M/s Century Galaxy Developers Ltd , Bangalore V. Deputy Commissioner of Income Tax Circle-11(2), Bangalore

ITA 452/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4670 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANIAM
• Keywords: Depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 452 / BANG/201 8 ASSESSMENT YEAR : 20 12 - 13 M/S. CENTURY GALAXY DEVELOPERS LTD., NO. 2, DIAMOND DISTRICT, (HAL) AIRPORT ROAD, KODIHALLY, BANGALORE 560 017. PAN: AAACC9836F VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11 (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMASUBRAMANIAM, CA RESPONDENT BY : SHRI M. RAJASEKHAR, ADDL. CIT (DR) DATE OF HEARING : 0 6 .0 6 .2018 DATE OF PRONOUNCEMENT : 08 .0 6 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A) 2, BANGALORE DATED 27.07.2016 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IN SO FAR IT IS PREJUDICIAL TO THE INTERE STS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE DEPRECIATION I S NOT ALLOWABLE ON THE BUILDING WHICH IS LEGALLY OWNED BY THE APPELLAN T. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT IS N OT THE OWNER JUST BECAUSE THE USER RIGHTS HAVE BEEN ASSIGNED TO THE S HAREHOLDER- ALLOTTEES. 4. WITHOUT PREJUDICE TO THE GROUNDS NO. 2 & 3 ABOVE , THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE DEPRECIATION ON THE COMMON AREAS WHICH ARE OWNED BY THE APPELLANT. ITA NO.452/BANG/2018 PAGE 2 OF 4 EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE LEARNED HON'BLE INCOM E TAX APPELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR OTHERW ISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE T IME OF HEARING OF THIS APPEAL. 3. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR O F ASSESSEE THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS COVERED AGAINST T HE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 20 11-12 IN ITA NO. 1306/BANG/2015 DATED 03.06.2016. HE SUBMITTED A CO PY OF THIS TRIBUNAL ORDER. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHO RITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN ASSESSMENT YEAR 2011-12, IN ASSESSEES OWN CASE, THE ISSUE INVOLVED WAS DECIDED BY TRIBUNAL AGAINST THE ASSESSEE BY FOLLOWING ANOTHER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04 IN ITA NO. 999/BAN G/2007 DATED 08.10.2008. THE LD. AR OF THE ASSESSEE HAS SUBMITT ED A COPY OF THIS TRIBUNAL ORDER ALSO. THE ISSUE IN DISPUTE WAS DECIDED BY TR IBUNAL IN THIS ORDER FOR ASSESSMENT YEAR 2003-04 BY A SPEAKING ORDER AS PER PARAS 14 TO 16 OF THIS TRIBUNAL ORDER AND IN A. Y. 2011 12, THE TRIBUNAL ORDER IS BY WAY OF FOLLOWING THE EARLIER ORDER FOR A. Y. 2003 04 AND THAT ORDE R IS NOT A SPEAKING ORDER. HENCE, WE REPRODUCE RELEVANT PARAS OF THE TRIBUNAL ORDER FOR A. Y. 2003 - 04 HEREIN BELOW FOR THE SAKE OF READY REFERENCE. 14. IT WAS THEN ARGUED THAT THE ARRANGEMENT BETWEEN THE ASSESSEE COMPANY AND THE SHAREHOLDERS WAS AKIN TO A LEASE AN D THE ASSESSEE- COMPANY CONTINUE TO BE THE OWNER WHO HAS MERELY LEA SED THE UNITS TO THE VARIOUS SHAREHOLDERS OR MEMBERS. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN CIT V. SHAAN FINANCE (P) LTD. (1998) 231 ITR 308. THIS JUD GMENT IS AUTHORITY FOR THE PROPOSITION THAT WHERE THE BUSINE SS OF THE ASSESSEE CONSISTS OF HIRING OUT MACHINERY AND/OR WHERE THE I NCOME DERIVED BY THE ASSESSEE FROM THE HIRING OF SUCH MACHINERY IS B USINESS INCOME, THE ASSESSEE MUST BE CONSIDERED AS HAVING LEASED THE MA CHINERY FOR THE PURPOSE OF ITS BUSINESS AND INVESTMENT ALLOWANCE U/ S. 32A MUST BE ALLOWED. WE DO NOT SEE HOW THIS CASE SUPPORTS THE P RESENT ASSESSEE IN ANY MANNER. AS THE DOCUMENTATION CLEARLY SHOWS - AN D WE HAVE EARLIER DEMONSTRATED HOW - IT IS NOT AS IF THE ASSE SSEE COMPANY CONTINUED TO BE THE OWNER OF THE BUILDING WHICH IT CAN BE SAID TO HAVE LEASED TO THE SHAREHOLDERS. THE OWNERSHIP RIGHTS IN THE UNITS CONSTRUCTED BY THE ASSESSEE WERE TRANSFERRED TO AND CONFERRED UPON THE SHAREHOLDERS FOR PAYMENT OF CONSIDERATION IN TH E FORM OF SHARE ITA NO.452/BANG/2018 PAGE 3 OF 4 CAPITAL CONTRIBUTION AS COST OF THE LAND AND PAYMEN T OF DEPOSIT AS COST OF THE SUPER-STRUCTURE. NO RIGHTS OF OWNERSHIP OVER THE UNIT'S CONTINUED TO REMAIN WITH THE ASSESSEE COMPANY, ONCE POSSESSION WAS HANDED OVER TO THE UNIT HOLDERS AFTER RECEIVING THE CONSIDERATION. AS ALREADY NOTED, THE MERE NON-EXECUTION OF A REGISTER ED CONVEYANCE DEED IN FAVOUR OF THE UNIT HOLDERS IS OF NO CONSEQU ENCE, AS THE AUTHORITIES CITED EARLIER HAVE SHOWN. WHEN THE ASSE SSEE COMPANY IS NOT THE REAL OR ACTUAL OWNER OF THE PROPERTY, IT CA NNOT BE POSTULATED THAT IT HAD LEASED OUT THE UNITS TO THE SHAREHOLDER S. NO LEASE RENT HAS BEEN RECEIVED BY THE COMPANY AS SHOWN BY ITS PROFIT & LOSS ACCOUNT, COPIES OF WHICH ARE PLACED AT PAGES 1 TO 18 OF THE PAPER BOOK FILED BEFORE US. THEREFORE, THIS CONTENTION OF THE ASSESS EE IS WITHOUT ANY MERIT AND IS REJECTED. 15. THE LD. REPRESENTATIVE FOR THE ASSESSEE FAIRLY BROUGHT TO OUR NOTICE AN ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DEEPAK FERTILIZERS AND PETROCHEMICALS CORPORATION LTD. V. DCIT (2008) 304 ITR (AT) 167 IN WHICH A SIMILAR ISSUE HAS BEEN DECI DED AGAINST THE ASSESSEE AND IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE BUILDING U/S. 32. WE ARE IN RES PECTFUL AGREEMENT WITH THE VIEW TAKEN BY THE MUMBAI BENCH. WE MAY ADD THAT IN R.B. JODHA MAL KUTHIALA V. CIT (1971) 82 IT1? 570, THE S UPREME COURT HELD THAT FOR THE PURPOSE OF SECTION 9 OF THE INDIA N INCOME-TAX ACT, 1922 (FORERUNNER OF SECTION 22 OF THE PRESENT ACT) THE OWNER MUST BE THAT PERSON WHO CAN EXERCISE THE RIGHTS OF THE OWNE R, NOT ON BEHALF OF THE OWNER, BUT IN HIS OWN RIGHT. IN THE PRESENT CAS E, SUCH RIGHTS CAN BE EXERCISED ONLY BY THE UNITHOLDERS, WHO ARE THE SHAR EHOLDERS OR MEMBERS OF THE COMPANY AND NOT BY THE COMPANY. THER EFORE, THE COMPANY CANNOT BE TREATED AS THE OWNER U/S. 32(1) O F THE ACT. THE INCOME-TAX AUTHORITIES WERE RIGHT IN LAW IN REJECTI NG THE ASSESSEE'S AIM FOR DEPRECIATION. 16. THE ASSESSEE HAS RAISED AN ALTERNATIVE CLAIM IN GROUND NO.6 TO THE EFFECT THAT THE INCOME-TAX AUTHORITIES OUGHT TO HAV E GRANTED DEPRECIATION ON THE COMMON AREAS OF THE BUILDING AN D OTHER CAPITAL EXPENDITURE DEBITED TO AND FORMING PART OF THE COST OF BUILDINGS AFTER EXCLUDING VALUE OF THE FLATS, OFFICES AND UNITS IN THE COMMERCIAL COMPLEX ALLOTTED TO THE SHAREHOLDERS FOR THEIR EXCL USIVE ENJOYMENT. IN THE COURSE OF THE ARGUMENTS BEFORE US, THE CLAIM WA S THAT DEPRECIATION SHOULD BE GIVEN IN RESPECT OF THE COMMON AREAS. THE CIT(APPEALS) HAS DENIED THE CLAIM ON THE GROUND THAT THE COMMON AREAS WERE INCIDENTAL TO THE ALLOTTED AREAS AND CANNOT BE SEPA RATELY VIEWED. THE ID. REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED BEFORE US THAT THE ASSESSEE HAS TAKEN MONIES FROM THE ALLOTTEES FOR TH E USE OF THE COMMON AREAS. WE ARE INCLINED TO UPHOLD THE VIEW TA KEN BY THE CIT(APPEALS) THAT THE USE OF THE COMMON AREAS, FOR WHICH THE ASSESSEE HAS TAKEN MONIES FROM THE UNITHOLDERS, CANNOT BE VI EWED INDEPENDENTLY FROM THE USE OF THE AREAS ALLOTTED TO THE UNITHOLDERS. ACCORDINGLY, THE ALTERNATIVE CLAIM IS ALSO REJECTED AND THE GROUND IS DISMISSED. ITA NO.452/BANG/2018 PAGE 4 OF 4 5. SINCE THERE IS NO DIFFERENCE IN FACTS IN THE PRE SENT YEAR, WE DECIDE THE ISSUE AGAINST THE ASSESSEE BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER WHICH IS ALSO FOLLOWED BY TRIBUNAL IN ANOTHER YEAR I.E. ASSESSMEN T YEAR 2011-12. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (N.V. VASUDEVAN) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 08 TH JUNE, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.