Appeal details
Counselvise Citation
[2024] 101 COUNSELVISE.COM (IT) 4972 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 year(s) 7 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-08-2024
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
E
Next Hearing Date
07-08-2024
Assessment Year
2012-2013
Appeal Filed On
29-12-2016
Judgement Text
1 ITA no. 6725/Del/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No. 6725/Del/2016 Asstt. Yr: 2012-13 DCIT, Circle-16(1), New Delhi. Vs M2K Entertainment Pvt. Ltd., E-34, 2 nd Floor, Connaught Circus, New Delhi-110001. PAN: AADCM 0608 C APPELLANT RESPONDENT Assessee represented by Shri Vartik Choksi, AR Department represented by Shri Amit Shukla, Sr. DR Date of hearing 08.08.2024 Date of pronouncement 14.08.2024 O R D E R PER KUL BHARAT, JM: This appeal, by the Revenue, is directed against the order of the learned Commissioner of Income-tax (Appeals)-6, New Delhi, dated 18.10.2016, pertaining to the assessment year 2012-13. The Revenue has raised following grounds of appeal: “1. Whether in facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs. 17,97,330/- made by the Assessing Officer (the AO) on account of non disclosure of income from 'maintenance charges' ignoring a fact that the assessee was following 2 ITA no. 6725/Del/2016 mercantile system of accounting and non-receipt of maintenance charges cannot be basis of not crediting income? 2. Whether in facts and circumstances of the case, the Ld CIT(A) is legally justified in deleting Rs. 9,739/- on account of late deposit of ESI funds by holding that the employees' contribution to the ESI which is deemed as the employer's income u/s 2(24)(x) of the Income Tax Act (the Act) and which is subject to deduction u/s 36(1)(va) of the Act is also governed by Section 43B of the Act? 3. Whether in facts and circumstances of the case, the Ld. CIT(A) is legally justified in restricting the disallowance of Rs. 3,23,435/- to Rs. 10,759/- u/s 14A of the Act r.w. R 8D of the Income Tax Rules 1962 (the Rule) on the ground that disallowance should be equivalent to tax exempt income without considering a legal principle that allowability of expenditure under the Act is not conditional upon earning of income as upheld by Hon'ble Supreme Court in case of CIT Vs Rajendra Prasad Moody (1978) 115 ITR 519? 3.1 Whether in the facts and circumstances of the case, the Ld. CIT(A) is legally justified in restricting the disallowance of Rs. 3,23,435/- to Rs. 10,759/- u/s 14A of the Act r.w. R 8D of the Rule without considering ratio decidendi as upheld in case of Maxopp Investment Vs CIT [2012] 347 ITR 272 (Delhi) on application of Rule 8D? 4. Whether in facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting addition of Rs. 4,75,75,902/- made by the AO on account of 'income from house property' by ignoring the ratio decedendi as held by Hon'ble jurisdictional High court in case of CIT Vs Ansal Housing Finance & Leasing Co. Ltd 354 ITR 180? 4.1 Whether in facts and circumstances of the case, the Ld. CIT(A) is legally justified in deleting addition of Rs. 4,75,75,902/- on account of 'income from house property' by ignoring a fact that the AO had made addition on the basis of enquiry made during the year under consideration and taking into account peculiar facts on the case? 5. That the appellant craves leave to add, amend, alter or forgo any ground/(s) of appeal either before or at the time of hearing of the appeal.” 3 ITA no. 6725/Del/2016 2. Facts of the case, in brief, are that the assessee filed its return of income declaring income at Rs. 20,11,830/- on 29.09.2012. The case was selected for scrutiny assessment and the assessment u/s 143(3) of the Income-tax Act, 1961 (the “Act”) was framed vide order dated 13.03.2015. While framing the assessment the Assessing Officer made additions on account of non-disclosure of maintenance charges amounting to Rs.17,97,330/-; late payment of ESI charges of Rs. 9,739/-; disallowance of expenses by invoking the provisions of section 14A of Rs. 3,23,435/-; disallowance of provision for diminution written back of Rs. 1,86,800/-; and income from house property at Rs. 3,33,03,131/- after giving statutory deduction u/s 24 of the Act. Thus, the AO assessed the income at Rs. 3,76,32,270/-. Aggrieved against this assessee preferred appeal before learned CIT(Appeals), who partly allowed the appeal. Thereby he deleted the addition related to income from house property; disallowance of expenses related to ESI and restricted the disallowance made by invoking the provisions of Section 14A to the extent of exempt income. Aggrieved against this the Revenue is in appeal before this Tribunal. 