ITO-1(2)(2), Mumbai V. M/S KIDDERPORE HOLDINGS LTD., Mumbai

ITA 3858/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7748 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2015-2016
• Appeal Filed On: 31-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEEHAR PANDEY
• Assessee Lawyers: ASSIGNMENT
• Keywords: Capital asset converted into stock in trade; Capital asset
• Section: 10; 154; 45(2); 143(3); 143(1); 250; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 3858 /MUM./201 9 ( ASSESSMENT YEAR : 20 15 16 ) ITA NO. 3859 /MUM./201 9 ( ASSESSMENT YEAR : 20 15 16 ) INCOME TAX OFFICER WARD 1(2)(2), MUMBAI . APPELLANT V/S KIDDERPORE HOLDINGS LTD. 412, 4 TH FLOOR, VARDHMAN CHAMBER CAWASJEE PATEL ROAD, FORT MUMBAI 400 001 PAN AABCK0790M . RESPONDENT REVENUE BY : SHRI NEEHAR PANDEY ASSESSEE BY : MS. AARTI SATHE DATE OF HEARING 21 .0 6 .2021 DATE OF ORDER 30.08.2021 O R D E R PER S. RIFAUR RAHMAN, A.M. THE REVENUE HAS FILED TWO APPEALS. FIRST ONE BEING ITA NO.3858/MUM./2019, IS AGAINST ORDER DATED 1 4 TH MARCH 2019, PASSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) , AND THE SECOND APPEAL BEING ITA NO.3859/MUM./2019, IS AGAINST ORDER DATED 16 TH APRIL 2019, PASSED UNDER SECTION 154 R/W SECTION 250 OF THE ACT BY THE LEARNED CIT(A) 2 , MUMBAI, W HICH PERTAIN TO THE ASSESSMENT YEAR 20 15 16 . 2 KIDDERPORE HOLDINGS LTD. ITA NO.3858/MUM./2019 [ REVENUES APPEAL AGAINST ORDER U/S 143(3) OF THE ACT ] 2. THE REVENUE FILED THE PRESENT APPEAL ON THE FOLLOWING GROUNDS: ' 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND CONSTRUCTION AND HAS CONSTRUCTED AND SOLD COMMERCIAL PREMISES DURING THE YE AR UNDER CONSIDERATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE SHOWS IN THE BALANCE SHEET, THE CONSTRUCTION EXPENDITURE INCURRED AS THE CAPITAL WORK IN PROGRESS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE CANNOT ESCAPE FROM OFFERING ITS PROFITS FOR TAXATION MERELY IF IT SHOWS THE SAID ACTIVITY BY DIFFERENT NOMENCLATURE IN TH E BOOKS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE COMPANY MADE MAJOR CHANGES IN THE ARTICLES OF ASSOCIATION BY ATTACHING THE SPACE IN BUILDING TO BE SOLD TO THE SH ARES OF THE COMPANY, THE ACTION ON THE PART OF THE ASSESSEE COMPANY IS ULTRA VIRUS OF THE COMPANY'S ACT, 1956. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.83,87 ,47,200/ - ON ACCOUNT INCOME FROM SALE OF LODHA SUPREMUS BUILDING WITHOUT APPRECIATING THE FACT THAT AS PER AIR INFORMATION DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE COMPANY HAS SOLD UNITS WORTH RS.83,87,47,200/ - FROM WHICH THE ASSESSEE EARNED INCOME OF RS.83,87,47,200/ - . 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.4,81,39,602/ - ON ACCOUNT PROPORTIONATE INCOME FROM SALE OF LODHA SUPREMUS BUILDING WITHOUT AP PRECIATING THE FACT THAT ALL THE BENEFITS, RIGHTS AND INTEREST ARE WITH THE ASSESSEE BY ASSIGNMENT AND ASSUMPTION AGREEMENT DATED 03/11/2009 MADE BETWEEN THE PARTIES, RANGNATH SOMANI (ON BEHALF OF M/S. ONKARMAL & COMPANY) AND ASSESSEE . 3 KIDDERPORE HOLDINGS LTD. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.2,43,04,000/ - ON ACCOUNT 8% PROFIT TREATING AS CONTRACTOR WITHOUT APPRECIATING THE FACT MENTIONED IN AGREEMENT FOR CONTRIBUTION TOWARDS CONTRIBUTION COST DATED 31.03.2011. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.2,43,04,000/ - ON ACCOUNT 8% PROFIT TREATING AS CONTRACTOR IGNORING THE AO'S REAS ONING AS PER PARAS 12.04 TO 12.6 OF THE ASSESSMENT ORDER. 4. INSOFAR ARE GROUNDS NO.1 TO 5 ARE CONCERNED , DURING THE COURSE OF HEARING, BOTH THE LEARNED COUNSEL APPEARING FOR THE PARTIES AGREED BEFORE US THAT THE ISSUES ARISING OUT OF THE AFORESAID GROUNDS OF APPEAL ARE COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE WHICH HAVE BEEN DECIDED BY THE CO ORDINATE BENCH OF THE TRIBUNAL IN APPEALS FILED BY THE REVENUE NAMELY ITO V/S KIDDEPORE HOLDINGS LTD., ITA NO.377/MUM./2016, FOR A.Y. 2012 13, ORDER DATED 23 RD AUGUST 2018 AND ITO V/S KIDDEPORE HOLDINGS LTD., ITA NO.5541/MUM./2017, FOR THE A.Y. 2011 12, ITA NO.5542/MUM./ 2017, FOR A.Y. 2013 14 AND ITA NO.5543/MUM./2017, FOR A.Y. 2014 15, ORDER DATED 2 ND DECEMBER 2020. FOR BETTER APPRECIATION OF FACTS, THE FINDINGS OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN REVENUES APPEAL BEING ITA NO.377/MUM./ 2017, FOR THE A.Y. 2012 13, ORDER DATED 23 RD AUGUST 2081, ARE REPRODUCED BELOW: 4. .. AFTER HAVING GONE THROUGH THE ORDERS PASSED BY REVENUE AUTHORITIES, WE FIND THAT LD. CIT(A) WHILE DECIDING THESE ISSUES HAS TAKEN INTO CONSIDERATION THE FACTS OF THE PRESENT CASE THAT THE INCOME TAXED BY THE AO IN THE ASSESSEES HAND HAS 4 KIDDERPORE HOLDINGS LTD. ALREADY ASSESSED AND TAXED IN T HE HAND OF SNCML, THEREFORE TAXING THE SAME AGAIN IN THE HAND OF THE ASSESSEE WILL RESULT INTO DOUBLE TAXATION OF THE SAID INCOME. WHILE REACHING TO THE CONCLUSION, LD. CIT(A) APPRECIATED THE FACTS FROM THE AUDITED FINANCIAL STATEMENTS AND ORDERS PASSED BY INCOME TAX SETTLEMENT COMMISSION (ITSC U/S 245 D(4) OF THE I.T. ACT. WE HAVE ALSO GONE THROUGH THE ELABORATED FINDINGS RECORDED TO THE EFFECT THAT ASSESSEE WAS USED AS A SPV (SPECIAL PURPOSE VEHICLE) BY SNCML FOR THE CONSTRUCTION OF LODHASUPREMUS, WHICH IS MORE LIKELY A COOPERATIVE SOCIETY CARRYING OUT WORK FOR AND ON BEHALF OF ITS MEMBERS OUT OF THE COST MET BY THEM AND NO PROFIT COULD ARISE IN THE HANDS OF SPV. THUS, THE ADDITIONS WERE RIGHTLY DELETED BY LD. CIT(A) . MOREOVER, NO NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASONS FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WELL REASONED. RESULTANTLY, THESE GROUNDS RAISED BY THE REVENUE STANDS DISMISSED . 12. SINCE THE ISSUES FOR OUR ADJUDICATION ARE SQUARELY COVERED BY THE AFORESAID DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE IN AN APPEAL FILED BY THE REVENUE CITED SUPRA , A COPY OF WHICH IS PLACED ON RECORD , WHEREIN THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE FOR THE REASONS STATED THEREIN, CONSISTE NT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) BY DISMISSING THE GROUNDS NO.1 TO 6, RAISED BY THE REVENUE. 5. THE ISSUE ARISING OUT OF G ROUNDS NO. 7 AND 8, RELATES TO DELETION OF ADDITION OF ` 2,43,04,000, ON ACCOUNT OF 8% PROFIT TR EATING AS CONTRACTOR. 5 KIDDERPORE HOLDINGS LTD. 6. DURING THE COURSE OF HEARING, BOTH THE LEARNED COUNSEL APPEARING FOR THE PARTIES AGREED BEFORE US THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS OF APPEAL IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE WHICH HAVE B EEN DECIDED BY THE CO ORDINATE BENCH OF THE TRIBUNAL IN APPEALS FILED BY THE REVENUE NAMELY ITO V/S KIDDEPORE HOLDINGS LTD., ITA NO.5541/MUM./2017, FOR THE A.Y. 2011 12, ITA NO.5542/MUM./ 2017, FOR A.Y. 2013 14 AND ITA NO.5543/ MUM./2017, FOR A.Y. 2014 15, ORDER DATED 2 ND DECEMBER 2020 , WHEREIN THE CO ORDINATE BENCH HAS REJECTED THE CLAIM OF THE REVENUE BY OBSERVING AS UNDER: 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IN THE INSTANT CASE THE AO PRESUMED THAT THE ASSESSEE ACTED AS A CONTRACTOR AND ESTIMATED PROFIT @ 8% OF COST. THERE IS NOTHING ON RECORD THAT THE ASSESSEE ACTED AS A W ORK CONTRACTOR ON BEHALF OF SNCML TO CONSTRUCT T HE BUILDING. THE CONTRIBUTION AGREEMENT REFERRED TO BY THE AO IS NOTHING BUT ASSIGNING THE SUPERVISION OF THE CONSTRUCTION TO THE ASSESSEE BY SNCML AS PER SECTION 10 OF MOFA. THE SAID AGREEMENT UNLIKE THAT O F ANY WORK CONTRACT, DOES NOT ASSIGN ANY CONTRACTUAL PROFIT OR COMMISSION TO THE ASSESSEE COMPANY. THE ASSESSEE RECEIVED CONTRIBUTION FROM THE PROSPECTIVE UNIT BUYERS. THE SAID CONTRIBUTION IS ENTIRELY TAKEN INTO ACCOUNT BY SNCML FOR DETERMINING PROFIT FRO M THE PROJECT. IT OFFERED THE ENTIRE PROFIT TO TAX. THE SAID PROFIT HAS BEEN TAXED IN THE HANDS OF SNCML (ASSESSEES HOLDING COMPANY) EVEN BY THE INCOME TAX SETTLEMENT COMMISSION (ITSC). NO PART OF THE PROFIT HAS BEEN ASSIGNED TO THE ASSESSEE. FURTHER, THE COMPUTATION OF THE COST OF THE PROJECT DOES NOT INCLUDE ANY PAYMENT MADE THE ASSESSEE AS A CONTRACTOR. THUS, THE PRESUMPTION OF THE AO THAT THE ASSESSEE ACTED AS A WORK CONTRACTOR AND THUS EARNED PROFIT IS CLEARLY CONTRARY TO THE FACTS. 7. SINCE THE ISSU E FOR OUR ADJUDICATION ARE SQUARELY COVERED BY THE AFORESAID DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE IN 6 KIDDERPORE HOLDINGS LTD. AN APPEAL FILED BY THE REVENUE CITED SUPRA, A COPY OF WHICH IS PLACED ON RECORD, WHEREIN THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE FOR THE REASONS STATED THEREIN, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) BY DISMISSING THE GROUNDS NO.7 AND 8, RAISED BY THE REVENUE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.3859/MUM./2019 [ REVENUES APPEAL AGAINST ORDER U/S 154 OF THE ACT ] 9. THE REVENUE HAS FILED THE PRESENT APPEAL ON THE FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN PASSING ORDER UNDER SECTION 154 R/W SECTION 250 OF THE ACT DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 12,83,31,400, ON ACCOUNT OF CAPITAL GAIN IGNORI NG THE A.OS REASONING AS PER PARAS 12.2 TO 12.3 OF THE ASSESSMENT ORDER. 