VIJAY ENTERPRISES, MUMBAI V. DCIT 24(2), MUMBAI

ITA 7758/MUM/2012

• Counselvise Citation: 775819914 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Business income; Capital receipt
• Section: 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ./ I.T.A. NO.7758/MUM/2012 ( ! ' / ASSESSMENT YEAR : 2009-10) VIJAY ENTERPRISES GROUND FLOOR, EESHA KRIPA, BRAHMAN SABHA LANE, MALAD, (W), MUMBAI-400064 / VS. DY.COMMISSIONER OF INCOME TAX 24(2), C-13, 6TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051. ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) # ./ '( ./ PAN/GIRNO.:AAAFV2622D #$ ) / APPELLANT BY : REEPAL G TRALSHAWALA %&#$ * ) /RESPONDENT BY: SHRI SUNIL KUMAR SINGH + , * -. / DATE OF HEARING : 19.8.2014 / '! * -. /DATE OF PRONOUNCEMENT : 22.10.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 25.10.2012 PASSED BY LD CIT(A)-34, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. VARIOUS GROUNDS OF APPEAL URGED BY THE ASSESSEE ARE RELATED TO ELIGIBILITY TO CLAIM DEDUCTION U/S 80IB(10) OF THE INCOME TAX ACT, 1961 (THE ACT) IN RESPECT OF CERTAIN RECEIPTS. 3. THE FACTS RELATED TO THE CASE ARE STATED IN BRIE F. THE ASSESSEE IS IN THE BUSINESS OF DEVELOPING AND BUILDING HOUSING PROJECT S. THE HOUSING PROJECT NAMED SYMPHONY GOT COMPLETED DURING THE YEAR REL EVANT TO THE ASSESSMENT YEAR 2009-10, I.E., IN THE YEAR UNDER CONSIDERATION . EARLIER IT HAD COMPLETED THE I.T.A. NO.7758/MUM/2012 2 HOUSING PROJECT NAMED B,C,D AND E WINGS NAZARENE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05. THE ASSE SSEE HAD ALSO DEVELOPED ANOTHER HOUSING PROJECT NAMED NAZARENE-WING A., W HICH WAS COMPLETED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. THE ASSESSEE CLAIMED DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF TWO HOUSING PROJECTS, VIZ., SYMPHONY AND B,C,D AND E WINGS NAZARENE. THE ASSESSEE DID NOT CLAIM DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF HO USING PROJECT NAMED NAZARENE-WING A. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE AO DID NOT ALLOW DEDUCTION U/S 80IB(10) OF THE ACT IN RESP ECT OF CERTAIN RECEIPTS. THE LD CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESS EE HAS FILED THIS APPEAL BEFORE US. 4. THE FIRST RECEIPT PERTAINS TO SHARE MONEY AMOUNT ING TO RS.37,800/- COLLECTED BY THE ASSESSEE FOR ISSUING SHARES IN THE PROPOSED CO-OPERATIVE HOUSING SOCIETY. THE AO NOTICED THAT THE ASSESSEE H AS CREDITED THIS AMOUNT IN THE PROFIT AND LOSS ACCOUNT AND ACCORDINGLY CLAIMED DEDUCTION U/S 80IB (10) OF THE ACT. WHEN THE AO POINTED OUT THAT THE ASSESSE E IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF THI S RECEIPT, THE ASSESSEE SUBMITTED TO THE AO THAT IT WAS A CAPITAL RECEIPT A ND FURTHER SUBMITTED THAT IT WAS WRONGLY INCLUDED IN THE PROFIT AND LOSS ACCOUNT. A CCORDINGLY, THE ASSESSEE REQUESTED THE AO TO EXCLUDE THE SAME FROM THE PROFI T AND GAINS OF THE BUSINESS. THOUGH THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF THE ABOVE RECEIPT BUT HE DID NOT EXCLUDE THE SAME FROM THE BUSINESS INCOME. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A ) CONFIRMED THE ACTION OF THE AO AND HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND CAREFULLY PERUSED THE RECORD. WE FIND THAT BOTH THE TAX AUTHORITIES H AD ACCEPTED THE SUBMISSIONS OF ASSESSEE THAT THE AMOUNT OF RS.37,800/- RECEIVED TO WARDS SHARE MONEY IN THE PROPOSED HOUSING CO-OPERATIVE SOCIETY IS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. BOTH THE TAX AUTHORITIES HAVE ALSO HELD THAT THIS RECEIPT IS NOT CONNECTED WITH DEVELOPMENT AND BUILDING OF THE HOUS ING PROJECT AND ACCORDINGLY DENIED DEDUCTION U/S 80IB(10) OF THE ACT. HOWEVER, WE NOTICE THAT TAX AUTHORITIES HAVE OMITTED TO CONSIDER THE ALTERNATIVE PLEA OF TH E ASSESSEE THAT IT IS LIABLE TO BE EXCLUDED FROM THE BUSINESS INCOME, SINCE IT IS A CA PITAL RECEIPT. THERE SHOULD NOT I.T.A. NO.7758/MUM/2012 3 BE ANY DOUBT THAT THE CAPITAL RECEIPT CANNOT BE ASS ESSED TO TAX EXCEPT WITH THE MANDATE OF THE ACT AND HENCE, WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THE SAME IS LIABLE TO BE EXCLUDED FROM THE TOT AL INCOME. ACCORDINGLY, WE DIRECT THE AO TO EXCLUDE THE SAME FROM THE BUSINESS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 6. NEXT ISSUE RELATES TO THE CONTRIBUTION OF RS.6,3 0,000/- RECEIVED FROM THE BUYERS OF FLATS TOWARDS LEGAL CHARGES. THE ASSESSEE HAS CLAIMED THAT IT HAS RECEIVED THE ABOVE SAID AMOUNT TOWARDS DRAFTING OF AGREEMENTS AND OTHER LEGAL FEES INCURRED ON BEHALF OF ALL THE FLAT OWNERS. BO TH THE AUTHORITIES REJECTED THE CLAIM OF DEDUCTION U/S 80IB(10) MADE IN RESPECT OF THE ABOVE SAID RECEIPTS. 7. BEFORE US, THE LD.AR PLACED RELIANCE ON THE DECI SION RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S M/S VAMAN ESTATE IN ITA NO.7570/MUM/2011 (AY-2008-09), DATED 19.10.2012 AND SUBMITTED THAT THE LEGAL COSTS COLLECTED BY THE BUILDER FROM THE BUYER S OF THE FLATS WAS TO BE ALLOWED AS DEDUCTION U/S 80IB(10) OF THE ACT. ON PERUSAL O F THE ORDER OF THE TRIBUNAL REFERRED ABOVE, WE NOTICE THAT THE TRIBUNAL, IN TU RN, HAS PLACED RELIANCE ON THE DECISION RENDERED BY ANOTHER CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S M/S PATHARE AND ASSOCIATES IN ITA NO.1211 /MUM/2008 (AY-2004-05), DATED 13.8.2009. IN BOTH THE CASES, IT HAS BEEN HE LD THAT THE DEDUCTION U/S 80IB(10) IS AVAILABLE IN RESPECT OF CONTRIBUTION RE CEIVED FOR LEGAL EXPENSES. THERE SHOULD NOT BE ANY DISPUTE THAT THE LEGAL EXPE NSES HAVE BEEN INCURRED BY THE ASSESSEE IN ORDER TO LEGALLY PUT THE FLATS TO T HE POSSESSION OF THE BUYERS. THUS, WE NOTICE THAT THESE EXPENSES HAVE BEEN INCUR RED TO COMPLETE THE FORMALITY OF SALE OF FLATS AND HENCE WE ARE OF THE VIEW THAT THE AMOUNT COLLECTED FROM THE BUYERS WILL FORM PART OF THE RECEIPTS PERT AINING TO DEVELOPMENT AND BUILDING OF HOUSING PROJECT. ACCORDINGLY, WE SET A SIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DEDUCTION U /S 80IB(10) OF THE ACT IN RESPECT OF THIS RECEIPT. 8. NEXT RECEIPT PERTAINS TO COLLECTION OF RS.5,04,0 00/- (WRONGLY MENTIONED RS.4,04,000/- BY CIT(A)) TOWARDS REGISTRATION OF HO USING SOCIETY. I.T.A. NO.7758/MUM/2012 4 9. THERE SHOULD NOT BE ANY DISPUTE THAT THE HOUSING SOCIETY IS FORMED FOR PEACEFUL LIVING IN THE FLATS PURCHASED BY THE OWNER S. THOUGH THE HOUSING SOCIETY MIGHT HAVE BEEN FORMED PRIOR TO THE COMPLETION OF T HE HOUSING PROJECT, YET ITS EFFECTIVE ACTIVITIES WOULD NORMALLY COMMENCE AFTER COMPLETION OF THE HOUSING PROJECT. ACCORDINGLY, WE ARE OF THE VIEW THAT TH IS RECEIPT WOULD NOT FORM PART OF THE DEVELOPMENT AND BUILDING OF HOUSING PROJECT AN D ACCORDINGLY THE AMOUNT COLLECTED TOWARDS REGISTRATION OF HOUSING SOCIETY W ILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. ACCORDINGLY, WE AFFIRM T HE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. HOWEVER, IT IS SUBMITTED THAT THE ASSE SSEE HAS BOOKED THE EXPENDITURE INCURRED FOR REGISTRATION OF SOCIETY IN ITS REGULAR BOOKS OF ACCOUNT AND FURTHER IT WAS SUBMITTED THAT IT IS NOT POSSIBLE TO MAKE 1 TO 1 CORRELATION OF THE SAME. SINCE, WE HAVE HELD THAT THE IMPUGNED COLLE CTION IS NOT RELATED TO ACTIVITY OF DEVELOPMENT OF HOUSING PROJECT, WE FIND MERIT IN THE SUBMISSION THAT THE EXPENDITURE INCURRED IN CONNECTION THEREWITH ARE LI ABLE TO BE EXCLUDED WHILE COMPUTING THE INCOME DERIVED FROM THE BUSINESS OF D EVELOPING AND BUILDING HOUSING PROJECTS ALONG WITH THE COLLECTION OF RS.5, 40,000/- REFERRED ABOVE. ACCORDINGLY, IF THE ASSESSEE IS ABLE TO IDENTIFY TH E EXPENSES AND ALSO SATISFY THE AO, THE EXPENSES REFERRED ABOVE MAY BE EXCLUDED. A CCORDINGLY, FOR THIS LIMITED PURPOSE, WE SET ASIDE THIS MATTER TO THE FILE OF AO . SUBJECT TO THE ABOVE, THE ORDER OF LD. CIT(A) STANDS CONFIRMED. 10. NEXT ISSUE PERTAINS TO CHARGES COLLECTED FOR PR OVISION OF SWIMMING POOL AND HEALTH CLUB. BEFORE US, THE LD. AR PLACED A CO PY OF THE DECISION RENDERED BY THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S M/S NORTH CITY DEVELOPERS IN ITA NO.1307(KOL) OF 2010 (AY-2007-08) DATED 14.7.2011 TO CONTEND THAT SWIMMING POOL HAS TO BE CONSIDERED AS PART OF HOUSING PROJECT. HOWEVER, WE NOTICE FROM THE ORDER OF LD. CIT(A) (P ARAGRAPH 4.4.) THAT THE FIRST APPELLATE AUTHORITY HAS GIVEN A FINDING THAT SWIMM ING POOL AND HEALTH CLUB WERE NOT FORMING PART OF HOUSING PROJECT APPROVED BY LO CAL AUTHORITY FOR SYMPHONY PROJECT. HOWEVER, BEFORE US, THE LD. AR HAS DISPUT ED THE SAID FINDING GIVEN BY THE LD. CIT(A). THERE SHOULD NOT BE ANY DISPUTE TH AT THE ASSESSEE SHALL BE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF HEALTH CLUB AND SWIMMING POOL IF IT FOUND TO BE PART OF THE HOUSI NG PROJECT PLAN APPROVED BY THE LOCAL AUTHORITY. HOWEVER, WE HAVE NOTICED THAT THE FINDING GIVEN BY THE LD. CIT(A) IN THIS RESPECT IS BEING DISPUTED BY THE LD. AR. HENCE, WE ARE OF THE VIEW THAT I.T.A. NO.7758/MUM/2012 5 THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO BY DULY CONSIDERING THE FACTUAL ASPECTS RELATING TO THE SAME. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO TH E FILE OF THE AO WITH A DIRECTION TO EXAMINE THE PLAN APPROVED BY THE LOCAL AUTHORITY AND TAKE APPROPRIATE DECISION IN THE LIGHT OF THE DISCUSSIONS MADE (SUPR A). 11. THE NEXT RECEIPT RELATES TO CAR PARKING CHARES RECEIVED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE AO HAS ALLOWED THE CL AIM OF THE ASSESSEE WHILE GIVING EFFECT TO THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, HE DID NOT PRESS THIS GROUND. ACCORDINGLY, WE DISMISS THIS GR OUND AS NOT PRESSED. 12. THE NEXT RECEIPT RELATES TO THE INTEREST COLLE CTED FROM BUYERS ON DELAYED PAYMENT OF INSTALLMENTS. THE LD CIT(A) HAD DIRECTE D THE AO TO ALLOW THE DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF REC EIPTS PERTAINING TO RESIDENTIAL UNITS. AT THE TIME OF HEARING, THE LD A.R SUBMITTE D THAT THE AO HAS NOT GIVEN EFFECT TO THE ORDER OF LD CIT(A). FURTHER, HE PLAC ED RELIANCE ON THE FOLLOWING CASE LAW TO SUBMIT THAT THE ASSESSEE IS ELIGIBLE FOR DED UCTION IN RESPECT OF INTEREST COLLECTED ON DELAYED PAYMENT OF INSTALLMENTS:- (A) CIT VS. PRATHAM DEVELOPERS (355 ITR 507)(GUJ) (B) CIT VS. VIDYUT CORPORATION (324 ITR 221)(BOM ) IN THE CASE OF PRATHAM DEVELOPERS (SUPRA), THE HON BLE GUJARAT HIGH COURT HAS HELD THAT THE INTEREST RECEIVED ON DELAYED PAYMENTS WOULD BE ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. ACCORDINGLY, W E SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE DEDUCTION U/S 80IB(10) IN RESPECT OF THIS RECEIPT. 13. THE NEXT RECEIPT RELATES TO THE AMOUNT OF R S.74,600/- COLLECTED BY THE ASSESSEE IN CONNECTION WITH NAZARENE HOUSING PROJEC T. THE BREAK-UP DETAILS OF THE SAID COLLECTION IS AVAILABLE AT PAGE 59 OF THE PAPER BOOK FILED BY THE ASSESSEE AND IT CONSISTS OF COLLECTION TOWARDS LEGAL EXPENSE S, WATER & ELECTRICITY CONNECTION, REGISTRATION OF SOCIETY, MANAGEMENT CHA RGES, DEVELOPMENT CHARGES, TUBEWELL CHARGES AND INTERCOM. THE LD A.R SUBMITTED THAT THE AO HAD ALLOWED DEDUCTION IN RESPECT OF MANAGEMENT CHARGES AND DEVELOPMENT CHARGES COLLECTED IN SYMPHONY PROJECT. ON A PERUSAL OF THE DETAILS, WE NOTICE THAT ALL THE I.T.A. NO.7758/MUM/2012 6 EXPENSES EXCEPT THAT PERTAINING TO REGISTRATION OF SOCIETY ARE RELATED TO THE DEVELOPMENT AND BUILDING OF HOUSING PROJECT. ACCOR DINGLY, WE SUSTAIN THE ORDER OF LD CIT(A) IN RESPECT OF COLLECTION RELATING TO R EGISTRATION OF SOCIETY (RS.21,000/-) AND SET ASIDE HIS ORDER IN RESPECT OF OTHER RECEIPTS. ACCORDINGLY, WE DIRECT THE AO TO ALLOW DEDUCTION U/S 80IB(10) IN RESPECT OF OTHER RECEIPTS. 14. THE LAST ISSUE PERTAINS TO THE SETTING OFF O F LOSS ARISING FROM NAZARENE-A WING (NON-80IB(10) PROJECT) AGAINST THE PROFIT ARI SING FROM 80IB(10) ELIGIBLE PROJECTS. THE LD A.R SUBMITTED THAT THE ASSESSEE H AD OBTAINED SEPARATE APPROVAL FOR EACH OF THE PROJECT AND HENCE THE TAX AUTHORITIES ARE NOT JUSTIFIED IN SETTING OF THE LOSS AS STATED ABOVE. HOWEVER, ON A PERUSAL OF THE ORDER PASSED BY LD CIT(A), WE NOTICE THAT THE FIRST APPELLATE AU THORITY HAS PROCEEDED TO ADJUDICATE THIS ISSUE AGAINST THE ASSESSEE ON THE P RESUMPTION THAT THERE WAS A SINGLE APPROVAL FOR ALL PROJECTS. IF THE APPROVALS HAVE BEEN OBTAINED SEPARATELY FOR EACH OF THE PROJECT, IN OUR VIEW, THERE IS NO R EQUIREMENT OF SETTING OFF LOSS ARISING FROM NON-80IB(10) PROJECT AGAINST THE PROFI T ARISING FROM 80-IB(10) PROJECTS. HOWEVER, SINCE THE FACTUAL DETAILS RELAT ING TO THE APPROVAL OF THE PROJECTS REQUIRE VERIFICATION AS THE ASSESSEE DISPU TES THE OBSERVATION MADE BY LD CIT(A), WE ARE OF THE VIEW THAT THIS ISSUE REQUI RES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING O FFICER WITH THE DIRECTION TO EXAMINE THE PROJECT APPROVAL DETAILS IN THE LIGHT O F DISCUSSIONS MADE SUPRA AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LA W. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPE N COURT ON 22ND OCT, 2014. / '! + 0 1 2 3 22 ND OCT , 2014 * ;, < SD SD ( . / D. MANMOHAN ) ( . . ,/ B.R. BASKARAN) / VICE- PRESIDENT / ACCOUNTANT MEMBER + , MUMBAI: 22ND OCT,2014. . . ./ SRL , SR. PS I.T.A. NO.7758/MUM/2012 7 / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT. 3. + =- ( ) / THE CIT(A)- CONCERNED 4. + =- / CIT CONCERNED 5. 6. >?; %- @ , . @ ! , + , / DR, ITAT, MUMBAI CONCERNED ; , / GUARD FILE. A + / BY ORDER, TRUE COPY ' (ASSTT. REGISTRAR) . @ ! , + , /ITAT, MUMBAI