THAKUR ESTATE DEVELOPMENT PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 23 , MUMBAI

MA 213/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 20-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 195; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) M.A. NO. 213/MUM/2018 (ITA NO. 3184/MUM/2014) ASSESSMENT YEAR: 2011 - 12 M/S THAKUR ESTATE DEVELOPMENT PVT. LTD., ASHOK NAGAR, KANDIVALI (E), MUMBAI - 400101. VS. DCIT - 23, ROOM NO. 409, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI - 400020. PAN NO. AAACT5599A APPELLANT RESPONDENT ASSESSEE BY : MR. RAJAN VORA, AR REVENUE BY : MR. MANOJ KUMAR SINGH, DR DATE OF HEARING : 05/04/2019 DATE OF PRONOUNCEMENT : 03/07/2019 ORDER PER N.K. PRADHAN, AM BY MEANS OF THIS MISCELLANEOUS APPLICATION (MA), THE APPLICANT SEEKS RECALL OF THE ORDER DATED 09.02.2018 IN ITA NO. 3184/MUM/2014 FOR THE AY 2011 - 12. IN PART - I , HERE - IN - BELOW, WE MENTION THE CONTENTIONS OF THE LD. COUNSEL OF THE APPLICANT, IN PART - II, THE SUBMISSIONS OF THE LD. DR AND IN PART - III, THE REASONS FOR OUR DECISION. I 2. THE CONTENTIONS OF THE LD. COUNSEL FOLLOW THE WRITTEN SUBMISSION FILED BY THE APPLICANT BEFORE THE TRIBUNAL. THEREFORE, WE REFER BEL OW THE SAID WRITTEN SUBMISSION. M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 2 IT IS STATED THAT DURING THE COURSE OF HEARING, IT WAS ARGUED THAT THE COMPENSATION GIVEN T O THE TRUST HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND IT WAS ALSO POINTED OUT THAT THERE WAS NO EVIDENCE WHATSOEVER PRODUCED BY THE AO TO PROVE THAT EXPENDITURE BY WAY OF COMPENSATION. IT IS ALSO STATED THAT THE FOLLOWING PROPOSITIONS WERE MADE BEF ORE THE CIT(A) AS WELL AS DURING THE TRIBUNAL PROCEEDINGS: (I) IT WAS SUBMITTED THAT THE ONUS LIES UPON THE AO TO PROVE THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF GOODS OR LEGITIMATE NEEDS OF THE BUSINESS. THE AO HAS TO PLACE ON RECORD EVIDENCE AS REGARDS EXCESSIVENESS OR UNREASONABLENESS. (II) IN THE PRESENT CASE THE AO HAS NOT GIVEN ANY FINDING AS TO WHAT IS EXCESSIVE OR UNREASONABLE PORTION IN THE TOTAL COMPENSATION PAYMENT. THERE IS NO FINDING ON WHAT IS THE LEGITIMATE NEED OF THE BUSINESS. THE AO HAS MERELY GONE BY THE PRINCIPLE THAT SINCE THE RESPONDENT AND THE TRUST ARE A PART OF THE THAKUR GROUP AND CONCLUDED THAT THE RESPONDENT HAD PAID EXCESSIVE COMPENSATION TO THE TRUST IN LIEU OF CANCELLATION OF TH E MOU AND SUCH COMPENSATION DOES NOT ARISE OUT OF ANY BUSINESS EXIGENCIES AND CONDUCT. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION IN ITO V. JAGDISH PRASAD GUPTA 123 TTJ 813 (DEL. ITAT), S.K. ENGINEERING V. JCIT 103 ITD 97 (BANGALORE ITAT) AND JAGD AMBA ROLLER FLOOR MILLS LTD. V. ACIT 117 ITD 260 (3 RD MEMBER, NAGPUR ITAT) FOR THE PROPOSITION THAT THE ONUS IS ON THE DEPARTMENT TO PROVE THAT EXPENDITURE IS UNREASONABLE/EXCESSIVE AND IN ABSENCE OF SAME, IT SHOULD BE ALLOWED. IT IS STATED THAT THE TRIBUN AL WHILE ADJUDICATING THE ISSUE HAS INADVERTENTLY NOT CONSIDERED THE ABOVE ARGUMENT RAISED BY THE ASSESSEE AND THEREBY FINDING HAS BEEN M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 3 GIVEN BY THE BENCH WITHOUT CONSIDERING THAT BASIC OR FUNDAMENTAL ISSUE HAS REMAINED TO BE ADJUDICATED. IT IS STATED THAT THIS BEING INADVERTENT MISTAKE, WHICH IS APPARENT FROM RECORD, THE ORDER BE RECALLED TO THE EXTENT OF ADJUDICATING THE ISSUE OF REASONABLENESS OF THE COMPENSATION PAID TO THE TRUST. THE LD. COUNSEL FURTHER SUBMITS THAT TO PROVE THE REASONABLENESS OF THE EXPENDITURE BY WAY OF COMPENSATION FOLLOWING INFORMATION/DOCUMENT WERE SUBMITTED BEFORE THE CIT(A) AS WELL AS DURING THE TRIBUNAL PROCEEDINGS. (I) ON COMPARISON BETWEEN STAMP DUTY RATES OF THE YEAR 2007 AND 2011 SHOWS THE INCREASE OF 79% IN COMMERCIAL P ROPERTY AND 134% IN RESIDENTIAL PROPERTY. THUS, AS PER MOU DATED 14.12.2007, TOTAL CONSIDERATION WAS RS.1,13,70,45,000/ - . THE LEAST ADDITIONAL COST, THE TRUST WOULD HAVE INCURRED FOR PURCHASING THE SAME AREA IN BOISAR WOULD AMOUNT TO RS.89,82,65,550/ - AND PROPORTIONATE INCREMENTAL ADVANCES REFUNDED BY THE RESPONDENT TO THE TRUST IN SAME RATIO WOULD INCREASE FROM RS.49.23 CRORES TO RS.88.03 CRORES. HOWEVER, COMPENSATION WHICH WAS PAID BY THE RESPONDENT WAS ONLY RS.20,00,00,000/ - . (II) ALSO IT WAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED THE LAND AFTER AVAILING ADVANCES OF RS.49.23 CRORES FROM THE TRUST AND IF THE RESPONDENT EARNED A GROSS PROFIT OF RS.48.95 CRORES ON SALE OF LAND, IT IS NATURAL THAT THE TRUST SHOULD HAVE RECEIVED SOME AMOUNT OF SUCH PROFIT S. IN FACT, HAD THE TRUST INVESTED THE AMOUNT IN BANK FDR, IT WOULD HAVE EARNED INTEREST AT ABOUT 9.5%. AS AGAINST THIS, THE COMPENSATION PAID @ 10.30% (INTEREST AMOUNT IS COMPUTED ON ADVANCES OF RS.49.23 CRORES ON DAY TO DAY BASIS TILL THE DATE OF REFUND M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 4 IN MAY 2012) WAS ONLY MARGINALLY HIGHER. FURTHER, AS PER THE MOU, IF THE TRUST DOES NOT PAY MONEY TO THE RESPONDENT AS PER SCHEDULE, THEN THEY HAD TO PAY INTEREST @ 15%. THE LD. COUNSEL SUBMITS THAT THE TRIBUNAL, WHILE ADJUDICATING THE ISSUE ON REASONABLE NESS OF THE EXPENDITURE HAS NOT CONSIDERED THE ARGUMENT IN BULLET POINT (I) ABOVE AND ONLY