Tidel Park Limited, CHENNAI V. ACIT, CHENNAI

ITA 913/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9654 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 28-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYACIT
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Depreciation; Capital receipt; Capital expenditure
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.913 & 914 /MDS./2015 ( / ASSESSMENT YEARS :2010-11 & 2011-12) M/S.TIDEL PARK LTD ., 4,RAJIV GANDHI SALAI, TARAMANI,CHENNAI 600 113. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2), CHENNAI 600 034. PAN AABCT 0666 R ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.R.VIJAYARAGHAVAN,ADVOCATE / RESPONDENT BY : MR.PATHLAVATH PEERYA,CIT, D.R / DATE OF HEARING : 28.03.2016 /DATE OF PRONOUNCEMENT : 13.04.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE DIFFERENT ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX-3, ITA NOS.913,914/MDS/2015 2 CHENNAI DATED 24.02.15 & 25.02.15 PERTAINING TO T HE ASSESSMENT YEARS 2010-11 & 2011-12 RESPECTIVELY. 2. THE COMMON GROUND IN THESE TWO APPEALS IS WITH R EGARD TO INVOKING THE JURISDICTION U/S.263 OF THE ACT SO AS TO HOLD THAT SINKING FUND DEPOSIT RECEIVED BY THE ASSESSEE FROM THE PART IES AS REVENUE RECEIPT. IN THESE ASSESSMENT YEARS, THE ASSESSEE RE CEIVED A SUM OF 8,60,040/- (A.Y.2010-11) FROM M/S.DATA TELESIS PVT . LTD., AND A SUM OF 2,58,254/- (A.Y 1011-12) FROM M/S.TECHNOSOFT GL OBAL SERVICES (P) LTD. THE AO MADE NO DEDUCTION TO THESE RECEIPTS IN HIS ASSESSMENT ORDERS. HENCE, THE CIT INVOKED THE PROVISIONS OF TH E SECTION 263 OF THE ACT SO AS TO GIVE DIRECTION TO THE AO TO CONSID ER THIS RECEIPT AS REVENUE RECEIPT AND RE-FRAME THE ASSESSMENT. AGAIN ST THIS ASSESSEE IS IN APPEAL BEFORE US. 3. BEFORE US, THE LD.A.R SUBMITTED THAT SINKING FU ND IS COLLECTED AT 1.5% OF THE SALE VALUE FROM THE OWNER OCCUPANTS TO WHOM ASSESSEE SOLD SPACE IN EARLIER YEARS FOR MEETING THE EXPENDI TURE ON COMMON FACILITIES USED BY THE CO-OWNERS. FURTHER, LD.A.R SUBMITTED THAT ITA NOS.913,914/MDS/2015 3 SINKING FUND IS CAPITAL IN NATURE AS THE SPACE IS S OLD ALONG WITH STRUCTURAL, ELECTRONIC AND ELECTRICAL EQUIPMENTS/IN STALLATIONS AT THE SOLD SPACE AND THEY ARE COLLECTED WITH AN ATTENDANT OBLIGATION TO UTILIZE THE SAME TOWARDS CAPITAL EXPENDITURE THAT A RE TO BE INCURRED BY ASSESSEE IN FUTURE LIKE REPLACEMENT OF PLANT & MACH INERY, MAJOR OVERHAULING EXPENSES ETC. AND THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON THOSE ASSETS. THE LD.A.R EMPHASIZED THAT APPROPRIATION TOWARDS SINKING FUND IS IN THE NATURE OF COLLECTING FUNDS FROM THE CO-OWNERS TO MEET FUTURE LIABILITY AND HEN CE IT CANNOT BE TREATED AS INCOME OF ASSESSEE. FURTHER, LD.A.R SUB MITTED THAT INTEREST ON SINKING FUND OF ` 10,62,076/- AND ` 18,67,921/- HAS ALREADY BEEN OFFERED TO TAX IN THE RETURN OF INCOME AND HE NCE THE 263 ORDER HAS TO BE SET ASIDE. LD.A.R PLACED RELIANCE IN THE CASE OF ALPHA SERVICES VS. DCIT IN ITA NO.1063/DEL/2011. 4. ON THE OTHER HAND, LD.D.R RELIED ON THE JUDGEME NT OF BOMBAY HIGH COURT IN THE CASE OF M.VISVESVARAYA, INDUSTRIA L RESEARCH AND DEVELOPMENT CENTRE VS. CIT REPORTED IN 26 TAXMANN.C OM 200 DATED 25.10.2012. ITA NOS.913,914/MDS/2015 4 5.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE COLLECTED THE SI NKING FUND FROM THE PARTIES AND TREATED AS CAPITAL RECEIPT. ACCORDING TO THE CIT, THE RECEIPT FROM SINKING FUND FROM THE PARTIES IS A REV ENUE RECEIPT IN VIEW OF THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE O F M.VISVESVARAYA, INDUSTRIAL RESEARCH AND DEVELOPMENT CENTRE VS. CIT (SUPRA) WHEREIN HELD THAT:- A) THE MERE USE OF THE TERM SINKING FUND AND THE MANNER IN WHICH THE ASSESSEE TREATS THE SAME IN ITS ACCOUNTS IS NOT DECISIVE OF THE MATTER. B) THE AMOUNT LYING IN THE SINKING FUND IS TO BE USED FOR DISCHARGING THE ASSESSEES OBLIGATIONS UNDER THE LE ASE AGREEMENTS. THE ASSESSEE HAD COMPLETE CONTROL OVER THESE FUNDS. IT WAS ENTITLED TO DETERMINE THE QUANTUM TH EREOF ALTHOUGH THE BASIS IS PROVIDED UNDER THE AGREEMENT. C) THE FUNDS WERE, IN FACT USED AND IN ANY EVENT, A RE ADMITTEDLY TO BE USED IN RESPECT OF THE SAID FACILITIES AND PLANT AND MACHINERY. FURTHER, THE ASSESSEE HAD CLAIMED AND WAS GRANTED DEPRECIATION IN RESPECT OF THE PLANT AND MA CHINERY AND ITA NOS.913,914/MDS/2015 5 THE EQUIPMENT IN RESPECT OF THE SAID FACILITIES ORI GINALLY INSTALLED AS WELL AS ANY REPLACEMENT IN RESPECT THEREOF. D) THE FACT THAT DEPRECIATION HAS BEEN CLAIMED BY T HE ASSESSEE IN RESPECT OF THE PLANT AND MACHINERY AND OTHER EQUIPM ENT REQUIRED FOR EXTENDING THE FACILITIES INDICATES THA T THE SINKING FUND WAS UTILIZED FOR ACQUIRING AND MAINTAINING TH E SAME FOR THE BENEFIT OF THE ASSESSEE. E) THE INCOME WAS, THEREFORE,, USED BY THE ASSESSEE AND FOR THE ASSESSEE AND THE ASSESSEE RETAINED THE BENEFIT ARIS ING THEREFROM. F) THEREFORE,, THE TRIBUNAL WAS RIGHT IN ITS CONCLU SION THAT THE AMOUNT APPROPRIATED TOWARDS A SINKING FUND WAS IN T HE NATURE OF REVENUE RECEIPT. FURTHER, CIT OBSERVED THAT IT IS VERY CLEAR FROM TH E ABOVE DECISION OF THE BOMBAY HIGH COURT THAT EVEN IF THE SINKING FUND WAS TO BE UTILIZED TOWARDS CAPITAL EXPENDITURE, STILL THE AMOUNT RECEI VED UNDER SINKING FUND WOULD BE ASSESSEES INCOME. ITA NOS.913,914/MDS/2015 6 5.2 ON THE OTHER HAND LD.A.R RELIED IN THE CASE OF ALPHA SERVICES VS. DCIT (SUPRA) WHEREIN HELD THAT FUND COLLECTED BY THE ASSESSEE FROM THE FLAT OWNERS AND /OR TENANTS FOR REPLACEMEN T OF CAPITAL ASSETS AND CAPITAL REPAIR WHICH WAS CONSIDERED AND TREATED AS CAPITAL RECEIPT IN THE ACCOUNTS BY THE ASSESSEE SINCE ITS INCEPTION , AND THE SAME WAS ALSO ACCEPTED BY THE DEPARTMENT IN EARLIER YEAR S, CANNOT BE TREATED AS CAPITAL RECEIPT WHEN THERE IS NO CHANGE IN FACTS OR LAW DURING THE CURRENT ASSESSMENT YEAR. 5.3 FURTHER, LD.A.R SUBMITTED THAT EVEN IF IT IS CONSIDERED AS A REVENUE RECEIPT, THE SINKING FUND COLLECTION IS PAR T OF THE SALE CONSIDERATION OF PROPERTY AND THEREBY ASSESSEE IS E NTITLED FOR DEDUCTION U/S.80-IA OF THE ACT. FIRST OF ALL, IN T HE ASSESSMENT ORDER THERE WAS NO DISCUSSION WHATSOEVER BY AO ON THE ISS UE RELATING TO SINKING FUND. THERE IS NO APPLICATION OF MIND OR A NY ENQUIRY BY THE AO ON THIS ISSUE. BEING SO, IN OUR OPINION, THE AS SUMPTION OF JURISDICTION U/S.263 OF THE ACT IS JUSTIFIED. REGAR DING THE PLEAS OF THE ASSESSEE IS THAT THE SINKING FUND IS A PART OF SALE CONSIDERATION OF THE PROPERTY, IN OUR OPINION, THIS PLEA OF THE ASSESSE E IS HAVING NO MERIT ITA NOS.913,914/MDS/2015 7 SINCE IT IS AN ADMITTED FACT THE OFFICE SPACE SOLD DURING THE YEAR WAS NOT ACTUALLY OWNED BY THE ASSESSEE. THE TRANSACTIO N HAS ACTUALLY TAKEN PLACE BETWEEN M/S.SCM MICROSYSTEMS (INDIA) P. LTD. AND M/S.DATA TELESIS PVT. LTD. THOUGH THE ASSESSEE IS N OT INVOLVED IN THE SALE OF OFFICE SPACE, STILL THE SINKING FUND IS COL LECTED BY THE ASSESSEE FROM THE BUYER. THIS DOES NOT A PART OF THE SALE C ONSIDERATION RECEIVED BY THE ASSESSEE SO AS TO BE TREATED AS CAP ITAL RECEIPT AND TO GRANT DEDUCTION U/S.80-IA OF THE ACT. FURTHER, THE CONTENTION OF ASSESSEES COUNSEL IS THAT THE SINKING FUND WAS COL LECTED FOR THE UTILIZATION OF ALL KINDS OF STRUCTURAL REPAIRS AND FOR THE REPLACEMENT OF MECHANICAL, ELECTRONIC AND ELECTRICAL EQUIPMENTS/IN STALLATIONS, AND THE ADMINISTRATIVE EXPENSES INCURRED THEREOF. IN O THER WORDS, IT HAS BEEN COLLECTED TO SAFEGUARD THE FUTURE PAYMENTS; TH E SALE IS ADJUSTED AGAINST IT. IN OUR OPINION, THE TRANSACTION IS IN THE NATURE OF CHARGING FEES FROM OWNERS FOR PROVIDING VARIOUS TYPES OF SER VICES IN THE FORM OF MAINTENANCE OF VARIOUS ROUTINE SERVICES AND MAINTEN ANCE OF THE BUILDING, CONSEQUENTLY, ALL WITHIN THE AMBIT OF TRA DING ACTIVITIES, NOTHING TO DO WITH THE CONSIDERATION RECEIVED BY TH E ASSESSEE, IF ANY. FURTHER, THERE IS A BINDING DECISION OF THE BOMBAY HIGH COURT (26 ITA NOS.913,914/MDS/2015 8 TAXMANN.COM 200) IN WHICH THE CIT PLACED RELIANCE S O AS TO TREAT THE IMPUGNED RECEIPT AS A REVENUE RECEIPT, AS SUCH WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT. BOTH THE ORDERS OF THE COMMISSIONER OF INCOME TAX FOR THE ASSESSMENT YEARS2010-11 & 201 1-12 ARE CONFIRMED. 6. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 13 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) ( ( () * + ) ) ! CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH APRIL,2016. K S SUNDARAM. -.,, /0,10 /COPY TO: , 1. /APPELLANT 2. /RESPONDENT 3. , 2,!' /CIT(A) 4. , 2 /CIT 5. 034, 5 /DR 6. 4&,6 /GF