3. Ground no. 1 is against deleting the addition made on account of non- disclosure of income from maintenance charges amounting to Rs. 17,97,330/-. 4 ITA no. 6725/Del/2016 4. Learned DR supported the assessment order and submitted that learned CIT(Appeals) was not justified in deleting the addition. 5. On the other hand, learned counsel for the assessee submitted that the issue is related to addition on account of maintenance charges. He contended that the assessee never received maintenance charges and the tax can be levied on the real income. He relied upon the decision of the learned CIT(Appeals). 6. We have heard rival contentions and perused the material on record. We find that learned CIT(Appeals) in deciding the issue has given finding of fact by observing as under: “Decision I have considered the observation of the AO, submissions, paper book & arguments of Ld AR. It is seen that the AO has made the addition of Rs.17,97,330/- on a/c of maintenance charges. The AO has observed that the appellant has not recognized the revenue of Rs. 17,97,330/- inspite of raising the bills on shop owners/tenant hence he made the additions of the same. The appellant has submitted before the AO as well as before me that bills raised towards maintenance charges of M2k mall at Rohini for Rs.9,06,804/- and M2k Pitampura for Rs.8,90,526/- aggregating to Rs.17,97,330/- was neither admitted nor acknowledge by shop owners/tenant. These shop owners/tenant has refused to pay the maintenance charges. The evidence of refusal by the shop owner/tenant were also filed in paper book filed by appellant at Page no. 55 to 86 & 70-71 of the paper book. The AR of the appellant has relied on the decision of Supreme Court in the case of CIT vs. Excel Industries Pvt. Ltd. 358-ITR- 295(SC). The AR also relied on the latest decision of Supreme Court in the case of P.G. & W. Sawoo Pvt. Ltd. vs. ACIT -385-ITR-60 (SC) for the proposition that unless the right to receive the amount is accrued to the appellant income cannot be ascertained nor it can be said that it is accrued 5 ITA no. 6725/Del/2016 to the appellant. The Supreme Court of India in the case of P.G. & W. Sawoo Pvt. Ltd. (supra) held that unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him. Further the Hon’.ble Supreme Court in the case of Excel Industries Pvt. Ltd. Supra held that "It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. Unless the corresponding liability is accepted by the payer, the benefit if any represent at its best, a hypothetical income which may or may not materialized and its money value is therefore not the income of the assessee" Applying the law laid down by Supreme Court in the case of P.G. & W. Sawoo Pvt. Ltd. Supra and Excel Industries supra, this is undisputed fact that the shop owners/tenants have denied the liability and refused to pay at the first Instance of raising the bills by appellant. Hence the shop owners/tenants have not admitted the liability to pay. It is also settled law that merely raising the bills by taxpayer does not give right to receive the billed amount unless and until the parties to whom bills are raised acknowledge the liability to pay and create a debt in favour of the taxpayer. In view of above facts and law laid down by Supreme Court in the decisions cited here above it is clear that the right to receive is not accrued to the appellant hence the bills raised for the maintenance charges but not acknowledged by the parties as debt is not the income accrued or arose to the appellant in true sense. Another important fact of the case is that the appellant is following this method of recognizing of income from AY-2008-09. The AO has accepted by this method in previous years in assessment u/s 143(3) of the Act. The AO has not brought any material on record to show that departure from accepted method is required due to change in facts. The facts of the above cited judgments are identical to the facts of the appellant case. Since the persons to whom bills for maintenance charges were raised have denied the payment at the beginning itself, the refusal by the parties to acknowledge as a liability to pay the maintenance charges shows that no right to receive accrued to the appellant. Respectfully following the decision of Hon'ble Supreme Court cited supra it is held that neither the income accrued nor arose to the appellant hence the addition 6 ITA no. 6725/Del/2016 made by the AO is not justified. Accordingly the additions of Rs. 17, 97, 330/- made by AO is hereby deleted. This ground of appeal is allowed.” 7. The above finding of fact given by the learned CIT(Appeals) is not rebutted by the Revenue by placing any contrary material on record. The Revenue has not brought any evidence suggesting that the maintenance charges were actually received by the assessee. Therefore, in the absence of such material we do not see any infirmity into the order of learned CIT(Appeals). Moreover, the Revenue has not brought any material pointing any change into facts and circumstances in this year. The Assessing Officer has been allowing the claim of the assessee regarding maintenance charges in earlier years holding that such income was not received by the assessee. It is not brought before us that any suit for recovery of maintenance charges in this regard was pending before any court for adjudication. Thus, this ground of Revenue lacks any merit. Ground no. 2 is against deletion of addition of Rs. 9,739/- deposited late by the assessee. 9. Learned counsel for the assessee fairly conceded that the issue is well settled by the judgment of Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. v. CIT [Civil Appeal no. 2833 of 2016 – dated October, 12,2022], holding that employees contribution, not paid within the due date specified under the relevant Act, is not allowable u/s 36(1)(va) of the Act. Accordingly, order of learned 7 ITA no. 6725/Del/2016 CIT(A) on the issue in question is set aside and that of Assessing Officer is restored. Ground is allowed. 10. Ground no. 3 is against sustaining the addition to the extent of exempt income. 11. Learned DR supported the assessment order. 12. On the other hand learned counsel for the assessee submitted that the issue is no more res-integra. The Hon’ble Delhi High Court in the case of Joint Investment Pvt. Ltd. vs. CIT (2015) 372 ITR 694 (Del.), has categorically held that disallowance of expenditure u/s 14A of the Act is restricted only in relation to tax exempt income. 13. We have heard rival submissions and perused the record. We find that the learned CIT(A) in restricting the disallowance has followed the judgment of the Hon’ble Jurisdictional High Court rendered in the case of Joint Investment Pvt. Ltd. vs. CIT (supra). Therefore, we do not find any infirmity into the order of learned CIT(A) on the issue in question. The same is hereby affirmed. Ground is rejected. 14. Ground no. 4 & 4.1 is against deletion of the addition made on account of income from house property. 8 ITA no. 6725/Del/2016 15. Learned DR supported the assessment order. He drew our attention to the finding of the Assessing Officer on this issue and submitted that the learned CIT(A) was not justified in deleting the addition. 16. On the other hand learned counsel for the assessee submitted that the Assessing Officer has grossly erred in making the addition and the Revenue has not made such addition in the subsequent years and in preceding year. The learned CIT(A) has taken note of the fact and also examined the ratio laid down by the Hon’ble Delhi High Court in the case of Ansal Housing Ltd. and the judgment of Hon’ble Supreme Court in the case of Chennai Property vs. CIT. 17. We have heard rival submissions and perused the material on record. The Revenue could not rebut the fact that there was no addition made in the subsequent years by the Revenue and he strongly relied upon the decision of the learned CIT(Appeals). We find that the learned CIT(A) deleted the addition by observing as under: “Decision:- I have carefully considered the impugned assessment order of AO, submissions, paper book and arguments of Ld AR. The facts that transpire from the assessment order are that the appellant has constructed two malls one at M2k Rohini and other Magnum Plaza Pitampura. The total area at Rohini is 36153.98 sq. ft. out of above Area 5824.70 sq. ft. is sold out and area of 18305.88 sq. ft. is being used for cinema hall of the appellant. Income of the same is offered for taxation and accepted by AO. The area which is left after the sold area and area used for cinema halls comes to 9 ITA no. 6725/Del/2016 12023.40 sq. ft. Out of above 12023.40 sq. ft. an area of 6928.60 sq. ft. is leased to various parties. The Balance area of 5049.80 is under dispute on which the AO has calculated the ALV. In the same way at the Pitampura site the total area is 53694.11 sq. ft. out of total area 18573.80 sq. ft. is sold out in previous years and 13225 sq. ft. stated is being used for cinema halls of the appellant. Out of remaining area of 21895.31 sq. ft. 5479.90 sq. ft. is leased out. The balance area 16415.41 is the vacant and under dispute. The AO observed that since the appellant is owner of the property/shop hence Income from such property/shop has to be determined as per provision of sec. 23 of the Act. The appellant submitted before AO that vacant area of 5049.80 sq. ft. at Rohini site is incomplete and not letable. The appellant contended that even the partition between the shops, P.O.P and paint work is not being done on this area, hence these areas is incomplete and cannot be let out regarding the Pitampura site the contention of the appellant is that the area in front of cinema hall is the passage used for the entrance and exit from the cinema hall and being used during the interval of the movie viewer. Hence it cannot be let out. To buttress the submission, the appellant submitted that in the cinema halls at the Rohini site. There are two screens which occupy 610 seats. The area capitalized at Rohini site for the cinema hall is 18315.41 sq. ft. which come to 30 sq. ft. per admit, where as in the cinema hall at the Pitampura site, there are three screens which occupy 803 seats. The Area capitalized in books of account is 13.225 sq. ft. which comes to 16 sq. ft. per admit and as per appellant it is not possible to accommodate 803 persons in such a small area of 16 feet each. If the passage area of 12,561.31 sq. ft. clubbed with the area of 13.225 sq. ft., which is capitalized in books of account, it totals to 25786.31 sq. ft. and 32 sq. ft. per admit which is as per norms of municipal corporation and Govt. to run the cinema hall. So far as the remaining area of 3853.83 sq. ft is concerned, it is incomplete and not letable and used as godown of the appellant. To substantiate these contentions, the appellant filed sanction plans for both the site, certificate from the qualified architect about the floor plan and also actual photographs of the Area/Shops under dispute. The copy of these documents were filed at Page no. 103 to 127 of the Paper Book filed along with submission dated 25.08.2015. Further the appellant vide its submission dated 27/01/2015 (as reproduced by AO on page no. 19, 1" Para) contended 10 ITA no. 6725/Del/2016 that "you deputed your staff to visit the premises of the assessee to whom the actual status of the Shops/Area was shown to established that the shops are incomplete and used by the assessee as godown, common passage for the business of the assessee. The AO rejected the contention of the appellant and concluded that the appellant has not shown any work in progress in its balance sheet and all the area is shown as stock in trade. Hence the contention of the appellant is contradictory. Accordingly AO computed the ALV and made the additions. The AO has extensively referred the judgment of Hon'ble High Court of Delhi in the case of CIT vs. Ansal Housing finance & leasing 354-ITR-180 (Delhi) to strengthen his conclusion, where as the case of the appellant is that since the Area/Shops are incomplete and used for the passage of cinema halls and storage by the appellant, hence the law laid down by Delhi High Court in Ansal housing supra is not applicable to the facts of the case. The appellant further argued that merely not capítalizing of area of common passage used for cinema business and not showing of W.I.P in balance sheet does not mean it can be let out. Particularly when actual facts are entirely different from as stated in Balance sheet. The AR of the appellant relied on the decision of Hon'ble Supreme Court reported as Sutlej Cotton Mills Ltd. 1979-116-ITR - 1(SC) and Tuticorn Alkalis Chemicals & Fertilizers Ltd. 1997-227-ITR-172 (SC) where in the Hon'ble Supreme Court held that Books of Account are not determinative of taxability, what is necessary to be considered is the true nature of transactions. On careful consideration of the facts and evidences I am of the view that the appellant has established the fact that the area under dispute is incomplete and used for the business of the appellant for cinema halls and store. The AO has not rebutted the contention of the appellant about actual visit by his office staff and spot inspection, inspite of relying on his report for computation of rent. The AO opted not to adjudicate the facts. The case law of Ansal Housing supra relied by AO was rendered on different facts. In the case of Ansal Housing the issue before court was whether if the assessee is a builder and developer, can provisions of sec. 23 of the Act, be invoked. On this issue the Hon'ble High court held that since the assessee is owner of the property, hence the provisions of sec 23 of the Act is applicable. It was not a case that the property is incomplete and used for the business of the assessee. In view of above, since the facts of the case of appellant is entirely different, hence law laid down by Delhi High court in the case of Ansal housing Supra is not applicable and ALV determined by AO by invoking the provisions of sec. 23 of the Act is not tenable in law. 11 ITA no. 6725/Del/2016 Another aspect of the case is that after decision of Delhi High Court in the case of Ansal Housing Ltd., supra Hon'ble Supreme court in case of Chennai properties and Investment vs. CIT 2015-373 ITR 0673(SC) held that if the main object of the assessee is acquiring, constructing & let out the property income arising from such activities will be business Income of the Assessee. This is admitted fact that the main object of the appellant is to acquire, build, operate and let out the properties and malls, hence law laid down by HonRs.ble Supreme Court in case of the Chennai properties supra is squarely applicable to the appellant. In view of above law and facts of the case the provision of sec. 23 of the Act cannot be invoked in the case of appellant and additions made by AO is to be deleted. The Ld. AR of the appellant also submitted that, the contention of the appellant regarding the use of the area under dispute is accepted by AO in preceding assessment years and even in subsequent assessment years, wherein the assessments are completed U/s 153A/143(3) of the Act. The Ld. AR of the appellant also filed copy of the assessment order for the assessment year 2013-14 passed u/s 143(3) of the Act on dated 15.03.2016 wherein after detail examination of the facts the contention of the appellant for the area under dispute is accepted by AO. Copy of assessment orders for the preceding assessment years and subsequent year were filed at page no. 01 to 22 of Annexure "A" of the submission dated 27.09.2016. In view of above facts as well as the law laid down by Supreme Court of India in the case of Radha Swami Satsang Bhawan vs. CIT-1992-193-ITR-321(SC), wherein it was held that even though res judicata is not applicable in the Income tax proceeding but where fundamental aspect were found as fact accepted in earlier year a consistent view should be taken in subsequent year. Applying the above law laid down by Hon'ble Supreme Court to the facts of the appellant case it is admitted position that the area under dispute is incomplete and used as a passage for cinema hall and storage of the appellant is accepted in preceding and subsequent assessments completed under section 153A/143(3) of the Act. I do not find any plausible reason to depart from the accepted facts. In this view of the matter also, the additions of Rs. 4,75,75,902/- made by AO is not sustainable in law and the same is hereby deleted. In result this ground of appeal is allowed.” 18. We find that the learned CIT(A) discussed the issue elaborately and in coming to his conclusion has relied on the ratio of decisions laid down by the 12 ITA no. 6725/Del/2016 Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs. Ansal Housing Finance & Leasing 354 ITR 180 (Delhi); and the judgment of Hon’ble Supreme Court in the case of Chennai Properties & Investment Ltd. vs. CIT (2015) 373 ITR 0673 (SC). Learned DR has not been able to controvert the aforesaid factual position. In the absence of any contrary material, rebutting the contention that part of area was being used for self and rest of the area being incomplete could not have been let out, we do not find any infirmity. The order of learned CIT(A) on the issue in question is affirmed. Ground taken by the Revenue is dismissed. 19. In the result, Revenue’s appeal is partly allowed. Order pronounced in open court on 14 th August, 2024. Sd/- Sd/- (BRAJESH KUMAR SINGH) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 14.08.2024. *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
Mehul