DCIT, New Delhi V. M/s. Sweet Peas Farms Pvt. Ltd., New Delhi

ITA 6314/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97340 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUD ICIAL MEMBER ITA NO: 6314/DEL/2013 AY : - 2007-08 DCIT, CIRCLE-7(1), VS. M/S. S WEET PEAS FARMS PVT. LTD. NEW DELHI. 2 1/48, COMMERCIAL COMPLEX, MALCHA MARG, DIPLOMATIC ENCLAVE NEW DELHI 21. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUJIT KUMAR, SR. DR RESPONDENT BY :SHRI K.V.S.R KRISHNA, CA DATE OF HEARING :08.9.2015 DATE OF PRONOUNCEMENT : .9.2015 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2007-08 ARISING OUT OF THE ORDER DATED 24.09.2013 PASSED BY THE LD. CIT (A) - X NEW DELHI. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO TH E DELETION OF ADDITION OF RS. 1,13,16,272/- MADE BY THE LD. CIT (A) ON ACCOUNT OF PROJECT MANAGEMENT FEE. IN THE ASSESSMENT ORDER, THE AO OBSERVED THAT PROJECT MANAGEMENT SERVICES INCLUDED BRAND QUALITY BENEFITS, ADEQUATE MARKETING NETWORK, ENHANCED CUSTOMER PERCEPTION, QUALITY CONTROL ETC. WHICH WERE SPECIFICALLY CAPITA L IN NATURE AND WERE NOT ALLOWABLE U/S 37 OF THE INCOME TAX ACT. THE AO WAS ALSO OF TH E VIEW THAT SINCE THE ASSESSEE DID NOT HAVE MUCH EXPERIENCE AND HAS APPOINTED A PR OJECT MANAGER HAVING THE REQUISITE TECHNICAL KNOWLEDGE AND COMPETENCE, ENDUR ING BENEFITS ACCRUED TO THE ITA NO.6314/DEL/2013 DCIT VS. SWEET PEAS FARMS PVT. LTD. 2 ASSESSEE COMPANY AND AS SUCH THE EXPENDITURE WAS CA PITAL IN NATURE. ACCORDINGLY, AN AMOUNT OF RS. 1,13,16,272/- WAS DISALLOWED AND ADDED TO TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT (A) HAS GIVEN A FI NDING THAT THE AO HAS NOT BROUGHT ANY MATERIAL OR EVIDENCE ON RECORD, TO DISA LLOW THESE EXPENSES. THE LD. CIT (A) ALSO TOOK NOTE OF THE FACT THAT THIS ISSUE WAS PARTICULARLY CONSIDERED AND DECIDED IN FAVOUR OF THE RESPONDENT ASSESSEE IN THE CASE OF ACIT VS. M/S GULAB FARMS PVT. LTD. (A SISTER CONCERN OF THE RESPONDENT ASSESSEE I N THE APPEAL BEFORE US) IN ITA NO. 1249/2011 WHEREIN THE C BENCH OF ITAT DELHI HAS H ELD THAT THESE EXPENSES WERE REVENUE IN NATURE. THE LD. CIT (A) ACCORDINGLY DELE TED THE ENTIRE ADDITION. 3. IN THE APPEAL BEFORE US THE LD. AR OF THE AS SESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN THEIR FAVOUR BY THE DECISION OF THE ITAT FOR ASSESSMENT YEAR 2007-08 IN ITA NO. 1249 OF 2011 DATED 20.05.2011 (SUPRA). ON T HE OTHER HAND LD. DR RELIED ON THE ORDER OF THE AO. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE ORDER OF THE COORDINATE BENCH OF THE ITAT IN ITA NO. 1249 OF 2011 WHEREIN THE ITAT DELHI C BEN CH HAS CONFIRMED THE DELETION OF ADDITION BY THE CIT (A) BY REPRODUCING THE OPERA TIVE PORTION OF THE ORDER IN ITA NO. 76/DEL/2011 IN PARA 4.2 OF THE ORDER AS UNDER: IN MY VIEW THE FINDING OF THE AO CANNOT BE SUSTAI NED. THE PAYMENT OF THE PROJECT MANAGEMENT FEE IS NOT MERELY FOR TECHNICAL ADVICE AS UNDERSTOOD BY THE LD. AO BUT IS FOR THE EXECUTION OF THE ENTIRE P ROJECT NAMELY THE CENTRAL PARK-1, PROJECT RELATING TO CONSTRUCTION OF RESIDEN TIAL FLATS. THE ASSESSEE COMPANY ALONG WITH ITS SISTER CONCERN M/S. SWEET PE AS FARMS (P) LTD. IS THE OWNER OF THE LAND. BOTH THE COMPANIES HAVE JOINTLY ENGAGED M/S. MOHINDRA GESCO DEVELOPERS LTD. A COMPANY ENGAGED IN THE BUS INESS OF PROPERTY DEVELOPMENT AND CONSTRUCTION OF GROUP HOUSING SCHEM E. AS PER THE MAIN TERMS OF THE AGREEMENT REFERRED TO IN PARA 4 IT IS SEEN THAT THE PROJECT MANAGER HAS BEEN ENGAGED TO PROCURE CAPITAL FOR THE PROJECT TO PREPARE ITA NO.6314/DEL/2013 DCIT VS. SWEET PEAS FARMS PVT. LTD. 3 FEASIBILITY REPORT, TO MANAGE AND CONSTRUCT THE WHO LE PROJECT TO OBTAIN NECESSARY CLEARANCE FROM THE VARIOUS GOVT. AGENCIES , TO ENGAGE ARCHITECT/CONSULTANTS AND TO COORDINATE THEIR DESIG N , CONCEPT AND DETAILING, TO DEVELOP MARKETING AND PROMOTIONAL STRATEGIES AND AL SO SELL THE FLATS. IN OTHER WORDS, THE PROJECT MANAGERS HAVE BEEN ENGAGED TO EX ECUTE THE ENTIRE PROJECT. THEY ARE ALSO TO ENSURE SALES AND RECEIPT OF SALE PROCEEDS RELATING TO THE PROJECT. WHEN THE WORK DISCHARGED BY THEM IS OF SUCH DETAILED NATURE, IT IS NEITHER CORRECT NOR JUSTIFIED TO RESTRICT THEIR FUNCTIONS TO THAT OF BEING TECHNICAL EXPERTS ONLY. THEREFORE, IN MY VIEW, TH E CONTENTION OF THE LD. COUNSEL THAT THE EXPENDITURE IS NOT CAPITAL IN NATU RE IS CORRECT. THE PROJECT MANAGERS HAVE CHARGED A FEE FOR EXECUTING THE CONST RUCTION OF THE FLATS. THE CHARACTERISTIC OF SUCH EXPENDITURE IS REVENUE IN NA TURE. IT HAS CARRIED OUT THE WORK WHICH WOULD ORDINARILY HAVE BEEN CARRIED OUT B Y THE ASSESSEE ITSELF HAD IT NOT ENGAGED THE PROJECT MANAGER. 5. SINCE THE ISSUE IS SQUARELY COVERED BY THE DE CISION OF ITAT IN FAVOUR OF THE ASSESEE BY ITA NO. 1249 OF 2011 WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) DELETING THE ADDITION AND WE UPHOLD THE SAME. IN THE RESULT APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2015. SD/- (J. SUDHAKAR REDDY) (S UDHANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 11. 9. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR ITA NO.6314/DEL/2013 DCIT VS. SWEET PEAS FARMS PVT. LTD. 4 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 8.9.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 9.9.20 15 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER