ACIT, New Delhi V. M/s. Parsvnath Developers Ltd., New Delhi

ITA 3778/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91418 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Depreciation; Rule of consistency; Corroborative evidences
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMB ER ITA NO: 3778/DEL/2011 AY : - 2007-08 ACIT VS. PAR SVNATH DEVELOPERS LTD. CENTRAL CIRCLE-18, PARSVNAT H METRO TOWER, ROOM NO. 327 NEAR SH AHDARA METRO STATION, 3 RD FLOOR, ARA CENTRE, NEW DELHI. E-2, JHANDEWALAN EXTN. (PAN AABCP0 743J) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKRAM SAHAY, SR. DR RESPONDENT BY :SHRI ADESH KUMAR JAIN, CA SHRI AKSHAT JAIN, CA DATE OF HEARING :08.7.2015 DATE OF PRONOUNCEMENT :15. 7.2015 O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTE D AGAINST THE ORDER OF THE CIT(A) III DATED 30.5.2011 FOR THE ASSTT. YEAR 2007-08 ON THE FOLLOWING GROUNDS :- 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF R S. 2,43,22,309/- MADE BY THE ASSESSING OFFICER U/S 80- IB OF THE INCOME TAX ACT, 1961 . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DISALLOWANCE OF RS. 25,00,00 0/- MADE BY THE ASSESSING OFFICER OUT OF STAFF WELFARE EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT( A) HAS ERRED IN LAW AND ON FACTS IN DISALLOWANCE OF RS. 60,00,00 0/- MADE BY THE ASSESSING OFFICER OUT OF OTHER EXPENSES. ITA NO.3778/DEL/2011 ACIT VS. PARSVNA TH DEVELOPERS LTD. 2 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DISALLOWANCE OF RS. 85,00,00 0/- MADE BY THE ASSESSING OFFICER OUT OF TRAVELING AND CONVEYANCE EXP ENSES. 2. WE HAVE HEARD SHRI VIKRAM SAHAY ON BEHALF OF THE REVENUE AND SHRI ADESH KUMAR JAIN ON BEHALF OF THE ASSESSEE. 3. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSAL OF THE FINDINGS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS. 4. ON GROUND NO. 1 I.E DELETION OF DISALLOWANCE OF RS. 2,43,22,309/- BEING EXEMPTION CLAIMED U/S 80-IB OF THE ACT. THE FACTS OF THE ISSUE ARE AS FOLLOWS. 5. THE ASSESSEE DEVELOPED HOUSING PROJECTS NAMELY PA RSVNATH MAJESTIC, PARSVNATH PLATINUM, PARSVNATH PARADISE, PARSVNATH PRESTIGE, P ARSVNATH PANCHVATI, PARSVNATH PRIVILEGE, PARSVNATH PALACIA, PARSVNATH PRATIBHA, P ARSVNATH PANCHKULA AND PARSVNATH PRERNA DURING THE FINANCIAL YEAR UNDER CONSIDERATIO N AND CLAIMED DEDUCTION UNDER SECTION 80IB(10)AGGREGATING TO RS 150,29,30,9811- ON PROFIT FROM SUCH PROJECTS IN IT'S RETURN OF INCOME FOR THE SAID ASSESSMENT YEAR. THE ASSESSEE ALSO CLAIMED ADMINISTRATIVE COST OF RS 88,35,76,776/- INCURRED B Y THE HEAD OFFICE IN ITS PROFIT & LOSS ACCOUNT. THE ASSESSEE HAS ALLOCATED EXPENSES O N ACCOUNT OF PERSONNEL COST, SELLING AND ADMINISTRATIVE EXPENSES, FINANCE COST A ND DEPRECIATION (HEREINAFTER REFERRED AS ALLOCABLE ADMINISTRATIVE EXPENSES)OF RS 6,08,05,771/- BEING 50% OF THE TOTAL ADMINISTRATIVE COST INCURRED AT THE HEAD OFFI CE TO THE 80IB(10) PROJECT FOR CLAIMING DEDUCTION UNDER SECTION 80IB( 10) OF THE I NCOME TAX ACT, 1961. ITA NO.3778/DEL/2011 ACIT VS. PARSVNA TH DEVELOPERS LTD. 3 6. THE ASSESSING OFFICER ACCEPTED THE JUSTIFI CATION AND FULFILMENT OF CONDITIONS PRESCRIBED UNDER SECTION 80IB( 1 0) OF THE INCOME T AX ACT, 1961 FOR CLAIMING DEDUCTION AND ALLOWED DEDUCTION CLAIMED. HOWEVER, T HE ASSESSING OFFICER HAS REDUCED THE DEDUCTION UNDER SECTION 80IB(10) BY INC REASING THE RATIO OF ALLOCATION OF ADMINISTRATIVE EXPENSES FROM 50% TO 70% OF THE TOTA L ADMINISTRATIVE COST, BY REJECTING THE ALLOCATION OF ADMINISTRATIVE EXPENSE S DEBITED TO PROFIT & LOSS ACCOUNT INCURRED AT HEAD OFFICE BY THE ASSESSEE TO 80IB(10) PROJECTS. 7. HENCE THE ISSUE BEFORE US IS WHETHER THE AO WAS RIGHT IN ALLOCATING 70% OF THE ADMINISTRATIVE EXPENSES INCURRED AT THE HEAD OF FICE TO 80IB ELIGIBLE PROJECTS , INSTEAD OF 50% OF SUCH COST ALLOCATED BY THE ASSESS EE. THE FIRST APPELLATE AUTHORITY AFTER CONSIDERING THE VARIOUS SUBMISSIONS OF THE AS SESEE AS WELL AS THE ALLOCATIONS MADE IN THE PREVIOUS 3 YEARS, AT PAGE 20 AND 21 AT PARA 3.1 HELD AS FOLLOWS :- 3.1 I HAVE CONSIDERED THE ASSESSMENT ORDER OF THE AO MAKING THE IMPUGNED ADDITION AND ALSO THE SUBMISSION OF THE APPELLANT V ERY CAREFULLY. THE WRITTEN SUBMISSION AND PAPER BOOK FILED BY THE APPELLANT HA VE BEEN PLACED ON RECORD. I HAVE CAREFULLY GONE THROUGH THE VARIOUS JUDICIAL PRONOUN CEMENTS CITED BY THE AR OF THE APPELLANT. I HAVE GONE THROUGH THE REASONING OF THE AO FOR ENHANCING THE PERCENTAGE OF ALLOCABLE ADMINISTRATIVE EXPENSES FROM 50% TO 70 % WHICH IS BASED ON THE PREMISE THAT THERE IS INCREASE IN THE NUMBER OF 80-IB(10) PROJECTS AS COMPARED TO PREVIOUS FINANCIAL YEAR. I HAVE GONE THROUGH THE SUBMISSION MADE BY THE APPELLANT AND NOTICED THAT WHILE THERE IS AN INCREASE IN NUMBER O F80-IB(10) PROJECTS (FROM 7 TO 10), BUT AT THE SAME TIME THE INCREASE IN NUMBER NON 80- IB(10) PROJECTS (FROM 24 IN THE PREVIOUS YEAR TO 39 IN CURRENT YEAR) IS HIGHER AS C OMPARED TO INCREASE IN 80-IB(10) PROJECTS DURING THE FINANCIAL YEAR UNDER CONSIDERAT ION. AFTER GOING THROUGH THE MATERIAL PLACED ON RECORD IT IS EVIDENT THAT ASSESS MENT IN THE APPELLANT'S CASE HAS BEEN FRAMED BY THE PREDECESSOR AOS FOR THE THREE CO NSECUTIVE ASSESSMENT YEARS 2004-05, 2005-06 AND 2Q06-07 BY ALLOCATING 50% OF A DMINISTRATIVE EXPENSES TO THE 80IB(10) PROJECTS. HOWEVER, THE AO HAS SUO MOTO ENH ANCED THE PERCENTAGE OF ALLOCATION OF ADMINISTRATIVE EXPENSES FROM 50% TO 7 0% WITHOUT BRINGING IN ANY COGENT MATERIAL ON RECORD THAT THERE IS CHANGE IN T HE FACTS OF THE CASE IN THE FINANCIAL YEAR UNDER CONSIDERATION AS COMPARED WITH IMMEDIATE LY THREE PRECEDING FINANCIAL YEARS. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE OF THE APPELLANT, REAPPRAISAL OF THE FACTS AND DECISIONS OF CASES CIT ED ABOVE, I FIND FORCE IN THE CONTENTION OF THE APPELLANT THAT THE AO ERRED BOTH IN FACTS AND IN LAW IN ARBITRARILY ITA NO.3778/DEL/2011 ACIT VS. PARSVNA TH DEVELOPERS LTD. 4 MAKING ALLOCATION OF ALLOCABLE ADMINISTRATIVE EXPEN SES TO 80IB(10) PROJECTS @ 70% INSTEAD OF 50%,WHICH IS NOT IN CONSONANCE WITH SETT LED 'RULE OF CONSISTENCY' WHICH ORDAINS THAT SETTLED POSITIONS MAY BE FOLLOWED UNLE SS THERE ARE VALID, COGENT & SUBSTANTIAL CHANGES WHICH WARRANT A FRESH POSITION. 0 FRESH MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THERE IS MATERIAL CH ANGE IN FACTS OF THE CASE IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS COMPARED TO PRECEDING ASSESSMENT YEARS 2004 - 05, 2005 - 06 AND 2006 - 07. HENCE, THE ASSE SSMENT IS BASED MERELY ON ESTIMATE AND THEREFORE THE ADDITION TO INCOME FOR R S 2,43,22,309/- IS HEREBY DIRECTED TO BE DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 8. WE AGREE WITH THIS FACTUAL FINDINGS OF THE LD. CIT( A). THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO JUSTIFY THE INCREASING A LLOCATION OF EXPENSES FROM 50% TO 70% BETWEEN PROJECTS ON WHICH EXEMPTION IS CLAIMED U/S 80-IB(10) OF THE ACT AND THOSE PROJECTS ON WHICH NO SUCH EXEMPTION IS CLAIME D. ON THE OTHER HAND, THE NON 80IB (10) ELIGIBLE PROJECTS HAVE BEEN INCREASED FRO M 24 PROJECTS DURING THE FINANCIAL YEAR 2005-06 TO 39 PROJECTS IN THE FINANCIAL YEAR 2 006-07 AND WHEREAS NUMBER OF 80IB(10) ELIGIBLE PROJECTS HAVE INCREASED FROM 7 P ROJECTS IN THE FINANCIAL YEAR 2005- 06 TO 10 PROJECTS IN THE FINANCIAL YEAR 2006-07. IF THIS RATIO OF 39:10 IS TAKEN THEN 50% ALLOCATION IS MORE THAN ADEQUATE. THE ALLOCAT ION OF ADMINISTRATIVE EXPENSES @ 50% TO PROJECTS WHICH ARE ELIGIBLE FOR EXEMPTION U/ S 80IB(10) WAS ALSO DONE FOR THE THREE PRECEDING ASSESSMENT YEARS I.E. ASSESSMENT YE AR 2004-05, 2005-06 AND 2006- 07. NO EXPLANATION IS GIVEN BY THE AO FOR HIS DECIS ION TO CHANGE THIS ALLOCATION THIS YEAR . THE AO HAD NEVER ASKED THE ASSESSEE TO JUSTI FY THE ALLOCATION OF 50% OF ADMINISTRATIVE EXPENSES FOR PROJECTS CLAIMING EXEMP TION U/S 80IB(10). LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT WI TH FACTS AND FIGURES THE CONCLUSION OF THE LD. CIT(A). IN THE RESULT, THIS GROUND OF THE REVENUE IS D ISMISSED. ITA NO.3778/DEL/2011 ACIT VS. PARSVNA TH DEVELOPERS LTD. 5 9. GROUND NOS. 2,3 AND 4 ARE ON THE ISSUE OF DE LETION OF VARIOUS DISALLOWANCES MADE BY THE FIRST APPELLATE AUTHORITY. THE FIRST AP PELLATE AUTHORITY HELD AS FOLLOWS :- I HAVE CONSIDERED THE ASSESSMENT ORDER OF THE AO MAKING THE IMPUGNED ADDITION AND ALSO THE SUBMISSION OF THE APPELLANT VERY CAREF ULLY. THE WRITTEN SUBMISSION AND PAPER BOOK FILED BY THE APPELLANT HAVE BEEN PLACED ON RECORD. I HAVE CAREFULLY GONE THROUGH THE VARIOUS JUDICIAL PRONOUNCEMENTS CITED B Y THE AR OF THE APPELLANT. AFTER GOING THROUGH THE MATERIAL PLACED ON RECORD IT IS E VIDENT THAT AO HAS MADE ESTIMATED DISALLOWANCE OF RS 25,00,000/-, RS 60,00, 000/- AND RS 85,00,000/- ON ACCOUNT OF EXCESSIVE EXPENSES CLAIMED UNDER THE HEA D STAFF WELFARE EXPENSES, TRAVELLING AND CONVEYANCE AND OTHER AND ALLEGED THA T SUPPORTING VOUCHERS IN RESPECT OF SOME OF THESE EXPENSES WERE NOT PRODUCED DURING THE COURSE OF ASSESSMENT. IT IS NOTICED FROM SUBMISSION DATED 01. 12.2009 BEFORE THE AO THAT THE ASSESSEE HAD FILED BOOKS OF ACCOUNTS & VOUCHERS ALO NGWITH SUPPORTING EVIDENCES & ORIGINAL BANK STATEMENT FOR VERIFICATION. AFTER EXA MINING THE MATERIAL PLACED ON RECORD, REAPPRAISAL OF THE FACTS AND DECISIONS OF C ASES CITED ABOVE IT IS HELD THAT THE ASSESSING OFFICER ERRED BOTH IN FACTS AND IN LAW IN ARBITRARILY MAKING ESTIMATED DISALLOWANCE OF RS 25,00,000/-, RS 60,00,000/- AND RS 85,00,000/- ON ACCOUNT OF EXCESSIVE EXPENSES CLAIMED UNDER THE HEAD STAFF WEL FARE EXPENSES, TRAVELLING AND CONVEYANCE AND OTHER EXPENSES WITHOUT POINTING OUT ABOUT ANY SPECIFIC INSTANCE OF NON PRODUCTION OF SUPPORTING VOUCHERS OF EXPENSES T HOUGH THE SAME HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT, WHICH WERE APPARE NTLY PRODUCED BEFORE THE AO BY THE APPELLANT. HENCE, THE ASSESSMENT IS BASED MEREL Y ON SURMISES AND CONJECTURE AND THEREFORE THE ADHOC AND ESTIMATED DISALLOWANCE OF R S 25,00,000/-, 60,00,000/- AND RS 85,00,000/- UNDER THE HEAD STAFF WELFARE EXPENSE S, TRAVELLING AND CONVEYANCE AND OTHER EXPENSES IS HEREBY DELETED. THE APPELLANT GETS RELIEF OF RS 1,70,00,000/- AND THIS GROUND APPEAL IS ALLOWED. 10. WE FIND NO INFIRMITY IN THESE FINDING OF FA CT. ADHOC DISALLOWANCES ARE RESORTED TO WITHOUT ANY MATERIAL. LD. COUNSEL FOR THE ASSESS EE RELIED ON NUMBER OF CASE LAWS IN SUPPORT OF THE PROPOSITION THAT AD-HOC DISALLOWA NCE CANNOT BE MADE ON ESTIMATED BASIS WITHOUT ANY MATERIAL. WE DO NOT SEE ANY NECE SSITY IN DEALING WITH THESE ITA NO.3778/DEL/2011 ACIT VS. PARSVNA TH DEVELOPERS LTD. 6 JUDGMENTS FOR THE REASON THAT, ON FACTS WE UPHOLD T HE ORDER OF FIRST APPELLATE AUTHORITY. WE DISMISS THESE GROUNDS OF THE ASSESSEE . 11. IN THE RESULT APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2015. SD/- SD/- (G.C. GUPTA) (J. SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 15.7. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 8.7.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 9.7.20 15 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER