ACIT, Circle-2(3), Hyderabad V. M/s.Green Home Realtors Pvt.Ltd., Hyderabad

ITA 918/HYD/2012

• Counselvise Citation: 91822514 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Capital asset; Depreciation; Revenue expenditure
• Section: 143(3); 133A; 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 918/HYD/2012 ASSESSMENT YEAR: 2005-06 ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 2(3), HYD. M/S GREEN HOME REALTORS PVT. LTD., HYDERABAD PAN AABCG3772B (APPELLANT) (RESPONDENT) REVENUE BY SHRI RAJAT MITRA ASSESSEE BY SHRI K.A. SAI PRASAD DATE OF HEARING 16-12-2014 DATE OF PRONOUNCEMENT 19-12-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST ORDER DATED 29/03/2012 OF LD. CIT(A)-III, HYDERABAD FOR THE ASS ESSMENT YEAR 2005-06. 2. THE DEPARTMENT HAS RAISED IN TOTAL EIGHT GROUNDS . GROUND NOS. 1, 7 & 8 BEING GENERAL IN NATURE DO NOT REQUIRE SPE CIFIC ADJUDICATION. THE FIRST ISSUE AS RAISED IN 2, 3 & 4 RELATES TO DE LETION OF ADDITION OF RS. 45,37,500 ON ACCOUNT OF SUPPRESSION OF SALE PRI CE. 3. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN DEVELOPMENT AND SALE OF PLOTS. FOR AY UNDER CONSID ERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 22/03/2004, DECLARING INCOME OF RS. 14,79,405. A SURVEY U/S 133A WAS CONDUCTED IN THE B USINESS PREMISES OF ASSESSEE ON 27/10/2005. THEREAFTER, ASS ESSMENT WAS 2 ITA NO. 918/HYD/2012 M/S GREEN HOME REALTORS PVT. LTD. COMPLETED U/S 143(3) VIDE ASSESSMENT ORDER DATED 29 /12/2006 BY ACCEPTING THE INCOME RETURNED. SUBSEQUENTLY, ON THE BASIS OF CERTAIN INFORMATION AVAILABLE WITH HIM, AO REOPENED THE ASS ESSMENT U/S 147 OF THE ACT. IN COURSE OF ASSESSMENT PROCEEDING, ASS ESSEE SUBMITTED A STATEMENT OF SALES SHOWING CUSTOMER-WISE DETAILS OF EXTENT OF LAND SOLD, RATE PER SQ.FT. ETC. AS PER THE STATEMENT LAN D WAS SOLD @ 125/130 PER SQ.YD. HOWEVER, IT WAS NOTICED BY AO TH AT IN CASE OF LAND SOLD TO MR. KIRSHNAMA NAIDU, PLOT NUMBER SOLD WAS N OT MENTIONED, BUT, EXTENT OF LAND WAS MENTIONED AT 36300 SQ.YD AN D SALE CONSIDERATION RECEIVED WAS SHOWN AT RS. 4,05,000, W HICH ACCORDING TO AO, WORKS OUT TO RS. 11.19 PER SQ.YD. WHEN AO CA LLED UPON ASSESSEE TO EXPLAIN THE DISCREPANCY IN THE SALE CON SIDERATION. IT WAS SUBMITTED BY ASSESSEE THAT THE PLOT OF LAND SOLD TO MR. KRISHNAMA NAIDU WAS NOT A DEVELOPED ONE AND IT WAS A LAND WHI CH IS NOT SUITABLE FOR LAY OUT. IT WAS FURTHER SUBMITTED THAT SALE WAS MADE IN ACRES BUT NOT IN YARDS AS IN THE CASE OF DEVELOPED PLOTS. ASS ESSEE FURTHER SUBMITTED THAT DURING THE ACQUISITION OF LAND SOME OF THE OWNERS OF THE LAND WOULD NOT SELL THEREFORE THEY CANNOT CONV ERT ALL LANDS INTO PLOTS. IT WAS SUBMITTED, WHEREVER IT IS NOT POSSIBL E TO LAY LAYOUTS, THEY SELL THE LAND AS IT IS IN UNDEVELOPED CONDITION. IN SUPPORT OF SUCH CLAIM, ASSESSEE ALSO FURNISHED BEFORE THE AO CERTAI N INSTANCES OF SALES OF UNDEVELOPED LAND. AO, HOWEVER, REJECTED TH E SUBMISSIONS OF ASSESSEE AND WORKED OUT THE SALE CONSIDERATION OF L AND SOLD TO MR. KRISHNAMA NAIDU BY TREATING IT ON PAR WITH OTHER PL OTS BY ADOPTING THE RATE OF RS. 125 PER SQ.YD. AS A RESULT, THE SALE CO NSIDERATION WAS DETERMINED AT RS. 45,37,500, WHICH WAS ADDED TO THE INCOME OF ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION, ASSESSE E PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF HEARING OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE FURNISHING THE DETAILS OF LAND PURCHASED AND SOLD SUBMITTED THAT THE SUBJECT LAND SOLD TO MR. KRISHNA MA NAIDU WAS NOT A DEVELOPED LAND AND IT WAS NOT IN THE LAY OUT ALSO. IT WAS SUBMITTED 3 ITA NO. 918/HYD/2012 M/S GREEN HOME REALTORS PVT. LTD. THAT SUBJECT LAND SITUATED IN SURVEY NO. 23 WAS SO LD IN ACRES AS IT WAS NOT DEVELOPED INTO PLOTS AND OUTSIDE THE LAY OU T. ASSESSEE FURNISHING THE DETAILS OF LAND ORIGINALLY PURCHASED BY IT, SUBMITTED THAT THE TOTAL LAND PURCHASED ARE AS UNDER: ORIGINALLY THE LAND WAS PURCHASED IN THE YEAR 2001 -2002: DOCUMENT NO. 2421/2002 DT. 02/07/2002 6.25 ACRES RS . 3,98,925 DOCUMENT NO. 3837/2001 DT. 28/08/2001 5.00 ACRES RS . 2,23,291 TOTAL 11.25 ACRES RS.6,22,216 AVERAGE PER ACRE RS. 55,524 IT WAS SUBMITTED, OUT OF THE TOTAL LAND AVAILABLE, ASSESSEE SOLD 7.20 ACRES FOR A CONSIDERATION OF RS. 4,05,000 WITH AVER AGE SALE PRICE OF RS. 56,000 PER ACRE. ASSESSEE ALSO FURNISHED A COPY OF LAY OUT TO DEMONSTRATE THAT SURVEY NO. 23 OF JUKAL VILLAGE WAS NOT PART OF THE LAY OUT. THUS, IT WAS SUBMITTED BY ASSESSEE, THE LA ND WAS PURCHASED AND SOLD IN ACRES AS IT WAS NOT DEVELOPED. THEREFOR E, SINCE IT WAS NOT PART OF THE PLOTS IN THE LAY OUT, IT CANNOT BE TREA TED ON PAR WITH THE SALE PRICE OF THE PLOTS. LD. CIT(A) AFTER CONSIDERI NG THE SUBMISSIONS OF ASSESSEE AND EXAMINING THE MATERIALS AVAILABLE O N RECORD ACCEPTED ASSESSEES CLAIM THAT THE LAND SOLD TO MR. KRISHNAMA NAIDU IN SURVEY NO. 23 IS NOT PART OF THE LAY OUT OF THE PLOTS, HENCE, THE PRICE OF THE LAND CANNOT BE TAKEN AT RS. 125 PER SQ .YD., WHICH IS THE PRICE FOR THE DEVELOPED PLOTS. LD. CIT(A), HOWEVER, FOUND THAT THE VALUE OF LAND SOLD BY ASSESSEE TO MR. KRISHNAMA NAI DU WORKS OUT TO RS. 56,250 WHEN COMPARED TO VALUE PER ACRE AT RS. 6 3,875 PURCHASED BY ASSESSEE DURING THE YEAR 2005. LD. CIT(A), THERE FORE, CONCLUDED THAT AS THE LAND SOLD TO KRISHNAMA NAIDU IN SURVEY NO. 23 OUTSIDE THE LAY OUT, AO COULD NOT HAVE ADOPTED THE RATE OF RS. 125 PER SQ.YD. HOWEVER, SHE DIRECTED THE AO TO ADOPT THE SALE CONS IDERATION AT RS. 63,875 PER ACRE AS AGAINST RS. 56,250 SHOWN BY ASSE SSEE. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. 4 ITA NO. 918/HYD/2012 M/S GREEN HOME REALTORS PVT. LTD. ON A PERUSAL OF THE ASSESSMENT ORDER, IT IS ABSOLU TELY CLEAR THAT AO HAS REJECTED EXPLANATION OF ASSESSEE WITHOUT PROPER APPRECIATION OF FACTS AND MATERIALS ON RECORD AND WITHOUT APPLICATI ON OF MIND. HE HAS NOT EXAMINED ASSESSEES CLAIM THAT THE LAND SOLD TO MR. KRISHNAMA NAIDU IN ACRES WAS AN UNDEVELOPED PLOT, HENCE, CANN OT BE TREATED ON PAR WITH DEVELOPED PLOTS SOLD AT RS. 125 TO 130 PER SQ.YD. IN THESE CIRCUMSTANCES, WHEN THE FACTS AND MATERIALS BROUGHT ON RECORD DEMONSTRATE THAT THE LAND SITUATED AT JUKAL VILLAG E IN SURVEY NO. 23 SOLD TO MR. KRISHNAMA NAIDU IS AN UNDEVELOPED LAND NOT WITHIN THE LAY OUT, AO COULD NOT HAVE IGNORED THE EVIDENCES BROUGH T ON RECORD AND TREATED THE VALUE OF LAND ON PAR WITH THE DEVELOPED PLOTS. MOREOVER, WHEN AO ALLEGES THAT ADDITIONAL SALE CONSIDERATION, OVER AND ABOVE THE AMOUNT SHOWN BY ASSESSEE, HAS PASSED BETWEEN T HE PARTIES, ONUS IS ON HIM TO PROVE THAT FACT. WITHOUT BRINGING ANY EVIDENCE ON RECORD TO SHOW THAT THE ADDITION SALE CONSIDERATION TO THE EXTENT OF RS. 45,37,500 HAS PASSED BETWEEN ASSESSEE AND THE P URCHASER, HE CANNOT MAKE ADDITION PURELY ON PRESUMPTIONS AND SUR MISES. IN THE AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUNDS RAISED ON THIS ISSUE ARE DISMISSED. 6. THE ONLY OTHER ISSUE AS RAISED IN GROUND NOS. 5 & 6 RELATES TO DISALLOWANCE OF DEPRECIATION OF RS. 2,30,788. 7. BRIEFLY, THE FACTS RELATING TO THE ISSUE ARE, DU RING THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION ON COTTAGES AND RESTAURANTS. SINCE AS SESSEE HAS NOT SHOWN ANY INCOME FROM RUNNING COTTAGES AND RESTAURA NTS, HE CALLED UPON ASSESSEE TO SUBSTANTIATE ITS CLAIM OF DEPRECIA TION ON COTTAGES AND RESTAURANTS. IN RESPONSE TO THE QUERY MADE BY A O, IT WAS EXPLAINED BY ASSESSEE THAT IT HAS CONSTRUCTED CLUBS , COTTAGES RESTAURANTS, SWIMMING POOL AT THE PROJECT SITE FOR ATTRACTING CUSTOMERS. IT WAS SUBMITTED, DEPRECIATION IS CLAIME D TILL COMPLETION OF 5 ITA NO. 918/HYD/2012 M/S GREEN HOME REALTORS PVT. LTD. THE PROJECT AND ONCE PROJECT IS COMPLETED, LEFT OVE R COST OF THESE STRUCTURES IS CLAIMED AS REVENUE EXPENDITURE. IT WA S SUBMITTED BY ASSESSEE THAT IN CASE DEPRECIATION IS DISALLOWED, E XPENDITURE INCURRED ON THE STRUCTURE SHOULD BE ALLOWED AS REVENUE EXPEN DITURE. AO, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF A SSESSEE. HE OBSERVED THAT ASSETS ON WHICH ASSESSEE CLAIMED DEPR ECIATION WERE NOT USED IN THE BUSINESS, SINCE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF PLOTS OF LAND AND NOT IN RUNNING RESTAUR ANTS, COTTAGES, ETC. ACCORDINGLY, HE CONCLUDED THAT ASSESSEE IS NOT ELIG IBLE TO CLAIM DEPRECIATION U/S 32 ON THE COTTAGES, RESTAURANTS, E TC. AND DISALLOWED THE CLAIM OF DEPRECATION AT RS. 2,30,788. ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE LD. CIT(A). 8. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND ON EXAMINING THE FACTS AND MATERIALS ON RECORD FOUN D THAT FACILITIES LIKE CLUBS, RESTAURANTS, COTTAGES, SWIMMING POOLS, ETC. WERE PROVIDED BY ASSESSEE TO ATTRACT CUSTOMERS FOR SALE OF PLOTS . IT WAS FURTHER FOUND THAT AFTER PROVIDING LAY OUT PLOTS, THESE ASS ETS ARE TRANSFERRED TO RESPECTIVE SOCIETY/ASSOCIATION. THUS, SHE WAS OF THE VIEW THAT DURING THE YEAR, ASSESSEE BEING DEVELOPER OF LAY OU T AND BEING THE OWNER OF ASSETS, THEY WERE PROVIDED AND USED IN DUE COURSE OF BUSINESS. SHE FURTHER NOTED THAT ASSESSEE HAS OWNER OF THESE STRUCTURES, WHICH HAVE ALSO BEEN SHOWN IN THE BOOKS OF ACCOUNT. SHE FURTHER NOTICED THAT IN THE BALANCE SHEET AS ON 31/ 03/2004, ASSESSEE HAS SHOWN FIXED ASSETS AT RS. 48,48,277 ON WHICH D EPRECIATION WAS CALCULATED AT RS. 16,94,471. SHE FURTHER NOTICED TH AT THIS GROSS BLOCK OF ASSETS OF RS. 48,84,277 INCLUDES CELL PHONES, MU SIC SYSTEMS, COMPUTERS, COMPUTER PRINTERS, COTTAGES, FURNITURE, OFFICE EQUIPMENT, RESTAURANT, TEMPORARY SHEDS ETC. HOWEVER, OUT OF TH E DEPRECIATION CLAIM OF RS. 16,94,471, AO HAS DISALLOWED RS. 2,30, 788 ON THE COTTAGES AND RESTAURANTS FOR THE REASON THAT NO INC OME IS DERIVED AND OFFERED TO TAX. LD. CIT(A) OBSERVED THAT SINCE SUCH ASSETS ARE ALREADY INCLUDED IN THE GROSS BLOCK AND THEY ARE CONSTRUCTE D TO FACILITATE IN 6 ITA NO. 918/HYD/2012 M/S GREEN HOME REALTORS PVT. LTD. BRINGING CUSTOMERS THEY ARE PART OF THE DAY TODAY B USINESS OF ASSESSEE. ON THE AFORESAID BASIS, LD. CIT(A) ULTIMA TELY CONCLUDED THAT ASSESSEE WOULD BE ELIGIBLE FOR DEPRECIATION ON SUCH ASSETS AS THEY ARE CAPITAL ASSETS. ACCORDINGLY, HE ALLOWED ASSESSE ES CLAIM OF DEPRECIATION OF RS. 2,30,788 DISALLOWED BY AO. 9. HAVING HEARD THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). AS CAN BE SEE N FROM THE OBSERVATIONS MADE BY LD. CIT(A), ASSETS SUCH AS COT TAGES, RESTAURANTS, ETC. FOUND PART OF THE GROSS BLOCK ON WHICH ASSESSEE HAS CLAIMED DEPRECIATION. MOREOVER, THERE IS NOTHING ON RECORD TO ESTABLISH THE FACT THAT ASSESSEE IS NOT THE OWNER O F THOSE ASSETS OR THEY WERE NOT USED IN THE BUSINESS OF ASSESSEE. IN THE AFORESAID FACTS AND CIRCUMSTANCES, ASSESSEES CLAIM THAT THEY ARE P ART OF THE BLOCK AND THEY ARE IN THE NATURE OF CAPITAL ASSET ON WHIC H DEPRECIATION IS ALLOWABLE HAS TO BE ACCEPTED. IN THAT VIEW OF THE M ATTER, WE AGREE WITH THE VIEW EXPRESSED BY LD. CIT(A) BY DISMISSIN G THE GROUNDS RAISED BY REVENUE. 10. IN THE RESULT, APPEAL OF DEPARTMENT IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 19/12/2014. SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT D EY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 19 TH DECEMBER, 2014 KV 7 ITA NO. 918/HYD/2012 M/S GREEN HOME REALTORS PVT. LTD. COPY TO:- 1) ACIT (I/C), CIRCLE 2(3), 8 TH FLOOR, B. BLOCK, IT TOWERS, HYDERABAD. 2) M/S GREEN HOME REALTORS PVT. LTD., 11-5-423, 3 RD FLOOR, SHYAM SREE ESTATES, RED HILLS, HYDERABAD - 500 004 3) CIT(A)-III, HYDERABAD 4) CIT-II, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.