DECIDED ON THE POINT (II) AND THUS THERE IS AN INADVERTENT ERROR IN THE TRIBUNAL ORDER WHICH NEED TO BE RECTIFIED. IT IS FURTHER STATED THAT THE TRIBUNAL WHILE ADJUD ICATING THE ISSUE ON REASONABLENESS OF THE EXPENDITURE IN PARA 7.4 HAS HELD THAT THE AO TO RESTRICT THE COMPENSATION/DAMAGE TO 9.5% ON RS.49.23 CRORE IN PLACE OF 10.30% ON DAY TO DAY BASIS TILL THE DATE OF REFUND IN MAY 2012. IT IS STATED BY THE LD. COUNSE L THAT THE TRIBUNAL SHOULD CLARIFY THE INTEREST TO BE COMPUTED @ 9.5% PER ANNUM ON CUMULATIVE INTEREST, AS THE IMPUGNED ORDER IS SILENT ON THIS POINT. THUS IT IS STATED THAT THE TRIBUNAL MAY RECALL THE IMPUGNED ORDER TO THE EXTENT OF ADJUDICATING THE ISS UE OF REASONABLENESS OF THE COMPENSATION PAID TO THE TRUST. II 3. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THERE IS NO MISTAKE APPARENT FROM RECORD IN THE IMPUGNED ORDER PASSED BY THE TRIBUNAL. HE SUBMITS THAT THE TRIBUNAL HAS NO POWER TO REVIEW ITS ORDER IN THE GARB OF SECTION 254(2) OF THE ACT. III 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 5 IN THE INSTANT CASE, FOLLOWING THE DECISION IN CIT V. HANS MACHOO& CO . 247 ITR 79 (DEL), CIT V. SA BUILDER PVT. LTD . 299 ITR 88 (P&H) AND CIT V. MURARI LAL AHUJA & SONS 177 ITR 228 (P&H), WE HAVE HELD IN THE IMPUGNED ORDER THAT THE PAYMENT OF DAMAGE FOR BREACH OF CONTRACT IN THE INSTANT CASE IS AN ALLOWABLE EXPENDITURE U/S 3 7 OF THE ACT. THE ABOVE CASE LAWS RELIED ON BY THE LD. COUNSEL DURING THE COURSE OF HEARING BEFORE THE TRIBUNAL ON 13.11.2017 HAVE BEEN DEALT WITH IN THE IMPUGNED ORDER AT PARA 7.3. 4.1 PARA 7.4 OF THE IMPUGNED ORDER IS RELEVANT HERE AND THE SAME IS AS UN DER : 7.4 BUT WHAT SHOULD BE THE AMOUNT OF COMPENSATION? WE FIND THAT THE ARBITRATOR HAS GIVEN THE FINAL AWARD ON 25.02.2011 IN THE FOLLOWING MANNER: NOW, HAVING CONSIDERED THE MATTERS IN DISPUTE, AFTER TAKING INTO CONSIDERATION ALL DOCUMENTS AND MATERI ALS PLACED BEFORE ME, AFTER CONDUCTING PROCEDURES AS FOUND NECESSARY FOR SOLVING THE MATTER IN DISPUTE AND HAVING HEARD THE ORAL EVIDENCE PRESENTED BY THE PARTIES, I GIVE MY AWARD AS FOLLOWS: 1. THE CLAIMANT IS ENTITLED TO RECEIVE FROM THE RESPONDENT A SUM OF RS.20 CRORES AS COMPENSATION/DAMAGES. 2. THE RESPONDENTS ARE NOT ENTITLED TO ANY COUNTER - CLAIM AGAINST THE CLAIMANT. 3. I DIRECT THAT THE RESPONDENT WILL PAY TO THE CLAIMANT A SUM OF R.20 CRORES FOR CANCELLATION OF THE CONTRACT AS COMPENSATION/DAMA GES IN ADDITION TO REFUND OF PRINCIPAL AMOUNT PAID. WE DO NOT PROPOSE TO AWARD INTEREST TO THE CLAIMANT FOR ANY PERIOD. THE ABOVE SUM SHALL BE PAID TO THE RESPONDENTS WITHIN A PERIOD OF 24 MONTHS OF THE DATE OF THIS AWARD. IF THE ABOVE DAMAGES/COMPENSATION IS NOT REPAID WITH PRINCIPAL AMOUNT OF ADVANCES GIVEN, BY THE ABOVE DATE THEN INTEREST AT THE RATE OF 18% P.A. SHALL BE PAID FROM THE DATE OF THIS AWARD TILL THE PAYMENT OF ENTIRE AMOUNT. M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 6 A PERUSAL OF THE ABOVE CLEARLY INDICATES THAT THE COMPENSATION OF RS.20 CRORE ARRIVED AT BY THE ARBITRATOR IS NOT BASED ON A CALCULATION. DURING THE COURSE OF HEARING, THE LD. COUNSEL OF THE ASSESSEE FILES A WRITTEN SUBMISSION STATING THAT HAD TET INVESTED THE AMOUNT IN BANK FDR, IT WOULD HAVE EARNED INTEREST @ 9.5%. AS AGAINST THIS, THE COMPENSATION PAID @ 10.30% (INTEREST AMOUNT IS COMPUTED ON ADVANCES OF RS.49.23 CRORE ON DAY TO DAY BASIS TILL THE DATE OF REFUND IN MAY 2012) WAS ONLY MARGINALLY HIGHER. AS THE AWARD GIVEN BY THE ARBITRATOR IS BEREFT OF CALCULATION, WE DIRECT THE AO TO RESTRICT THE COMPENSATION/DAMAGES TO 9.5% ON RS.49.23 CRORE IN PLACE OF 10.30% ON DAY TO DAY BASIS TILL THE DATE OF REFUND IN MAY 2012. THE ASSESSEE WOULD FILE THE DETAILS OF BEFORE THE AO. TO SUM UP, WE HOLD THAT THE COMPENSATION/DAMAGES PAID BY TEDPL IS AN ALLOWABLE EXPENSE U/S 37 OF THE ACT. THE AO IS DIRECTED TO CALCULATE THE AMOUNT AS PER OUR OBSERVATION HEREINBEFORE AND ALLOW THE SAME. 4.2 IT IS RELEVANT TO MENTION HERE THAT THE ASSESSEE VIDE SUBMISSION FILED BEFORE THE TRIBUNAL HAS MENTIONED AT PARA 27 THE FOLLOWING : 27. IT IS VERY IMPORTANT TO MENTION OVER HERE THAT THE RESPONDENT HAD PURCHASED THE LAND AFTER AVAILING ADVANCES OF RS.49.23 CRORES FROM THE TRUST AND IF THE RESPONDENT EARNED A GROSS PROFIT OF RS.48.95 CRORES ON SALE OF LAND, IT IS NATURAL THAT THE TRUST SHOULD HAVE BEEN RECEIVED SOME AMOUNT OF SUCH PROFITS. IN FACT, HAD THE TRUST INVESTED THE AMOUNT IN THE BAND FDR, IT WOULD HAVE EARNED INTEREST AT ABOUT 9.5%. AS AGAINST THIS , THE COMPENSATION PAID AT THE RATE OF 10.30% (INTEREST AMOUNT IS COMPUTED ON ADVANCES OF RS.49.23 CRORES ON DAY TO DAY BASIS TILL THE DATE OF REFUND IN MAY 2012) WAS ONLY MARGINALLY HIGHER. FURTHER, AS PER THE MOU, IF THE TRUST DOES NOT PAY MONEY TO THE R ESPONDENT AS PER SCHEDULE, THEN THEY HAD TO PAY INTEREST AT THE RATE OF 15%. 4.3 A PERUSAL OF THE IMPUGNED ORDER CLEARLY INDICATES THAT HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD, WE HAVE DIRECTED THE AO TO RESTRICT T HE COMPENSATION/DAMAGE M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 7 TO 9.5% ON RS.49.23 CRORES IN PLACE OF 10.30% ON DAY TO DAY BASIS TILL THE DATE OF REFUND IN MAY 2012. IN THIS REGARD WE HAVE MENTIONED THAT THE ASSESSEE WOULD FILE THE DETAILS BEFORE THE AO. AS THE AWARD GIVEN BY THE ARBITRATOR IN ABOVE CASE IS BEREFT OF CALCULATION, WE HAVE RESTORED THE MATTER TO THE FILE OF THE AO TO CALCULATE IT AS PER THE ABOVE OBSERVATION. 4.4 A PERUSAL OF THE ABOVE FACTS CLEARLY INDICATE THAT THE APPLICANT HAS NOT POINTED OUT ANY MISTAKE APPARENT FROM THE RE CORD. A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOUS MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MIST AKE APPARENT FROM THE RECORD. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE SUPREME COURT IN T.S. BALARAM, ITO V. VOLKART BROS ., (1971) 82 ITR 50 (SC), MASTER CONSTRUCTION CO. P. LTD. V. STATE OF ORISSA , AIR 1966 SC 1047, KARAM CHAND THAPAR & BROS. (COAL SALES) LTD. V. STATE OF U.P. (1976) TAX LR 1921, 1927 (SC) AND CCE V. ASCU LTD ., (2003) 9 SCC 230, 232. IN FACT, NOT A SINGLE ERROR IN THE IMPUGNED ORDER HAS BEEN POINTED OUT BY THE APPLICANT. WHAT THE APPLICANT WANTS IS A REVIEW OF THE ORDER PASSED BY THE TRIBUNAL. THE TRIBUNAL IS A CREATURE OF THE STATUTE. THE TRIBUNAL CANNOT REVIEW ITS OWN DECISION UNLESS IT IS PERMITTED TO DO SO BY THE STATUTE. THE HONBLE SUPREME COURT HAS HELD IN PATEL NARSHI THAKERSHI V. PRADYUMANSINGHJI ARJUNSINGHJI [AIR 1970 SC 1273] THAT THE POWER TO REVIEW IS NOT AN INHERENT POWER. IT MUST BE CONFERRED BY LAW EITHER SPECIFICALLY OR BY NECESSARY IMPLICATION. IT IS A SETTLED LAW THAT THE TRIBUNAL HAS NO POWER TO REVIEW ITS ORDER IN THE GARB OF SECTION 254(2) OF THE ACT AS HEL D IN CIT V. GLOBE TRANSPORT M/S THAKUR ESTATE DEVELOPERS PVT. LTD. M.A. NO. 213/MUM/2018 8 CORPN. [1992] 195 ITR 311 (RAJ) (HC), CIT V. ROOP NARAIN SARDAR MAL [2004] 267 ITR 601 (RAJ) (HC), CIT V. DEVILAL SONI [2004] 271 ITR 566 (RAJ) (HC), JAINARAIN JEEVRAJ V. CIT [1980] 121 ITR 358 (RAJ.) (HC), PRAJATANTRA PRACHAR S AMITI V. CIT [2003] 264 ITR 160 (ORISSA) (HC), CIT V. JAGABANDHU ROUL [1984] 145 ITR 153 (ORISSA) (HC), CIT & ANR. V. ITAT & ANR. [1992] 196 ITR 640 (ORISSA) (HC), SHAW WALLACE & CO. LTD. V. ITAT & OTHERS [1999] 240 ITR 579 (CAL) (HC), CIT V. SUMAN TEA & PLYWOOD INDUSTRIES PVT. LTD. [1997] 226 ITR 34 (CAL) (HC), ITO V. ITAT & ANR. [1998] 229 ITR 651 (PAT.) (HC), CIT & ANR. V. ITAT & ANR. [1994] 206 ITR 126 (AP) (HC), ACIT V. C. N. ANANTHRAM [2004] 266 ITR 470 (KAR) (HC). 5. IN VIEW OF T HE FACTUAL SCENARIO AND POSITION OF LAW DELINEATED HEREINBEFORE, THE PRESENT MA, BEING DEVOID OF MERIT, IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/07/2019. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 03/07/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI