M/s Triad Resorts & Hotels P Ltd, Bangalore V. Income tax Officer, Bangalore

MA 51/BANG/2016

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4641 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Capital asset; Business income; Business expenditure; Cost of acquisition; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER M.P. NO.51 TO 53/BANG/2016 (IN I.T . A. NOS.791 TO 793 /BANG/20 14) (ASSESSMENT YEAR : 20 08 - 09 ) 1. M/S. TRIAD RESORTS & HOTELS PVT. LTD., BANGALORE. 2. M/S. NOORANI PROPERTIES PVT. LTD., BANGALORE. 3. M/S. VERDE DEVELOPERS PVT. LTD., BANGALORE. . PETITIONERS . VS. THE INCOM E TAX OFFICER, WARD 12(2), BANGALORE. .. RESPONDENT. PETITIONERS BY : SHRI C.P. RAMASWAMY, C.A. R E SPONDENT BY : SHRI SANJAY KUMAR, CIT (D.R) DATE OF H EARING : 01.07.2016. DATE OF P RONOUNC EMENT : 11.8 .201 6 . O R D E R PER SHRI VIJAY P AL RAO, J .M . : BY WAY OF THESE MISC. PETITIONS, THE ASSESSEE'S ARE SEEKING RECTIF ICATION IN THE ORDER DT.9.10.2015 OF THIS TRIBUNAL. 2. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT 2 M.P. NO. 51 TO 53/BANG/2016 (IN I.T. A. NOS.791 TO 793/BANG/2014) MATERIAL ON RECORD. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE HAS SUBMITTED THAT WHILE DECIDING THE GROUND NO.3 REGARDING THE CLAIM FOR EXPENDITURE INCURRED BY THE ASSESSEE AS COST OF IMPROVEMENT OF THE PROPERTY FOR THE PURPOSE OF SECTION 48 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'), THE TRIBUNAL HAS GI VEN FINDING IN PARA 16 THAT THE SAID EXPENDITURE INCURRED IN PURSUANT OR AS AN OBLIGATION UNDER THE JOINT DEVELOPMENT AGREEMENT (JDA) CAN BE CLAIMED AS BUSINESS EXPENDITURE AND THEREFORE CANNOT BE TREATED AS EXPENDITURE INCURRED FOR IMPROVEMENT OF THE CAPI TAL ASSET IN QUESTION. THE LEARNED AUTHORISED REPRESENTATIVE HAS POINTED OUT THAT SINCE THE EXPENDITURE CLAIMED BY THE ASSESSEE WERE INCURRED W.E.F. F.Y. 1996 - 97 TO 2006 - 07 AND THE JDA WAS ENTERED INTO ONLY ON 5.12.2000 THEREFORE , THE EXPENDITURE INCURR ED PRIOR TO THE JDA CANNOT BE TREATED AS BUSINESS EXPENDITURE AND ACCORDINGLY SHOULD BE ALLOWED AS COST OF IMPROVEMENT OF THE PROPERTY WHEN THE PROPERTY WAS FINALLY SOLD AS CAPITAL ASSET. HE HAS REFERRED THE DETAILS OF THE EXPENDITURE WHICH IS ALSO REPROD UCED IN THE IMPUGNED ORDER UNDER PARA 12 AND SUBMITTED THAT THE EXPENDITURE INCURRED UPTO THE DATE OF JDA CANNOT BE TREATED AS BUSINESS EXPENDITURE EVEN AS PER 3 M.P. NO. 51 TO 53/BANG/2016 (IN I.T. A. NOS.791 TO 793/BANG/2014) THE FINDING OF THE TRIBUNAL. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THER E IS A MISTAKE IN THE IMPUGNED ORDER AS THERE IS NO FINDING GIVEN ABOUT THE EXPENDITURE WHICH IS INCURRED PRIOR TO THE JDA. 3. ON THE OTHER HAND , THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS OBJECTED TO THE MISC. PETITION AND SUBMITTED THAT THE ALLEG ED MISTAKE IN THE MISC. PETITION IS BEYOND THE SCOPE OF RECTIFICATION UNDER SECTION 254(2) OF THE ACT. 4. HAVING HEARD THE RIVAL S UBMISSIONS AS WELL AS PERUSAL OF RECORD , WE NOTE THAT THE TRIBUNAL WHILE DECIDING THE GROUND NO.3 OF THE APPEAL H AS HELD IN PARAS 16 &17 AS UNDER : 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ENTIRE EXPENDITURE IS CLAIMED TO HAVE BEEN INCURRED IN CASH. HOWEVER, THE ASSESSEE HAS NOT PRODUCED ANY BILLS OR DETAILS OF WORK AS WELL AS PARTIES TO WHOM THE PAYMENT WAS MADE. WHAT WAS PRODUCED BY THE ASSESSEE WERE THE SELF MADE VOUCHERS WITHOUT ANY CONFIRMATION FROM THE OTHER PARTY. IT IS PERTINENT TO NOTE THAT THE ASSESSEE COMPANIES ARE IN THE BUSINESS OF DEVELOPMENT OF THE PROPERTIES AND THE JOINT DEVELOPMENT AGREEMENT WERE ENTERED INTO BETWEEN THE PARTIES IN CONNECTION WITH THEIR BUSINESS ACTIVITIES. THE ASSESSEE WERE TO GET 13% OF THE DEVELOPED PROPERTY AND THE INCOME FROM THE SALE THE DEVELOPED PROPERTY WOULD BE THE BUSINESS INCOME OF THE ASSESSEE. THEREFORE, ANY ACTIVITY UNDER THE JOINT DEVELOPMENT AGREEMENT WAS IN THE NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE. THE EXPENDITURE INCURRED IN PURSUANT TO OR AS AN OBLIGATION UNDER THE JOINT DEVELOPMENT AGREEMENT CAN BE CLAIMED AS BUSIN ESS EXPENDITURE DESPITE THE FACT THAT THE SAID JOINT DEVELOPMENT PROJECT COULD NOT MATERIALIZE. THEREFORE, THE EXPENDITURE INCURRED SUBSEQUENT TO THE JOINT DEVELOPMENT AGREEMENT CANNOT BE TREATED AS THE EXPENDITURE INCURRED FOR IMPROVEMENT OF THE CAPITAL A SSET IN QUESTION. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR LEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW TO QUA THIS ISSUE. 4 M.P. NO. 51 TO 53/BANG/2016 (IN I.T. A. NOS.791 TO 793/BANG/2014) 17. THIS GROUND IS ACCORDINGLY, DISMISSED. THUS IT IS CLEAR THAT THE CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE AUTHORITIES BELOW FOR WANT OF SUPPORTING EVIDENCE HOWEVER THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW ON THE GROUND THAT THE EXPENDITURE INCURRED IN PURSUANT TO OR UNDER THE OBLIGATION OF JDA C AN BE CLAIMED AS BUSINESS EXPENDITURE IRRESPECTIVE OF THE FACT THAT THE SAID JDA COULD NOT BE FRUCTIFIED. THE TRIBUNAL HAS REPRODUCED THE DETAILS OF THE EXPENDITURE IN PARA 12 AS UNDER : F I N A N C I A L Y E A R CO S T OF ACQUISITION / I M P R O V EME N T I N D E X E D C O S T OF AC Q U I SIT I O N / I M P ROV E M E N T 19 9 6 - 9 7 29 5 5 6 636 5 3 395 7 5 9 19 9 7 - 9 8 22 3 1 7 65 3 7 151 1 3 19 9 8 - 9 9 60 5 7 7 5 9 5 0946 19 9 9 - 0 0 92 9 0 1 5 1 3 159 0 6 20 0 1 - 0 2 66 0 6 5 0 8 5 4503 20 0 2 - 0 3 32 5 0 8 20 4 0 071 6 3 20 0 3 - 0 4 54 9 6 7 5 6 5 4149 20 0 4 - 0 5 48 1 6 7 0 5 5 2917 20 0 5 - 0 6 16 0 0 0 00 1 7 738 4 3 5 M.P. NO. 51 TO 53/BANG/2016 (IN I.T. A. NOS.791 TO 793/BANG/2014) 20 0 6 - 0 7 65 0 0 0 0 6 9 0077 20 0 7 - 0 8 13 2 7 8 425 1 3 278 4 2 5 THUS IT IS APPARENT THAT THE CLAIM OF THE EXPENDITURE ALSO INCLUDES THE EXPENDITURE INCURRED PRIOR TO THE DATE OF THE JDA I.E. 5.12.2000 AND THEREFORE THE FINDING OF THE TRIBUNAL WOULD NOT BE APPLICABLE TO THE EXTENT OF THE EXPENDITURE INCURRED PRIOR TO THE DATE OF JDA. SINCE THE SAID EXPENDITURE HAS NOT BEEN BIFURCATED IN TERMS OF THE COST OF ACQUISITION AND IMPROVEMENT OF THE PROPERTY IN QUESTION AND FURTHER THE AUTHORITIES BE LOW HAVE DISALLOWED THE CLAIM FOR WANT OF SUPPORTING EVIDENCE T HEREFORE , WE SET ASIDE THIS ISSUE OF ALLOWABILITY OF THE CLAIM OF THE EXPENDITURE OF IMPROVEMENT INCURRED PRIOR TO THE DATE OF JDA TO THE RECORD OF THE ASSESSING OFFICER FOR PROPER VERIFICATION AND RECONSIDERATION. THE IMPUGNED ORDER IS ACCORDINGLY STANDS MODIFIED. 4. IN THE RESULT, THE MISC. PETITION IS DISPOSED OF IN THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11TH DAY OF AUG. , 201 6 . SD/ - ( INTURI RAMA RAO ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER *REDDY GP