10. DURING THE COURSE OF HEARING, BOTH THE LEARNED COUNSEL APPEARING FOR THE PARTIES AGREED BEFORE US THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS OF APPEAL IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE WHICH HAVE BEEN DECIDED BY THE CO ORDINATE BENCH OF THE TRIBUNAL IN APPEALS FILED BY THE REVENUE NAMELY ITO V/S KIDDEPORE HOLDINGS LTD., ITA NO.5541/MUM./2017, FOR THE A.Y. 2011 12, ITA NO.5542/MUM./ 2017, FOR A.Y. 2013 14 AND ITA NO.5543/ 7 KIDDERPORE HOLDINGS LTD. MUM./2017, FOR A.Y. 2014 15, ORDER DATED 2 ND DECEMBER 2020, WHEREIN THE CO ORDINATE BENCH HAS REJECTED THE CLAIM OF THE REVENUE BY OBSERVING AS UNDER: 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS O N RECORD. IN THE INSTANT CASE, THE ENTIRE PROJECT LAND WAS OWNED BY SNCML AND IT WAS MERELY THE GODOWN RIGHT WHICH WAS ASSIGNED TO THE ASSESSEE COMPANY. FURTHER, EVEN THE COST OF SUCH GODOWN RIGHT WAS ASSUMED BY SNCML IN ITS ESTIMATED CONSTRUCTION COST OF PROJECT WHICH IS MENTIONED IN PARA 4.1 OF THE AGREEMENT FOR CONTRIBUTION TOWARDS CONSTRUCTION COST DATED 31.03.2011. THUS THE ASSESSEE WAS MERELY HOLDING THE GODOWN RIGHT AS AN INVESTMENT IN ITS BOOKS OF ACCOUNTS, THE COST OF SUCH RIGHT WAS IN FACT FORMI NG PART OF THE PROJECT COST (INVENTORY) IN THE BOOKS OF SNCML SINCE THE PROJECT LODHA SUPREMUS WAS OWNED AND DEVELOPED BY SNCML. AS PER THE ACCOUNTS, THE GODOWN RIGHT OF RS.3,25,00,000/ - WAS HELD AS INVESTMENT IN THE BOOKS OF THE ASSESSEE AS ON 31.03.20 11; IN THE AUDITED FINANCIALS OF FY 2011 - 12, THE SAID INVESTMENT IN GODOWN RIGHT WAS INCLUDED WITHIN CAPITAL WORK - IN - PROGRESS SHOWN UNDER THE SCHEDULE FIXED ASSETS. THE APPLICATION OF SECTION 45(2) IS ATTRACTED ONLY WHEN THERE IS A CONVERSION OF FIXED ASSETS INTO STOCK - IN - TRADE WHICH IS NOT THE CASE UNDER CONSIDERATION THEREON. HERE, THE ASSESSEE HAS NO RIGHT TO SELL ANY UNIT, THE GODOWN RIGHT WAS EMBEDDED IN THE COST OF THE UNITS DEVELOPED WHICH WERE SOLD BY SNCML. SECTION 45(2) WHICH RELATES TO CAPIT AL GAIN ARISING OUT OF CONVERSION OF CAPITAL ASSET INTO STOCK - IN - TRADE REQUIRES THAT IN ORDER TO BE CHARGEABLE TO TAX, THERE HAS TO BE A TRANSFER U/S 2(47) OF THE ACT AND CAPITAL GAIN SHALL BE BROUGHT TO TAX IN THE YEAR IN WHICH THE STOCK - IN - TRADE HAS BEEN SOLD. SINCE, THERE IS NO CONVERSION OF CAPITAL ASSET INTO STOCK - IN - TRADE AND THERE IS NO TRANSFER OF SUCH RIGHT BY THE ASSESSEE - COMPANY SINCE IT HAS NOT SOLD ANY UNITS OF LODHA SUPREMUS, AS ALL THE SALES IS RECOGNIZED AND TAXED IN SNCML, THERE IS NO Q UESTION OF ANY TAXABILITY IN THE HANDS OF THE ASSESSEE. THEREFORE, THE ABOVE GROUND OF APPEAL (8TH GROUND OF APPEAL FOR A.Y. 2013 - 14 AND 9TH GROUND OF APPEAL FOR AY 2014 - 15) IS DISMISSED. FACT BEING IDENTICAL, OUR DECISION FOR THE AY 2011 - 12 APPLIES MUTATIS MUTANDIS TO AYS 2013 - 14 AND 2014 - 15. 8 KIDDERPORE HOLDINGS LTD. 11. SINCE THE ISSUE FOR OUR ADJUDICATION ARE SQUARELY COVERED BY THE AFORESAID DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE IN AN APPEAL FILED BY THE REVENUE CITED SUPRA, A COPY OF WHICH IS PLACED ON RECORD , WHEREIN THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE FOR THE REASONS STATED THEREIN, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) BY DISMISSING THE GROUND RAISED BY THE REVENUE. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 13. TO SUM UP, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED OPEN COURT ON 30.08.2021 SD/ - RAVISH SOOD JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN, ACCOUNTANT MEMBER MUMBAI, DATED: 30.08.2021 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI