WALIA REALTORS P.LTD, MUMBAI V. ITO 8(3)(4), MUMBAI

ITA 596/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0639 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2017
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Assessee Lawyers: RUSHABH CHHEDA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 596 / MUM/20 1 7 ( ASSESSMENT YEAR : 2011 - 12 ) M/S. WALIA REALTORS PVT. LTD., B - 503, COLONY SANTA RISING SUN APARTMENT, JUHU CHURCH ROAD, SANTACRUZ (W), MUMBAI 40 0 049 VS. ITO 8(3)(4), MUMBAI PAN/GIR NO. AAACW7463N APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI RUSHABH CHHEDA REVENUE BY SHRI A.K.KARDAM DATE OF HEARING 09/05 /201 7 DATE OF PRONOUNCEME NT 16 / 05 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 18, MUMBAI DATED 07/10/2016 FOR THE A.Y.2011 - 2012 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE GROUNDS TAKEN BY ASSESSEE READS AS UNDER: - 1. THE COMMISSIONER OF INCOME TAX (APPEALS) - 18, MUMBAI ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING LOSS OF RS.20,73,504/ - . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT ASSESSE E IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF PROPERTIES. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT OFFERED ANY INCOME FROM BUSINESS O F ITS CONSTRUCTION ITA NO. 596/MUM/2017 M/S. WALIA REALTORS PVT. LTD., 2 ACTIVITY. THE EXPENSES INCURRED ON CONSTRUCTION ACTIVITY TO THE TUNE OF R S. 7,98,20,299/ - SHOWN AS WORK IN PROGRESS HAD BEEN CAPITALIZED AND TRANSFERRED TO BALANCE SHEET UNDER THE HEAD CURRENT ASSETS. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED AND DEBITED EXPENSES TO THE TUNE OF RS. 20,73,504/ - UNDER VARIOUS HEADS . V IDE ORD ER SHEET NOTING DATED 06 - 02 - 2014, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHEY EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT SHOULD NOT BE DISALLOWED AS THERE WAS NO BUSINESS INCOME IN THE YEAR UNDER CONSIDERATION. IN RESPONSE TO SAME, THE ASSESSEE HA S CONTENDED AS FOLLOWS. 'THE EXPENSES CLAIM TO PROFIT AND LOSS ACCOUNT ARE GENERAL EXPENSES, OFFICE STAFF EXPENSES, CAR DE PRECIATION, CAR LOAN INTEREST ET C. THESE EXPENSES ARE NOT DIRECTLY RELATED TO THE PROJECT. AS PER ACCOUNTING STANDARD 7 OF THE ICAI , THE COST ATTRIBUTE TO THE PROJECT OR TO BE CHARGE OFF TO THE PROFIT AND LOSS ACCOUNT. THIS ACCOUNTING PRINCIPLE IS EQUALLY APPLICABLE AND ACCEPTED BY INCOME TAX.' 5. HOWEVER, THE AO DID NOT ACCEPT ASSESSEES CONTENTION BY OBSERVING THAT THE ASSESSEE COMPA NY HAS NOT OFFERED A NY BUSINESS/ INCOME FOR THE YEAR UNDER CONSIDERATION BY STATING THAT THEIR PROJECT IS UNDER PROGRESS AND NO INCOME HA S ARISEN OUT OF IT. IT HAS BEE N FURTHER STARED THAT THE EXPEN SES DEBITED TO PRO FIT AND LOSS ACCOUNT ARE ADMINISTRATIVE EXPENSES TO RUN THE BUSINESS 6. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7 . I HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM RECORD THAT THE ENTIRE EXPENDITURE SO INCURRED WHICH WERE DIRECTLY ATTRIBUTE TO THE PROJEC T WERE CARRY FORWARD BY WAY OF CLOSING WORK IN PROGRESS (WIP) AS ON 31 - 03 - 2011 RS. 38,88,68,94 / - (ADDITION MADE DURING THE YEAR RS. 7,98,20,300/ - ). ITA NO. 596/MUM/2017 M/S. WALIA REALTORS PVT. LTD., 3 THE COPY OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ARE PLACED ON RE CORD. 9. THE EXPENSES CHARGED TO PROFIT AND LOSS ACCOUNT REPRESENT OFFICE AND ADMINISTRATIVE EXPENSES LIKE CONVEYANCE, INTEREST ON CAR LOAN, CAR EXPENSES, DEPRECIATION, OFFICE EXPENSES ETC. OF THE COMPANY WHICH ARE NOT DIRECTLY RELATED TO PROJECT. HENCE, T HESE EXPENSES ARE CHARGED TO PROFIT AND LOSS ACCOUNT . T HIS TREATMENT OF THE COMPANY IS IN ACCORDANCE OF AS 7 ISSUED BY ICAI AND SAME IS ACCEPTED BY INCOME TAX. 10. THE DETAILS OF EXPENSES CLAIMED IN P & L ACCOUNT WERE IN THE NATURE OF DEPRECIATION, CAR EX PENSES, INTEREST ON CAR LOAN, OFFICE ELECTRICITY EXPENSES AND GENERAL EXPENSES ETC. THESE EXPENSES ARE ESSENTIAL TO CONTINUE THE BUSINESS EVEN WHEN THERE IS NO REALIZATION OF REVENUE. FROM THE RECORD, I FOUND THAT EVEN EXPENDITURE ON ACCOUNT OF DONATION AN D PRELIMINARY EXPENSES WERE CLAIMED IN THE P & L ACCOUNT AS REVENUE EXPENSES. AO IS DIRECTED TO VERIFY THESE EXPENSES. IN RESPECT OF DONATION, ASSESSEE IS DIRECTED TO PRODUCE RECEIPT AND THE ELIGIBILITY OF DAINI U/S.80G. WITH REGARD TO THE PRELIMINARY EXPE NSES, AO IS DIRECTED TO ALLOW ONLY PROBATIONARY EXPENSES AS PER LAW. I DIRECT ACCORDINGLY. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 16 / 05 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 05 /201 7 KARUNA SR. PS ITA NO. 596/MUM/2017 M/S. WALIA REALTORS PVT. LTD., 4 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//