Summit Builders, Sec'bad, Hyderabad V. ITO, Ward-10(4), Hyderabad, Hyderabad

ITA 387/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6177 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 26-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Depreciation; Revenue expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 387/HYD/2016 ASSESSMENT YEAR: 2007-08 SUMMIT BUILDERS, SECUNDERABAD [PAN: AAYFS2757C] VS INCOME TAX OFFICER, WARD-10(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT SUMAN MALIK, DR DATE OF HEARING : 25-01-2017 DATE OF PRONOUNCEMENT : 08-02-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)- 9, HYDERABAD DATED 08-12-2015. ASSESSEE HAS RAISED THE FOLLOWING GROUN DS: 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ARRIVING AT THE GROSS PROFIT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF R S. 5,46,680/-. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING PROPORTIONATE EXPENDITURE OF RS. 8,83,690/- DISALLOWED IN THE EAR LIER YEAR. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE. 2. BRIEFLY STATED, ASSESSEE-FIRM IS ENGAGED IN THE BUS INESS OF CONSTRUCTING APARTMENTS AND HAS OFFERED INCOMES ON SA LE OF FLATS I.T.A. NO. 387/HYD/2016 SUMMIT BUILDERS :- 2 - : AS WELL AS ON ADVANCES RECEIVED AT 8% AND HAS OFFER ED INCOME OF RS. 17,30,960/. IN THE COURSE OF ASSESSMENT PROCEED INGS, ASSESSING OFFICER (AO) NOTICED THAT ASSESSEE HAS OFF ERED INCOME ON ADVANCES RECEIVED OF ABOUT 98 , WHEREAS TOTAL PLOTS IN RESPECT OF WHICH EXPENDITURE WAS CLAIMED WAS AT 120. ACCORDINGLY , HE HAS PROPORTIONATELY DISALLOWED AN AMOUNT OF RS. 5,46,680 /-. ASSESSEE, HOWEVER, SUBMITTED THAT THE COST OF CONSTRUCTION AND OTHER EXPENDITURE PERTAINING TO THE PROJECT WAS CAPITALISED AND ASSESSEE HAS CLAIMED ONLY REVENUE EXPENDITURE. 3. BEFORE THE LD.CIT(A) IT WAS CONTENDED THAT PROPORTIONA TE DISALLOWANCE DOES NOT ARISE AS THE EXPENDITURE CLAIMED WAS REVENUE IN NATURE. HOWEVER, LD.CIT(A) DID NOT AGREE AND CONFIRMED THE ACTION OF THE AO IN PROPORTIONATELY DISALLOWING THE AMOUNT. 4. LD. COUNSEL REFERRING THE P&L A/C AND SCHEDULES THEREON SUBMITTED THAT WHATEVER IS THE PROJECT EXPENDITURE, THE SAM E WAS CAPITALISED AND SHOWN IN WORK-IN-PROGRESS AND WHATEV ER THE EXPENDITURE BEING REVENUE IN NATURE NOT RELATABLE TO WO RK-IN- PROGRESS HAS BEEN CLAIMED IN THE P&L A/C. SINCE ASSE SSEES PROJECT IS PENDING, IT HAS ESTIMATED THE INCOME ON THE SALE OF FLATS AND ON THE BASIS OF INSTALMENTS RECEIVED DURING THE YEAR. TH E EXPENDITURE CLAIMED IN THE P&L A/C IS REVENUE IN NATURE FOR DAY TO DAY ACTIVITIES OF THE FIRM AND CANNOT BE RELATED TO WORK-IN- PROGRESS. IT WAS SUBMITTED THAT ENTIRE EXPENDITURE CLAIMED IS ALLOWABL E AS REVENUE EXPENDITURE. I.T.A. NO. 387/HYD/2016 SUMMIT BUILDERS :- 3 - : 5. LD.DR, HOWEVER, SUBMITTED THAT BOTH AO AND CIT(A) A RE MORE THAN REASONABLE IN ALLOWING THE EXPENDITURE; THEREFORE , THERE IS NO MERIT IN ASSESSEES SUBMISSIONS. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE PAPER BOOK FILED IN THIS REGARD. I AM UNABLE TO UNDE RSTAND ON WHAT BASIS A PROPORTIONATE EXPENDITURE CAN BE DISALLO WED. ASSESSEE HAS OFFERED INCOME ON SALE OF FLATS AS WELL AS ESTIMATION OF INCOME ON ADVANCES RECEIVED. AS CAN BE SEEN FROM THE COMPUTATION OF INCOME OFFERED BY ASSESSEE IN THE P&L A/C, ASSESS EE HAS NOT ONLY CLAIMED EXPENDITURES INCURRED ON THE FLATS SOLD AS EXPENDITURE BUT ALSO OTHER EXPENDITURE AGAINST OFFERED INCOME ON E STIMATION BASIS ON THE INSTALMENTS RECEIVED TOWARDS SALE PRICE. AS SEEN FROM THE P&L A/C, EXPENDITURE PERTAINING TO ADVERTISEMENT CHA RGES, PRINTING AND STATIONERY, DEPRECIATION, INTEREST ON UNSEC URED LOANS, REGISTRATION CHARGES, AUDIT FEE, POSTING AND COURIER ETC ., WHICH ARE REVENUE IN NATURE HAVE BEEN CLAIMED. I AM OF THE OP INION THAT ASSESSEES EXPENDITURE CLAIM HAS TO BE ALLOWED AS SU CH AGAINST THE INCOMES OFFERED DURING THE YEAR. I DO NOT FIND ANY MISTAKE IN ASSESSEES CLAIM. IN FACT AO SHOULD NOT HAVE UNDERTAKE N PROPORTIONATE DISALLOWANCE WHEN ASSESSEE HAS OFFERED /COMPUTED INCOME ON SALE OF FLATS AS WELL. THE CLAIM IS ALLO WABLE. THEREFORE. I DIRECT THE AO TO ALLOW THE EXPENDITURE AS CLAIMED. 7. GROUND NO. 4 PERTAINS TO ACTION OF THE AO IN NOT AL LOWING THE PROPORTIONATE EXPENDITURE OF RS. 8,83,690/- DISALLOW ED IN EARLIER YEAR. THIS ISSUE WAS AGITATED BEFORE THE CIT(A) IN GR OUND NO. 3 BUT CIT(A) HAS NOT ADJUDICATED THE SAME. THE REASONS FOR DISALLOWANCE IN EARLIER YEAR HAVE NOT BEEN PLACED ON RECORD. I.T.A. NO. 387/HYD/2016 SUMMIT BUILDERS :- 4 - : THEREFORE, NO ADJUDICATION CAN BE MADE WITHOUT EXAMINI NG THE FACTS. IN VIEW OF THAT, I RESTORE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE WHETHER THE AMOUNT DISALLOWED IN EARLIER YEAR CAN BE ALLOWED IN THE PRESENT YEAR? THIS ASPECT HAS TO BE EXA MINED IN THE LIGHT OF THE ORDERS IN EARLIER YEAR AND ASSESSMENT RE CORD OF ASSESSEE. 8. IN THE RESULT, APPEAL OF ASSESSEE IS TREATED AS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH FEBRUARY, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 8 TH FEBRUARY, 2017 TNMM COPY TO : 1. SUMMIT BUILDERS, SECUNDERABAD. C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-10(4), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-9, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-6, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.