DCIT 13(3)(2), MUMBAI V. ZEARS DEVELOPES P.LTD, MUMBAI

ITA 3891/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8082 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURSHOTTAM KUMAR
• Keywords: Gift; Business income; Business expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D MUMBAI BEFORE SHRI D.T.GARASIA , JM AND SHRI RAJESH KUMAR, AM I.T.A. NO. 3891 /MUM/20 1 5 ( / ASSESSMENT YEAR : 20 11 - 12 ) THE DY. COMMISSIONER OF IN COME TAX, 13(3)(2), ROOM NO.229,2 ND FL, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400093 / VS. M/S ZEARS DEVELOPERS P. LTD., GOD GIFT TOWERS, 4TH FLOOR, HILL ROAD, BANDRA (W), MUMBAI - 400050 ./ PAN : AAACZ2097E ( / APPELLANT) : ( / RESPONDENT ) / REVENUE BY : SHRI PURSHOTTAM KUMAR / ASSESSEE BY : SHRI RAJESH SANGHVI / DATE OF HEARING : 28.2.2017 / DATE OF PRONOUNCEMENT : 7. 3. 201 7 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 20.4.2015 PASSED BY THE LD.CIT(A) - 51, MUMBAI FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C IT(A) ERRED IN ALLOWING BALANCE INTEREST OF RS.82,30,294/ - AS BUSINESS EXPENDITURE, WITHOUT APPRECIATING THE FACT THAT THERE IS NO PROOF THAT SUCH EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS?'. 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. IT(A) HAS NOT APPRECIATED THE FACT THAT IN CASE, THE INTEREST EXPENDITURE IS ALLOWED AS BUSINESS EXPENDITURE, THEN THERE SHOULD HAVE BEEN INCREASE IN THE VALUE OF CLOSING STOCK TO THAT EXTENT?' 2 ITA NO. 3891/M/2015 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS.27,10,667/ - , BEING STANDARD DEDUCTION @ 30% CLAIMED AGAINST INCOME FROM AMENITIES, WITHOUT APPRECIATING THE FACT THAT THERE ARE TWO SETS OF AGREEMENTS, ONE FOR RENT AND THE OTHER FOR AMENITIES PROVIDED AND AS SUCH INCOME FROM AMENITIES SHOULD HAVE BEEN TAKEN AS BUSINESS INCOME?'. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. 3. AT THE OUTSET, THE LD. COUNSEL SUBMITTED BEFORE US THAT THE ISSUE RAISED BY THE REVENUE IN GROUNDS OF APPEAL NO.1 TO 3 IS REGARDING ALLOWING INTEREST OF RS. 82,30,294/ - AS BUSINESS EXPENDITURE AND ALLOWING RS.27,10,667/ - AS STANDARD DEDUCTION AT THE RATE OF 30% CLAIMED AGAINST THE INCOME FROM AMENITIES BY THE FAA . THE LD. AR FILED A COPY OF FORM NO.36 ALONG WITH THE GROUNDS RAISED IN THE EARLIER YEAR AY 2010 - 11 AND THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.5615/MUM/2013 (AY - 2010 - 11) DATED 26.5.2015 SUBMITTING THEREBY ALL THESE ISSUES WERE FULLY COVERED BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSES S EES OWN CASE ( SUPRA) AND THEREFORE THE APPEAL OF THE REVENUE DESERVE D TO BE DISMISS ED. 4. ON THE OTHER HAND, THE LD. DR APPEARED TO BE FAIRLY AGREED WITH THE CONTENTION RAISED BY THE LD.AR. 5 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE ASSESSEE. WE FIND THAT THE ISSUES RAISED IN GROUNDS NO.1 AND 2 QUA 3 ITA NO. 3891/M/2015 ALLOWING THE INTEREST OF RS.82,30,294/ - BY THE LD.CIT(A) AS BUSINESS EXPENSES IS IDENTICAL TO ONE AS DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA). FOR THE SAKE OF READY REFERENCE, WE REPRODUCE THE OBSERVATIONS AND FINDING OF THE TRIBUNAL AS UNDER : 3. SO FAR AS ALLOWING INTEREST OF RS. 93,65,760/ - AS BUSINESS EXPENDITURE IS CONCERNED THE LEARNED DR PLACED RELIANCE UPON THE CONCLUS ION DRAWN IN THE ASSESSMENT ORDER, WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE CLAIM OF THE IMPUGNED AMOUNT WAS DECLINED BY THE ASSESSING OFFICER AS CLAIMED BUSINESS LOSS ON THE PLEA THAT NO MEANINGFUL BUSINESS WAS CARRIED OUT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE ASSESSEE BOOKED SALES OF 191.52 LAKHS FROM SALE OF 773 SQ.FT. OF COMMERCIAL SPACE, THIS FACTUAL MATRIX IS WAS ALSO ACCEPTED TO BE CORRECT IN PARA 5.7 OF THE ASSESSMENT ORDER ITSELF. THE ACCOUNT OF THE ASSESSEE FURTHER SHOWS UNSOLD STOCK OF RS. 6,49,82,508/ - . IN THE ASSESSMENT ORDER IT HAS BEEN SPECIFICALLY MEN TIONED THAT TWO OTHER PROJECTS SHIV ASTHAN & ANITA APARTMENTS WERE STOPPED DUE TO LEGAL PROBLEMS. THUS, IT CANNOT BE SAID THAT THE BUSINESS WAS COMPLETELY STOPPED. THERE IS A POSSIBILITY THAT SOMETIMES THERE MAY BE SALE OR LULL IN THE SALE BUT IT CANNO T BE INFERRED THAT THE ASSESSEE - COMPANY HAS CLOSED DOWN FACT REMAINS THAT THE ASSESSEE MADE SALES OF RS. 1.91 CRORES DURING THE RELEVANT PERIOD THEREFORE, WE ARE NOT IN AGREEMENT WITH THE OBSERVATION MADE IN THE ASSESSMENT ORDER THAT THERE WAS NO SALE OR N O MEANINGFUL BUSINESS. THE LD. ASSESSING OFFICER ALLOCATED PART OF THE INTEREST EXPENSES TOWARDS HOUSE RENTED AND DISALLOWED BALANCE INTEREST MORE SPECIFICALLY WHEN THE ASSESSEE IS A GOING CONCERN. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) EVEN 5 M/S ZE ARS DEVELOPERS P. LTD CONSIDERED THE REPLY THE QUERIES RAISED TO THE ASSESSEE CLAIMING THAT THE ASSESSEE STARTED WORK ON THE DORMANT PROJECT AND PROPOSAL FOR RESIDENTIAL COMPLEX WAS RESPONDED VIDE LETTER DATED 03.05.2013 EVIDENCING THAT THE ASSESSEE IS ONG OING CONCERN, THUS WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. 4 ITA NO. 3891/M/2015 6 . RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE ARE INCLIN ED TO DISMISS THE APPEAL OF THE DEPARTMENT ON THIS ISSUE AS RAISED IN GROUND N O.1 AND 2 BY UPHOLDING THE ORDER OF LD.CIT(A). 7 . THE ISSUE RAISED IN GROUND NO.3 ALSO STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE SAME DECISION AS MENTIONED ABOVE. THE RELEVANT PA RT OF THE JUDGEMENT IS REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE AS UNDER : GROUNDS NO. 1 AND 2, RAISED BY THE REVENUE PERTAINS TO TREATING AMENITIES INCOME AMOUNTING TO RS. 90,35,556/ - AS INCOME FROM HOUSE PROPERTY AND ALLOWING DEDUCTION @ 30% U/S. 24(A) OF THE ACT WITHOUT APPRECIATING THE FACTS THAT THERE WERE TWO SETS OF AGREEMENT, ONE FOR THE RENT AND OTHER FOR THE AMENITIES PROVIDED THUS THE INCOME FROM AMENITIES SHOULD HAVE BEEN TREATED AS BUSINESS INCOME. 2. AT THE TIME HEARING, THE LD. DR , SHRI VIJAY KUMAR BORA, ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED BY SUBMITTING THAT THE SUBSTANTIAL INCOME AROSE OUT OF AMENITIES SHOULD HAVE BEEN TREATED AS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. THE ASSESSMENT ORDER W AS DEFENDED. ON THE OTHER HAND, SHRI RAJESH SANGHVI, LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE AMENITIES ARE INTERCONNECTED, THEREFORE, CANNOT BE CONSIDERED IN ISOLATION AND THUS THE AMENITIES WILL STAND WITH RENT AND IT IS ACTUALLY AN INCOME FRO M HOUSE PROPERTY. THE IMPUGNED ORDER WAS DEFENDED. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, DECLARED LOSS OF RS. 42, 66,877/ - . THE LEARNED ASSESSING OFFICER DETERMINED THE INCOME AT RS. 83,09,550/ - . THE ASSESSEE EARNED GROSS RENTAL RECEIPTS TO THE TUNE OF RS. 1,39,87,808/ - WHICH WAS CONSISTING OF RS. 44,52,252/ - (TREATED AS RENTAL INCOME) AND RS. 78,35,556/ - (FROM AMENIT IES) AND FURTHER A SUM OF RS. 12,00,000/ - ON ACCOUNT OF AMENITIES FROM CROMA 3 M/S ZEARS DEVELOPERS P. LTD AND ANOTHER RS. 2,00,000/ - AS RENT FROM VODAPHONE. THE LEARNED ASSESSING OFFICER, WHILE COMPLETING THE ASSESSMENT TREATED THE INCOME EMANATING FROM A MENITIES AS BUSINESS INCOME. THIS STAND OF THE ASSESSING OFFICER WAS CHALLENGED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX 5 ITA NO. 3891/M/2015 (APPEALS) ON THE PLEA THAT THE AMENITIES LIKE FLOORING, HBAC, GENERATOR, ELECTRICAL CABLING, PLUMBING, SPRINKLERS, HYDRANTS, SIGNAGE, ANCHOR SPACE ETC. ARE PART AND PARTIAL OF THE RENT AGREEMENT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AGREED WITH THE SUBMISSION OF THE ASSESSEE AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 2.2. IF THE OBSERVATION MADE IN TH E ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT WHILE COMING TO A PA RTICULAR CONCLUSION THE LD. COMMISSIONER OF INCOME TAX (APPEALS) JUSTIFIABLY ANALYSED THE RENT AND THE AMENITIES AGREEMENT AND FOLLOWED THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN J.K. INVESTORS (BOMBAY LTD.) ITA NO. 1089 TO 2011 AND BHAKTAVAR C ONSTRUCTION PVT. LTD. 162 ITR 452 HOLDING THAT AMENITIES AGREEMENT CANNOT OPERATE IN ISOLATION OF THE RENT AGREEMENT. THE AMENITIES ARE PART AND PARTIAL OF THE RENT AGREEMENT, THUS THE AMOUNT RECEIVED AS AMENITIES IS PART AND PARTIAL OF THE RENT THUS IT IS INCOME FROM HOUSE PROPERTY, THEREFORE, THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS AFFIRMED. 8 . RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE HEREBY UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE AP PEAL OF THE DEPARTMENT. 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH MARCH, 2017 . S D SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 7. 3 .2017 SR.PS:SRL: 6 ITA NO. 3891/M/2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI