CREST ESTATE DEVELOPERS P. LTD, MUMBAI V. ITO 9(1)-2, MUMBAI

ITA 5766/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7442 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-03-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 15-09-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: K SHIVARAM; AJAY R SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI R V EASWAR, SENIOR VICE PRESIDENT AND SHRI P M JAGTAP, ACCOUNTANT MEMBER I T A NO: 4743/MUM/2008 AND 5766/MUM/2008 (ASSESSMENT YEAR: 2002-03) CREST ESTATE DEVELOPERS PVT. LTD., MUMBAI APPELLA NT (PAN: AAACC1896K) VS INCOME TAX OFFICER 9(1)-2, MUMBAI RESPONDENT APPELLANT BY: SHRI K SHIVARAM & SHRI AJAY R SINGH RESPONDENT BY: SHRI NAVEEN GUPTA O R D E R R V EASWAR, SENIOR VICE PRESIDENT: THESE TWO APPEALS BY THE ASSESSEE RELATE TO THE AS SESSMENT YEAR 2002-03. THE ASSESSEE IS A PRIVATE LIMITED CO MPANY CARRYING ON BUSINESS AS ESTATE DEVELOPERS. 2. WE MAY NOTICE THE BRIEF FACTS RELATING TO THE AP PEALS. ONE NARENDRA SHAH WAS THE OWNER OF A PLOT OF LAND BEARI NG CTS NO: 185, 185/1 IN BORIVALI (WEST), ADMEASURING 2687.40 SQ. M TRS. HE SURRENDERED THE PLOT TO MCGM AND IN LIEU THEREOF WA S ALLOTTED DEVELOPMENT RIGHTS FOR 2687.40 SQ. MTRS. THESE DEV ELOPMENT RIGHTS WERE ACQUIRED BY THE ASSESSEE FROM NARENDRA SHAH UN DER IRREVOCABLE POWER OF ATTORNEY SOMETIME IN 1995. THEREAFTER IT WOULD APPEAR THAT THE ASSESSEE STARTED DISPOSING OFF THE TDR OVER A P ERIOD OF TIME. IN THE FINANCIAL YEAR ENDED 1998-99 HE SOLD 237.40 SQ. MTRS., IN THE FINANCIAL YEAR 2000-01 HE SOLD 1200 SQ. MTRS. AND I N THE FINANCIAL YEAR 2001-02 HE SOLD 1300 SQ. MTRS.; AND WAS LEFT WITH 1 50 SQ. MTRS. AS ON 2 31.03.2002. AGAINST THIS 150 SQ. MTRS. OF TDR HE H AD RECEIVED AN ADVANCE IN THE FINANCIAL YEAR 2001-02 FROM BHUVNESH CONSTRUCTION. THE COST PRICE OF THE TDR, INCLUDING THE COST OF LA ND AND OTHER EXPENSES, AS ON 31.03.2002 CAME TO RS.63,79,194/- A ND THE SALE PRICE AS ON 31.03.2002, IN THE AGGREGATE, FOR SALE OF 253 7.40 SQ. MTRS. CAME TO RS.65,35,300/-. THE ENTIRE EXPENSES WERE CAPITA LIZED AND SHOWN IN THE BALANCE SHEET AND THE SALE PRICE WAS ALSO SHOWN IN THE BALANCE SHEET, BUT AS ADVANCE AGAINST THE SALE. IN OTHER W ORDS, FOR THE YEAR ENDED 31.03.2002, RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL, THE ASSESSEE DID NOT DECLARE ANY INCOME FROM THE SALE O F TDR. THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFF ICER WAS THAT AS ON 31.03.2002 THE ASSESSEE HAD STILL TO SELL 150 SQ. M TRS. OF TDR WHICH WAS SOLD ONLY IN THE YEAR ENDED 31.03.2003, THAT TH E PROFIT ON THE SALE OF THE ENTIRE TDR WAS SHOWN IN THE RETURN FOR THE A SSESSMENT YEAR 2003-04 AND IT WAS ALSO ASSESSED BY THE ASSESSING O FFICER IN THAT YEAR UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, A ND, THEREFORE, NO PROFITS FROM THE SALE OF TDRS WERE ASSESSABLE IN TH E YEAR UNDER APPEAL. THE ASSESSING OFFICER WAS NOT INCLINED TO ACCEPT THE ASSESSEES CONTENTION. HE WAS INCLINED TO VIEW THE SALE OF TDRS AS SALE OF STOCK-IN-TRADE AND WAS ACCORDINGLY OF THE O PINION THAT THE SALE OF 1300 SQ. MTRS. DURING THE YEAR UNDER APPEAL, GIV ING RISE TO A PROFIT OF RS.19,25,604/-, SHOULD BE ASSESSED IN THE YEAR UNDE R APPEAL. HE ACCORDINGLY BROUGHT THE AFORESAID AMOUNT TO TAX IN THE YEAR UNDER CONSIDERATION. 3 3. ON APPEAL, THE ASSESSEE REITERATED ITS CONTENTIO NS BEFORE THE CIT(A). ALTERNATIVE CLAIMS WERE ALSO RAISED BEFORE HIM REGARDING THE COMPUTATION OF THE PROFITS ON SALE OF TDR. THE CIT (A) OBTAINED REMAND REPORT FROM THE ASSESSING OFFICER. AFTER CO NSIDERING THE ASSESSEES SUBMISSIONS AND THE REMAND REPORT, HE TO OK THE VIEW THAT THOUGH THE PROJECT COMPLETION METHOD HAS BEEN FOLLO WED BY THE ASSESSEE IN RESPECT OF THE BUILDING PROJECTS, THE S AME CANNOT BE ADOPTED IN RESPECT OF THE BUSINESS OF BUYING AND SE LLING TDR AND IN THIS RESPECT ENDORSED THE VIEW TAKEN BY THE ASSESSI NG OFFICER. HE FURTHER HELD THAT OUT OF THE TOTAL TDR OF 2687.40 S Q. MTRS., THE ASSESSEE WAS ABLE TO SELL 2537.40 SQ. MTRS. TILL 31 .03.2002 AND THUS APPROXIMATELY 99% OF THE TDR HAS BEEN SOLD AND, THE REFORE, THE ENTIRE INCOME FROM THE SALE OF THE TDR SHOULD BE BROUGHT T O ASSESSMENT IN THE YEAR UNDER APPEAL ONLY. IN THIS VIEW OF THE MA TTER, HE UPHELD THE ASSESSMENT ORDER ON THIS POINT SUBJECT TO MINOR REL IEF BEING GRANTED IN RESPECT OF INTEREST EXPENSES INCURRED BY THE ASSESS EE SINCE THE FINANCIAL YEAR 1998-99. 4. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US QUES TIONING THE DECISION OF THE CIT(A). IN ITA NO: 4743/MUM/2008, THE ORDER OF THE CIT(A) DATED 04.04.2008 PRACTICALLY CONFIRMING THE ASSESSMENT HAS BEEN CHALLENGED. ITA NO: 5766/MUM/2008 IS AN APPEA L AGAINST THE ORDER PASSED BY THE CIT(A) ON THE ASSESSEES APPLIC ATION FOR RECTIFICATION OF HIS ORDER. THE ASSESSEE HAD APPLI ED TO THE CIT(A) TO RECTIFY HIS DECISION THAT INTEREST EXPENSES INCURRE D SINCE 1998-99 SHOULD BE ALLOWED AS DEDUCTION, THE CONTENTION BEIN G THAT INTEREST WAS 4 BEING PAID SINCE THE FINANCIAL YEAR 1995-96 WHICH W AS ALSO ACCEPTED BY THE ASSESSING OFFICER IN THE REMAND REPORT AND, THEREFORE, THE CIT(A) SHOULD AMEND HIS ORDER. THE CIT(A) REFUSED TO AMEND THE ORDER AS PRAYED FOR BY THE ASSESSEE AND THE ASSESSE E HAS COME IN APPEAL AGAINST THE REFUSAL IN ITA NO: 5766/MUM/2008 . 5. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. THE MAIN THRUST OF THE LEARNED COUNSE L FOR THE ASSESSEE IS THAT THOUGH NORMALLY THE PROJECT COMPLETION METH OD IS NOT TO BE FOLLOWED IN RESPECT OF SALE OF TDRS, IN THIS CASE B ECAUSE OF THE PECULIAR FACTS THE METHOD FOLLOWED BY THE ASSESSEE SHOULD NOT BE DISTURBED BECAUSE IT WOULD UPSET MANY ASSESSMENTS C OMPLETED IN THE PAST AND ALSO THE ASSESSMENT FOR THE ASSESSMENT YEA R 2003-04 IN WHICH THE ENTIRE PROFITS ON THE SALE OF TDRS WERE O FFERED AND ASSESSED. IN OTHER WORDS, THE ARGUMENT WAS THAT SI NCE THE DEPARTMENT AND THE ASSESSEE HAD BOTH AGREED TO ASSE SS THE PROFITS ON THE SALE OF TDRS IN THE YEAR IN WHICH THE ENTIRE TD RS WERE SOLD, I.E. IN THE ASSESSMENT YEAR 2003-04, MATTERS SHOULD BE ALLO WED TO REST THERE. IT IS ALSO PLEADED THAT BRINGING TO TAX THE PROFITS ON THE SALE OF TDRS IN THE ASSESSMENT YEAR UNDER APPEAL WOULD ALSO AMOUNT TO DOUBLE TAXATION, IN ADDITION TO UPSETTING THE PAST AND FUT URE ASSESSMENTS. IT IS CONTENDED THAT HAVING REGARD TO THE PECULIAR FACTS OF THE CASE, THE ASSESSEES CLAIM SHOULD BE ACCEPTED. IN THE ALTERN ATIVE, IT IS PLEADED THAT THE INCOME ASSESSED IN THE YEAR UNDER APPEAL, FROM THE SALE OF TDRS WHICH COMES TO RS.5,12,172/- AS PER THE WORKIN G GIVEN BEFORE 5 US, SHOULD BE DIRECTED TO BE DELETED FROM THE ASSES SMENT FOR THE ASSESSMENT YEAR 2003-04. 6. ON THE OTHER HAND, THE LEARNED CIT DR SUBMITTED THAT TDR IS JUST LIKE ANY OTHER STOCK-IN-TRADE AND MERELY BECAU SE THE ASSESSEE HAS FOLLOWED THE PRACTICE OF ADOPTING PROJECT COMPLETIO N METHOD AND THIS PRACTICE HAS ALSO BEEN APPROVED BY THE DEPARTMENT I N THE PAST, IT DOES NOT FOLLOW THAT THE PROPER PRINCIPLES NEED NOT BE A PPLIED. HE SUBMITTED THAT APPROPRIATE DIRECTIONS MAY BE ISSUED TO EXCLUD E THE INCOME WHICH IS ASSESSED IN THE ASSESSMENT YEAR 2003-04 AND THE PRESENT ASSESSMENT MAY BE UPHELD. 7. ON A CAREFUL CONSIDERATION OF THE MATTER, WE ARE OF THE VIEW THAT HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANC ES OF THIS CASE AND NOT FOR ANY OTHER REASON, THE ASSESSEES CONTENTION SHOULD BE UPHELD. THE ASSESSEE HAS BEEN SELLING THE TDRS IN THE FINAN CIAL YEAR 1998-99 AND 2000-01 ALSO BUT NO PROFITS THEREFROM WERE OFFE RED TO TAX ON THE BASIS, THOUGH IT IS ERRONEOUS, THAT THE ASSESSEE IS OTHERWISE FOLLOWING THE PROJECT COMPLETION METHOD IN RESPECT OF ITS OTH ER BUILDING PROJECTS. WE DO NOT SEE ANY CONNECTION BETWEEN THE BUILDING P ROJECTS AND THE SALE OF TDRS WHICH IS A SEPARATE ACTIVITY BY ITSELF AND AS RIGHTLY POINTED OUT ON BEHALF OF THE DEPARTMENT, IT IS LIKE ANY OTH ER BUSINESS THE PROFITS OF WHICH SHOULD BE BROUGHT TO TAX AS AND WHEN THE S TOCK IS SOLD. HOWEVER, THE ASSESSING OFFICER, THOUGH HE WAS AWARE OF THE SALE OF TDRS IN THE EARLIER YEARS, DID NOT BRING THE PROFIT S THEREFROM TO TAX IN THOSE YEARS AND IMPLIEDLY ACCEPTED THE ASSESSEES C LAIM THAT THE PROFITS WOULD BE DECLARED FOR ASSESSMENT IN THE YEA R IN WHICH THE SALE 6 OF TDRS IS COMPLETE. THE ASSESSEE ALSO, CONSISTENT WITH ITS STAND, DECLARED THE PROFITS ON THE SALE OF TDRS IN THE RET URN FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSMENT FOR THE AS SESSMENT YEAR 2003-04 HAS BEEN COMPLETED AFTER SCRUTINY UNDER SEC TION 143(3) AND IN PARAGRAPH 3 OF THE ASSESSMENT ORDER THE ASSESSING O FFICER HAS TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS SHOWN THE SA LE CONSIDERATION OF DEVLALI PROJECT ON PROJECT COMPLETION METHOD AND SI MILARLY HAS ALSO OFFERED FOR TAXATION THE ENTIRE SALE OF TDR WHICH W AS RECEIVED ON SURRENDER OF LAND TO BMC, RELATED TO MUMBAI PROJECT . WE ARE OF THE VIEW THAT IF THE PROFITS ON THE SALE OF TDRS OF 253 7.40 SQ. MTRS. ARE ASSESSED IN THE YEAR UNDER APPEAL, TWO CONSEQUENCES WOULD FOLLOW. THE FIRST IS THAT IT WOULD UPSET THE PAST AS WELL A S FUTURE ASSESSMENTS AND SEVERAL ADJUSTMENTS MAY HAVE TO BE MADE TO THOS E ASSESSMENTS. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WILL ALSO HAVE TO BE DISTURBED, IN WHICH YEAR THE ENTIRE PROFITS ON THE SALE OF THE ENTIRE TDR HAVE BEEN BROUGHT TO ASSESSMENT. THE SECOND CONSEQ UENCE WILL BE THAT UPHOLDING THE PRESENT ASSESSMENT WOULD GIVE RI SE TO DOUBLE TAXATION UNLESS DIRECTIONS ARE ISSUED TO REMEDY THE M. IT IS A QUESTION AS TO WHETHER THE TRIBUNAL CAN GIVE DIRECTIONS IN R ESPECT OF YEARS WHICH ARE NOT BEFORE IT AND THAT TOO FOR THE PURPOSE OF G IVING RELIEF IN THOSE YEARS. TAKING ALL THESE INTO CONSIDERATION AND HAV ING REGARD ONLY TO THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND WITHOUT ATTEMPTING IN ANY MANNER TO LAY DOWN ANY RULE OF UN IVERSAL APPLICATION, CONFINING OURSELVES ONLY TO THE FACTS OF THE PRESEN T CASE, WE OPINE THAT 7 THE BEST WAY TO RESOLVE THE ISSUE WOULD BE TO DELET E THE ADDITION MADE IN THE YEAR UNDER APPEAL FOR PROFITS ON THE SALE OF TDRS. WE DO SO. 8. IN THE VIEW WE HAVE TAKEN WE DO NOT CONSIDER IT NECESSARY OR PROPER TO DEAL WITH THE ALTERNATIVE CLAIMS OF THE A SSESSEE REGARDING THE COMPUTATION OF THE PROFITS ON SALE OF TDRS. THERE IS ALSO NO NEED TO DEAL WITH ITA NO: 5766/MUM/2008 SEPARATELY AND THE SAME IS DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, ITA NO: 4743/MUM/2008 IS ALLOWED AND ITA NO: 5766/MUM/2008 IS DISMISSED AS INFRUCTUOUS. NO COST S. ORDER PRONOUNCED ON 17 TH MARCH 2010. SD/- SD/- (P M JAGTAP) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI, DATED 17 TH MARCH 2010 SALDANHA COPY TO: 1. CREST ESTATE DEVELOPERS PVT. LTD. J-14, STONE CASTLE, I C COLONY ROAD BORIVALI (WEST), MUMBAI 103 2. ITO 9(1)-2 3. CIT-IX 4.CIT(A)-IX 5.DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI