MEMA ENGINEERS & CONTRACTORS P. LTD., MUMBAI V. ACIT CIR. 6(3), MUMBAI

ITA 654/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3119 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 16-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SENT H IL KUMARAN
• Keywords: Business income; Business expenditure; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 43B; 143(3); 28; 139

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.654 /MUM/2011 ( / ASSESSMENT YEAR : 2006-07) MEMA ENGINEERS & CONTRACTORS PRIVATE LIMITED, UNIT NO. G-6, NAVBHARAT ESTATE, ZAKARIA BUNDER, MUMBAI 400 015. / V. A.C.I.T. CIRCLE 6(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. ./ PAN : AAACH 1383 E ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI NISHIT GANDHI REVENUE BY : SHRI S. SENTHIL KUMARAN / DATE OF HEARING : 16-03-2016 / DATE OF PRONOUNCEMENT : 13-06-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE COMPANY, BEING ITA NO. 654/MUM/2011, IS DIRECTED AGAINST THE ORDER DATED 2 9-10-2010 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 12, M UMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2006- 07, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 12-12-2008 PASSED BY THE LEARNED ASSESSING OF FICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HE REINAFTER CALLED THE ACT). ITA 654/MUM/2011 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE COM PANY IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1.1 THE LEARNED COMMISSIONER OF INCOME - TAX (APPEA LS) - 12, MUMBAI, ['ID. CIT (A)'] ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER ['THE A.O.'] IN FRAMING THE ASSESSMENT ORDER W ITHOUT AFFORDING REASONABLE AND FAIR OPPORTUNITY OF BEING HEARD. 1.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTAN CES OF THE CASE, AND IN LAW, THE APPELLATE ORDER WAS REQUIRED TO BE HELD AS BAD IN LAW ON ACCOUNT OF BREACH OF THE PRINCIPLES OF NATURAL JUSTICE. WITHOUT PREJUDICE TO THE ABOVE: 2.1 THE ID. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING OF 50,000/-, BEING THE BUSINESS DEDUCTIO N CLAIMED BY THE APPELLANT AS DEMOLITION CHARGES, BY HOLDING THE SAME A S NON BUSINESS EXPENSES. 2.2 WHILE DOING SO, THE A.O. ERRED IN: (I) BASING HIS ACTION ONLY ON SURMISES, SUSPICION A ND CONJECTURE; (II) TAKING INTO ACCOUNT IRRELEVANT AND EXTRANEOUS CONS IDERATIONS; AND (III) IGNORING RELEVANT MATERIAL AND CONSIDERATIONS. 2.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANC ES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED F OR. THE ASSESSEE COMPANY HAS RAISED AN ADDITIONAL GROUN DS OF APPEAL AS UNDER: 4.1 THE ASSISTANT COMMISSIONER OF INCOME TAX-6(3),M UMBAI, [ THE AO] ERRED IN DISALLOWING RS.4,55,422/- PAID AS COL LECTORS CHARGES UNDER SECTION 43B OF THE INCOME TAX ACT,1961[ THE AC T] 4.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCE S OF THE CASE, AND IN LAW, SUCH ACTION OF A.O. WAS BAD IN LAW AND H ENCE THE DISALLOWANCE IS LIABLE TO BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE, CONSTRUCTION, DEVELOPM ENT AND ELEVATION AND DESILTING OF WATER DRAINS. ITA 654/MUM/2011 3 THE ASSESSEE COMPANY HAS PAID DEMOLITION CHARGES OF RS. 50,000/-TO BMC FOR WHICH DETAILS WERE ASKED BY THE A.O. THE ASSESSEE COMPANY DID NOT SUBMIT ANY DETAILS IN RESPECT OF DEMOLITION CHARGES BEFORE THE AO, AND THE A.O. DISALLOWED THE DEMOLITION CHARGES OF RS.50,000/- CL AIMED BY THE ASSESSEE COMPANY AS BUSINESS EXPENSES , BY TREATING THE SAME AS NON-BUSINESS EXPENSES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE COMPANY VIDE ASSESSMENT ORDERS DATED 12 DECEMBER, 2008 PASS ED BY THE AO U/S 143 (3) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 12.12.2 008 PASSED BY THE AO U/S . 143(3) OF THE ACT, THE ASSESSEE COMPANY FILED FIRST APPEAL WITH THE LEARNED CIT(A). 5. THE ASSESSEE COMPANY IN STATEMENT OF FACTS(SOF) FILED BEFORE THE LEARNED CIT(A) STATED AS UNDER: THE APPELLANT IS A PRIVATE LIMITED COMPANY IN TH E BUSINESS OF REAL ESTATE CONSTRUCTION/DEVELOPMENT , DESILTING OF WATE R DRAINS ETC.. THE APPELLANT WAS GRANTED 55 ACRES OF MAHARASHTRA LAND VIDE LETTER DT 15 TH JUNE 1968 FROM THE COLLECTORS OFFICE BSA, OLD CUS TOM HOUSE, FORT, BOMBAY. WITH CERTAIN TERMS AND CONDITIONS ON WHICH THE LAND WAS ALLOTTED & LATER ON AMENDED BY THE BMC AUTHORITIES. THE APPE LLANT WAS REQUIRED TO INCUR EXPENSES FOR DEVELOPMENT OF ROAD & OTHER INFR ASTRUCTURE FACILITIES SUBJECT TO WHICH IT WOULD BE ENTITLED FOR SALEABLE FSI. SUBJECT TO THE ABOVE THE APPELLANT HAS BEEN INCURRED VARIOUS EXPENSES SINCE DT OF ALLOTMENT TILL DATE AND CAPITALIZING THE SAME TILL THE YEAR IN WHICH IT WOULD EITHER DEVELOP/CONSTRUCT ANY COMMERCIAL PROPERTY OR SALE T HE AVAILABLE FSI AGAINST SURRENDER OF ROAD ETC. TO THE MUNICIPAL AUTHORITIES . ITA 654/MUM/2011 4 THE APPELLANT HAD PRIOR TO 1998 GIVEN THE PLOTS ON LEASE TO VARIOUS PARTIES WHO IN TURN BUILT THEIR OWN INDUSTRY. THE A PPELLANT HAVE SOLD THE ABOVE PLOTS ON VARIOUS DATE TO THE EXISTING LESSEE SINCE THEY WERE THE OCCUPANT OF THE PLOTS SINCE LAST SEVERAL YEARS & HA D OFFERED THE SAME AS BUSINESS INCOME. ***** GROUNDS OF APPEALS ***** ***** 4. DEMOLITION EXPENSES RS.50,000/- THE ACIT ERRED IN DISALLOWING DEMOLITION CHARGES O F RS.50,000/- AS NON BUSINESS EXPENSES. THE APPELLANT SUBMITS THAT THE ABOVE EXPENSES HAVE BEEN PAID TO BMC I.E. BOMBAY MUNICIPAL CORPORATION AND THE RECEIPT O F THE SAME HAD BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT SUBMITS THAT ONLY ON HANDING OVER OF VACANT LAND TO BMC THE SALEABLE FSI WOULD BE GRANTED & HENCE THE DEMOL ITION OF UNAUTHORIZED HUTMENTS IS A GENUINE BUSINESS EXPENDITURE. ALSO TH E SAME HAS BEEN PAID TO STATE GOVT. AUTHORITIES. ***** ***** WITH REGARD TO THE DEMOLITION CHARGES OF RS.50,000/ - DISALLOWED BY THE AO BY TREATING THE SAME AS NON BUSINESS EXPENSES , BEFORE THE LEARNED CIT(A), THE ASSESSEE COMPANY CONTENDED THAT RS. 50,000/- WAS PA ID TO THE BMC AND THE RECEIPT WAS SUBMITTED BEFORE THE AO DURING THE ASSE SSMENT PROCEEDINGS . THE ASSESSEE COMPANY SUBMITTED AS AN ADDITIONAL EVI DENCES BEFORE LEARNED ITA 654/MUM/2011 5 CIT(A) , CORRESPONDENCE AND LETTERS WHICH INCLUDED LETTER FROM ASSISTANT COMMISSIONER K/WEST TO SH. L.R.PATKAR STATING THAT IF CLIENT OF SH. L.R.PATKAR IS READY TO PAY AN AMOUNT OF RS.50,000/- TOWARDS DE MOLITION OF UNAUTHORIZED STALLS. THESE ADDITIONAL EVIDENCES WERE FORWARDED BY THE LE ARNED CIT(A) TO THE AO FOR REMAND REPORT. THE AO OBJECTED TO THE ADMISSIONS OF THESE ADDITIO NAL EVIDENCES IN REMAND REPORT PROCEEDINGS AND ALSO CONTENDED ON MERITS THA T THESE ADDITIONAL EVIDENCES DOES NOT PROVE THAT THESE DEMOLITION CHAR GES WERE BUSINESS EXPENSES OF THE ASSESSEE COMPANY AND THEREFORE ALLO WABLE AS BUSINESS EXPENSES IN THE HANDS OF THE ASSESSEE COMPANY. THE LEARNED CIT(A) ADMITTED THE ADDITIONAL EVIDENCE S IN THE INTEREST OF JUSTICE AS THE AO DID NOT SHOW-CAUSED THE ASSESSEE COMPANY BEFORE MAKING DISALLOWANCES. THE ASSESSEE COMPANY WAS FORWARDED BY THE LEARNED C IT(A) THE REMAND REPORT OF THE AO AND THE ASSESSEE COMPANY SUBMITTED THAT THESE ADDITIONAL EVIDENCES ARE LETTERS WRITTEN BY MR L R PATKAR , AR CHITECT ON BEHALF OF THE ASSESSEE COMPANY TO THE MUNICIPAL COMMISSIONER IN R ESPECT OF UNAUTHORIZED STRUCTURES AND OCCUPANTS ON THE ROAD DEVELOPED BY T HE ASSESSEE COMPANY AND THE RESPONSE OF THE MUNICIPAL COMMISSIONER TO T HE LETTER FROM MR L R PATKAR , ARCHITECT . THESE ADDITIONAL EVIDENCES WER E FILED TO PROVE THAT WHILE DEVELOPING THE PLOT OF LAND , THE ASSESSEE COMPANY HAD TO INCUR EXPENDITURE FOR REMOVING THE UN-AUTHORIZED STRUCTURES AND OCCUP ANTS AND THEREFORE THE SAID EXPENDITURE WAS RIGHTLY CLAIMED BY THE ASSESSE E COMPANY. ITA 654/MUM/2011 6 THE LEARNED CIT(A) CONSIDERED THE DOCUMENTARY EVIDE NCES FILED BY THE ASSESSEE COMPANY AND OBSERVED THAT THESE DOCUMENTS ARE LETTERS WRITTEN BY ONE SH. L R PATKER , CHARTERED ARCHITECT TO THE MUN ICIPAL COMMISSIONER, BMC AND THE CHIEF ENGINEER OF THE MCGM INFORMING TH EM ABOUT THE UNAUTHORIZED STRUCTURES ON A PIECE OF LAND AND THAT IMMEDIATE ACTION SHOULD BE TAKEN FOR DEMOLISHING THE SAME. ALONG WITH THE S AID LETTER A COPY OF RECEIPT OF MCGM TO SHRI L.R.PATKAR SHOWING AN AMOUNT OF RS. 50,000/- AS PAYMENT MADE FOR DEMOLITION CHARGE HAS BEEN FURNISHED BY TH E ASSESSEE COMPANY. HOWEVER, THE INVOLVEMENT OF THE ASSESSEE COMPANY WA S NOT CLEAR . IT WAS ALSO HELD BY THE LEARNED CIT(A) THAT AT NO POINT OF TIME HAS THE ASSESSEE COMPANY AUTHORIZED THE CHIEF ARCHITECT TO TAKE NECESSARY AC TION. THUS, AS PER LEARNED CIT(A) , THE ASSESSEE COMPANY WAS NOT ABLE TO SUBST ANTIATE OR ESTABLISH THAT THE CONCERNED PAYMENT OF RS.50,000/- TO BMC WAS IN RESPECT OF BUSINESS CARRIED ON BY THE ASSESSEE COMPANY AND HENCE THE LE ARNED CIT(A) UPHELD THE ASSESSMENT ORDERS DATED 12.12.2008 PASSED BY THE AO U/S 143(3) OF THE ACT, VIDE APPELLATE ORDERS DATED 29.10.2010. 6.AGGRIEVED BY THE APPELLATE ORDERS DATED 29.10.201 0 OF THE LEARNED CIT(A), THE ASSESSEE COMPANY FILED SECOND APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE COMPANY SUBMITT ED BEFORE THE TRIBUNAL THAT THE ASSESSEE COMPANY HAS INCURRED DE MOLITION EXPENSES OF RS. 50,000/- FOR WHICH THE DISALLOWANCE HAS BEEN CONFIR MED BY THE LEARNED CIT(A). THE LEARNED COUNSEL SUBMITTED THAT THE DEV ELOPMENT EXPENSES WITH RESPECT TO THE SAME PROPERTY AND EVACUATION EXPENSE S FOR REMOVAL OF ILLEGAL OCCUPANTS FROM THE SAME PROPERTY GRANTED TO THE ASS ESSEE COMPANY BY THE COLLECTOR IN 1968 AS SET OUT IN SOF ABOVE HAS BEEN ALLOWED BY THE LEARNED CIT(A) , WHEREAS THE DEMOLITION EXPENSES OF THE IL LEGAL STRUCTURES FROM THE SAME PROPERTY WAS DISALLOWED BY LEARNED CIT(A) ON T ECHNICAL GROUNDS THAT THE RECEIPT ISSUED BY BMC IS IN THE NAME OF ARCHITECT O F THE ASSESSEE COMPANY. ITA 654/MUM/2011 7 THE LEARNED COUNSEL FOR THE ASSESSEE COMPANY STATED BEFORE US THAT THE PAYMENT MADE TO THE BMC OF RS. 50,000/- THROUGH CHA RTERED ARCHITECT WAS ON BEHALF OF THE ASSESSEE COMPANY. 8. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE PAYMENT OF RS.50,000/- HAS B EEN MADE TO BMC BY THE ARCHITECT AND NOT BY THE ASSESSEE COMPANY . 9. WE HAVE HEARD THE RIVAL CONTENTION AND ALSO PERU SED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE COMPANY HAS INCURRED DEMOLITION EXPENSES OF RS.50,000/- FOR REM OVAL OF ILLEGAL STRUCTURES ON THE PIECE OF LAND GRANTED TO THE ASSESSEE COMPAN Y BY THE COLLECTORS OFFICE IN 1968 AS PER SOF AS DETAILED ABOVE, WHICH ILLEGAL STRUCTURES WERE REMOVED BY THE BMC AND THE EXPENSES OF RS.50,000/- WERE PAI D BY THE CHARTERED ARCHITECT ON BEHALF OF THE ASSESSEE COMPANY TO BMC WITH RESPECT TO THE DEMOLITION EXPENSES OF ILLEGAL STRUCTURE ON THE PIE CE OF LAND , AGAINST WHICH THE ASSESSEE WOULD GET FSI ON SURRENDER OF VACANT L AND TO BMC. NO APPEAL HAS BEEN FILED BY THE REVENUE WITH THE TRIBUNAL AS CONFIRMED BY LEARNED DR DURING THE COURSE OF HEARING BEFORE THE TRIBUNAL, A GAINST THE ORDERS OF THE LEARNED CIT(A) WHEREBY THE LEARNED CIT(A) ALLOWED T HE DEVELOPMENT EXPENSES WITH RESPECT TO SAME LAND AND EXCAVATION EXPENSES INCURRED BY THE ASSESSEE COMPANY FOR EVICTION OF ILLEGAL TENANTS OCCUPYING THE PORTIONS OF THE SAME LAND BOTH AS BUSINESS EXPENSES. THE AMOUNT OF RS. 50,000/- WAS PAID BY THE ASSESSEE COMPANY THROUGH ITS ARCHITECT TO THE BMC A ND THE COPY OF THE RECEIPT HAS BEEN FURNISHED BY THE ASSESSEE COMPANY TOWARDS DEMOLITION CHARGES OF THE ILLEGAL STRUCTURES, WHICH IS PLACED IN PAPER BOOK. THE SAID RECEIPT OF AMOUNT ISSUED BY BMC IS IN THE NAME OF SH L R PATKAR, THE ARCHITECT OF THE ASSESSEE COMPANY. IT IS AN UNDISP UTED POSITION THAT THE PAYMENT HAS BEEN MADE THROUGH CHARTERED ARCHITECT. IN OUR CONSIDERED VIEW, THE DEMOLITION EXPENSES OF RS.50,000/- WERE INCURRE D BY THE ASSESSEE ITA 654/MUM/2011 8 COMPANY TO REMOVE ILLEGAL STRUCTURE IN THE PORTION OF THE PLOT OF LAND GRANTED BY COLLECTORS OFFICE IN FAVOUR OF THE ASSESSEE COMP ANY IN 1968 AS SET OUT IN SOF ABOVE AND IN OUR CONSIDERED VIEW, THIS IS A NOR MAL BUSINESS EXPENDITURE ALTHOUGH IT IS INCURRED THROUGH CHARTERED ARCHITECT WHICH WAS REIMBURSED BY THE ASSESSEE COMPANY. HENCE, WE HOLD MERIT IN THE CONTENTIONS OF THE ASSESSEE COMPANY AND ALLOW THE EXPENSES OF RS.50,00 0/- INCURRED BY THE ASSESSEE COMPANY AS BUSINESS EXPENSES THROUGH ITS A RCHITECT PAID TO BMC TOWARDS DEMOLITION OF ILLEGAL STRUCTURE ON ITS PLOT OF LAND. WE DONOT FIND ANY MERIT IN THE CONTENTIONS OF THE REVENUE AS ON THE O NE HAND DEVELOPMENT EXPENSES AND EVACUATION EXPENSES WITH RESPECT TO TH E SAME PIECE OF LAND WAS ALLOWED BY LEARNED CIT(A) AS BUSINESS EXPENSES , WH ICH ORDERS OF THE LEARNED CIT(A) IS NOT CONTESTED BY THE REVENUE AS NO SECOND APPEAL IS FILED BY THE REVENUE AGAINST THE ORDERS OF LEARNED CIT(A) BEFORE THE TRIBUNAL , AND MERELY BECAUSE THE RECEIPT FOR DEMOLITION EXPENSES FOR DEM OLISHING THE ILLEGAL STRUCTURE ON THE SAME PIECE OF LAND IS IN THE NAME OF THE ARCHITECT, THE SAME CANNOT BE HELD TO BE NON-BUSINESS EXPENSES AND DISA LLOWED BY THE REVENUE. WE ORDER ACCORDINGLY. 10. THE NEXT GROUND IS REGARDING DISALLOWANCE OF RS .4,55,422/- U/S 43B OF THE ACT. THE ASSESSEE COMPANY HAS RAISED THIS GROUN D OF APPEAL BEFORE THE TRIBUNAL VIDE ADDITIONAL GROUND OF APPEAL . IT IS S UBMITTED THAT THE LEARNED CIT(A) HAS DISPOSED OF THIS GROUND IN A CRYPTIC MAN NER WITHOUT ANY DISCUSSIONS. THE ASSESSEE COMPANY SUBMITTED THAT DU E TO INADVERTENT OMISSION, THE ASSESSEE COMPANY DID NOT RAISED THIS GROUND OF APPEAL BEFORE THE TRIBUNAL IN THE GROUNDS OF APPEAL FILED ALONG W ITH MEMO OF APPEAL FILED WITH THE TRIBUNAL. THE ASSESSEE COMPANY PRAYED THAT THIS GROUND OF APPEAL BEING PURELY LEGAL GROUND SHOULD BE ADMITTED AS IT GOES TO THE ROOT OF THE MATTER. THE LEARNED DR OBJECTED TO THE ADMISSION OF THIS ADDITIONAL GROUND. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND WE HAV E OBSERVED THAT THE ASSESSEE COMPANY DID RAISED THIS GROUND OF APPEAL R EGARDING DISALLOWANCE OF ITA 654/MUM/2011 9 RS.4,55,242/- BEING DISALLOWED BY THE AO REGARDING COLLECTOR CHARGES PAYABLE ON SALE OF PLOT OF LAND BEFORE THE LEARNED CIT(A) A ND THE SAME WAS DISMISSED BY LEARNED CIT(A). THE ASSESSEE COMPANY DID NOT RAI SE THIS GROUND IN GROUNDS OF APPEAL FILED WITH MEMO OF APPEAL FILED WITH THE TRIBUNAL BUT RAISED THIS ADDITIONAL GROUND OF APPEAL DURING THE COURSE OF HE ARING AND IN OUR CONSIDERED VIEW AND IN THE INTEREST OF JUSTICE , TH E GROUND BEING PURELY LEGAL IS ALLOWED TO BE ADMITTED AND IS ADJUDICATED ON MERITS . 11. THE ASSESSEE COMPANY HAS CLAIMED COLLECTORS CH ARGES OF RS. 4,55,422/- AS AMOUNT PAYABLE TO THE COLLECTOR OF MUMBAI TOWARD S SALE OF TWO PLOTS OF LAND TO M/S SWEET ANGEL AND M/S SUPREME INDUSTRIES. THE ASSESSEE COMPANY HAS BEEN CONTESTING THE PAYMENT OF DUES TO THE COLL ECTOR ON SALE OF PLOTS OF LAND AND A SUM OF RS. 11,76,715/- IS PAYABLE IN RES PECT OF SALE OF PLOTS PRIOR TO THE FINANCIAL YEAR 2001-02. THE ASSESSEE COMPANY HAS PAID A SUM OF RS. 64,890/- TOWARDS THE SALE OF ONE OF THE PLOTS HENCE THE ARBITRARILY PROVISION OF 50% OF THE SALE VALUE OF PLOTS OF LAND AS PAYABLE T O THE COLLECTOR IS NOT JUSTIFIED, AS PER THE AO. IN ADDITION , AS PER THE A.O. ANY SUM PAYABLE TO THE COLLECTOR IS COVERED UNDER THE PROVISIONS OF SECTIO N 43B OF THE ACT. FURTHER, THE ASSESSEE COMPANY ITSELF HAS PREVIOUSLY TREATED THE LIABILITY OF RS. 45 LACS PAYABLE TO THE COLLECTOR AS COVERED U/S 43B OF THE ACT IN THE ASSESSMENT YEAR 1998-99. THUS, THIS AMOUNT OF RS. 4,55,422/- PAYABL E TO COLLECTOR OF MUMBAI WAS DISALLOWED BY THE AO AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE COMPANY VIDE ASSESSMENT ORDERS DATED 12/12/2008 PAS SED BY THE AO U/S 143(3) OF THE ACT. 12.AGGRIEVED BY THE ASSESSMENT ORDERS DATED 12/12/2 008 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSEE COMPANY FI LED ITS FIRST APPEAL BEFORE THE LEARNED CIT(A). WITH RESPECT TO THE DISALLOWANC E U/S 43B OF THE ACT, IT WAS SUBMITTED BY THE ASSESSEE COMPANY THAT AS PER THE TERMS AND CONDITIONS FOR ALLOTMENT OF LAND IT IS PERMISSIBLE TO SELL THE PLO T OF LAND SUBJECT TO SHARING OF ITA 654/MUM/2011 10 50% OF UNEARNED INCOME ON SALE OF PLOT I.E. PROFIT EARNED BY THE ASSESSEE COMPANY WITH THE COLLECTOR . IT WAS SUBMITTED THAT THE GOVERNMENT OF MAHARASHTRA AND THE ASSESSEE COMPANY ARE CO-OWNERS OF THE PLOT SHARING EQUALLY IN THE CASE OF SALE OF PLOTS. THE AMOUNT IS PAYABLE TO COLLECTORS OFFICE ONLY. THE A.O. IN HIS ASSESSMENT ORDER FOR THE ASS ESSMENT YEAR 1998-99 STATED THAT THE ASSESSEE COMPANY HAD DISALLOWED RS. 45 LACS U/S 43B OF THE ACT. THE ASSESSEE COMPANY SUBMITTED THAT THE ABOVE AMOUNT WAS DISALLOWED SINCE THE SAME WAS NOT PAID AND IT WAS FOR CHANGE O F USER FROM INDUSTRIAL PURPOSE TO COMMERCIAL PURPOSE. THE POINT OF DISALLO WANCE WAS NOT PAYMENT , AND NOT ANY SHARE OF TAXES, RULES OR DUTIES PAYABLE TO THE COLLECTORS OFFICE. HOWEVER IN RESPECT OF THE SALE OF THESE TWO PLOTS, THE ASSESSEE COMPANY IS NOT CONTESTING THE AMOUNT PAYABLE BUT THE COLLECTOR IS NOT ACCEPTING THIS AMOUNT AND RAISED DEMAND OF RS. 119 CRORES IN RESPECT OF S ALE OF PLOTS IN THE EARLIER YEARS. THUS, THE ASSESSEE COMPANY HAS PRAYED THAT THE ABOVE DISALLOWANCE SHOULD BE DELETED. THE LEARNED CIT(A) CONSIDERED T HE SUBMISSION OF THE ASSESSEE COMPANY AND OBSERVED THAT THE A.O. HAS CLE ARLY FOLLOWED THE PROVISIONS OF SECTION 43B OF THE ACT AND AS SUCH HE DECLINED TO INTERFERE WITH THE ADDITION MADE BY THE A.O. AND THE LEARNED CIT(A ) CONFIRMED THE ASSESSMENT ORDERS DATED 12/12/2008 PASSED BY THE AO U/S 143(3) OF THE ACT ON THIS ISSUE AND SUSTAINED THE ADDITIONS MADE BY T HE AO ON THE GROUNDS THAT THE SAID PAYMENT IS COVERED U/S 43B OF THE ACT AND SINCE THE ASSESSEE COMPANY HAS NOT MADE PAYMENT OF COLLECTORS CHARGES WITHIN TIME STIPULATED U/S 43B OF THE ACT, THE DISALLOWANCE MADE BY THE AO IS JUSTIFIED, VIDE LEARNED CIT(A) APPELLATE ORDERS DATED 29.10.2010. 13. AGGRIEVED BY THE APPELLATE ORDERS DATED 29.10.2 010 PASSED BY THE LEARNED CIT(A), THE ASSESSEE COMPANY FILED SECOND APPEAL WI TH THE TRIBUNAL AND RAISED THIS GROUND THROUGH ADDITIONAL GROUND WHICH HAS ALREADY BEEN ADMITTED BY THE TRIBUNAL AS INDICATED ABOVE IN PREC EDING PARAS OF THIS ORDER. ITA 654/MUM/2011 11 14. THE LEARNED COUNSEL FOR THE ASSESSEE COMPANY SU BMITTED THAT THERE WERE TWO PLOTS OF LAND WHICH WERE SOLD BY THE ASSES SEE COMPANY. THESE PLOTS OF LAND WERE GRANTED BY ADDITIONAL COLLECTOR OF BOM BAY IN FAVOUR OF THE ASSESSEE COMPANY VIDE AGREEMENT DATED 03-07-1964. T HE AGREEMENT TO THIS EFFECT IS PLACED AT PAPER BOOK PAGE 46 TO 48 FILED WITH THE TRIBUNAL. AS PER CLAUSE 2(G) OF SCHEDULE II TO THE AFORE-STATED AGR EEMENT, THE GOVERNMENT WILL BE ENTITLED TO HALF THE UNEARNED INCREMENT IN THE E VENT OF SALE OR TRANSFER OF THE PLOT. THE SAID CLAUSE 2(G) IS REPRODUCED BELOW :- THAT THE GOVERNMENT WILL BE ENTITLED TO HALF THE U NEARNED INCREMENT IN THE EVENT OF SALE OR TRANSFER WHETHER OUTRIGHT OR A S A RESULT OF UNREDEEMED MORTGAGE AND THAT THE LAND SO SOLD OR TR ANSFERRED SHOULD BE USED FOR A PURPOSE APPROVED BY THE GOVT. IF IT IS T O BE USED FOR A PURPOSE OTHER THAN APPROVED INDUSTRIAL OR COMMERCIAL PURPOS ES. THE LEARNED COUNSEL FOR THE ASSESSEE COMPANY SUBMIT TED THAT THE INCOME RECEIVED FROM SALE OF REVERSIONARY RIGHTS WITH RESP ECT TO THESE PLOT OF LAND HAVE BEEN OFFERED FOR TAXATION IN THE RETURN OF INC OME FILED WITH THE REVENUE FOR THE IMPUGNED ASSESSMENT YEAR. AN AMOUNT OF RS. 64,890/- HAS BEEN PAID TOWARDS UN-EARNED INCOME VIDE WORKING OF THE ARCHIT ECT IN PAGE 44-45 OF THE PAPER BOOK FILED WITH THE TRIBUNAL WHICH IS ALSO AL LOWED BY THE AO . BUT THE BALANCE AMOUNT PAYABLE OF RS. 4,55,422/- TOWARDS UN EARNED INCOME PAYABLE TO THE COLLECTOR WHICH HAS BEEN PROVIDED IN THE BOO KS OF ACCOUNTS , THE COLLECTOR IS NOT ACCEPTING THIS AMOUNT AND RAISED D EMAND OF RS. 119 CRORES IN RESPECT OF SALE OF PLOTS IN THE EARLIER YEARS FROM THE ASSESSEE COMPANY. DETAILS OF COLLECTOR CHARGES OF RS.4,55,422/- PAYABLE ARE P LACED IN THE PAPER BOOK PAGE 31,37,40,42 AND ADDITIONAL WORKING CHART FILED ON THE DATE OF HEARING ON 16 TH MARCH 2016. THE LEARNED COUNSEL FOR THE ASSESSEE COMPANY SUBMITTED THAT THIS PAYMENT IS NOT HIT BY PROVISIONS OF SECTI ON 43B OF THE ACT. THE ASSESSEE COMPANY RELIED UPON THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF CIT V. MCDOWELL & CO. LTD. [2009] 314 ITR 0 167 (SC) AND THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. G. SOMAN [2011] 241 CTR ITA 654/MUM/2011 12 0082 (KER.). THE ASSESSEE COMPANY ALSO RELIED UPON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT V. EXCEL INDUSTRI ES LIMITED (2013) 258 ITR 295(SC) AND BHARAT EARTH MOVERS V. CIT (2000) 112 TAXMAN 61(SC) AND SUBMITTED THAT THE LIABILITY HAS ACCRUED AND IS A R EAL LIABILITY WHICH SHOULD BE ALLOWED AS DEDUCTION ON MATCHING PRINCIPLES . THER E IS A LIABILITY PAYABLE BY THE ASSESSEE COMPANY KEEPING IN VIEW THE MATCHING C ONCEPT AS THE INCOME IN RELATION THERETO HAS ALREADY BEEN OFFERED TO TAX IN THE RETURN OF INCOME FILED WITH THE REVENUE FOR THE IMPUGNED ASSESSMENT YEAR AND THE SAID EXPENSES PAYABLE SHOULD BE ALLOWED BEING ACCRUED AND REAL LI ABILITY. 15. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE CASE OF THE ASSESSEE COMPANY IS COVERED U/S 43B OF THE ACT AND SINCE THE ASSESSEE COMPANY HAS NOT MADE THE PAYMENT BY TIME STIPULATED U/S 43B OF THE ACT, THE SAID AMOUNT WAS RIGHTLY DISALLOWED BY THE AUTHORITIES BELOW. TH E ASSESSEE COMAPNY HAS MADE PROVISION FOR THE SAME BUT THE AMOUNT OF RS.4, 55,422/- WAS NOT PAID BY THE ASSESSEE COMPANY AND AS SUCH HIT BY PROVISIO NS OF SECTION 43B OF THE ACT. 16. IN THE REJOINDER, THE LD. COUNSEL SUBMITTED THA T AS PER THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. G. SOMAN (SUPRA) LICENSE FEE/RENTAL PAYABLE IN RESPECT OF PURCHASE OF TODDY SHOPS PAYABLE UNDER THE AKBARI ACT WAS HELD TO BE NOT HIT BY THE PROVISIONS OF SECTION 43B(A) OF THE ACT. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE COMPANY HAS ENTERED INTO AN AGREEMENT WITH ADDITIONAL COLLECTOR OF BOMBAY VIDE AGREEMENT DATED 03-07-1964 WHEREBY THE ASSESSEE COM PANY WAS GRANTED LAND ADMEASURING 55 ACRES AS SPECIFIED IN SCHEDULE- I TO THE AGREEMENT DATED 03-07-1964 ON THE TERMS AND CONDITIONS AS CONTAINED IN THE AGREEMENT DATED ITA 654/MUM/2011 13 03-07-1964. UNDER THE AFORE-STATED AGREEMENT, 50% OF THE UNEARNED INCREMENT IN THE EVENT OF SALE OR TRANSFER OF PROPE RTY IS PAYABLE TO THE GOVERNMENT AS PER CLAUSE 2(G) OF THE SCHEDULE II O F SAID AGREEMENT DATED 03- 07-1964 WHICH IS REPRODUCED BELOW : THAT THE GOVERNMENT WILL BE ENTITLED TO HALF THE U NEARNED INCREMENT IN THE EVENT OF SALE OR TRANSFER WHETHER OUTRIGHT OR A S A RESULT OF UNREDEEMED MORTGAGE AND THAT THE LAND SO SOLD OR TR ANSFERRED SHOULD BE USED FOR A PURPOSE APPROVED BY THE GOVT. IF IT IS T O BE USED FOR A PURPOSE OTHER THAN APPROVED INDUSTRIAL OR COMMERCIAL PURPOS ES. WE HAVE OBSERVED THAT THERE IS A CONDITION STIPULA TED IN AFORE-STATED CLAUSE 2(G) OF THE AGREEMENT DATED 03-07-1964, SHARING OF 50% OF UNEARNED INCREMENT IN THE LAND WITH THE GOVERNMENT IN THE EV ENT OF SALE OR TRANSFER OF PLOT OF LAND , AND THE LIABILITY OF THE ASSESSEE CO MPANY WITH RESPECT THERETO HAS ARISEN FROM THE AGREEMENT DATED 03-07-1964 RATH ER THAN ARISING OUT OF ANY LAW IN FORCE WHICH IS THE ESSENTIAL REQUIREMENT TO BE MADE LIABLE TO BE COVERED UNDER THE PROVISION OF SECTION 43B(A) OF TH E ACT WHICH IS REPRODUCED BELOW : [ CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT 6 . 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER P ROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF [(A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX 6 , DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR] ****** ****** SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY ITA 654/MUM/2011 14 TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCOR DING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONL Y IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM : [ PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM [***] WHICH IS ACTUALLY PAID BY THE A SSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE A SSESSEE ALONG WITH SUCH RETURN. [***]] ***** ***** THE REVENUE FAILED TO BRING ON RECORD PROVISIONS OF ANY LAW IN FORCE UNDER WHICH THIS LIABILITY OF SHARING OF 50% UNEARNED INC REASE IN THE LAND ON SALE OR TRANSFER WITH THE GOVERNMENT CAN BE CRYSTALLIZED OR FASTENED ON THE ASSESSEE COMPANY , RATHER IT IS A CONTRACTUAL LIABILITY ARIS ING FROM CONTRACT BETWEEN THE TWO CONTRACTING PARTIES VIZ. THE ASSESSEE COMPANY O N THE ONE HAND AND GOVERNMENT ON THE OTHER HAND THROUGH COLLECTOR. IN OUR CONSIDERED VIEW, THE AFORE-STATED AMOUNT OF RS.4,55,422/- STATED TO BE P AYABLE TOWARDS UNEARNED INCREASE IN THE PLOT OF LAND IN THE EVENT OF SALE O R TRANSFER VIDE CLAUSE 2(G) OF SCHEDULE II OF THE AGREEMENT DATED 03-07-194 ENTERE D INTO BY THE ASSESSEE COMPANY AND ADDITIONAL COLLECTOR OF BOMBAY FOR GRA NT OF LAND IN FAVOUR OF ITA 654/MUM/2011 15 THE ASSESSEE COMPANY IS NOT HIT BY PROVISIONS OF SE CTION 43B OF THE ACT AS THE LIABILITY HAS NOT ARISEN ON ACCOUNT OF ANY SUM PAYA BLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE , BUT THE LIABILITY HAS ARISEN OUT O F THE CONTRACT BETWEEN THE TWO CONTRACTING PARTIES AND NOT ARISING OUT OF ANY LAW IN FORCE. THUS, WE HOLD THAT THIS AMOUNT STATED TO BE PAYABLE OF RS.4,55,42 2/- TO COLLECTOR TOWARDS UNEARNED INCREASE IN THE LAND ON SALE OF REVERSIONARY RIGHTS IN THE PLOT IS NOT HIT BY PROVISIONS OF SECTION 43B OF THE ACT. THERE IS ANOTHER ASPECT TO THIS ISSUE WHICH ALSO NEEDS TO BE DEALT WITH IS WITH RES PECT TO THE VERIFICATION OF THE COMPUTATION OF RS.4,55,422/- AS COMPUTED BY THE ASSESSEE COMPANY , I.E. WHETHER OR NOT A CORRECT AMOUNT OF LIABILITY ALBEIT NOT PAID WHICH HAS ACCRUED AND CRYSTALLIZED IN FAVOUR OF THE COLLECTOR VIDE AG REEMENT DATED 03-07-1964 WITH RESPECT TO THE SALE OF REVERSIONARY RIGHTS IN THE TWO PLOTS AND HENCE LIMITED VERIFICATION IS REQUIRED TO BE DONE BY THE REVENUE ON THE COMPUTATION OF WORKING OF RS.4,55,422/- WHICH HAS BEEN PRODUCED BEFORE US AS THE AUTHORITIES BELOW HAVE NOT ACCEPTED THE CLAIM OF TH E ASSESSEE COMPANY OF RS.4,55,422/- BEING PAYABLE TO THE COLLECTOR AND AL LOWED THE ACTUAL AMOUNT OF RS.64890/- PAID TO THE COLLECTOR WHICH WAS COMPU TED BY THE ARCHITECT VIDE WORKING ENCLOSED IN PAPER BOOK PAGE 44-45 FILED WIT H THE TRIBUNAL . ACCORDINGLY, WE SET ASIDE AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH LIMITED DIRECTION TO VERIFY THE COMPUTATION OF THE WORKING OF THE UNEARNED INCREMENT OF RS.4,55,422/- MADE BY THE ASSESSEEE CO MPANY WITH RESPECT TO THE SALE OF THE REVERSIONARY RIGHTS IN THE TWO PLOT S BY THE ASSESSEE COMPANY AND CORRESPONDING EXISTENCE OF LIABILITY OF THE AS SESSEE COMPANY TO THE TUNE OF RS.4,55,422/- IN FAVOUR OF THE COLLECTOR IN ACCO RDANCE WITH THE AGREEMENT DATED 03-07-1964 . THE AO SHALL ACCORDINGLY THERE-A FTER VERIFICATION ALLOW THE AMOUNT PAYABLE TO THE COLLECTOR IN ACCORDANCE WITH THE TERMS OF AGREEMENT DATED 03-07-1964 . OUR DIRECTIONS ARE ONLY LIMITED TO THE CHECKING OF THE COMPUTATIONAL WORKING OF THE AMOUNT AS CLAIMED BY T HE ASSESSEE COMPANY STATED TO BE PAYABLE TO THE COLLECTOR IN ACCORDANCE WITH THE AGREEMENT DATED ITA 654/MUM/2011 16 03-07-1964 BEING UNEARNED INCREMENT ON SALE OF THE REVERSIONARY RIGHTS IN TWO PLOTS OF LAND. THE ASSESSEE COMPANY IS DIRECTED TO APPEAR BEFORE THE LEARNED AO AND PRODUCE AND JUSTIFY THE COMPUTATION OF WORKING OF COLLECTOR CHARGES STATED TO HAVE ACCRUED AND PAYABLE TO THE C OLLECTOR TO THE TUNE OF RS.4,55,422/- TOWARDS UNEARNED INCREMENT IN THE LAN D ON THE SALE OF REVERSIONARY RIGHTS IN TWO PLOTS IN ACCORDANCE AND IN TERMS OF AGREEMENT DATED 03-07-1964 . NEEDLESS TO SAY PROPER AND ADEQU ATE OPPORTUNITY OF BEING HEARD WILL BE PROVIDED BY THE AO TO THE ASSESSEE CO MPANY IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WIT H THE LAW. THE AO SHALL ALLOW AND ADMIT THE RELEVANT EVIDENCES AND EXPLANAT ION SUBMITTED BY THE ASSESSEE COMPANY TO SUPPORT AND SUBSTANTIATE ITS CL AIM IN ITS DEFENSE. WE ORDER ACCORDINGLY. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IN ITA N0. 654/MUM/2011 FOR THE ASSESSMENT YEAR 2006-07 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE , 2016. # $% &' 13-06-2016 ( ) SD/- AS/- (C.N.PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 13-06-2016 [ ITA 654/MUM/2011 17 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI G BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI