KEYSTONE REALTORS PVT LTD, MUMBAI V. DY CIT CC 2(4), MUMBAI

MA 319/MUM/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5724 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 31-10-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 19-04-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revenue expenditure
• Section: 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER M.A. no.316/Mum./2023 (Arising out of ITA No.1228/Mum./2023) (Assessment Year : 2015–16) M.A. no.317/Mum./2023 (Arising out of ITA no.4229/Mum./2019) (Assessment Year : 2015–16) M.A. no.318/Mum./2023 (Arising out of ITA No.3004/Mum./2019) (Assessment Year : 2013–14) M.A. no.319/Mum./2023 (Arising out of ITA No.611/Mum./2020) (Assessment Year : 2014–15) Keystone Realtors Pvt. Ltd. 702, Natraj, M.V. Road W.E. Highway, Andheri (East) Mumbai 400 069 PAN – AAACK2499Q ................ Applicant (Original Appellant) v/s Dy. Commissioner of Income Tax Central Circle–(2)4, Mumbai ................ Respondent (Original Respondent) Assessee by : Shri Naresh Kumar Revenue by : Shri Manoj Kumar Sinha Date of Hearing – 04/08/2023 Date of Order – 01/11/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present batch of four Miscellaneous Applications have been filed by the assessee under section 254(2) of the Income Tax Act, 1961 (“the Act”) seeking rectification of the common order dated 14/11/2022, passed by the coordinate bench of the Tribunal in assessee’s appeals being ITA no.3004/Mum./2019, ITA no. 611/Mum./2020, ITA no.4229/Mum./2019 and ITA no.1228/Mum./2020, for the assessment years 2013–14, 2014–15, and 2015–16, respectively. Keystone Realtors Pvt. Ltd. MA No.316 to 319/Mum./2023 Page | 2 2. Since the grievance of the assessee in all four Miscellaneous Applications is common, therefore these Miscellaneous Applications were heard together and are being decided by way of this consolidated order. 3. The dispute raised in these Miscellaneous Applications is summarised in para-7 of MA No. 318/Mum/2023, for the assessment year 2013-14, as under:- “7 However, it is humbly submitted that the following mistake has crept in the order of the Hon'ble ITAT while deciding this issue :- (a) The appellant had relied on the judgement of the Coordinate Bench in the case of DCIT Circle-10 vs Rustomji Evershine Joint Venture Pvt Ltd, Mumbai for 2010-11 in ITA Nos 5613/Mumbai/2014 wherein on identical facts the expenses incurred on Commission and Brokerage were allowed as deduction.. (b) The Hon'ble Bench was pleased to record that the AR has relied upon the above mentioned judgement, yet it neither followed the said judgement nor distinguished the same. (c) There seems to be inherent contradiction in para No 25 of the impugned order of the Hon'ble ITAT wherein in the initial part of the paragraph, the Hon'ble Bench seems to be agreeing with the arguments of the appellant, but unfortunately the issue was decided against the appellant. 4. From the above, it is evident that the contention of the assessee in the present Miscellaneous Applications is two-fold. Firstly, it is submitted that the decision of the coordinate bench of the Tribunal in DCIT v/s Rustomji Evershine Joint Venture Pvt. Ltd., in ITA No. 5613/Mum./2014, relied upon by the assessee, was neither followed nor distinguished by the coordinate bench of the Tribunal vide common order dated 14/11/2022. Further, it is the plea of the assessee that in the initial part of paragraph 25, the coordinate bench seems to have agreed with the arguments of the assessee, but unfortunately, the issue was decided against the assessee. Keystone Realtors Pvt. Ltd. MA No.316 to 319/Mum./2023 Page | 3 5. From the perusal of the record, we find that the assessee has debited commission and brokerage expenses to the profit and loss account. During the assessment proceedings, the assessee was asked to show cause as to why the commission and brokerage expenses be not disallowed as revenue expenditure proportionate to the cost of sales and capitalised in Work in Progress. As per the assessee, the commission paid to brokers which is the selling and marketing expenses is not related to a single project directly. Further, as per the assessee, the common expenses do not add value to or increase the cost of production and therefore the same cannot be added to the Work in Progress. The AO disagreed with the submissions of the assessee and held that the selling costs incurred in the business are based on the specific project and these are never in the nature of general advertisement/marketing. Accordingly, the AO debited the commission expenses to the cost of construction and allowed the same in proportion to the revenue recognised from the project. The learned CIT(A) dismissed the appeal filed by the assessee on this issue. The coordinate bench of the Tribunal, vide common order dated 14/11/2022, decided the ground raised by the assessee on this issue by observing as under:- “24. We have considered the rival submissions and perused the material available on record. The assessee claims that the commission expenses incurred by the assessee are not in respect of any particular project and these expenses are required to be incurred under all circumstances while carrying on the business. Further, as per AS 7 para 19 selling costs cannot be attributed to contract activity and the same cannot be allocated to the contract and therefore are to be excluded from the cost of the construction contract. We find that para 20 of AS 7 reads as under: “20. Contract costs include the costs attributable to a contract for the period from the date of securing the contract to the final completion of the contract. However, costs that relate directly to a contract and which are incurred in securing the contract are also included as part of the contract costs if they can Keystone Realtors Pvt. Ltd. MA No.316 to 319/Mum./2023 Page | 4 be separately identified and measured reliably and it is probable that the contract will be obtained. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period.” 25. Thus, as per para 20 of AS 7 if the cost which is directly related to the contract and is incurred for securing the contract is also included as part of the contract cost if they can be separately identified and measured reliably and there is a possibility that the contract will be obtained. From the perusal of pages 67 – 68 of the paper book, we find that assessee has provided the details of commission and brokerage expenses, which were paid to various brokers in respect of flats in its various projects. The said details were further confirmed vide written submission filed by the learned AR. Thus it is evident that in the present case the commission expense has been identified by the assessee not only in respect of each project undertaken by it but also in respect of each flat for which such commission expenses were incurred. Insofar as the decision of the coordinate bench of the Tribunal in Rustomjee Evershine Joint- Venture Private Ltd (supra), we find that in para 7 the coordinate bench after perusal of AS-7 noted that general administrative costs and selling costs are not considered as part of the contract cost unless they are contract specific. Since in the present case the commission expense incurred by the assessee is separately identifiable therefore we are of the considered view that commission expenditure should be allowed proportionally to the revenue offered. Thus we find no infirmity in the impugned order passed on this issue. As a result, ground No. 3 raised in assessee’s appeal is dismissed.” (emphasis supplied by us) 6. From the perusal of the aforesaid findings of the coordinate bench of the Tribunal vide common order dated 14/11/2022, it is evident that the coordinate bench after considering Accounting Standard-7 (“AS-7”) came to the conclusion that the commission expenses have been identified by the assessee not only in respect of each project undertaken by it but also in respect of each flat for which commission expenses were incurred. Further, from para 25 of the aforesaid common order, it is also evident that the coordinate bench considered the decision of another coordinate bench in Rustomji Evershine Joint-Venture Private Ltd (supra) and came to the conclusion that since in the present case, the commission expenses incurred by the assessee are separately identifiable therefore as per para 20 of AS-7 these expenditure should be allowed proportionately to the revenue offered. Keystone Realtors Pvt. Ltd. MA No.316 to 319/Mum./2023 Page | 5 7. Thus, we find no merits in the contentions raised by the assessee in para 7 of the Miscellaneous Application, as not only did the coordinate bench, vide common order dated 14/11/2022, consider the decision in the case of Rustomjee Evershine Joint-Venture Private Ltd (supra) but also considered various aspects of AS-7, i.e. para 19 and para 20 of AS-7 and came to the conclusion that in the present case since the commission expense incurred by the assessee is separately identifiable therefore the same should be allowed proportionately to the revenue offered. Accordingly, we find no merits in the present Miscellaneous Applications raising the common issue by the assessee. 8. In the result, the present Miscellaneous Applications filed by the assessee are dismissed. Order pronounced in the open Court on 01/11/2023 Sd/- PRASHANT MAHARISHI ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 01/11/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai