT COMPLIANCE OF THE PROVISIONS OF SEC. 14A R.W.R 8D. IN THE RESULT, GROUND NO. 2 OF THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN RESPECT OF GROUND NO. 3 IT WAS SUBMITTED BY THE LD. DR THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 17.6 LACS ON ACCOUNT OF PROFESSIONAL/CONSULTANCY/SURVEY FEES. IT WAS THE SUBMISSION THAT IN THE COURSE OF THE ASSESSMENT THE AO HAD DISALLOWED VARIOUS EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT ON THE GROUND THAT THE SAID EXPENDITURE RELATED TO REAL ESTATE PROJECTS IN PROGRESS. IT WAS THE SUBMISSION THAT THE SAID EXPENDITURE BEING RELATED TO PROJECTS WERE L IABLE TO BE TAKEN TO THE CLOSING WORK IN PROGRESS OF THE PROJECT. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE REVERSED. 4 ITA NO. 377/PNJ/2013 (A.Y 2009 - 10) 7. IN REPLY, THE LD. AR DREW OUR ATTENTION TO PAGE 88 OF THE PAPER BOOK WHICH IS COPY OF THE VARIOUS EXPEN SES WHICH HAVE BEEN DISALLOWED BY THE AO. IT WAS THE SUBMISSION THAT NONE OF THE EXPENDITURE RELATED TO ANY SPECIFIC PROJECT. IT WAS THE SUBMISSION THAT THESE WERE GENERAL ADMINISTRATIVE EXPENSES. IT WAS THE SUBMISSION THAT BEING GENERAL ADMINISTRATIVE EXPENSES THEY WERE LIABLE TO BE ALLOWED IN COMPUTING THE PROFIT AND LOSS OF THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE SUSTAINED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF PAGE 88 OF THE PAPER BOOK CLEARLY SHOWS THAT THE EXPENDITURE WHICH HAS BEEN DISALLOWED BY THE AO ARE NOT PROJECT SPECIFIC. THESE ARE EXPENSES RELATED TO GENERAL ADMINISTRATION, FILING OF RETURNS, CER TIFICATION, LEGAL ADVICE, MARKETING, PUBLIC RELATIONS ETC. AS THESE EXPENSES ARE NOT PROJECT RELATED, THE SAME ARE LIABLE TO BE REDUCED WHEN COMPUTING THE PROFIT AND LOSS OF THE ASSESSEE. IN THE CIRCUMSTANCES, THE FINDING OF THE LD. CIT(A) ON THIS ISSUE S TANDS CONFIRMED. 9. IN RESPECT OF GROUND NO. 4 IT WAS THE SUBMISSION BY THE LD. DR THAT IN THE COURSE OF THE ASSESSMENT THE AO HAD TREATED THE VARIOUS PROJECTS WHICH WERE SUBSTANTIALLY COMPLETED AS INCOME OF THE ASSESSEE. IT WAS THE SUBMISSION THAT THE A SSESSEE WAS FOLLOWING THE METHOD OF RECOGNIZING THE PROFITS ONLY WHEN THE REGISTRATION IN RESPECT OF THE PROJECT WAS COMPLETED. IT WAS THE SUBMISSION THAT THE AO HAD APPLIED PERCENTAGE COMPLETION METHOD AND HAD BROUGHT TO TAX THE INCOME FROM THE PROJECTS WHICH WERE MORE THAN 70% COMPLETED. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE DISALLOWANCE MADE BY THE AO. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE REVERSED. 5 ITA NO. 377/PNJ/2013 (A.Y 2009 - 10) 10. IN REPLY, THE LD. AR DREW OUR ATTENTION TO PARA 4.9 AT PAGE 7 OF THE ASSESSMENT ORDER WHEREIN THE AO HAS IDENTIFIED THE VARIOUS PROJECTS AND THE PERCENTAGE OF ADVANCES RECEIVED. THE LD. AR FURTHER DREW OUR ATTENTION TO PAGE 120 OF THE PAPER BOOK TO SUBMIT THAT THE INCOME FROM THE SAID PROJECTS HAD BEEN OFFERED TO TAX DURING THE YEAR ENDED 31.3.2010, 31.3.2011 AND 31.3.2012. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS FOLLOWING THE METHOD OF RECOGNIZING THE INCOME ON THE REGISTRATION OF THE PROPERTIES. IT WAS THE SUBMISSION THAT FOR THE A.Y 2007 - 0 8 ALSO SCRUTINY ASSESSMENT HAD BEEN COMPLETED WHEREIN THE METHOD OF ACCOUNTING WAS VERIFIED BY THE AO AND NO DISTURBANCE TO THE SAME WAS MADE. IT WAS THE SUBMISSION THAT AS THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING OF OFFERING T HE INCOME WHEN THE REGISTRATION IN RESPECT OF THE PROJECT IS COMPLETED, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE WAS LIABLE TO BE SUSTAINED. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF PAGE 120 OF THE PAPER BOOK SHOWS THAT THE ASSESSEE I S CLAIMING TO HAVE OFFERED THE INCOME IN RESPECT OF ALL THOSE PROJECTS WHICH THE AO HAS TREATED AS LIABLE TO BE ASSESSED DURING THE RELEVANT ASSESSMENT YEAR DURING A.YS 2010 - 11, 2011 - 12 & 2012 - 13. HOWEVER, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SHO W THAT THE INCOME HAS BEEN OFFERED DURING THE RELEVANT ASSESSMENT YEARS. IN THE CIRCUMSTANCES, THIS ISSUE IS RESTORED TO THE FILE OF THE AO FOR VERIFICATION AS TO WHETHER THE ASSESSEE HAS OFFERED THE INCOME FROM THE SAID PROJECTS DURING THE SAID THREE ASS ESSMENT YEARS. IF THE ASSESSEE HAS OFFERED THE INCOME DURING THE RELEVANT THREE ASSESSMENT YEARS, THEN, NO ADDITION WOULD BE CALLED FOR IN THE HANDS OF THE ASSESSEE FOR THE IMPUGNED A.Y 2009 - 10. IN THE RESULT, GROUND NO. 4 OF THE REVENUES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6 ITA NO. 377/PNJ/2013 (A.Y 2009 - 10) 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 24/11/2015. S D / - (N.S. SAINI) ACCOU NTANT MEMBER S D / - (GEORGE MATHAN) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 24/11/2015 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER, 7 ITA NO. 377/PNJ/2013 (A.Y 2009 - 10) DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ORDER ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 24/11/2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 24/11/2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 6 /11/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 2 6 /11/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 6 /11/2015 SR.PS 6. DATE OF PRONOUNCEMENT 24/11/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 2 6 /11/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER