The Dy. Commissioner of Income tax, Jammu V. The J&K Cooperative Housing Corporation Ltd, Jammu

ITA 658/ASR/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5347 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 658(ASR)/2013 ASSESSMENT YEAR: 2010-11 PAN: AAAFJ6591R DEPUTY COMMISSIONER OF VS. THE J&K COOPERATIVE HO USING INCOME TAX, CIRCLE-2, CORPORATION LTD, 243, NEW JAMMU PLOTS, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY: SH. MAHAVIR SINGH, SR. DR RESPONDENT BY: SH. JOGINDER SINGH, CA DATE OF HEARING: 13.02.2014 DATE OF PRONOUNCEMENT: 26.02.2014 ORDER PER BENCH 1. THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 02.08.2013 PASSED BY LEARNED CIT(A), JA MMU, FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS: I. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN ALLOWING THE ADDITION AMOUNTING TO RS. 8,7 2,675/- ON ACCOUNT OF APPLYING 3% ON TRANSFER FEE. II. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEARNED CIT(A) WAS RIGHT IN ALLOWING THE ADDITION AMOUNTING TO RS. 1,2 7,865/- ON ACCOUNT OF BANK INTEREST CONSIDERING INTEREST PORTI ON AS A PART OF SALES CONSIDERATION. III. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MOR E GROUNDS OF APPEAL. 2. THE ASSESSEE SOCIETY FILED ITS RETURN OF INCOME ON 26.09.2011 DECLARING LOSS OF RS. 7,23,85,825/-. THE CASE OF TH E ASSESSEE WAS SELECTED 2 I.T.A. NO. 658(ASR)/2013 ASSESSMENT YEAR: 2010-11 UNDER SCRUTINY COMPULSORY CATEGORY OF SELECTION OF CASES FOR SCRUTINY AND ACCORDINGLY STATUTORY NOTICE UNDER SECTION 143(2) O F THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) WAS ISSUED ON 26.09.2011 AND WAS DULY SERVED UPON THE ASSESSEE ON 28.09.2011. LASTLY, THE ASSESS ING COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORD ER DATED 18.01.2013 AND MADE THE FOLLOWING ADDITIONS: A. ESTIMATING THE NET PROFIT @ 3% ON THE SALE CONSIDER ATION RECEIVED DURING THE YEAR AND MADE AN ADDITION OF RS . 15,30,302/- TO THE RETURNED LOSS OF THE ASSESSEE. B. ADDITION OF RS. 8,99,665/- ON ACCOUNT OF TRANSFER F EE RECEIVED DURING THE YEAR. C. ADDITION OF RS. 1,31,820/- ON ACCOUNT OF INTEREST I NCOME. 3. AGGRIEVED WITH ASSESSMENT ORDER DATED 18.01.2013 , THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED FIRST A PPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 02.08.2013, PARTLY ALLOWE D THE APPEAL OF THE ASSESSEE. NOW, THE REVENUE FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 02.08.2013. 4. AT THE TIME OF HEARING, LEARNED DR RELIED UPON T HE ORDER PASSED BY THE ASSESSING OFFICER AND ON THE CONTRARY, LEARN ED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY LEARNED CI T(A), JAMMU. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THE ISSUES IN DISPUTE. THE LEARNED F IRST APPELLATE AUTHORITY 3 I.T.A. NO. 658(ASR)/2013 ASSESSMENT YEAR: 2010-11 HAD DECIDED THE ISSUES INVOLVED IN GROUND NOS. 1 & 2 AT PAGE NOS. 5 AND 6, WHICH ARE REPRODUCED AS UNDER: GROUND NO. 2 RELATES TO ADDITION OF RS. 8,99,665/- ON ACCOUNT OF TRANSFER FEE. THE APPELLANT HAS ARGUED THAT THE A.O . HAS REJECTED THE BOOKS BOOK RESULTS AND APPLIED NET PROFIT RATE OF 3 % ON SALES. TRANSFER FEE IS ALSO A BUSINESS RECEIPT OF THE APPELLANT AND THEREFORE RATE OF 3% SHOULD BE APPLIED ON THE SAME. THE THEN CIT(A), JAM MU, HAS ALSO CONSIDERED THIS ISSUE AND HELD THE TRANSFER FEE TO BE PART OF BUSINESS TURNOVER AND APPLIED 3% NET PROFIT ON SUCH TRANSFER FEE IN THE CASE OF APPELLANT ITSELF FOR THE ASSESSMENT YEAR 2005-06 AN D 2006-07 WHICH WAS FURTHER UPHELD BY THE JURISDICTIONAL I.T.A.T. B ENCH, AMRITSAR IN ITA 479,495 & 496(ASR)/2011. I HAVE CONSIDERED THE SUBMISSION OF APPELLANT, ASSESSMENT ORDER AND ORDER OF I.T.A.T. B ENCH AMRITSAR FOR THE EARLIER ASSESSMENT YEARS AND I AM OF THE OPINIO N THAT THE TRANSFER FEE RECEIVED BY THE APPELLANT IS BUSINESS RECEIPTS OF THE APPELLANT AND ONCE THE BOOKS ARE REJECTED AND NET PROFIT RATE IS APPLIED ON SALES, THE ACTION OF A.O. OF SEPARATING SUCH RECEIPTS FROM OTH ER BUSINESS RECEIPTS IS NOT JUSTIFIED. IT IS, THEREFORE, DIRECTED TO APP LY A NET PROFIT RATE OF 3% ON TRANSFER FEE ALONG WITH THE SALES MADE BY THE AP PELLANT. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED AND A RELIEF OF RS. 8,72,675/- IS ALLOWED. GROUND OF APPEAL NO. 3 RELATES TO ADDITION OF RS. 1 ,31,820/- ON ACCOUNT OF BANK INTEREST. THE APPELLANT HAS ARGUED THAT THE BANK INTEREST IN EARNED ON THE AMOUNT RECEIVED FROM MEMBERS AS ADVAN CES AND SUCH INTEREST INCOME IS CREDITED TO THE PARTICULAR PROJE CT ACCOUNT FOR WHICH THE AMOUNT IS RECEIVED AND SUCH INTEREST INCOME IS UTILIZED IN THE CONSTRUCTION ACTIVITIES OF THAT PARTICULAR PROJECT . SUCH INCOME IS PURELY OF BUSINESS NATURE AS THE AMOUNT OF ADVANCE IS DETERMINED TAKEN INTO ACCOUNT THE INTEREST TO BE EARNED DURING CONSTRUCTION PERIOD AND IS AS SUCH A PART OF BUSINESS RECEIPTS. THE APP ELLANT HAS ALSO ARGUED THAT ONCE BOOKS OF ACCOUNTS ARE REJECTED AND NET PROFIT RATE IS APPLIED, NO SEPARATE ADDITIONS CAN BE MADE. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND ASSESSMENT ORDER, I T IS OBSERVED THAT ADVANCES ARE RECEIVED FROM MEMBERS AGAINST PARTICUL AR PROJECTS AND SUCH ADVANCES ARE UTILIZED FOR CONSTRUCTION ACTIVIT Y OF A PARTICULAR PROJECT. THE INTEREST EARNED FROM SUCH PROJECTS ARE UTILIZED FOR THE CONSTRUCTION ACTIVITY OF SUCH PROJECT. SINCE THE AM OUNTS ARE RECEIVED WELL IN ADVANCE EVEN BEFORE STARTING THE CONSTRUCTI ON ACTIVITY, THE 4 I.T.A. NO. 658(ASR)/2013 ASSESSMENT YEAR: 2010-11 AMOUNTS OF SALE CONSIDERATION IS FIXED AT LOWER RAT E THAN THE MARKET RATE. THUS, THE INTEREST PORTION IS IN FACT A PART OF SALES CONSIDERATION RECEIVED IN THE FORM OF INTEREST ON ADVANCES. THERE FORE, IT WOULD BE JUSTIFIED TO APPLY A NET PROFIT RATE OF 3% ON SUCH INCOME ALONG WITH SALES CONSIDERATION. THUS GROUND OF APPEAL OF THE A PPELLANT IS PARTLY ALLOWED AND A RELIEF OF RS. 1, 27,865/- IS ALLOWED. 6. AFTER GOING THROUGH THE RELEVANT PORTION OF THE IMPUGNED ORDER, REPRODUCED ABOVE, WE ARE OF THE VIEW THAT THE LEARN ED FIRST APPELLATE AUTHORITY HAD DECIDED THE ISSUE IN DISPUTE ON THE B ASIS OF DECISION RENDERED BY THIS BENCH IN I.T.A. 479, 495 & 496(ASR )/2011, WHEREIN IT HAS BEEN HELD THAT THE TRANSFER FEE IS A PART OF BU SINESS TURNOVER AND APPLIED 3% NET PROFIT ON SUCH TRANSFER FEE IN THE C ASE OF APPELLANT ITSELF. THEREFORE, IN OUR VIEW, THE LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE ADDITION OF 8,72,675/-. THUS, NO INTERF ERENCE IS CALLED FOR IN THE WELL REASONED IMPUGNED ORDER, WHICH IS PASSED O N THE BASIS OF PREVIOUS ASSESSMENT ORDERS AND WE ACCORDINGLY UPHOL D THE IMPUGNED ORDER ON THE ISSUED INVOLVED IN GROUND NO. 1. 7. AS REGARDS TO THE ISSUE INVOLVED IN GROUND NO. 2 , WE ARE OF THE VIEW THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY HELD THAT ONCE BOOKS OF ACCOUNTS ARE REJECTED AND NET PROFIT RATE IS APPLIED, NO SEPARATE ADDITIONS CAN BE MADE AND THE INTEREST PORTION IS I N FACT A PART OF SALE CONSIDERATION RECEIVED IN THE FORM OF INTEREST ON A DVANCES. THUS, HE HAS RIGHTLY APPLIED THE NET PROFIT RATE @ 3% ON SUCH IN COME ALONG WITH SALE 5 I.T.A. NO. 658(ASR)/2013 ASSESSMENT YEAR: 2010-11 CONSIDERATION. WE ARE OF THE VIEW THAT LEARNED FIRS T APPELLATE AUTHORITY HAS RIGHTLY DELETED THE ADDITION OF RS. 1,27,865/- BY PASSING A WELL REASONED ORDER ON THE BASIS OF DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE. THEREFORE, WE UPHOLD THE IMPUGNED ORDER P ASSED BY LEARNED CIT(A), JAMMU, ON THE ISSUE INVOLVED IN GROUND NO. 2. 8. WITH THE FOREGOING DISCUSSION, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND WE UPHOLD THE IMPUGNED ORDER DATED 02.08.2013 PASSED BY LEARNED CIT(A), JAMMU. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2014 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH FEBRUARY, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: THE J&K COOPERATIVE HOUSING CORPORAT ION LTD, 243, NEW PLOTS, JAMMU 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAMMU 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER 6 I.T.A. NO. 658(ASR)/2013 ASSESSMENT YEAR: 2010-11 (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.