Assistant Commissioner of Income tax, Pune V. Jayant Maniklal Lunawat, Pune

ITA 618/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7216 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: SHRENIK GANDHI
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 618 /P U N/201 7 / ASSESSMENT YEAR : 20 09 - 10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE ....... / APPELLANT / V/S. SHRI JAYANT MANIKLAL LUNAWAT, 1206/B/22, LUNAWAT COURT, SHIVAJINAGAR, PUNE 411005 PAN : AAYPL3026H / RESPONDENT ASSESSEE BY : S HRI SHRENIK GANDHI REVENUE BY : SHRI P.S. NAIK / DATE OF HEARING : 1 6 - 04 - 2019 / DATE OF PRONOUNCEMENT : 22 - 04 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 3, PUNE DATED 25 - 10 - 2016 FOR THE ASSESSMENT YEAR 20 09 - 10. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION OF INTEREST EXPENSES & LEGAL AND P ROFESSIONAL EXPENSES, WHICH NEEDED TO BE CAPITALIZED AND ADDED BACK IN THE WIP. 2 ITA NO .618/PUN/2017, A.Y. 2009 - 10 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE ISSUE OF CAPITALIZATION OF INTER EST EXPENSES & LEGAL AND PROFESSIONAL EXPENSES IN HIS ORDER AND ALLOWING THESE EXPENSES ONLY ON THE BASIS T HAT T D R TRADING BUSINESS CANNOT BE DISTINGUISHED FROM ROUTINE BUSINE SS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE IS FOLLOW ING PROJECT COMPLETION METHOD IN RESPECT OF THE PROJECT UNDERTAKEN AND THEREFORE, ALL THE E X PENSES INCLUDING INTEREST EXPENS E AND LEGA L/ PROFESSIONAL EXPENSES RELATING TO SUCH PROJECTS CAN ONLY BE ALLOWED IN THE YEAR IN WHICH REVENUE IS RECOGNIZED AND THEREFORE, THE SAID EXPENSES HAVE TO BE INCLUDED IN T HE CLOSING WIP. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR OMIT ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLATE PROCEEDINGS. 3. SHRI P.S. NAIK REPRESENTING THE DEPARTMENT SUBMITTED THAT THE ASSESSEE HA D CLAIMED INTEREST AND FINANCIAL CHARGES AMOUNTING TO RS.87,77,780/ - AND LEGAL AND P ROFESSIONAL CHARGES RS.15,90,742/ - AS EXPENDITURE. THE ASSESSING OFFICER AFTER EXAMINING THE FACTS OF THE CASE HELD THE EXPENDITURE TOWARDS PAYMENT OF INTEREST AND FINANCIAL CHARGES AS CAPITAL IN NATURE. SIMILARLY, THE LEGAL AND PROFESSIONAL CHARGES PAID BY THE ASSESSEE WERE ALSO HELD TO BE ON CAPITAL ACCOUNT. IN FIRST APPELLATE PROCEEDINGS, THE ASSESSEE ASSAILED THE ABOVE ADDITIONS. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION S WITHOUT ASSIGNING ANY REASONS IN A NON - SPEAKING ORDER. 4. ON THE OTHER HAND SHRI SHRENIK GANDHI APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ASSESSEE IS ALSO ENGAGED IN TRADING OF TDR. THE ASSESSEE HAD CLAIMED INTEREST EXPENDITURE, LEGAL AND PROFESSIONAL CHARGES ON REVENUE ACCOUNT. THE ASSESSING OFFICER HELD THE SAME TO BE ON CAPITAL ACCOUNT. IN FIRST APPEAL, THE COMMISSIONER OF 3 ITA NO .618/PUN/2017, A.Y. 2009 - 10 INCOME TAX (APPEALS) REVERSED THE FINDINGS OF ASSESSING OFFICER. A PERUSAL OF IMPUGNED ORDER SHOWS THAT THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS SKETCHY AND A NON - SPEAKING ORDER. THE CONTENTION OF THE ASSESSEE IS THAT INTEREST AND FINANCIAL CHARGES AND LEGAL AND PROFESSIONAL CHARGES ARE UNRELATED TO TDR BUSINESS. SINCE, THE ASSESSEE HAS PREPARED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR HIS ENTIRE BUSINESS ACTIVITIES THE FACTS AR E NOT CLEARLY EMERGING. WITHOUT COMMENTING ON THE MERITS OF THE ADDITIONS, WE DEEM IT APPROPRIATE TO RESTORE THIS FILE TO COMMISSIONER OF INCOME TAX (APPEALS) FOR PASSING SPEAKING AND DETAILED ORDER. THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF REVE NUE IS ALLOWED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON MONDAY, THE 22 ND DAY OF APRIL, 2019. SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 22 ND APRIL, 2019. RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 3, PUNE 4. THE PR. COMMISSIONER OF INCOME TAX - 2, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE