DCIT, New Delhi V. M/s. Unitech Property Management Pvt. Ltd., New Delhi

ITA 4252/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7025 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 02-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARAS KUMAR
• Assessee Lawyers: KANIKA JAIN ADV SH MOHIT JAIN
• Keywords: Diversion of income; Question of law
• Section: 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.4252/DEL/2016 (ASSESSMENT YEAR: 2011-12) DY. CIT, CIRCLE-27(1), NEW DELHI. VS. M/S UNITECH PROPERTY MANAGEMENT PVT. LTD., 6, COMMUNITY CENTRE, SAKET, NEW DELHI-110017. PAN AAACU 1291Q (APPELLANT) (RESPONDENT) ITA NO.4034/DEL/2016 (ASSESSMENT YEAR: 2011-12) M/S UNITECH PROPERTY MANAGEMENT PVT. LTD., (PRESENTLY KNOWN AS M/S QNS FACILITY MANAGEMENT PVT. LTD.) 6, COMMUNITY CENTRE, SAKET, NEW DELHI-110017. PAN AAACU 1291Q VS. DY. CIT, CIRCLE-18(1), NOW CIRCLE-27(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. SARAS KUMAR, SR. DR RESPONDENT BY MS KANIKA JAIN, ADV. SH. MOHIT JAIN, CA DATE OF HEARING 23.06.2020 DATE OF PRONOUNCEMENT 31.08.2020 2 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT ORDER PER SUDHANSHU SRIVASTAVA, JM: ITA 4034/DEL/2016 IS THE ASSESSEES APPEAL AGAINST ORDER DATED 23.05.2016 PASSED BY THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS)-22, NEW DELHI {CIT(A)} FOR ASS ESSMENT YEAR 2011-12 WHEREAS ITA NO.4252/DEL/2016 IS THE DEPARTME NTS CROSS APPEAL FOR THE SAME YEAR. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF MAINTAINENANCE OF IMMOVABLE PROPERTY WHICH WERE MAINL Y DEVELOPED BY M/S UNITECH LTD. THE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME AT RS.23,74,36,630/-. THE RE TURN WAS INITIALLY PROCESSED U/S 143(1) OF THE INCOME TAX AC T, 1961 (HEREINAFTER CALLED THE ACT) AND THE CASE WAS LATE R SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER (AO) NOTICED THAT AN AMOUNT OF RS .4,03,23,314/- WAS TRANSFERRED BY THE ASSESSEE TO THE ASSET REPLACE MENT RESERVE ACCOUNT AND DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS REQUIRED BY THE ASSESSING OFFICER TO JUSTIFY THE ALLOWABILITY OF 3 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT THE SAME AND ALSO TO PROVIDE DETAILS OF THE ASSET R EPLACEMENT RESERVE ACCOUNT. THE ASSESSING OFFICER ALSO NOTED T HAT A DISALLOWANCE HAD BEEN MADE ON AN IDENTICAL ISSUE IN ASSESSMENT YEARS 2009-10 AND 2010-11. IT WAS THE ASSESSEES CON TENTION BEFORE THE ASSESSING OFFICER THAT THE AMOUNT REPRESENTED C ONTRIBUTION RECEIVED BY THE ASSESSEE COMPANY TOWARDS SINKING FUN D AND THE SAME WAS RECEIVED BY THE ASSESSEE COMPANY UNDER AN AGREEMENT WITH THE OWNERS FOR MEETING THE COST OF REPLACEMENT, REFURBISHING, MAJOR REPAIRS AND OTHER CAPITAL EXPENSES. IT WAS AL SO SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE CONTRIBUTION/ S WERE KEPT IN A SEPARATE ACCOUNT AND IN NO MANNER REPRESENTED THE I NCOME OF THE ASSESSEE COMPANY PARTICULARLY SINCE THE ASSETS DID NOT BELONG TO THE ASSESSEE COMPANY. IT WAS HIGHLIGHTED THAT THE VA RIOUS ASSETS BELONGED TO THE OWNERS/RESIDENT WELFARE ASSOCIATION AND WERE NOT PART OF EITHER THE CURRENT ASSETS OR THE FIXED ASSE TS OF THE ASSESSEE COMPANY. IT WAS THE ASSESSEES CONTENTION THAT IT WAS A CASE WHERE THERE WAS A DIVERSION OF INCOME BY OVERRIDING TITLE AND IT WAS NOT A CASE OF APPLICATION OF INCOME. HOWEVER, THE ASSESSI NG OFFICER WAS OF THE VIEW THAT SIMILAR DISALLOWANCE HAD BEEN MADE IN ASSESSMENT 4 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT YEARS 2009-10 AND 2010-11 AND THOUGH IN BOTH THE YE ARS, THE LD. FIRST APPELLATE AUTHORITY HAD GIVEN A FINDING IN FA VOUR OF THE ASSESSEE, THE DEPARTMENTS APPEAL WAS PENDING BEFORE THE TRIBUNAL AND, THEREFORE, ON IDENTICAL FACTS, THE DISALLOWANCE HAD TO BE MADE. THE ASSESSING OFFICER PROCEEDED TO MAKE ADDITION OF RS.4,03,23,314/- ON THIS ACCOUNT AND THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.27,77,59,940/-. 2.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL B EFORE THE LD. FIRST APPELLATE AUTHORITY. THE LD. CIT (A) PART LY ALLOWED THE APPEAL BY OBSERVING THAT THE ACTUAL AMOUNT SPENT ON REPLACEMENT ETC. WAS CONSIDERABLY LESS THAN AMOUNT TRANSFERRED TO THE ASSETS REPLACEMENT ACCOUNT. THE LD. CIT (A) ALSO OBSERVED THAT THE RATIO OF THE AMOUNT TRANSFERRED TO ASSETS REPLACEMENT ACCOUN T AND MANAGEMENT FEE RECEIVED WAS FLUCTUATING AND NOT FIXE D FROM YEAR TO YEAR. THE LD. CIT (A) HELD THAT THE TOTAL MAINTENAN CE CHARGES RECEIVED BY THE ASSESSEE COMPANY, IRRESPECTIVE OF I TS NOMENCLATURE, CONSTITUTED REVENUE RECEIPTS AND THE APPROPRIATION OUT OF THE SAME TOWARDS SINKING FUND COULD NOT BE ALLOWED AS DEDUCTI ON, BUT DEDUCTION OF ACTUAL EXPENDITURE INCURRED IS TO BE A LLOWED. 5 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT 2.2 AGGRIEVED WITH THE FINDINGS OF THE LD. CIT (A), NOW BOTH THE ASSESSEE AS WELL AS DEPARTMENT ARE BEFORE THIS T RIBUNAL AND HAD RAISED THE FOLLOWING GROUNDS OF APPEAL: GROUNDS OF APPEAL IN ITA NO.4252/DEL/2016 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE TO TAL ADDITION OF RS.4,03,23,314/- AND ALLOWING EXPENDITURE ACTUALLY INCURRED FOR ASSET REPLACEMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE LD. CIT(A) HAS ERRED IN ACCEPTING ADDITION AL EVIDENCES WITHOUT GIVING OPPORTUNITY TO THE AO IN CONTRAVENTION OF THE RULE 46A OF THE INCOME TAX RUL ES, 1962. 3. THE APPELLANT CRAVES, LEAVE OR RESERVING THE RIG HT TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEA L. GROUNDS OF APPEAL IN ITA NO.4034/DEL/2016 1) THAT ORDER MADE U/S 250 OF THE INCOME TAX ACT DATED 23/05/2016 BY THE LEARNED CIT(APPEALS)-22 IS ERRONE OUS IN NATURE AS HE HAS MORE OR LESS CONFIRMED THE ORDER O F LD. AO WHO MADE ADDITIONS ON ARBITRARY BASIS ON ACCOUNT OF AMOUNT TRANSFERRED TO ASSET REPLACEMENT A/C. 2) THAT THE ORDER PASSED BY THE LD. CIT(A) -22 IS BAD IN LAW PARTICULARLY WHEN THE ISSUE STANDS ALREADY COVE RED IN THE APPEALS FOR THE AY 2009-10 AND AY 2010-11 AND H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE COMPANY BY H IS WORTHY PREDECESSOR. 3.0 AT THE OUTSET, THE LD. AUTHORIZED REPRESENTAT IVE SUBMITTED THAT THE ISSUE STOOD COVERED BY THE ORDER OF THE ITAT IN 6 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2009-10 AND 2010-11 IN ITA NOS.1316 & 2615/DEL/2014 VIDE ORDER DATED 19.09 .2016. THE LD. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THA T THE ORDER OF THE TRIBUNAL HAD REACHED FINALITY IN VIEW OF THE FAC T THAT THE DEPARTMENTS APPEAL AGAINST THE SAID ORDER WAS DISMI SSED BY THE HONBLE DELHI HIGH COURT IN ITA NO.440/2018 AND C.M . NO.14353 & 14354/2018 VIDE ORDER DATED 13.08.2018, WHEREIN THE HONBLE DELHI HIGH COURT HAD HELD THAT NO QUESTION OF LAW AR OSE IN THIS APPEAL AS THE MAINTENANCE/SERVICE FEES CHARGED DID NOT ENTIRELY VEST WITH THE ASSESSEE. THE LD. AUTHORIZED REPRESENT ATIVE FURTHER SUBMITTED THAT THE DEPARTMENTS SLP AGAINST THE ORD ER OF THE HONBLE DELHI HIGH COURT STOOD DISMISSED AS WITHDRAWN BY THE HONBLE APEX COURT VIDE ORDER DATED 22.11.2019. IT WAS SUBMITTED THAT, THEREFORE, THE ISSUE HAS ATTAINED FINALITY AN D, ACCORDINGLY, THE DEPARTMENTS APPEAL DESERVED TO BE DISMISSED AND TH E ASSESSEES APPEAL DESERVED TO BE ALLOWED. 4.0 PER CONTRA, THE LD. SR. DEPARTMENTAL REPRESENT ATIVE (DR) PLACED RELIANCE ON THE FINDINGS OF THE LOWER AUTHOR ITIES. HOWEVER, THE LD. SR. DR FAIRLY ACCEPTED THAT THE ISSUE STOOD COVERED BY THE 7 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ASSESSME NT YEARS 2009- 10 AND 2010-11. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO PERUSE D THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEARS 2009-10 AND 2010-11 IN ITA NOS.131 6 AND 2615/DEL/2014 WHEREIN VIDE ORDER DATED 19.09.2016, T HE CO- ORDINATE BENCH HAS DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE BENCH ARE CONTAINED IN PARA -9 OF THE SAID ORDER AND THE SAME IS BEING REPRODUCED HEREIN UNDER FOR A READY REFERENCE: 9. IN VIEW OF THE ABOVE CITED DECISIONS, WHEN W E APPLY THE RATIO OF THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF DTTDC [SUPRA], THEN IN THE LIGHT OF ART ICLE 10.2, WE OBSERVE THAT IN CONSEQUENCE OF TERMINATION OF CONTR ACT, THE MAINTENANCE AGENCY SHALL RECONCILE ALL THE ACCOUNTS AND TRANSFER THE IFSD, SINKING FUND AND OTHER ADVANCES, IF ANY, TO THE BUYERS ASSOCIATION, SUBJECT TO ADJUSTMENT OF AN Y ALL AMOUNTS DUE TO IT FROM THE OCCUPANT(S) UNDER THE SA ID CONTRACT. THUS, IN VIEW O THE DICTA LAID DOWN BY TH E CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ALPHA SERVICES [SUPRA] IMPUGNED RECEIPTS OUT OF FEES AND SERVING C LAUSE RECEIVED AND TRANSFERRED TO SINKING FUNDS TOWARDS A SSETS REPLACEMENT FUND FOR PURCHASE OR MAINTENANCE ASSETS OF FLATS, WHICH IS RETURNABLE IN THE EVENT OF TERMINAT ION OF CONTRACT TO THE PAYER FLAT OWNER CANNOT BE HELD AS INCOME 8 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT TAXABLE IN THE HANDS OF THE ASSESSEE. THIS AGREEME NT WAS CONFRONTED TO THE AO BY THE CIT(A) AND REMAND REPOR T WAS ALSO FILED. THUS, WE DECLINE TO ACCEPT THE CONTENTI ONS OF THE LD. DR THAT THE SAID AGREEMENT WAS NOT CONFRONTED T O THE AO THEREFORE, WE ARE UNABLE TO AGREE WITH THE CONTENTI ON OF THE ID. DR THAT THE MATER SHOULD BE RESTORED TO THE AO FOR A FRESH ADJUDICATION. WE ARE, THEREFORE, OF THE OPINION THA T THE CONCLUSION RECORDED BY THE CIT(A) IN PARA 2.3 OF TH E ORDER IS SUSTAINABLE AND THUS WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS WE UPHOLD THE O RDER OF THE CIT(A) ON THIS COUNT. CONSEQUENTLY, GROUNDS RAI SED BY THE REVENUE IN BOTH THE APPEALS BEING DEVOID OF MERITS, ARE DISMISSED. 5.1 WE ALSO NOTE THAT THE DEPARTMENTS APPEAL BEFO RE THE HONBLE DELHI HIGH COURT HAS BEEN DISMISSED BY APPR OVING THE ORDER OF THE ITAT WITH THE OBSERVATION THAT NO SUBST ANTIAL QUESTION OF LAW AROSE IN THIS CASE. WE ALSO NOTE THAT THE SLP OF THE DEPARTMENT AGAINST THE ORDER OF THE HONBLE DELHI H IGH COURT WAS DISMISSED AS WITHDRAWN BY THE HONBLE APEX COURT VIDE ORDER DATED 22.11.2019. THUS, FOR ALL PRACTICAL PURPOSES, THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AS AFORESAID HAS ATT AINED FINALITY AND RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUNDS RAISED BY THE DEPARTMENT AND ALLOW THE GROUNDS RAISED BY TH E ASSESSSEE. THUS, THE IMPUGNED AMOUNT TRANSFERRED TO THE ASSETS REPLACEMENT 9 ITA NOS.4252 & 4034 /DEL/2016 M/S UNITECH PROPERTY MANAGEMENT PVT. LTD . VS. DCIT ACCOUNT FOR THE YEAR UNDER CONSIDERATION WILL NOT FO RM PART OF THE TAXABLE INCOME OF THE ASSESSEES COMPANY. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSES SEE STANDS ALLOWED WHEREAS THE APPEAL OF THE DEPARTMENTS STANDS DISMIS SED. ORDER PRONOUNCED ON 31/08/2020. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31/08/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI