DCIT, New Delhi V. M/s Gopal Das Estates & Housing Pvt. Ltd., New Delhi

ITA 52/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4112 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 05-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KUMAR PANDEY
• Assessee Lawyers: S KRISHAN
• Keywords: Capital asset; Business expenditure; Commercial expediency; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI C.L. SETHI, JM I.T. A. NO.52/DEL OF 2010 ASSESSMENT YEAR: 2006-07 DCIT, CENTRAL CIRCLE-20, VS GOPAL DAS ESTATES & HOUSING P. LTD. NEW DELHI. 16 TH FLOOR, DR. GOPAL DAS BHAWAN, 28, BARAKHAMBA ROAD, NEW DELHI. APPELLANT RESPONDENT APPELLANT BY: SH. ASHOK KUMAR PANDEY, SR. DR RESPONDENT BY: SHRI S. KRISHAN, ADVOCATE ORDER PER C.L. SETHI, JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 23 .10.2009 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT U/S 1 43(3) PERTAINING TO THE ASSTT. YEAR 2006-07. GROUND NO.1 RAISED BY THE REV ENUE IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.2,44,63,001/- MADE BY THE AO ON ACCOUNT OF COMPENSATION OF FLAT OWNERS. 2. WE HAVE HEARD BOTH THE PARTIES, AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS RELATIN G TO THIS ISSUE, AND THE REASONS FOR DECIDING THIS ISSUE IN FAVOUR OF THE AS SESSEE HAS BEEN GIVEN BY THE LEARNED CIT(A) AS UNDER: 2 GROUND OF APPEAL NO./2 COMPENSATION PAID TO FLAT BUYERS AND OTHERS IN THE COURSE OF BUSINESS (1) COMPENSATION PAID TO FLAT BUYERS AND OTHERS IN THE COURSE OF BUSINESS THE COMPANY IS INCORPORATED IN 1974 TO TAKE UP THE CONSTRUCTION OF MULTI STOREYED BUILDING AT 28, BARAKHAMBA ROAD, NEW DELHI. HOWEVER, THE PROJECT STARTED IN 1979-80 BUT THE SAME WAS COMPLETED VERY LATE I.E. IN 1994-95. THE VERY MANY PEOPLE WHO HAD BOOKED THE SPACE WANTED TO WITHDRAW FROM THE PROJECT FOR VARIOUS REASONS, WHICH INCLUDED THE FOLLOWING: A) THE PROJECT WAS DELAYED BEYOND REASONABLE PERIOD. B) THE PURPOSE FOR WHICH THE VARIOUS PEOPLE BOOKED, CEASED BY THE TIME THE BUILDING WAS READY. C) THE SPACE OFFERED TO THEM WAS NOT TO THEIR LIKING AND THEY WANTED TO CHANGE, WHICH WAS NOT POSSIBLE. D) THE MAJORITY OF THE ALLOTTEES WANTED TO LET OUT THE IR PREMISES WHEREAS FEW WANTED TO RETAIN PORTION OF THE FLOOR ALLOTTED TO THEM WHICH HAS CREATED DIFFICULTY IN LETTING OUT THE SPACE TO BIG CORPORAT E. E) THE SPACE BOOKED IN LOWER GROUND FLOOR WAS AIR- CONDITIONED, COMMERCIALLY USEABLE SPACE, WHEREAS IN 1993-94, THE SAME WAS CLEARED BY THE NDMC ONLY FOR PARKING OR STORAGE WHICH MEANS THE PURPOSE FOR WHICH THE SPACE WAS BOOKED BY MANY ALLOTTEES COULD NOT BE ACHIEVED. IN VIEW OF VARIOUS REASONS MENTIONED HEREINABOVE THE VARIOUS PERSONS WANTED TO SURRENDER THEIR RIGHT OF ALLOTMENT PROVIDE THEY WERE ADEQUATELY COMPENSATED FOR THEIR HUGE INVESTMENT IN THE PROJECT, WHICH WAS USED BY US FOR CONSTRUCTING THE BUILDING. THE ASSESSEE IS A REPUTED BUSINESS HOUSE HAVING A NICELY CONSTRUCTED BUILDING AT MOST PROMINENT PLACE IN CONNAUGHT PLACE, NEW DELHI AND WITH A VIEW TO RETAIN GOODWILL IN THE MARKET, 3 AVOID LITIGATION, AND IN THE INTEREST OF COMMERCIAL EXPEDIENCY WE DECIDED TO PAY THEM THE SUITABLE COMPENSATION FOR USER OF THEIR FUNDS. THE DETAILS OF PAYMENT OF COMPENSATION OF RS.2,44,63,001.50 DURING THE YEAR WERE FILED. IN THE ASSTT. YEAR 1995-96, THE PAYMENT OF ABOVE SAID COMPENSATION WAS CONSIDERED AS A CAPITAL EXPENDITURE. THE ITAT ALSO CONFIRMED THIS VIEW IGNORING ASSTT. YEAR 1997-98, THE MATTER WAS AGAIN BROUGHT TO THE NOTICE OF THE BENCH OF ITAT AND AFTER CONSIDERING THE SUPREME COURT AND HIGH COURT DECISIONS ON THE SUBJECT, THEY ALLOWED THE APPEAL CONSIDERING THE EXPENDITURE AS A REVENUE EXPENDITURE. THEREAFTER, IN ALL THE APPEALS, THE EXPENDITURE HAS BEEN ALLOWED BY THE ITAT. HOWEVER, THE DEPARTMENT IS IN APPEAL BEFORE HONBLE HIGH COURT. THE ASSESSEE HAD CONSTRUCTED A MULTI-STOREYED BUILDING AT 28, BARAKHAMBA ROAD, NEW DELHI WHICH WAS COMPLETED IN THE FINANCIAL YEAR 1994. VARIOUS PERSONS WHO HAD BOOKED THE SPACE IN THE BUILDING A NUMBER OF YEARS AGO, HAD SURRENDERED THEIR RIGHT TO ACQUIRE THE SPACE. THESE PARTIES REQUIRED COMPENSATION FOR THE USER OF THEIR FUNDS IN CONSTRUCTING THE BUILDING AND WITH A VIEW TO AVOID LITIGATION AND FOR KEEPING THE REPUTATION AND GOODWILL IN THE MARKET, REFUNDED THE AMOUNT PAID BY THEM AND COMPENSATION FOR THE USER OF THEIR FUNDS DURING THE LONG PERIOD OF CONSTRUCTION OF THE BUILDING FROM 1982 ONWARDS. THE REVENUE HAS OBJECTED TO THE PAYMENT OF THIS COMPENSATION TO THE PERSONS WHO HAD BOOKED THE SPACE IN THE BUILDING AND HAD SURRENDERED THEIR RIGHT ON VARIOUS REASONS. THE APPELLANTS CONTENTION OF EXPENDITURE AS REVENUE IN NATURE HAS BEEN THAT THE CONSTRUCTED SPACE IS HELD AS STOCK-IN-TRADE IS REVENUE EXPENDITURE AND THE COMPENSATION PAID TO THE PERSONS/SPACE ALLOTTEES IS TOWARDS COMMERCIAL EXPEDIENCY TO RETAIN GOOD NAME IN THE MARKET. 4 THE ITAT IN THE ASSESSMENT YEAR 195-96 HAD DISALLOWED THIS CLAIM. HOWEVER, IN THE SUBSEQUENT YEARS ALL THE BENCHES OF THE ITAT HAD ALLOWED THE CLAIM FOLLOWING THE ORDER OF ITAT IN THE ASSTT. YEA R 1997-98 WHERE THEY HAD CONSIDERED ADDITIONAL SUBMISSION AND THE SUPREME COURT DECISION CITED ON THE SUBJECT. THE LATEST ORDER OF THE ITAT IN TH E CASE IS FOR THE AY 1999-2000 AND 2001-02 WHERE AGAIN THEY HAD FOLLOWED THE DECISION OF ITAT FOR THE AY 1997-98. 6. I HAVE CONSIDERED THE RIVAL POSITION CAREFULLY. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAD NOT PAID ANY COMPENSATION TO THE ALLOTTEES BUT IN FACT IT HAS REPURCHASED THESE FLATS AS THEY HAVE SURRENDERED THEIR RIGHTS IN THESE FLATS. HENCE, THESE PAYMENTS ARE NOT BUSINESS EXPENDITURE BUT INVESTMENT IN PURCHASE OF STOCK-IN-TRADE. THEREFORE, AO DISALLOWED THE SAME. THE AO ALSO RELIED ON THE ORDER OF ITAT FOR AY 1995-96. HOWEVER, THE HONBLE ITAT HAD ALLOWED THIS EXPENDITURE IN AT 1997-98, 1999-2000 AND 2001-02 IN THE CASE OF THE ASSESSEE ITSELF. SIMILAR ADDITION HAD ALSO BEEN CONSIDERED AND ALLOWED BY MY PREDECESSOR IN AY 2005-06 FOLLOWING THE JUDGMENT OF HONBLE ITAT IN SEVERAL YEARS. SINCE THIS ISSUE IS ALREADY COVERED BY THE ORDER OF ITAT IN AY 1997-98, 1999-2000 AND 2001-02, THE APPEAL OF THE APPELLANT IS ALLOWED. AO IS DIRECTED ACCORDINGLY. IN THE COURSE OF HEARING OF THIS APPEAL, IT HAS BEE N POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE RAISED IN T HIS GROUND IS FULLY COVERED BY THE TRIBUNAL DECISION PERTAINING TO THE ASSTT. Y EARS 1997-98, 1998-99, 1999-2000 AND 2001-02 AS WAS OBSERVED AND DISCUSSED BY THE CIT(A) IN HIS ORDER. IN THIS CONNECTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED 5 BEFORE US THE ORDER DATED 22.5.2009 PASSED BY THE I TAT, DELHI BENCH E, NEW DELHI IN ITA NO.1225 AND 5531/DEL/2003-04 PERTA INING TO THE ASSTT. YEARS 1999-2000 AND 2001-02, AND INVITED OUR ATTENT ION TO THE CONCLUDING PARA 7 OF THE ORDER. HE FURTHER POINTED OUT THAT T HOUGH THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASS TT. YEAR 1995-96, THE ISSUE CAME TO BE DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNALS ORDER IN LATER ASSTT. YEAR I.E. 1997-98 AND 199-2000 AND 200 1-02. HE FURTHER SUBMITTED THAT THE ISSUE IS PRESENTLY PENDING FOR D ECISION BEFORE THE HONBLE HIGH COURT. 3. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T THE ISSUE WAS DECIDED IN FAVOUR OF THE REVENUE IN ASSTT. YEAR 199 5-96 AGAINST WHICH AN APPEAL FILED BY THE ASSESSEE IS PENDING BEFORE THE HONBLE HIGH COURT. HE ALSO SUBMITTED THAT IN THE LATTER ASSESSMENT YEARS, THE MATTER HAS BEEN DECIDED AGAINST THE REVENUE AND THE REVENUE APPEAL HAS ALREADY BEEN ADMITTED BY THE HONBLE HIGH COURT. 4. AFTER CONSIDERING THE FACTS OF THE CASE, WE FIND THAT THE TRIBUNAL IN ITS LATEST ORDER DATED 25.2.2009 PERTAINING TO THE ASST T. YEAR 1999-2000, AND 2001-02 WAS INCLINED TO FOLLOW THE TRIBUNALS ORDER FOR LATTER ASSTT. YEARS 1997-98 AND 1998-99 AS AGAINST THE TRIBUNALS EARLI ER ORDER PERTAINING TO ASSTT. YEAR 1995-96, AND PASSED THE ORDER ACCORDING LY. RESPECTFULLY 6 FOLLOWING THE AFORESAID TRIBUNALS ORDER DATED 22.5 .2009 PERTAINING TO THE ASSTT. YEAR 1999-2000, 2001-02, WE UPHOLD THE ORDER OF CIT(A) IN DELETING DISALLOWANCE MADE BY THE AO. THE ORDER OF CIT(A) O N THIS POINT IS, THUS, UPHELD. HOWEVER, BEFORE PARTING WITH THIS ISSUE, W E WOULD LIKE TO REPRODUCE THE TRIBUNALS ORDER DATED 22.5.2009 PASSED IN ASST T. YEARS 1999-2000, 2001-02, WHICH READS AS UNDER: 4. BRIEFLY STATED, THE FACTS ARE THAT IT IS NOTED B Y THE ASSESSING OFFICER ON PAGE NO.2 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS PAID COMPENSATION OF RS.1,38,89,789/- TO THE FLAT/SPACE OWNERS TO WHOM THE FLAT WERE ALLOTTED AND CLAIMED IT AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NEGOTIATED WITH THE FLAT OWNERS AND PERSUADED THEM TO SURRENDER THEIR OWNERSHIP AND ALLOTMENT LETTER. THE ASSESSEE HAS REPAID THE ADVANCE MONEY RECEIVED FROM THESE FLAT OWNERS AND ALSO PAID COMPENSATION OVER AND ABOVE THE ADVANCE AMOUNTING TO RS.1,38,89,789/- TO THESE FLAT OWNERS IN LIEU OF SURRENDER OF THEIR RIGHT IN THE FLAT/SPACE. THE ASSESSEE WAS REQUIRED BY THE ASSESSING OFFICER TO EXPLAIN AS TO WHY THE COMPENSATION OF RS.1,38,89,789/-WAS PAID TO THE SPACE OWNERS IN LIEU PF SURRENDER OF THEIR RIGHTS AND CLAIMED IT AS REVENUE EXPENDITURE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SAME SHOULD NOT BE ADDED TO THE COST OF FLAT/SPACE LIKE IN ASSESSMENT YEAR 1995 - 96 TO 1997-98. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE IN REPLY DATED 6.2.2002 HAS FURNISHED THE DETAILS OF THE PARTIES TO WHOM SUCH COMPENSATION HAS BEEN PAID BUT NO EXPLANATION WITH REGARD TO THE JUSTIFICATION OF THE 7 PAYMENT HAS BEEN FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER FURTHER SAYS THAT THIS ISSUE HAS BEEN DWELT AT LENGTH IN THE ASSESSMENT YEAR 1998- 99 AND EARLIER YEARS ALSO WHERE THE AMOUNT OF COMPENSATION CLAIMED BY THE ASSESSEE HAS BEEN DISALLOWED. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT ALTHOUGH THE ASSESSEE HAS BEEN GRANTED RELIEF BY THE CIT(A) BUT THE SAME HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE APPEAL TO THE ITAT IS PENDING FOR ADJUDICATION FOR ASSESSMENT YEAR 1995-96 TO 1997-98 AND APPEAL TO THE ITAT FOR ASSESSMENT YEAR 1998-99 AGAINST THE ORDER OF LD CIT(A) IS ALSO BEING FILED. ON THIS BASIS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE DECISION OF THE ASSESSING OFFICER IN EARLIER YEARS ALSO ON THIS ISSUE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) WHO DELETED THE DISALLOWANCE ON THE BASIS OF ORDERS OF HIS PREDECESSOR FOR ASSESSMENT YEAR 1995-96 TO 1998- 99. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. LD DR OF THE REVENUE SUBMITTED THAT THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 AS PER I.T.A. NO.3096 & 3686/DEL/2000 DATED 24.8.2004 IS APPEARING ON PAGES 16-52 OF THE PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA NO.39 OF THE TRIBUNAL DECISION AS APPEARING ON PAGE NO.39 OF THE PAPER BOOK. IT IS POINTED OUT THAT IT IS NOTED BY THE TRIBUNAL IN THIS PARA THAT LD DR OF THE REVENUE HAS RELIED UPON THE TRIBUNAL DECISION DATED 28.2.2002 IN THE CASE OF THIS VERY ASSESSEE FOR ASSESSMENT YEAR 1995-96 IN WHICH, THE ISSUE IS DECIDED AGAINST THE ASSESSEE. LD DR OF THE REVENUE RELIED UPON THIS TRIBUNAL ORDER IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 1995-96 AS PER WHICH, SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. IT IS ALSO SUBMITTED THAT THE 8 TRIBUNAL DECISION FOR ASSESSMENT YEAR 1998-99 IN THE CASE OF THIS VERY ASSESSEE AS PER I.T.A. NO.131/DEL/2002 DATED 31.3.2006 IS APPEARING ON PAGES 53-58 OF THE PAPER BOOK AND IN PARTICULAR OUR ATTENTION WAS DRAWN TO PARA NO.3 OF THE TRIBUNAL DECISION AS APPEARING ON PAGE NO.53 OF THE PAPER BOOK. IT IS POINTED OUT THAT WHEN THERE ARE TWO DIVERGENT DECISIONS ON ONE ISSUE, THE MATTER SHOULD BE REFERRED TO A LARGER BENCH. 6. AS AGAINST THIS, IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR O F THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 AS PER I.T.A. NO.3096/DEL/2000 DATED 24.8.2004, COPY OF WHICH IS AVAILABLE ON PAGES 16 52 OF THE PAPER BOOK AND ALSO BY ANOTHER TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 AS PER I.T.A. NO.131/DEL/2002 DATED 31.3.2006, COPY OF WHICH IS AVAILABLE ON PAGES 53-58 OF THE PAPER BOOK. IT IS ALSO SUBMITTED THAT THE TRIBUNAL DECISION IN ASSESSMENT YEAR 1995-96 WAS DULY CONSIDERED BY THE TRIBUNAL IN BOTH THESE DECISIONS AND THEREAFTER THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 1997- 98 AND IN ASSESSMENT YEAR 1998-99, THE TRIBUNAL FOLLOWED THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1997-98 AND HENCE IN THE PRESENT YEAR ALSO THIS ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1997-98 AND 1998-99. REGARDING THIS SUBMISSION OF LD DR OF THE REVENUE THAT THE MATTER MAY BE REFERRED TO A LARGER BENCH, IT WAS SUBMITTED THAT THIS ISSUE WAS DULY CONSIDERED BY THE TRIBUNAL IN ASSESSMENT YEAR 1998-99 AND SUCH REQUEST OF THE LD DR OF THE REVENUE IN THAT YEAR DID NOT FIND FAVOUR OF THE TRIBUNAL AND HENCE IN TH E PRESENT YEAR, THIS SUBMISSION IS NOT REQUIRED TO BE CONSIDERED AGAIN. 9 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT IS OBSERVED BY THE ASSESSING OFFICER AS WELL AS BY LD CIT(A) THAT DISALLOWANCE IN THIS YEAR MADE BY THE ASSESSING OFFICER IS ON THE BASIS OF EARLIER YEARS AND DELETION OF THE SAME BY LD CIT(A) IS ALSO ON THE BASIS OF EARLIER YEARS. IN ASSESSMENT YEAR 1997-98 AND 1998-99, THIS ASPECT OF THE MATTER WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AFTER DULY CONSIDERING THE TRIBUNAL DECISION IN ASSESSMENT YEAR 1995-96. IT IS OBSERVED BY THE TRIBUNAL IN PARA NO.9 OF THE DECISION FOR ASSESSMENT YEAR 1998-99 THAT IF THE FIRST BENCH OF THE TRIBUNAL DID NOT HAVE ANY PARTICULAR MATERIAL BEFORE IT OR DID NOT TAKE INTO CONSIDERATION PARTICULAR FACTS AND IF THE SECOND BENCH OF THE TRIBUNAL IS SATISFIED THAT IF THOSE MATERIAL FACTS HAD BEEN TAKEN INTO CONSIDERATION, THE DECISION OF THE FIRST BENCH OF THE TRIBUNAL WOULD HAVE BEEN DIFFERENT, IN THAT SITUATION, THE SECOND BENCH OF THE TRIBUNAL WOULD BE JUSTIFIED IN NOT ADHERING TO THE DECISION OF THE FIRST BENCH. TH IS OBSERVATION OF THE TRIBUNAL WAS WITH REGARD TO THE SUBMISSION OF LD DR OF THE REVENUE THAT THE TRIBUNAL IN ASSESSMENT YEAR 1997-98 SHOULD HAVE FOLLOWED THE EARLIER TRIBUNAL ORDER IN ASSESSMENT YEAR 1995-96. IT IS FURTHER NOTED BY THE TRIBUNAL IN PARA NO.10 OF THE DECISION FOR ASSESSMENT YEAR 1998-99 THAT FROM THE DECISION GIVEN IN ASSESSMENT YEAR 1995-96, THE FACTS RELEVANT TO THE DISPOSAL OF THE ISSUE UNDER CONSIDERATION ARE DISTINGUISHABLE AND THAT IS WHY THE SECOND BENCH OF THE TRIBUNAL WHILE DECIDING THIS ISSUE IN FAVOUR OF THE ASSESSEE HAS DECIDED ON THE BASIS OF FACTS, WHICH WERE NOT CONSIDERED BY THE FIRST BENCH OF THE TRIBUNAL. IN ASSESSMENT YEAR 1998-99, AFTER CONSIDERING BOTH DECISIONS IN ASSESSMENT YEAR 1995-96 AND IN ASSESSMENT YEAR 1997-98, THE TRIBUNAL CHOSE TO FOLLOW THE DECISION FOR ASSESSMENT YEAR 1997-98. 10 BEFORE US, NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE FACTS IN THE PRESENT YEAR ARE DIFFERE NT WITH THE FACTS IN ASSESSMENT YEAR 1998-99 AND HENCE, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR. REGARDING THIS SUBMISSION OF THE LD DR OF THE REVENUE THAT THE MATTER MAY BE REFERRED TO A LARGER BENCH, WE FIND THAT SUCH CLAIM WAS RAISED BY THE LD DR OF THE REVENUE IN ASSESSMENT YEAR 1998-99 ALSO AND THE SAME WAS REJECTED BY THE TRIBUNAL. IT IS OBSERVED BY THE TRIBUNAL IN PARA NO.12 OF THE DECISION FOR ASSESSMENT YEAR 1998-99 THAT THE FIRST DECISION CAN BE SAID TO BE PER INCURIUM BECAUSE THE FACTS OF THI S CASE ARE NOT AT ALL DECIDED IN ONE WAY OR THE OTHER BY THAT BENCH AND THE DECISION WAS TAKEN ON DIFFERENT FOOTING WHICH IS NOT THE SUBJECT MATTER BEFORE THEM. SINCE IN ASSESSMENT YEAR 1998-99, IT WAS HELD BY THE TRIBUNAL THAT THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 1995-96 IS PER INCURIUM, THIS CLAIM OF THE LD DR OF THE REVENUE DOES NOT SURVIVE. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY THE LD DR OF THE REVENUE AND IN THE PRESENT ASSESSMENT YEAR AND IN ASSESSMENT YEAR 1997-98 AND 1998-99, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR AND HENCE BY RESPECTFULLY FOLLOWING THE TRIBUNAL DECISIONS FOR ASSESSMENT YEAR 1997-98 AND 1998-99, IN THIS YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESS EE. BOTH THESE GROUNDS OF THE REVENUE ARE REJECTED. 5. THE NEXT ISSUE TAKEN BY THE REVENUE IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.85,54,000/- MADE BY THE AO ON ACCOUNT OF INTEREST AND GUARANTEE COMMISSION PAID TO BANK. 11 6. WE HAVE HEARD BOTH THE PARTIES, AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE WITH REGARD TO THE DISALLOWANCE OF INTEREST, AND BANK GUARANTEE CAME UP FOR CONSIDERAT ION BEFORE THE ITAT, DELHI BENCH E, NEW DELHI IN THE ASSTT. YEARS 1999 -2000 AND 2001-02 WHERE THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE TRIBUNALS EARLIER ORDER IN ASSESSEE S OWN CASE PERTAINING TO THE ASSTT. YEARS 1997-98, 2002-03 AND 2003-04, AND, THUS, OBSERVED AS UNDER: 13. GROUND NO.4 & 5 OF THE APPEAL ARE INTER- CONNECTED WHICH READ AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN:- 4) ALLOWING INTEREST ON LOANS AND BANK GUARANTEE BY CONSIDERING IT AS REVENUE EXPENDITURE AND IGNORING THE FACT THAT SINCE THE LOAN WAS TAKEN FOR PURCHASE OF CAPITAL ASSET, INTEREST ON SUCH LOAN SHOULD BE TREATED AS CAPITAL IN NATURE 5) IGNORING THE FINDINGS OF HIS JUST IMMEDIATE PREDECESSOR IN THE ASSESSMENT YEAR 1998-99 WHO TOOK THE STAND THAT THE ASSESSEE COMPANY SHOULD HAVE CAPITALIZED THE INTEREST IN VIEW OF THE HON'BL E SUPREME COURT IN THE CASE OF CAHALLAPALLI SUGAR LTD. V. CIT 98 ITR 167. 14. BRIEFLY STATED, THE FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO.3 OF THE ASSESSMENT ORDER THAT THE ASSESSEE COMPANY HAS PAID INTEREST TO BANK AMOUNTING TO RS.3,20,71,864/- ON THE LOAN RAISED FROM THE BANKS FOR INVESTMENT IN NEW PROJECTS IN DISTRICT GURGAON 12 AND GUARANTEE COMMISSION PAID TO BANK AND THE ASSESSEE HAS CLAIMED THIS EXPENSES AS REVENUE EXPENDITURE. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE INTEREST OF RS.3,20,71,864/- AND BANK GUARANTEE COMMISSION OF RS.22,78,707/-, WHICH IS RELATED TO GURGAON PROJECT SHOULD NOT BE CAPITALIZED IN COST OF PROJECT AS PER THE SYSTEM OF ACCOUNTING FOLLOWED IN EARLIER YEARS 15. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT REGARDING PAYMENT OF INTEREST OF RS.320.71 LAKHS, THE FACT IS THAT A LOAN FROM CITY BANK WAS RAISED DURING FINANCIAL YEAR 1994-95 FOR ACQUIRING AGRICULTURE LAND FOR DEVELOPING A HOUSING COLONY WITH THE HELP OF OTHER ASSOCIATE COMPANIES IN GURGAON DISTRICT. THE LOAN WAS FOR THE PURPOSE OF BUYING THE LAND. FOR ASSESSMENT YEAR 1998-99, THE ASSESSING OFFICER FURTHER SAYING THAT ASSESSEE WAS FOLLOWING COMPLETE CONTRACT METHOD AND ALL THE EXPENDITURE RELATED TO PURCHASE OF LAND & BUILDING IS CAPITALIZED AND THE PROFIT WAS SHOWN ONLY AFTER COMPLETION OF THE PROJECT AND SALE OF LAND/SPACE AND INTEREST ON BANK GUARANTEE CHARGES SHOULD BE CAPITALIZED. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT THIS VIEW OF THE ASSESSING OFFICER FINDS FAVOUR OF D CIT(A) IN ASSESSMENT YEAR 1998- 99 AND ACCORDINGLY IN THIS YEAR ALSO, HE DISALLOWED BOTH THESE EXPENSES. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) WHO DELETED THIS DISALLOWANCE ON THE BASIS THAT THE INTEREST PAID TO VARIOUS BANKS AND OVER DRAFT FACILITY IS FOR BUSINESS PURPOSE. NOW, THE REVENUE IS IN APPEAL BEFORE US. 16. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). IT IS ALSO SUBMITTED BY HIM THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98, 13 2002-03 & 2003-04. IT IS SUBMITTED THAT ALL THESE DECISIONS ARE AVAILABLE IN PAPER BOOK. FOR ASSESSMENT YEAR 1997-98, HE DRAWN OUR ATTENTION TO PARA NO.48 TO 53 AS AVAILABLE ON PAGES 53-56 OF THE PAPER BOOK . LD DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YE AR AND HENCE, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR. IN ASSESSMENT YEAR 1998- 99, IT WAS HELD BY THE TRIBUNAL THAT THE BORROWED CAPITAL IS USED FOR THE PURPOSE OF BUSINESS AND HENCE THE CIT(A) WAS JUSTIFIED IN DELETING THE ENTIRE ADDITION. RESPECTFULLY FOLLOWING THE PRECEDENT IN THIS YEAR ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND BOTH THESE GROUNDS OF THE REVENUE ARE REJECTED. THE LEARNED CIT(A) HAS ALSO DELETED THE ADDITION BY FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE. 7. IN THIS VIEW OF THE MATTER, THE ORDER OF CIT(A) IS, THUS, UPHELD IN SO FAR AS THIS ISSUE WITH REGARD TO THE DEDUCTION OF P AYMENT OF INTEREST AND BANK GUARANTEE COMMISSION IS CONCERNED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. 9. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 7 TH MAY, 2010. (G.E. VEERABHADRAPPA) (C.L. SETH I) VICE PRESIDENT JUDICIAL MEMBER DATED: 7 TH MAY , 2010 VIJAY 14 COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-I, NEW DELHI. 5. DR ASSISTANT REGISTRAR