AHCL-PEL, MUMBAI V. ACIT 24(1), MUMBAI

ITA 423/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84001 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Assessee Lawyers: MA YUR KISHNADWALA
• Section: 234B; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO.2168/M/2009 ( AY: 2005 - 2006) ./I.T.A. NO.423/M/2010 ( AY: 2006 - 2007) ./I.T.A. NO.2693/M/2011 ( AY: 2007 - 2008) M/S. AHCL - PEL, PATEL ESTATE ROAD, JOGESHWARI (W), MUMBAI - 400102. / VS. INCOME TAX OFFICER - 24(1) (1) , PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E), MUMBAI - 400 051. ./ PAN : AANFA5615N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MAYUR KISHNADWALA / RESPONDENT BY : SHRI ASGHAR ZAIN / DATE OF HEARING : 08.10.2014 / DATE OF PRONOUNCEMENT : 29 .10.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE 3 APPEALS UNDER CONSIDERATION AND THEY ARE FILED BY THE ASSESSEE FOR THE AYS 2005 - 06, 2006 - 07 AND 2007 - 08. SINCE, THE ASSESSEE RAISED THE IDENTICAL GROUNDS IN ALL THE THREE APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO. 423/M/2010 FOR THE AY 2006 - 07 AS A LEAD APPEAL. THIS APPEAL FILED BY THE ASSESSEE ON 18.01.2010 AGAIN ST THE ORDER OF THE CIT (A) - 34 , MUMBAI DATED 16.11.2009 . IN THIS APPEAL, ASSESSEE RAISED THE FOLLOIWNG GROUNDS WHICH READ AS UNDER: 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF DEDUCTION U/S 80IB(10) ON INCOME FROM LEAVE & LICENSE FEES OF RS. 49,12,503/ - AND MISCELLANEOUS INCOME OF RS. 14,500/ - . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE LEVY OF INTEREST BY THE AO OF RS. 1,89,833/ - U/S 234B OF THE ACT. 3. AT THE OUTSET, SHRI MAYUR KISNADWALA, LD COUNSEL FOR THE ASSESSEE MENTI ONED THAT THE ASSESSEE IS A BUILDER AND ENGAGED IN THE BUSINESS OF DEVELOPMENT OF HO USING PROJECT WHICH IS ALLOWABLE FOR DEDUCTION U/S 80IB OF THE ACT. THERE IS NO DISPUTE ABOUT THE PROJECT AND THE ALLOWABILITY OF DEDUCTION OF PROFITS RELATABLE TO THE SA LE PROCEEDS OF THE FLATS OF THE SAID HOUSING PROJECT. THE ONLY DISPUTE RELATES TO THE ALLOWABILITY OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF THE RENTAL INCOME EARNED BY THE ASSESSEE IN RESPECT OF CERTAIN UNSOLD FLATS HELD AS STOCK - IN - TRADE. IT IS TH E CASE OF THE ASSESSEE THAT SOME OF THE FLATS WHICH ARE LEFT UNSOLD WERE LET OUT UNDER LEAVE AND LICENSE SYSTEM AND THE SAID INCOME BEING DIRECTED CONNECTED TO THE FLATS, WHICH IS INTEGRAL PART OF THE HOUSING PROJECT IS ALSO ALLOWABLE FOR DEDUCTION U/S 8 0IB OF THE ACT. HE RELIED ON VARIOUS DECISIONS IN SUPPORT OF THE SAME. 4. ON THE OTHER HAND, REVENUE OFFICERS ARE OF THE OPINION THAT SUCH RECEIPTS ARE NOT ALLOWABLE PROFITS AND DENIED THE CLAIM OF DEDUCTION. 5. BEFORE US, LD COUNSEL FOR THE ASSESSEE S UBMITTED THAT THERE I S NO DISPUTE ON THE FACTS AND THE DISPUTE IS ONLY WITH REGARD TO THE DEFINITION OF ELIGIBLE PROFITS WHETHER IT INCLUDES RENTAL INCOME EARNED BY THE ASSESSEE FROM THE UNSOLD PART OF THE HOUSING PROJECT. BRINGING OUR ATTENTION TO VARIO US DECISION PLACED BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SCRAP SALES ARE HELD TO BE ELIGIBLE PROFITS. HE ALSO MENTIONED THAT THE INTEREST PAYMENTS RECEIVED BY THE ASSESSEE FROM THE DEBTORS, RELATING TO THE SALE PROCEEDS, WERE ALSO FOUND ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB OF THE ACT. IN SUPPORT OF HIS ARGUMENT, LD COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF ITAT, HYDERABAD IN THE CASE OF ACIT VS. BIOTECH MEDICALS (P) LTD [2009] 119 ITD 143 (HYD). FURTHER, LD COUNSEL ALSO RELIED ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF TATA INFOMEDIA LTD VS. ACIT [2009] 116 ITD 426 (MUM), WHICH IS DELIVERED IN THE CONTEXT OF DE D U C TION U/S 80Q OF THE ACT, WHEREIN IT WAS HELD THAT ADVERTISEMENT INCOME CONSTITUTES ELIGIBLE PROFITS. 3 IN THIS CASE, THE INCOME IS EARNED ON SALE OF YELLOW PAGES. DRAWING PARALLAL TO THE ABOVE INSTANCES, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RENTAL RECEIPTS EARNED OUT THE UNSOLD FLATS OF THE HOUSING PROJECT SHOULD BE HELD ELIGIBLE FOR DEDUCTION. FURTHER, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT [2009] 317 ITR 218 (SC) FOR THE PROPOSITION THAT THE INCOME WITH FIRST DEGREE NEXUS SHOULD BE CONSI DERED AS ELIGIBLE INCOME FOR THE PURPOSE OF CLAIM OF DEDUCTION UJ/S 80IB OF THE ACT. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITED DECISIONS OF THE TRIBUNAL AND THE HIGHER JUDICIARY. ON HEARING BOTH THE PARTIES, WE FIND, THE SAID PROPOSITIONS MENTION E D ABOVE ARE HELPFUL FOR DECIDING THE ISSUE ON HAND. CONSIDERING THE FACT THAT THE UNSOLD FLATS, BEING STOCK - IN - TRADE OF THE HOU SING PROJECT, BEING THE IMMEDIATE SOURCE OF THE IMPUGNED RENTAL INCOME, WE FIND DIRECT NEXUS OF THE SAID INCOME TO THE HOUSING PROJECT ON HAND. THEREFORE, THE SAID INCOME IS DERIVED FROM THE HOUSING PROJECT, MAKING THE INCOME ELIGIBLE FOR DEDUCTION U/S 80 IB(10) OF THE ACT. THEREFORE, THE CONCLUSIONS DRAWN BY THE CIT (A) ARE NOT SUSTAINA BLE IN LAW. ACCORDINGLY, WE REV ERSE THE ORDER OF THE CIT (A) ON THIS ISSUE AND ALLOW THE GROUND NO.1 IN ALL THE THREE APPEALS. 8. REGARDING THE MISCELLANEOUS INCOME OF RS. 14,500/ - , WHICH WAS HELD BY THE REVENUE AUTHORITIES AS INELIGIBLE INCOME FOR THE PURPOSE OF DEDUCTION U/S 80IB(10) OF THE ACT, WE FIND, THE INCOME TAX AUTHORITIES HAS NOT GONE INTO THE FACTS RELATING TO THIS INCOME. AS PER THE LD COUNSEL, THE SAME CONSTI TUTES REIMBURSEMENTS OF MAINTENANCE CHARGES BY THE FLAT OWNERS. THIS IS THE REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE TO THE HOUSING SOCIETY OF THE HOUSING PROJECT. SUCH REIMBURSEMENT DOES NOT CONSTITUTE INCOME OF THE ASSESSEE. THE REVENUE AUTH ORITIES HAVE WRONGLY HELD IT AS INCOME AND TREATED THE SAME AS INELIGIBLE FOR CLAIM OF DEDUCTION. IN OUR OPINION, THIS MATTER SHOULD VISIT THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER ANALYZING THE RELEVANT FACTS. ACCORDINGLY, WE REMAND THIS PART OF T HE GROUND 4 NO.1 RAISED BY THE ASSESSEE FOR THE AY 2006 - 07 AND ALLOWED FOR STA T I S T I CAL PURPOSES. 9. GROUND NO.2 RELATES TO THE LEVY OF INTEREST U/S 234B OF THE ACT. CONSIDERING THE CONSEQUENTIAL NATURE OF THIS GROUND, ADJUDICATION OF THE SAME IS AN ACADEMIC E XERCISE. ACCORDINGLY, GROUND NO.2 IS DISMISSED. 10. IN THE RESULT, APPEAL O F THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2168/M/2009 (AY 2005 - 2006) ITA NO.2693/M/2011 (AY 2007 - 2008) 11. THESE APPEALS ARE FILED BY THE ASSESSEE FOR THE AY 2005 - 06 AND 2007 - 08. SINCE, THE GROUNDS RAISED IN THE PRESENT APPEALS ARE IDENTICAL AND THE ONLY DIFFERENCE IS IN FIGURES, THEREFORE, THE ADJUDICATION GIVEN BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER WITH REGARD TO ITA NO.423/M/2010 FOR THE AY 2006 - 200 7 SQUARELY APPLIES TO THE INSTANT APPEALS TOO. CONSIDERING THE SAME, THE GROUND NO.1 RAISED BY THE ASSESSEE IN BOTH THE INSTANT APPEALS IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.2 IS DISMISSED AS ACADEMIC. 12. IN THE RESULT, TWO APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. CONCLUSIVELY, ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOU NCED IN THE OPEN COURT ON 2 9 T H O CTOBER, 2014. S D / - S D / - ( SANJA Y GARG ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 2 9 /10/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI