ITO 9(3)(3), MUMBAI V. TIRUSHRI BUILDERS & DEVELOPERS P. LTD, MUMBAI

ITA 5406/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3624 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 29-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RSHMIKANT D KUND ALIA
• Section: 143(3)

Judgement Text

1 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO , JM ITA NO. 5406/MUM/09 ASSESSMENT YEAR 2005-06 INCOME TAX OFFICER -9(3)(3), R. NO. 227, 2 ND FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400 020. VS. M/S TIRUSHRI BUILDERS & DEVELOPERS PVT. LTD., SHOP NO. 9, MADHUR APARTMENTS, 56, TPS ROAD, BORIVALI (W), MUMBAI . 92 PAN AAACT2555N APPELLANT RESPONDENT APPELLANT BY SHRI SHISHIR SRIVAS TAVA RESPONDENT BY SHRI RSHMIKANT D. KUND ALIA ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) CENTRAL - 1, MUMBAI DATED 08.07.2009 AND THE SOLITARY ISSUE A RISING OUT OF THE SAME RELATES TO THE ADDITION OF ` 8,31,542/- MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DIFFERENCE BETWEEN THE AMOUNT COLLECTED FROM THE FLAT OWNERS AND ACTUAL EXPENSES INCURRED IN CONNECTION WITH VARIOUS SERVICES WHICH STANDS DELETED BY THE LD. CIT(A). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION. THE RETURN OF INCOME FOR TH E YEAR UNDER CONSIDERATION WAS FILED BY IT ON 14.7.05 DECLARING TOTAL INCOME OF ` 5,55,130/-. IN THE BALANCE SHEET FILED ALONG WITH THE SAID RETURN, THE ASSESSEE COMPANY HAD SHOWN SOC IETY DEPOSITS AND RETENTION MONEY AMOUNTING TO ` 11,16,138/- AND ` 4,19,164/- RECEIVED FROM THE FLAT HOLDERS AS CURRE NT LIABILITIES. SINCE THE RELEVANT PROJECT IN RESPECT OF WHICH THE SAID AMOUNTS WERE RECEIVED 2 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. FROM THE ASSESSEE COMPANY HAD ALREADY BEEN COMPLETE D, THE ASSESSEE WAS CALLED UPON BY THE A.O. TO EXPLAIN AS TO WHY THE SAID RECEIPTS SHO ULD NOT BE BROUGHT TO TAX AS INCOME IN ITS HANDS. IN REPLY, THE FOLLOWING SUBMISSIONS WER E MADE BY THE ASSESSEE VIDE ITS LETTER DATED 26.11.07:- THE ASSESSEE BEING A BUILDER HAS TO COLLECT SOCIET Y DEPOSIT FROM THE FLAT OWNERS OVER AND ABOVE THE AGREEMENT VALUE FOR PURPO SE OF INCURRING CERTAIN EXPENSES ON BEHALF OF THE FLAT OWNERS LIKE SALARIES TO SECURITY STAFF, SWEEPERS, GARDENERS, ELECTRICITY CHARGES, LIFT CHARGES, PROPE RTY TAXES, REPAIRS AND MAINTENANCE ETC. TILL THE DATE OF FORMATION OF SOCIETY AND THE HAND OVER TO THE MEMBERS OF THE SOCIETY. THE PROJECT IS SITUATED AT MIRA ROAD, WHI CH FACES SEVERE WATER FACILITIES AND HENCE THE ASSESSEE HAD TO INCUR MAJOR EXPENDITURE F OR PROVISION OF TANKER WATER ON A DAILY BASIS TO THE FLAT OWNERS. THE ASSESSEE HAS I NCURRED TOTAL EXPENSES OF ` 12,71,332/-AND WE ENCLOSE HEREWITH YEAR WISE DETAIL S OF SOCIETY EXPENSES INCURRED BY THE ASSESSEE. THE DEPOSIT COLLECTED BY THE ASSE SSEE FROM THE FLAT OWNERS IS A PURE LIABILITY ON ACCOUNT OF EXPENSES TO BE INCURRED AND THERE IS NO PROFIT ELEMENT OR INCOME ARISING TO THE ASSESSEE. THE ASSESSEE IS AC COUNTABLE TO THE FLAT OWNERS FOR THE AMOUNT COLLECTED FROM THEM AND HAS TO FURNISH A DET AILED ACCOUNT OF THE EXPENSES INCURRED BY THEM ON BEHALF OF THE FLAT OWNERS AS AN D WHEN THE SOCIETY IS FORMED. (ANNEXURE-2) 3. SUBSEQUENTLY, A LETTER DATED 3.12.07 WAS ALSO FI LED BY THE ASSESSEE BEFORE THE A.O. MAKING THE FOLLOWING FURTHER SUBMISSIONS ON THIS IS SUE: WE ENCLOSE HEREWITH THE YEAR WISE ZEROX COPIES OF B ILLS FOR THE EXPENSES INCURRED BY THE ASSESSEE FOR RUNNING AND MAINTENANC E OF BUILDING FOR THE OCCUPIERS OF THE FLATS. (ANNEXURE-IV). THE ASSESSEE COLLECT THE ADVANCE MAINTENANCE AND DEPOSIT MONEY AT THE TIME OF HANDLING OVER THE POSS ESSION OF THE FLAT TO THE RESPECTIVE PURCHASER AND SAID AMOUNT IS NOT THE PAR T OF SALE CONSIDERATION. THE ASSESSEE IS THE TRUSTEE FOR THE SAID MONEY AND IF B ALANCE REMAINS AFTER MEETING THE RUNNING EXPENSES I.E WATER CHARGES, LIFT MAINTENANC E, ELECTRICITY EXPENSES, WAGES, SECURITY CHARGES AND OTHER EXPENSES, THE SURPLUS AM OUNT IS HANDED OVER OR DEFICIT RECOVERED FROM THE SOCIETY AS WHEN FORMED BY THE FL AT OWNERS. 4. AFTER CONSIDERING THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE, THE A.O. FOUND THAT OUT OF THE TOTAL AMOUNT OF ` 15,35,302/- RECEIVED BY THE ASSESSEE FROM THE FLAT OWNERS ON ACCOUNT OF SECURITY DEPOSIT AND RETENTION MONEY, ONLY THE AMOUNT OF ` 7,03,760/- WAS ACTUALLY SPENT ON THE VARIOUS EXPENSES INCURRED. H E, THEREFORE TREATED THE BALANCE AMOUNT OF ` 8,31,542/- AS THE INCOME OF THE ASSESSEE AND THE S AME WAS ADDED BY HIM TO THE TOTAL 3 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 10.12.07. 5. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND FOLLOWING SUBMIS SIONS WERE MADE ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) TO CONTEND THAT THE ADDITION OF ` 8,31,542/- MADE BY THE A.O. WAS NOT JUSTIFIED IN THE FACTS OF THE CASE: THE LEARNED ASSESSING OFFICER HAS MADE ADDITIONS OF ` 8,31,542/- BEING THE DIFFERENCE BETWEEN ` 15,31,302/- PROVIDED IN THE BALANCE SHEET AS ON 31 .3.04 UNDER THE HEAD SECURITY DEPOSIT AND RETENTION MONEY AND T HE ACTUAL EXPENSES MADE ` 7,03,760/-. THE LEARNED ASSESSING OFFICER HAS NOT ACCEPTED THE FACTS, CIRCUMSTANCES AND DETAILS PRODUCED BEFORE HIM TREATING THE SAME A S THE INCOME OF THE APPELLANT. THE APPELLANT IS IN THE LINE OF BUILDING AND CONSTR UCTION SERVICES. AS PER THE NORMALLY ACCEPTED BUSINESS POLICIES, THE BUILDER CO LLECTS DEPOSIT FROM THE FLAT OWNERS TO MEET THE DAY TO DAY SOCIETY RUNNING EXPENSES LIK E PAYMENT OF ELECTRICITY, WATER BILL, PROPERTY TAX, BUILDING MAINTENANCE EXPENSES E TC. TILL THE SOCIETY IS REGISTERED AND HANDED OVER TO THE MEMBERS. THE SAID AMOUNT IS IN DEPOSIT WITH THE BUILDER AND OUT OF THE SAID DEPOSIT, THE BUILDER INCURS THE EXP ENSES AND THE BALANCE IF ANY IS REPAID TO THE NEWLY FORMED SOCIETY AT THE TIME OF H ANDING OVER THE SOCIETY TO THE MEMBERS. THE APPELLANT HAS THEREFORE RECOVERED FROM TIME TO TIME A SUM OF ` 11,16,138/- FROM THE MEMBERS OF THE SOCIETY AND ALSO RECEIVED RETENT ION MONEY OF ` 4,19,164/-. THE RETENTION MONEY RECEIVED BY THE APPELLANT IS ALREAD Y OFFERED FOR TAX AS INCOME IN THE ANNUAL ACCOUNTS FILED WITH THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. THE SAME IS SHOWN AS OTHER INCOME IN THE PROFIT AND LOS S ACCOUNT. THE COPY OF THE SAME IS ENCLOSED HEREWITH IN PAGE NO. 18. THE LEARNED A SSESSING OFFICER HAS ERRED IN TAXING THE SAME AGAIN AT THE TIME OF ASSESSMENT TRE ATING IT AS NOT OFFERED FOR TAX. AS A RESULT OF THIS, THE INCOME WHICH IS ALREADY OFFER ED IN TAX HAS BEEN TAXED AGAIN. THE APPELLANT HAS ALSO INFORMED TO RECTIFY THE SAID MIS TAKE TO THE LEARNED ASSESSING OFFICER VIDE LETTERS DATED 31 ST DECEMBER, 2007, 9 TH FEBRUARY, 2008, 16 TH MAY, 2008. THE COPIES OF THE SAME ARE ENCLOSED IN PAGE NO. 19- 21. SINCE IT IS EVIDENT THAT THE INCOME HAS BEEN OFFERED FOR TAX, THE APPELLANT PRAY S FOR THE DELETION OF THE SAID ADDITION OF ` 4,19,164/-. FURTHER AS AGAINST THE SOCIETY DEPOSIT OF ` 11,16,138/-, THE APPELLANT HAS ALREADY FILED THE FULL DETAILS OF YEAR WISE EXPENSES THE DE TAILS THEREOF ARE AS UNDER: ASSESSMENT YEAR AMOUNT OF EXPENSES; 2002-03 ` 3,26,858/- 2003-04 ` 5,61,594/- 4 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. 2004-05 ` 3,82,870/- TOTAL ` 12,71,322/-. 6. THE FOLLOWING CONTENTIONS WERE ALSO RAISED ON BE HALF OF THE ASSESSEE BEFORE THE LD. CIT(A) TO CONTEND THAT THE IMPUGNED ADDITION MADE B Y THE A.O. WAS NOT SUSTAINABLE IN LAW. 1. THE APPELLANT IS A TRUSTEE OF THE FLAT OWNERS TI LL THE SOCIETY IS REGISTERED AND FORMED AND HANDED OVER TO THE FLAT OWNERS. 2. THE SAID EXPENSES ARE LEGAL, LAWFUL AND SPENT O UT OF THE FUNDS COLLECTED AS DEPOSIT FROM THE FLAT OWNERS ON THEIR BEHALF. 3. THE SAID EXPENSES AND DEPOSITS COLLECTED HAS NO T BEEN INCURRED DURING THE YEAR BUT THE SAME ARE PERTAINING TO THE EARLIER YEA RS AND HAVE BEEN OUT OF THE DEPOSITS RECEIVED IN THE EARLIER YEARS FROM THE FLA T OWNERS. 4. THE SAID AMOUNTS RECEIVED AND PAID IS NEITHER A N INCOME NOR AN EXPENSE OF THE APPELLANT. THE SAID AMOUNT IS RECEIVED AND PAI D AS A PART OF BUSINESS TRANSACTIONS AS PER THE NORMALLY ACCEPTED BUSINESS PRACTICES PREVAILING CAST UPON THE BUILDERS. 5. THE SAID ACCOUNT IS APPROVED BY THE FLAT OWNERS AT THE TIME OF TAKING OVER THE COMMERCIAL AFFAIRS FROM THE BUILDERS ONCE THE P ROJECT IS COMPLETED AND HANDED OVER TO THE SOCIETY. 7. THE LD. CIT(A) FOUND MERIT IN THE ABOVE SUBMISSI ONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM AND DELETED THE ADDITION OF ` 8,31,542/- MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSEE FOR THE FOLLOWING REASONS GI VEN IN PARA 9 OF HIS IMPUGNED ORDER: I HAVE CAREFULLY CONSIDERED THE REASONING OF THE AS SESSING OFFICER AS WELL AS SUBMISSIONS OF THE APPELLANT. AFTER TAKING INTO ACCOUNT THE SUBMISSION AS MADE BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER IS NOT JUSTIFIED TO MAKE THE ADDITION IN THE HANDS OF THE APPELLANT. ONCE THE FLATS ARE SOLD BY THE BUILDER IT IS THE RESPONSIBILITY OF THE FLAT OWNERS TO TAKE CARE OF THE EXPENSES TOWARDS MAINTENANCE AND COMMON ACTIVITIES. SUCH CO MMON SERVICES ARE NORMALLY UNDERTAKEN BY THE SOCIETY, WHICH IS FORMED BY THE O WNERS. IN ORDER TO FACILITATE THE MAINTENANCE OF THE BUILDING, THE EXPENSES NORMALLY ARE INCURRED BY THE BUILDER AFTER COLLECTING THE NECESSARY DEPOSITS FROM THE FLAT OWN ERS ON THEIR BEHALF TILL THE FORMATION OF THE SOCIETY. THEREFORE, THE DEPOSIT A S SUCH COLLECTED BY THE BUILDER FROM THE FLAT OWNER FOR RENDERING SERVICES IN RESPE CT OF THE COMMON EXPENSES CANNOT BE TAKEN AS INCOME OF THE BUILDER. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED TO TAKE INTO ACCOUNT THE DIFFERENCE AMOUNT AS REMAI NED WITH THE BUILDER, WHICH IS REQUIRED TO BE TRANSFERRED TO THE SOCIETY AS INCOME OF THE APPELLANT. THEREFORE, THE 5 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. ADDITION AS MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. THE APPELLANT GETS RELIEF ON THE ABOVE GROUND OF APPEAL. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) AND REITERATED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US, OUT OF THE TOTAL AMOUNT OF ` 15,35,302/-RECEIVED BY THE ASSESSEE FROM FLAT OWNER S ON ACCOUNT OF SOCIETY DEPOSITS AND RETENTION MONEY, THE AMOUNT OF ` 4,19,164/- RECEIVED AS RETENTION MONEY WAS ALREADY OFFERED TO TAX BY THE ASSESSEE AS INCOME IN THE ANN UAL ACCOUNTS. EVEN THE REMAINING AMOUNT OF ` 11,16,138/- WAS ENTIRELY SPENT BY THE ASSESSEE FOR INCURRING VARIOUS EXPENSES IN A.Y. 2002-03, 2003-04 AND 2004-05 AGGREGATING TO ` 12,71,322/-. THERE WAS THUS NO AMOUNT LEFT WITH THE ASSESSEE OUT OF SOCIETY DEPOSI T AND RETENTION MONEY RECEIVED FROM THE FLAT OWNERS WHICH COULD BE TREATED AS INCOME OF THE ASSESSEE. IN ANY CASE, IF AT ALL SOME AMOUNT WAS LEFT WITH THE ASSESSEE OUT OF SOCIE TY DEPOSITS RECEIVED FROM THE FLAT OWNERS, THE SAME WAS HELD BY IT AS TRUSTEE OF THE F LAT OWNERS TILL THE SOCIETY IS DULY REGISTERED AND THE SAME WAS LIABLE TO BE TRANSFERRE D BY THE ASSESSEE TO THE SOCIETY ON ITS FORMATION. IN OUR OPINION, THE ADDITION MADE BY TH E A.O. ON THIS ISSUE THUS WAS NOT SUSTAINABLE EITHER IN THE FACTS OF THE CASE OR IN L AW AND THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE SAME. IN THAT VIEW OF THE MATTER, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THIS APPEAL FILED BY THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 15 TH DECEMBER, 2010. SD/- SD/- (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED 15 TH DECEMBER , 2010. 6 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CENTRAL -1, MUMBAI 4. THE CIT- CENTRAL -1,MUMBAI 5. THE DR BENCH, E 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 7 ITA5406/MUM/09, M/S TIRUSHRI BUILDERS & DEVELOPERS P. LTD. ` DATE INITIALS 1. DRAFT DICTATED 2.12.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 8.12.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.