VIJAY ENTERPRISES, MUMBAI V. DCIT 24(2), MUMBAI

ITA 4157/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3540 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Assessee Lawyers: REEPAL TRALSHAVA LA
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 80IB; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) VIJAY ENTERPRISE GROUND FLOOR EESHA KRIPA BRAHMAN SABHA LANE, MALAD (W), MUMBAI 400 064 PAN: AAAFV 2622D ...... APPELLANT VS. THE DCIT 24(2), MUMBAI .... RESPONDE NT APPELLANTS BY : SHRI REEPAL TRALSHAVA LA RESPONDENT BY : SHRI A.K.KARDAM DATE OF HEARING : 14/07/2016 DATE OF PRONOUNCEMENT : 17/08/2016 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORD ER PASSED BY CIT(A)- 42 MUMBAI DATED 27/04/2015, WHICH IN TURN ARISES OU T OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. (A) THE LEARNED CIT (A) ERRED IN CONFIRMING DI SALLOWANCE (BY WAY OF REDUCING THE APPELLANT'S CLAIM OF DEDUCTION U/S. 80IB(10) OF THE INCOME-TAX ACT, 1961)OF RS. 1,28,000/- RECEIVED BY THE APPELLANT TOWARDS FORMATION AND REGISTRATION OF HOUSING SOCIE TY FOR 'SYMPHONY HOUSING PROJECT' BY HOLDING THAT THE SAID REGISTRATION 2 ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) CHARGES RECEIPT OF RS.1,28,000/- IS INCOME NOT ELIG IBLE FOR THE DEDUCTION OF 80IB(10) OF THE INCOME TAX ACT,1961. (B) THE LEARNED CIT(A) ALSO ERRED IN CONFIRMING DI SALLOWANCE (BY WAY OF REDUCING THE APPELLANT'S CLAIM OF DEDUCTION U/S.80IB(10) OF THE INCOME-TAX ACT, 1961) OF RS.28,000/- RECEIVED B Y THE APPELLANT TOWARDS FORMATION AND REGISTRATION OF HOUSING SOCIE TY FOR 'NAZARENE HOUSING PROJECT' BY HOLDING THAT THE SAID REGISTRATION CHARGES RECEIPT OF RS. 28,000/- IS INCOME NOT ELIGI BLE FOR THE DEDUCTION OF 80IB(10) OF THE INCOME TAX ACT,1961. 2. THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISA LLOWANCE (BY WAY OF REDUCING THE APPELLANT'S CLAIM OF DEDUCTION U/S. 80IB (10) OF THE INCOME-TAX ACT,1961) OF RS.16,06,290/- OUT OF THE A PPELLANT'S COLLECTION OF CHARGES TOWARDS SWIMMING POOL AND HEA LTH CLUB BY HOLDING THAT THE INCOME EARNED ON CONSTRUCTION OF S WIMMING POOL & HEALTH CLUB IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB (10) OF THE INCOME TAX ACT, 1961. 3. THE LEARNED ASSESSING OFFICER ERR ED IN DISALLOWING RS.64,332/- U/S.14(A) OF THE INCOME-TAX ACT, THOUGH THE APPELLANT HAD THEMSELVES OFFERED EXPENSES FOR DISALLOWANCE TH E AMOUNT OF RS 4,03,488/- AS DISALLOWANCE U/S. 14(A). 3. THE APPELLANT BEFORE US IS A PARTNERSHIP FIRM, W HICH IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. IN SO FAR AS THE DISPUTES IN GROUNDS OF APPEAL NO.1() TO 1(B) IS CONCERNED, THE SAME RELATE TO THE CLAIM OF DEDUCTION UNDER SECTION 80 IB(10)OF THE AC T WITH RESPECT TO INCOME EARNED BY THE ASSESSEE OF RS.1,28,000/- AND RS.28,000/- BY WAY OF FORMATION AND REGISTRATION CHARGES OF HOUSING SO CIETY FOR THE TWO PROJECTS NAMELY, SYMPHONY AND NAZARENE HOUSING PRO JECT RESPECTIVELY. THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10)OF THE ACT WITH RESPECT TO THE AFORESAID I NCOMES ON THE GROUND THAT THE SAME DID NOT CONSTITUTE INCOMES DERIVED FR OM DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY FOLLOWING THE DE CISION OF THE TRIBUNAL 3 ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 -10, RENDERED VIDE ITA NO.7758/MUM/2012 DATED 22/10/2014. 3.1 ON THIS POINT, IT WAS A COMMON POINT BETWEEN TH E PARTIES THAT THE DECISION OF THE TRIBUNAL ON THIS ASPECT CONTINU ES TO HOLD THE FIELD AND, THEREFORE, THE DECISION OF THE CIT(A) DESERVES TO BE AFFIRMED. THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO QUITE FAIR LY POINTED OUT THAT EVEN WHEN THE MATTER WAS SET-ASIDE BY THE TRIBUNAL FOR THE LIMITED PURPOSE, THE ASSESSING OFFICER IN A SUBSEQUENT ORDE R DATED 29/1/2016 HAS REJECTED THE CLAIM OF THE ASSESSEE. IN THIS VI EW OF THE MATTER, I, THEREFORE, UPHOLD THE STAND OF THE CIT(A) AND ASSES SEE FAILS ON GROUNDS OF APPEAL NO.1 (A) & 1(B). 4. THE DISPUTE IN GROUND OF APPEAL NO.2 RELATES TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10)OF THE ACT WITH RE SPECT TO EARNING MADE BY THE ASSESSEE TOWARDS SWIMMING POOL AND HEAL TH CLUB. THE ASSESSING OFFICER HAD DENIED THE CLAIM ON THE GROUN D THAT THE SAID INCOME DID NOT CONSTITUTE AN INCOME DERIVED FROM TH E DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT. THE CIT(A) HA S ALSO UPHELD THE STAND OF THE ASSESSING OFFICER. NOTABLY, THE CIT(A ) NOTED THAT THE SAID ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSMEN T YEAR 2009- 10(SUPRA), WHEREBY THE MATTER WAS SET-ASIDE TO THE ASSESSING OFFICER FOR EXAMINING WHETHER THE SWIMMING POOL AND HEALTH CLUB WAS A PART OF THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORIT Y. THE CIT(A) NOTES THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TO VERIFY THE SAID DECISION, THE DENIAL OF DEDUCTION UNDER SECTION 80I B(10) OF THE ACT WAS UPHELD. 4 ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) 4.1 ON THIS ASPECT, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT CONSEQUENT TO THE DIRECTION OF THE TRIBUNA L IN ITS ORDER DATED 22/10/2014, THE ASSESSING OFFICER HAD CARRIED OUT T HE VERIFICATION EXERCISE AND VIDE ORDER DATED 29/1/2016, THE CLAIM FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT WITH RESPECT TO COLLECT IONS TOWARDS SWIMMING POOL AND HEALTH CLUB HAS BEEN ALLOWED FOR ASSESSMENT YEAR 2009-10, A COPY OF SUCH ORDER HAS ALSO BEEN PLACED ON RECORD. ON THE STRENGTH OF THE AFORESAID, IT IS CANVASSED THAT IN THE INSTANT YEAR TOO, THE ASSESSEE BE ALLOWED THE CLAIM OF DEDUCTION UNDER SE CTION 80IB(10) OF THE ACT WITH RESPECT TO THE EARNINGS TOWARD SWIMMIN G POOL AND HEALTH CLUB. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS ALSO POINTED OUT THAT THE IMPUGNED ORDER OF THE CIT(A) WAS RENDERED PRIOR TO THE ORDER PASSED BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2009-10 DATED 29/01/2016, WHEREIN THE APPROPRIATE VERIFICATION EX ERCISE HAS BEEN CARRIED OUT WITH RESPECT TO THE PLAN OF HOUSING PRO JECT APPROVED BY THE LOCAL AUTHORITY. IN VIEW OF THE AFORESAID FACTUAL MATRIX, WHICH HAS NOT BEEN CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENT ATIVE, I DEEM IT FIT AND PROPER TO DIRECT THAT ASSESSEES CLAIM OF DEDUC TION UNDER SECTION 80 IB(10) OF THE ACT WITH RESPECT TO COLLECTION OF CHA RGES TOWARDS SWIMMING POOL AND HEALTH CLUB AMOUNTING TO RS.16,06 ,290/- BE ALLOWED. THUS, IN GROUND OF APPEAL NO.2, ASSESSEE SUCCEEDS. 5. THE DISPUTE IN THE LAST GROUND RELATES TO THE QU ANTIFICATION OF THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE ASS ESSING OFFICER NOTICED THAT ASSESSEE HAD DECLARED DIVIDEND INCOME FROM MUTUAL FUNDS OF RS.16,95,532/-, WHICH WAS CLAIMED AS EXEMPT UND ER SECTION 10(35) OF THE ACT. THE ASSESSEE HAD ALSO MADE SUO-MOTU DI SALLOWANCE UNDER 5 ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) SECTION 14A OF THE ACT AMOUNTING TO RS.4,03,488/-. IT WAS EXPLAINED BY THE ASSESSEE THAT WHILE COMPUTING DISALLOWANCE UNDE R SECTION 14A OF THE ACT, IT HAD EXCLUDED THE INVESTMENTS IN MUTUAL FUNDS, WHICH DID NOT YIELD EXEMPT DIVIDEND INCOMES. THE ASSESSING OFFIC ER HOWEVER, COMPUTED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT BY INCLUDING THE ENTIRE INVESTMENTS IN MUTUAL FUNDS AND THUS, TH E DISALLOWANCE WAS COMPUTED AT RS.4,67,820/-. ACCORDINGLY, THE ADDITI ONAL DISALLOWANCE WAS COMPUTED AT RS.64,332/-, WHICH WAS CHALLENGED I N AN APPEAL BEFORE THE CIT(A). THE CIT(A) HAS SINCE AFFIRMED T HE DISALLOWANCE, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEF ORE THE TRIBUNAL. 5.1 I FIND THAT THE ASSESSEE HAS CONSISTENTLY EXPLA INED THAT THE INVESTMENT IN MUTUAL FUNDS WHICH DO NOT YIELD EXEMP T DIVIDEND INCOMES ARE LIABLE TO BE EXCLUDED FOR THE PURPOSES OF COMPUTING DISALLOWANCE UNDER SECTION 14A OF THE ACT. IT HAS BEEN EXPLAINED THAT ASSESSEE HAS INVESTED ALSO IN MUTUAL FUNDS WHICH AR E NON-DIVIDEND PAYING SCHEMES I.E. GROWTH OPTION SCHEMES, WHICH DO NOT PAY ANY DIVIDEND AND THE GAIN ARISES ONLY ON REDEMPTION OF THE SAME, WHICH IS TAXABLE AS CAPITAL GAINS. 5.2 THE LD. DEPARTMENTAL REPRESENTATIVE MERELY REIT ERATED THE STAND OF THE ASSESSING OFFICER, WHICH I HAVE ALREADY ADV ERTED TO IN THE EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAM E OF BREVITY. 5.3 IN MY CONSIDERED OPINION, THE PROPOSITION BEING ADVANCED BY THE ASSESSEE IS QUITE FAIR AND APT. OBVIOUSLY, WHETHER AN INVESTMENT DOES NOT OR SHALL GENERATE EXEMPT DIVIDEND INCOME, SUCH INVESTMENTS ARE TO BE EXCLUDED FOR THE PURPOSES OF COMPUTING DISALLOWA NCE UNDER SECTION 6 ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) 14A OF THE ACT. AT THE TIME OF HEARING, IT WAS POI NTED OUT THAT THE AFORESAID WOULD REQUIRE A FACTUAL APPRECIATION OF T HE AFFAIRS, AS TO WHETHER THE INVESTMENTS SOUGHT TO BE EXCLUDED BY TH E ASSESSEE ARE THOSE WHICH ARE NOT TO YIELD EXEMPT INCOME. THE LD . REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF EX AMINING THE AFORESAID FACT POSITION. IN VIEW OF THE MATTER, I , THEREFOR E, DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO CONSIDER THE EXP LANATION OF THE ASSESSEE AND TO LIMIT THE COMPUTATION OF DISALLOWAN CE UNDER SECTION 14A OF THE ACT ONLY WITH RESPECT TO THE INVESTMENTS IN MUTUAL FUNDS, WHICH YIELD EXEMPT INCOME AND EXCLUDE THE INVESTMEN TS IN MUTUAL FUNDS WHICH DO NOT YIELD EXEMPT INCOMES. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD AND, THEREAFTER RE-DETERMINE THE DISALL OWANCE UNDER SECTION 14A OF THE ACT AS PER LAW. THUS, ON THIS A SPECT ASSESSEE PARTLY SUCCEEDS. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/08/2016 SD/- (G.S. PANNU) ACCOCUNTANT MEMBER MUMBAI, DATED 17/08/2016 VM , SR. PS 7 ITA NO. 4157/MUM/2015 (ASSESSMENT YEAR : 2010-11) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI