HCC REAL ESTATE LTD, MUMBAI V. ACIT 10(3), MUMBAI

ITA 4224/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1657 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: N P MAHAJANI
• Keywords: Business income; Business expenditure

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R. K. GUPTA , JM ITA NO. 4 224 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 200 7 - 20 0 8 ) HCC REAL ESTATE LIMITED, HINCON HOUSE, LBS MARG, VIKHROLI (W), MUMBAI - 400 083 VS. ACIT 10(3), MUMBAI - 20 PAN/GIR NO. : A ABCH 6060 P ( APPELLANT ) .. ( RESPONDENT ) /ASSE SSEE BY : MR. N.P.MAHAJANI /REVENUE BY : MR. OMPRAKASH MEENA DATE OF HEARING : 20 TH DEC . , 2012 DATE OF PRONOUNCEMENT : 4 TH JAN . , 201 3 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25 - 3 - 2011 OF LEANED CIT(A) - 22 , MUMBAI RELA TING TO THE ASSESSMENT YEAR 200 7 - 0 8 . 2 . THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS AGAINST THE FINDING OF THE CIT(A) THAT EXPENDITURE OF RS. 93,68,007/ - SHOULD HAVE BEEN I NCLUDED IN THE VALUE OF WIP AND CONFIRMING THE BUSINESS EXPENSES OF RS. 6,00,355/ - TOWARDS SOFTWARE EXPENSES BEING CAPITAL IN NATURE. 3 . BRIEF FACTS IN THIS REGARD ARE THAT THE ASSESSEE IS IN BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF BUILDINGS, HOUSES, O FFICE PREMISES. THE RETURN DECLARING NIL INCOME WAS FILED, HOWEVER, THE INCOME OF THE ASSESSEE WAS COMPUTED AT RS. 1,20,910/ - . DURING THE ASSESSMENT ITA NO. 4224 /20 1 1 2 PROCEEDING, THE AO NOTED THAT THE ASSESSEE HAD NO BUSINESS ACTIVITY AND IT SHOWN THE INTEREST INCOME ONLY TO CLAIM VARIOUS EXPENSES SUCH AS SALARIES, CONTRIBUTION TO PF, WELFARE, AUDIT FEES, DIRECTORS FEES, GENERAL EXPENSES, HIRE CHARGES, MAINTENANCE EXPENSES, MOTOR CAR, PRINTING & STATIONERY, PROFESSIONAL CHARGES ETC. ETC. TOTALING TO RS. 99,68.362/ - , WHICH INC LUDES SOFTWARE EXPENSES OF RS. 6,00,355/ - . THE AO ALSO NOTED THAT THE ASSESSEE HAD SHOWN INTEREST INCOME OF RS. 1,20,912/ - UNDER THAT BUSINESS INCOME. THE AO NOTED THAT SINCE NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE AND ONLY ONE PROJECT IS G OING ON, THEREFORE, HE HELD THAT ALL THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT SHOULD HAVE BEEN SHOWN UNDER THE HEAD WIP. ACCORDINGLY, HE DISALLOWED THE CLAIM OF THE ASSESSEE CLAIMING VARIOUS EXPENSES IN THE PROFIT AND LOSS ACCOUNT TOTALING TO RS . 93,68, 007/ - . THE AO ALSO NOTED THAT THE ASSESSEE HAS CLAIMED BUSINESS EXPENSES OF RS. 6,00,355/ - ON ACCOUNT OF SOFTWARE EXPENSES. HE TREATED THESE EXPENSES ALSO AS CAPITAL IN NATURE, AND THEREFORE, THE CLAIM OF THE ASSESSEE WAS REJECTED. 4 . IN APPEAL, THE LEARNED CIT(A) ALSO CONFIRMED THE ACTION OF THE AO . 5 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, I FOUND THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH. I NOTED THAT NO DOUBT, ONE PROJECT WAS GOI NG ON, HOWEVER, MANY PROJECTS WERE IN PIPE LINE. IT IS SEEN THAT THE ASSESSEE HAD ENTERED INTO VARIOUS AGREEMENT OF URBAN DEVELOPMENT ITA NO. 4224 /20 1 1 3 AND ENTERED INTO AN AGREEMENT WITH THE LAND OWNER FOR REDEVELOPMENT OF A PRIME PROPERTY IN THE SUBU R BS OF MUMBAI TO CONDUC T TABLE SURVEY, CENSUS OF THE OCCUPANTS ETC. AT VIKHROLI. FOR THIS, VARIOUS ANALYSIS WERE CONDUCTED BY ICICI PROPERTY SERVICES. THE ASSESSEE MADE AN APPLICATION TO MUNICIPAL CORPORATION OF GREATER MUMBAI ON 17 - 6 - 2006. IT WAS FURTHER SUBMITTED THAT OUT OF DE VELOPMENT EXPENSES OF RS. 76 CRORES, THE EXPENSES RELATED TO DEVELOPMENT OF INDUSTRIAL PARK PROPERTY WERE CARRIED FORWARD UNDER WORK IN PROGRESS IN THE BALANCE SHEET AND WHICH WERE NOT DIRECTLY RELATED TO THE SAID DEVELOPMENT ACTIVITY WERE CHARGED TO PROFI T AND LOSS ACCOUNT. I FURTHER FO UND THAT BUSINESS WAS VERY MUCH IN EXISTING AND, THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE. IF BY ANY REASON IN VARIOUS OTHER PROCEEDINGS, WHERE WORKING WAS IN PIPE LINE AN D WORKING COULD NOT BE STARTED THEN ALSO THE EXPENSES CLAIMED ON THESE ACTIVITIES ARE TO BE ALLOWED IN ACCORDANCE WITH THE BUSINESS ACTIVITIES. HENCE, I THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO TO EXAMINE AFRESH AFTER AFFORDING OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. THE AO ALSO VERIFIED THAT SOFTWARE EXPENSES CLAIMED BY THE ASSESSEE ARE INCURRED ON DEVELOPMENT OF SOFTWARE OR PURCHASING SOME PARTS OF SOFTWARE AND THEN WILL TAKE A VIEW THAT THOSE EXPENSES ARE CAPITAL IN NATURE OR REVENUE IN NA TURE. I ORDER ACCORDINGLY. 6 . FURTHER, THE ISSUE IN APPEAL OF THE ASSESSEE IS AGAINST TREATING THE INTEREST INCOME OF RS. 1,20,912/ - AS INCOME FROM OTHER SOURCES. THE INTEREST INCOME WAS EARNED ON FDR, THEREFORE, THE AO TREATED THE ITA NO. 4224 /20 1 1 4 SAME AS INCOME FROM OTHE R SOURCES. THE CIT(A) HAS CONFIRMED THE SAME. 7 . AFTER CONSIDERING THE ORDER OF THE AO AND CIT(A) , I FOUND THAT THIS ISSUE ALSO NEEDS REVERIFICATION. IT WAS PLEADED BY THE LEARNED AR OF THE ASSESSEE THAT THE ASSESSEE HAD PAID INTEREST OF RS. 1.5 LAKH AN D HAS EARNED ONLY 1.20 LAKHS, THEREFORE, NETTING OF BOTH HE INTEREST HAS TO BE ALLOWED WHICH HAS NOT BEEN CONSIDERED BY THE LEARNED AO OR BY THE LEARNED CIT(A) . THE AO ALSO LOOKED INTO THE MATTER THAT THERE IS NO INDEPENDENT SOURCE OF INTEREST AND LEARNED ARS CONTENTION THAT THIS SHOULD ALSO GO TO THE HEAD OF WIP. LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, I RESTORE THIS ISSUE TO THE FILE OF THE AO. 8 . GROUND NO.5 WAS NOT PRESSED, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 9 . IN TH E RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JAN . 201 3 . JAN. 201 3 SD/ - ( ) ( R.K.GUPTA ) / JUDICIAL MEMBER MUMBAI ; DATED : 04 / 01 / 201 3 . /PKM , PS COPY OF THE ORDER FORWARDED TO : ITA NO. 4224 /20 1 1 5 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MU MBAI