DCIT 1(1)(2), MUMBAI V. FORBES & COMPANY LTD, MUMBAI

ITA 4433/MUM/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5542 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MILIND V PATIL
• Assessee Lawyers: CHETAN A KARIA
• Keywords: Opportunity of being heard; Earning of tax free income; Rule 8D; Capital Gains
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' H ' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 4433/MUM/2016 (ASSESSMENT YEAR: 2012 - 13 ) D C I T - 1(1)(2) ROOM NO. 579, 5TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. FORBES & COMPANY LTD. 4TH FLOOR, CRYSTAL BLDG. 79, DR. ANNIE BESANT ROAD WORLI, MUMBAI 400018 PAN AAACF1765A APPELLANT RESPONDENT APPELLANT BY: SHRI MILIND V PATIL RESPONDENT BY: SHRI CHETAN A KARIA DATE OF HEARING: 07/09/2018 DATE OF PRONOUNCEMENT: 05 / 11 / 2018 O R D E R PER R.C. SHARMA, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - 2 , MUMBAI DATED 01.03.2016 FOR A.Y. 2012 - 13 IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) O F INCOME TAX ACT (HEREINAFTER THE ACT). 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 120.05 CRORES MADE U/S. 28(IV), WITHOUT APPRECIATING THE ASSESSING OFFICER'S FINDINGS THAT THE ASSESSEE DID NOT DISCLOSE THE REGAINING THE LAND IN THE SCHEDULE OF FIXED ASSETS IN THE BALANCE SHEET AS ON 31.3.2012 BUT ONLY DISCLOSED IT AS PART OF THE NOTES TO ACCOUNTS AND THAT THE REGAINING OF LA ND HAS TO BE TAXED AS A PERQUISITE U/S 28(IV) AS THE SAME HAS ARISEN OUT OF CONSENT TERMS OF THE AGREEMENT. ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 2 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S. 14A OF THE I.T. AC T, WITHOUT APPRECIATING THE ASSESSING OFFICER'S FINDINGS THAT THE CBDT VIDE CIRCULAR NO. 5/2014 DT. 11.2.2014 CLARIFIED THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME, THEREFORE, THE RECEIPT OR NON - RECEIPT OF EXEMPT INCOME IS NOT RELEVANT AFTER THE ISSUE OF THE CBDT CIRCULAR.' 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING, TRADING AND EXPORT OF ENGINEERING TOOLS. FROM THE RECORD WE FIND THAT IN FY 1994 - 95, ASSESSEE WAS SEIZED AND POSSESSED OF LAND MEASURING 42,985.30 SQ. MTS. OUT OF THIS PARCEL OF LAND, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT TO DEVELOP 27,350 SQ. MTS. AT CHANDIVALI. FOR THE SAME, THE ASSESSEE ENTERED INTO A M EMORANDUM OF UNDERSTANDING ('MOU ) DATED 29TH DECEMBER 1994 WITH VIDEOCON PROPERTIES LTD. (IN SHORT VPL) WHEREBY ASSESSEE AGREED TO GRANT VIDEOCON THE RIGHT TO DEVELOP THE LAND (27,350 SQ. MTS. AT CHANDIVALI) FOR A LUMP SUM CONSIDERATION OF RS. 28,25,00,000 / - AS SPECIFIED IN CLAUSE 8 OF THE MOU. CLAUSE 6 OF THE MOU PROVIDED THAT THE DEVELOPER SHALL HAVE THE SOLE, FULL AND EXCLUSIVE RIGH T TO DEVELOP THE LAND. AS PER CLAUSE 10 OF THE MOU, VIDEOCON HAD THE LICENCE AND AUTHORITY TO ENTER UPON THE SAID PROPERTY TO COMMENCE AND COMPLETE DEVELOPMENT AND CONSTRUCTION WORK SUBJECT TO THE PAYMENT OF CONSIDERATION OF RS. 19,77,50,000 / - . THE CLAUSE F URTHER PROVIDED THAT THE INTENTION OF THE PARTIES IS TO TRANSFER THE POSSESSION OF PROPERTY TO DEVELOPERS ONLY UPON EXECUTION OF THE DEED OF CONVEYANCE UPON COMPLETION ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 3 OF DEVELOPMENT OF THE PROPERTY AND ON RECEIPT OF THE ENTIRE CONSI DERATION BY THE ASSESSEE FROM VIDEOCON. PURSUANT TO THE MOU, VIDEOCON PAID TO ASSESSEE RS. 19,77,50,000 / - BY WAY OF PART CONSIDERATION. FOR THE BALANCE CONSIDERATION OF RS. 8,47,50,000 / - , VPL ARRANGED FOR ISSUANCE OF A BANK GUARANTEE FROM GLOBAL TRUST BANK LTD. ('GTB ') IN FAVOUR OF ASSESSEE . 4. AS PER THE PROVISIONS OF SECTION 269 (UL) AND FORM 371, NECESSARY AND REQUISITE APPROVALS WERE TAKEN BY ASSESSEE AND CAPITAL GAIN WAS PAID IN FINANCIAL YEAR 1994 - 1995 , I.E. AY 1995 - 96, EVEN THOUGH ONE INSTALLMENT OF RS. 8.47 CRORES WAS PENDING WHICH AS PER MOU WAS DUE IN SUBSEQUENT FINANCIAL YEAR; NO POWER OF ATTORNEY WAS ISSUED TO VIDEOCONE; AND NO POSSESSION OF LAND WAS GIVEN TO VIDEOCON. 5. THEREAFTER, DIFFERENCE AND DISPUTES AROSE BETWEEN THE VIDEOCON AND ASSESSEE L EADING TO THE FOLLOWING LEGAL PROCEEDINGS: (I) VIDEOCON FILED SUIT NO. 3009 OF 1997 IN BOMBAY HIGH COURT AGAINST ASSESSEE AND GTB, SEEKING INJUNCTION AGAINST ASSESSEE FROM SELLING OR DISPOSING OFF THE LAND AS WELL AS SEEKING INJUNCTION RESTRAINING GTB FROM MAKING ANY PAYMENT TO ASSESSEE UNDER THE BANK GUARANTEE (WHICH ASSESSEE ANYWAYS WITHDREW ON 19 AUGUST 1997) . (II) VIDEOCON FILED ANOTHER SUIT NO. 2907 OF 2003 BEFORE BOMBAY HIGH COURT FOR REFUND OF RS. 19,77,50,000 / - PAID TO ASSESSEE TOGETHER WITH INTEREST THEREON. (II I) ASSESSEE FILED SUIT NO. 1858 OF 2004 IN THE BOMBAY HIGH COURT AGAINST GTB PRAYING FOR PAYMENT OF THE BALANCE AMOUNT OF CONSIDERATION OF RS. 8,47,50,000 / - WHICH WAS GUARANTEED UNDER THE BANK GUARANTEE ISSUED BY ASSESSEE . PURSUANT THERETO, GTB PAID TO A SSESSEE AN AMOUNT OF RS. 10,43,09,835 / - INCLUDING INTEREST. ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 4 (IV) VIDEOCON TOOK OUT CHAMBER SUMMONS TO AMEND ITS PLAINT IN SUIT NO. 2907 OF 2003 TO SEEK SPECIFIC PERFORMANCE OF THE MOU. (V) WHILE THE ABOVE MENTIONED CHAMBER SUMMONS WAS PENDING, ASSESSEE AND VIDEOCON SETTLED THEIR DISPUTES VIDE EXECUTION OF AN AGREEMENT FOR DEVELOPMENT DATED 1 DECEMBER, 2011. (VI) IN F.Y. 2011 - 12, THE ASSESSEE AND VIDEOCON AMICABLY SETTLED ALL OTHER DISPUTES OUT OF COURT BY ENTERING INTO CONSENT TERMS (SUIT NO.2907 OF 2003 AND CHAMBER SUMMONS NO. 1671 OF 2009) AND A DEVELOPMENT AGREEMENT DATED 1 DECEMBER 2011 AS PER WHICH VIDEOCON WITHDREW THE SUIT FILED AGAINST THE APPELLANT AND THE PARTIES AGREED TO DEVELOP THE PROPERTY JO INTLY. THE RELEVANT CLAUSES OF THE DEVELOPMENT AGREEMENT DATED 1 DECEMBER 2011 ARE AS UNDER: IN LIEU OF THE SUM OF RS. 30,20,59,835 / - PAID BY VIDEOCON TO THE ASSESSEE , THE FORMER WAS ALLOCATED 50% OF THE DEVELOPMENT RIGHTS IN THE PERMISSIBLE FLOOR SPACE INDEX ('FSI') OF THE SPECIFIED LAND AND THE BALANCE 50% OF THE FSI OF THE LAND WAS TO BE RETAINED BY THE ASSESSEE (CLAUSE VI. PAGE 2 AND CLAUSE 2.1 (A) PAGE 4 TO 5 OF THE AGREEMENT FOR DEVELOPMENT.) THE ASSESSEE SHALL JOINTLY DEVELOP THE LAND WITH V IDEOCON. BOTH THE PARTIES HAVE AGREED TO DEVELOP THEIR RESPECTIVE SHARE OF LAND USING THE SERVICES OF NUEVO CONSULTANCY SERVICES LTD., A COMPANY OF SHAPOORJI PALLONJI GROUP ('NUEVO') AND THE SALE OF PROPERTIES THEREAFTER. (CLAUSE 2.L(F), PAGE 5) THE ASSESSEE AND VIDEOCON SHALL INDIVIDUALLY PUR CHASE AND PAY FOR TDK FOR THEIR RESPECTIVE PORTION OF FSI UTILIZED FOR THE PURPOSE OF THE PROJECT. BOTH THE PARTIES SHALL BEAR AND PAY 50% OF THE PROJECT COST (CLAUSE 2.1 (B) AND (C), PAGE 4). THOUGH THE LAND SHALL BE DEVELOPED AS ONE PROJECT IN TERMS OF DESIGN AND OUTLOOK, BOTH THE PARTIES SHALL HAVE THEIR CLEARLY DISTINCT AND MARKED OUT PORTIONS OF THE TOTAL SALEABLE AREA, WHICH THEY WILL SELL SEPARATELY AND SHALL BE FREE TO RETAIN CONSIDERATION AMOUNT RECEIV ED THERE FROM AS THEY DEEM FIT. EACH PARTY CAN SELL THEIR RESPECTIVE PORTION OF THE SALEABLE AREA AND NEITHER PARTY SHALL HAVE ANY RIGHT/TITLE/INTEREST OVER THE SALEABLE AREA ALLOCATED TO THE OTHER PARTY (CLAUSE 4.2, PAGE 7). (VII) AS A RESULT, THE BOMBA Y HIGH COURT VIDE ITS ORDER DATED 13 TH DECEMBER 2011 IN SUIT NO. 2907 OF 2004, SET OUT THE CONSENT TERMS DULY NOTING THAT THE PARTIES (APPELLANT AND VIDEOCON) HAD ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 5 AGREED TO DEVELOP THE LAND ON THE TERMS AND CONDITIONS MUTUALLY AGREED TO IN THE AGREEMENT FO R DEVELOPMENT ANNEXED TO THE ORDER. HENCE, THE SUIT FILED BY VIDEOCON WAS DISPOSED OFF. (VIII) ACCORDING TO CLAUSE (VI) OF THE AGREEMENT FOR DEVELOPMENT, IN LIEU OF RS. 30,20,59,835.61 PAID BY VIDEOCON TO ASSESSEE TILL DATE, ASSESSEE AGREED TO ALLOCATE 50 % OF THE RIGHTS IN THE PERMISSIBLE FLOOR SPACE INDEX (FSI) OF THE LAND TO VIDEOCON. THE BALANCE 50% OF THE LAND WAS RETAINED BY ASSESSEE AND WAS TO BE DEVELOPED BY ASSESSEE (ON THE TERMS AND CONDITIONS MENTIONED IN THE AGREEMENT) THROUGH NUEVO CONSULTANCY SERVICES LTD. (A COMPANY OF SHAPOORJI PALLONJI GROUP). 6. THE AO VIDE ORDER DATED 17 MARCH 2015 PASSED UNDER SECTION 143(3) OF THE ACT, MADE AN ADDITION OF RS. 1,20,05,000 / - UNDER SECTION 28(IV) OF THE ACT SEEKING TO TAX THE ESTIMATED VALUE OF THE LAND THAT THE ASSESSEE 'GOT BACK' AS A RESULT OF THE AGREEMENT FOR DEVELOPME NT DATED 1 DECEMBER 2011 WITH VIDEOCON, DEEMING IT TO BE A BENEFIT ARISING FROM THE CONSENT TERMS WHERE BY VIDEOCON GAVE UP ITS CLAIM FOR SPECIFIC PERFORMANCE OF THE MOU. 7 . HOWEVER, THE LEARNED AO DISREGARDING THE SUBMISSIONS OF THE ASSESSEE AND WITHOUT PROVIDING THE ASSESSEE ANY OPPORTUNITY TO MAKE ANY FURTHER SUBMISSIONS, COMPUTED THE MARKET VALUE OF THE ENTIRE PLOT OF LAND AT RS. 120,05,00,000 / - AND CHARGE D THE SAID AMOUNT TO TAX UNDER S ECTION 28(IV) OF THE ACT. THE OBSERVATIONS OF THE LEARNED ACIT WHILE MAKING THE ADDITIONS IN BRIEF ARE AS UNDER: ASSESSEE COMPANY HAS IN EFFECT GOT 27263 SQ. MTS OF LAND, AT NO COST OTHER THAN THE AMOUNT RECEIVED BY IT IN A.Y. 1995 - 96. THE ASSESSES, IS IN THE BUSINESS OF DEVELOPMENT OF PROPERTY, AND HAS INVOLVED IN LITIGATION ON THIS ACCOUNT SINCE 1994 - 95, AND HENCE THE VALUE OF PROPERTY, THE RIGHTS TO OWNERSHIP RECEIVED BY IT, WILL BE TAXED AS INCOME ARISING FROM BUSINESS OR PROFESSION. ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 6 8 . BY THE IMPUGNED ORDER THE CIT(A) ALLOWED ASSESSEES CLAIM AFTER OBSERVING AS UNDER: - 3.3 I HAVE CONSIDERED THE ASSESSMENT ORDER DATED 17.03.2015, SUBMISSIONS GIVEN BY THE AR OF THE APPELLANT SUCH AS THE ORIGINAL MEMORANDUM OF UNDERSTANDING (MOU) DATED 29.12.1996, CONSENT TERMS AND A DEVELOPMENT AGREEMENT DATED 01.12.2011. THE AO HAS ADDED A SUM OF RS. 120,05,00,000/ - U/S. 28 (IV) OF THE I.T. ACT STATING THE REASON THAT THE APPELLANT COMPANY GOT BENEFIT OUT OF CONSENT TERMS AGREEMENT ENTERED BETWEEN THE APPELLANT COMPANY AND VIDEOCON REALITY 85 INFRASTRUCTURE LTD. IN THE PREAMBLE OF THE ORDER T HE AO HAS MENTIONED THE NATURE OF BUSINESS AS MANUFACTURING, TRADING & EXPORT OF ENGINEERING TOOLS. THE AR OF THE APPELLANT ARGUES THAT THE APPELLANT COMPANY IS NOT INTO THE BUSINESS OF DEVELOPIN G PROPERTY IN RESPECT OF THE ABO VE LAND AT CHANDIVALI. RIGHT FROM THE BEGINNING THE PROPERTY UNDER QUESTION , I.E. CHANDIVALI LAND CONSISTING OF 42,460 SQ.MTS. SHOWN AS AN INVESTMENT IN THE B/S OF THE APPELLANT COMPANY. WITH THE ORIGINAL MOU ENTERED BETWEEN THE APPELLANT COMPANY AND VIDECON REALITY AND INFRASTRUCTUR E LTD. (VRIL) ON 29.12.1994, THE APPELLANT COMPANY GAVE THE DEVELOPMENT RIGHT TO THE DEVELOPER I.E. VRIL, A PORTION OF THE LAND ADMEASURING 27,350 SQ.MTS. FOR WHICH AGREED CONSIDERATION O F RS.28,25,00,000/ - OUT OF RS. 28,25,00,000/ - , THE APPELLANT COMPA NY H AS RECEIVED RS. 19,77,50,000/ - IN THE FORM OF MONEY FROM VIDEOCON AND FOR THE BALANCE OF RS. 8,47,50,000/ - . VIDEOCON HAD ARRANGED FOR ISSUANCE OF BANK GUARANTEE FROM GLOBAL TRUST BANK LTD. AND THE ENTIRE CONSIDERATION WERE OFFERED FOR TAXATION IN THE RESPE CTIVE A. Y . MAY 1995 - 96 AND PAID THE FULL TAXES THEREON EVEN THOUGH THE PORTION OF THE CONSIDERATION FOR THE BANK GUARANTEE OF RS. 8,47,50,000/ - WAS RELEASED LATER ON. NOW FOR THE SAME PROPERTY THE APPELLANT ENTERED INTO CONSENT T ERM S WITH VIDEOCON PROPERTIES LTD. ON 01.12.2011 AS A COMPROMISE TO DEVELOP ONLY 50% OF THE LAND PORTION 13,631 SQ.MTS OUT OF 27,263 SQ.MTS ORIGINALLY AGREED UPON BY THE MOU ON29.12.1994. THE AR FURTHER ARGUES THAT HAVING PAID THE CAPITAL GAIN ON THE PROPERTY UNDER QUESTION FOR F.Y. 1994 - 95 RELEVANT FOR THE AY 1995 - 96, THE APPELLANT COMPANY NEED NOT BE TAXED AGAIN FOR THE SAME PROPERTY. IT IS TRUE THAT THE COMPANY GAINED 50% DEVELOPMENT RIGHTS BY ENTERING INTO CONSENT T ERM S WITH VIDEOCON PROPERTIES LTD. WHICH WILL BE SUFFERED TO TAX IN FUTURE WHENEVER SALES TAX TAKES PLACE. FURTHER, THE AR OF THE APPELLANT RELIED ON THE FOLLOWING JUDICIAL DECISIONS : (I) KALPATARU CONSTRUCTION OVERSEAS PVT. LTD. V DCIT (13 SOT 194) (II) BIO PHARMA V ITO (5 SOT 478) (IV) ANANT CHUNILAL KATE (267 ITR 482) ( V ) M. SHYAMALA RAO V CIT (234 ITR 140) ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 7 (VI) ANANT CHUNILAL KATE V ITO (SUPRA) (VII) CIT V GEORGE HENDERSON & CO LTD. (66 ITR 622) (VIII) MEHBOOK PRODUCTIONS PR. LTD. VS. CIT (1977) 106 ITR 758 (BOM) (IX) MAHINDRA & MAHINDRA LTD. V. CIT [2003] 128 TAXMAN 394 (BOM.) THE AO IS OF THE STRONG OPINION THAT THE APPELLANT COMPANY GOT THIS BENEFIT U/S. 28(IV) OWING TO ITS BUSINESS ACTIVITY. AFTER EXAMINING THE PREAMBLE OF THE ORDER, AO AGREED TO THE NATURE OF BUSINESS OF THE APPELLANT COMPANY AS MANUFACTURING, TRADING & EXPORT OF ENGINEERING TOOLS. THE APPELLANT COMPANY HAS ALREADY OFFERED CAPITAL GAIN ON THE DEVELOPMENT RIGHTS, CONSIDERATION RECEIVED FROM VIDEOCON PROPERTIES LTD. AND PAID THE TAX THEREOF. TO MY OPINION, IF THE AO TAXED THIS B ENEFIT ARISING FROM CONSENT TERMS AGREEMENT ENTERED INTO BY CONSENT TIMES AND VIDEOCON, THIS WILL AMOUNT TO DOUBLE TAXATION FOR THE SAME DEVELOPMENT RIGHTS. IN FACT BY RETAINING 50% OF DEVELOPMENT RIGHTS I.E. 13, 631, REVENUE IS TAKING ADVANTAGE OF TAXING ANOTHER 50% DEVELOPMENT RIGHTS WHENEVER THE APPELLANT SOLD SUCH RIGHTS IN FUTURE. CONSIDERING THE ABOVE SUBMISSION, LEGAL POSITIONS INVOLVED AND HAVING OFFERED THE CONSIDERATION RECEIVED FOR THE DEVELOPMENT RIGHTS RECEIVED FROM VIDEOCON PROPERTIES LTD FOR THE AY 1994 - 95 RELEVANT FOR THE AY 1995 - 96 AND THE THEN AO HAS ALREADY ACCEPTED THE STAND OF THE APPELLANT COMPANY AND THEREBY, I AM OF THE CONSIDERED OPINION THAT TAXING OF THE DEVELOPMENT RIGHTS AGAIN BY THE PRESENT AO IS NOT JUSTIFIABLE AND ACCORDINGLY, I DIRECT THE AO TO DELETE THE ABOVE ADDITION. AS THE APPEAL IS RECEIVED IN FAVOUR OF THE APPELLANT SO GROUND NOS. 1 TO 12 IS DISPOSED OFF. 4. GROUND NOS. 13 TO 16 : 4.1. IN GROUND OF APPEAL NOS. 13 TO 16, THE APPELLANT HAS CHALLENGED THE ADDITION MADE OF RS. 2,23,00,000/ - , BEING 50% OF THE STAMP DUTY PAID ON REGISTRATION OF AGREEMENT FOR DEVELOPMENT. THE AO HAS DISCUSSED THIS ISSUE AT PARA 1 1 OF THE ASSESSMENT ORDER. THE APPELLANT HAS SUBMITTED THAT THE ENTIRE AMOUNT OF STAMP DUTY FOR REGISTRATION OF AGRE EMENT FOR DEVELOPMENT WAS BORNE BY VIDEOCON. THE APPELLANT REFERRING TO THE PROFIT & LOSS ACCOUNT, SUBMITTED THAT NO EXPENSES HAVE BEEN DEBITED ON ACCOUNT OF STAMP DUTY PAYMENT FOR REGISTRATION OF AGREEMENT FOR DEVELOPMENT. I HAVE CONSIDERED THE SUBMISSION S. I FIND THAT AS PER THE REGISTERED AGREEMENT FOR DEVELOPMENT DATED 1.12.2011, THE ENTIRE STAMP DUTY WAS PAID BY VIDEOCON. FURTHER I FIND THAT NO CLAIM HAS BEEN MADE BY THE APPELLANT FOR DEDUCTION OF STAMP DUTY ON GRANT OF DEVELOPMENT RIGHTS TO VIDEOCON. IN VIEW OF THESE FACTS, THE DISALLOWANCE MADE BY THE AO IS DELETED. THIS GROUND OF APPEAL STANDS ALLOWED. 5. GROUND NOS. 17 TO 23 ; ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 8 5.1. IN GROUND OF APPEAL NO. 17 TO 23, THE APPELLANT HAS CHALLENGED THE DISALLOWANCE MADE U/S. 14A R.W. RULE 8D. THE AO HAS DISCUSSED THIS ISSUE ON PAGE 8 OF THE ASSESSMENT ORDER. THE APPELLANT HAS SUBMITTED THAT IT HAS NOT EARNED ANY DIVIDEND INCOME DURING THE PREVIOUS YEAR AND HENCE IN VIEW OF THE DECISION OF HONB LE DELHI HIGH COURT IN CASE OF CHEMINVEST V CIT NO DISALLOWAN CE WAS CALLED FOR U/S. 14A. THE APPELLANT HAS ALSO SUBMITTED THAT THE INVESTMENTS WERE MADE OUT OF OWN FUNDS AND WERE MADE FROM OWN ACCRUALS AND ACCUMULATED SURPLUS AGGREGATED FOR LAST SEVERAL YEARS AND SALE PROCEEDS OF OTHER ASSETS/INVESTMENTS. RELYING ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK 366 ITR 505 (BOM) AND RELIANCE UTILITIES 313 ITR 340 (BOM), THE APPELLANT HAS SUBMITTED NO DISALLOWANCE IS CALLED FOR U/S. 14A R.W. RULE 8D. THE APPELLANT ALSO SUBMITTED THAT THE APPELLA NT HAS MADE INVESTMENTS IN SUBSIDIARY COMPANIES IN FURTHERANCE OF BUSINESS OF THE APPELLANT, AND HENCE NO DISALLOWANCE U/S. 14A IS CALLED FOR. IN SUPPORT THE APPELLANT HAS RELIED ON THE DECISIONS IN CASE OF CIT V ORIENTAL STRUCTURAL ENGINEERS P. LTD. 216 T AXMAN 92 (DEL); GARWARE WALL ROPES LTD. V ADDL. CIT ITA - 5408/M/2012 (MUM) AND M/S. JM FINANCIAL LTD. V ADDL. CIT - ITA 4521/M/2012(MUM). DECISION ; 5.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. THE AO HAS MADE DISALLOW ANCE U/S. 14A R.W. RULE 8D MERELY ON THE BASIS OF THE SHOW CAUSE NOTICE DATED 9. - 2.2015. THE AO HAS NOT CONSIDERED THE SUBMISSIONS OF THE APPELLANT DATED 16.2.2015. NO SATISFACTION HAS BEEN RECORDED BY THE AO, HAVING REGARD TO THE BOOKS OF ACCOUNT, THAT TH E CLAIM MADE BY THE APPELLANT OF NOT HAVING INCURRED ANY EXPENDITURE FOR EARNING OF DIVIDEND INCOME, WAS INCORRECT OR WRONG. THE AR OF THE APPELLANT ARGUES THAT THE INVESTMENT WERE MADE IN EXEMPT INCOME OUT OF THE OWN FUNDS OF THE APPELLANT COMPANY NO BORR OWED FUNDS WERE UTILIZED FOR SUCH INVESTMENT. SO I HAVE GONE THROUGH THE BALANCE SHEET WHERE OWN FUNDS VALUE OF RS. 142.34 CRORE AND INVESTMENT MADE OF RS.22.82 CRORES AS THE INVESTMENT IS WELL BELOW THE VALUE OF THE OWNED FUND SO INTEREST CANNOT BE DISALL OWED FOR INVOKING RULE 8D AND SIMILARLY AR OF THE APPELLANT ARGUES THAT THERE IS NO EXEMPT INCOME EARNED BY THE APPELLANT COMPANY DURING THIS AY AND ACCORDINGLY NO EXPENDITURE CAN BE DISALLOWED. AS THE ISSUE RELATES TO OLD AY, THE AO MAY VERIFY WHETHER APP ELLANT RECEIVED ANY EXEMPT INCOME OR NOT AND DISALLOW ADMINISTRATIVE EXPENDITURE ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 9 . AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US. ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 9 1 0 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING B EFORE US. 1 1 . FROM THE RECORD, WE FOUND THAT DURING THE COURSE OF ASSESSMENT, AO ASKED FOR ADDITION U/S.28(IV) OF THE IT ACT. HE HAD CALLED FOR VARIOUS DETAILS AND SUBMISSIONS ON VARIOUS ISSUES RELATED TO TRANSFER OF CHANDIVALI LAND, WHICH WERE FURNISHED BY THE A SSESSEE FROM TIME TO TIME. THE A SSESSEE IN ITS SUBMISSIONS ALSO REQUESTED THE LEARNED ACIT AT VARIOUS OCCASIONS TO PROVIDE AN OPPORTUNITY OF BEING HEARD BEFORE PROPOSING ANY SPECIFIC ADDITION ON THIS ASPECT. HOWEVER, THE LEARNED AO WITHOUT ACCEPTIN G THE CONTENTIONS OF THE APPELLANT IN THEIR CORRECT PERSPECTIVE MADE AN ADDITION OF RS. 120,05,00,000 UNDER SECTION 28(IV) OF THE ACT. WE DO NOT FIND ANY MERIT IN THE ACTION OF AO. 12. CONSIDERING THE VARIOUS CLAUSES OF THE MOU DATED 29 TH DECEMBER 1994, V IZ. CLAUSES 10 AND 12 AND THE SUBSTANCE OF THE TRANSACTION, WE FOUND THAT THE DEVELOPMENT AGREEMENT RESULTED IN A TRANSFER UNDER SECTION 45 READ WITH SECTION 2(47) OF THE ACT, AND ACCORDINGLY ASSESSEE HAD ALREADY OFFERED THE GAINS TO TAX. AS FAR AS BOOKS OF ACCOUNT WERE CONCERNED, THE ASSESSEE REDUCED THE COST OF LAND FROM THE ASSET BLOCK (BOOKS OF ACCOUNTS) DURING THE PREVIOUS YEAR 1994 - 95 (REFER SCHEDULE 5 FIXED ASSETS AND NOTE 2 AT ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 10 SCHEDULE 11). THE ASSESSEE IN THE P & L ACCOUNT FOR THE YEAR HAD SHOWN THE GAIN ARISING IN THIS TRANSACTION AS 'PROFIT ON SALE OF PROPERTY' 13. THE ASSESSEE IN ITS RETURN OF INCOME FOR THE A.Y. 1995 - 96 COMPUTED CAPITAL GAINS CONSIDERING THE CONSIDERATION OF RS. 28,25,00,000/ - RECEIVA BLE UNDER THE MOU AND OFFERED GAINS TO TAX. THE SAID TRANSFER AND RESULTANT COMPUTATION OF CAPITAL GAINS WAS ACCEPTED IN THE ASSESSMENT PROCEEDINGS, WHICH WAS COMPLETED VIDE ORDER UNDER SECTION 143(3) DATED 28 JANUARY 1998. 14. THE DISPUTE IN RELATION TO BANK GUARANTEE ISSUED IN FAVOUR OF THE ASSESSEE WAS DECREED IN ITS FAVOUR ON 22 FEBRUARY, 2006 AND PURSUANT THERETO GLOBAL TRUST BANK LTD. PAID AN AMOUNT OF RS. 10,43,09,835/ - INCLUDING INTEREST OF RS. 1,95,59,835/ - TO THE ASSESSEE. THE ASSESSEE OFFERED THE INTEREST AMOUNT OF RS. 1,95,59,835/ - TO TAX IN THE A.Y. 2006 - 07. 15. THUS THE TOTAL CONSIDERATION OF RS. 28,25,00,000/ - WAS OFFERED TO TAX BY THE ASSESSEE IN A.Y. 1995 - 96 AND THE INTEREST RECEIVED FROM GLOBAL TRUST BANK WAS OFFERED TO TAX IN ASSESSMENT YEAR 2006 - 07. 16. IN VIEW OF THE ABOVE CONSENT TERMS ENTERED INTO DURING THE ASSESSMENT YEAR UNDER APPEAL I.E., A.Y. 2012 - 13, THE ASSESSEE MADE THE F U LL DISCLOSURE VIDE PARA 29(A) IN THE NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH, 2012: ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 11 17. IN THE YEAR 1994 - 95, THE COMPANY HAD ENTERED IN TO A MEMORANDUM OF UNDERSTANDING GIVING SOLE AND EXCLUSIVE RIGHT FOR DEVELOPING A PART OF ITS LAND AT CHANDIVALI, MUMBAI. THE DEVELOPER HAD FILED A SUIT AGAINST THE COMPANY FOR RECESSION OF THE SAID MEMORANDU M OF UNDERSTANDING AND HAS CLAIMED A SUM OF RS. 3,271.48 LAKHS AND HAS ASKED INTEREST AT 21% PER ANNUM WITH EFFECT FROM APRIL 1, 1998. THE COMPANY HAD BEEN CONTESTING THE AFORESAID CLAIM. THIS HAS BEEN SETTLED OUT OF COURT ON 22 ND DECEMBER, 2011 AND THE AFO RESAID CLAIM IS WITHDRAWN BY THE DEVELOPER. 18. AS PER OUR CONSIDERED VIEW, HAVING PAID THE CAPITAL GAIN ON THE PROPERTY UNDER QUESTION FOR F.Y. 1994 - 95 RELEVANT FOR THE AY 1995 - 96, THE APPELLANT COMPANY NEED NOT BE TAXED AGAIN FOR THE SAME PROPERTY. IT I S TRUE THAT THE COMPANY GAINED 50% DEVELOPMENT RIGHTS BY ENTERING INTO CONSENT TERMS WITH VIDEOCON PROPERTIES LTD. WHICH WILL BE SUFFERED TO TAX IN FUTURE WHENEVER SALES TAX TAKES PLACE . 19. THE CIT(A) HAS DEALT WITH THE ISSUE THREADBARE AND AFTER CONSIDER ING VARIOUS JUDICIAL PRONOUNCEMENTS AND ON THE BASIS OF MATERIAL PLACED ON RECORD REACHED TO THE CONCLUSION THAT NO ADDITION U/S.28 (IV) IS WARRANTED DURING THE YEAR UNDER CONSIDERATION. THE DETAILED FINDING SO RECORDED BY CIT(A) ARE AS PER MATERIAL ON REC ORD AND NOTHING POSITIVE HAS BEEN PLACED BY LEARNED DR ON RECORD SO AS TO PERSUADE US TO DEVIATE FROM THE FINDINGS OF THE CIT(A) AND WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE U/S.28(IV) OF THE IT ACT. ITA NO. 4433 /MUM/ 2016 M/S. FORBES & COMPANY LTD. 12 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 / 11 / 2018. SD/ - SD/ - ( SANDEEP GOSAIN ) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 05 / 11 / 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 2 , MUMBAI 4. THE CIT - 1 , MUMBAI 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.