Dugar Housing Development Finance India Limited, CHENNAI V. ACIT, CHENNAI

MA 63/CHNY/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3424 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 29-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: V S JAYAKUMAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER MISCELLANEOUS PETITIO N NO.63/ MDS/2015 (IN ITA.NO.2208/MDS/2007 ) (ASSESSMENT YEAR: 1999-2000) DUGAR HOUSING DEVELOPMENT FINANCE INDIA LTD. (FORMERLY KNOWN AS M/S. J.PAQ SOLUTIONS LTD.) DUGAR TOWERS, 34, MARSHALLS ROAD, CHENNAI-600 008. VS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- II (3) , CHENNAI. PAN: AAACJ9857B ( PETITIONER ) RESPONDENT) APPLICANT BY : MR. V.S.JAYAKUMAR, ADVOCATE RESPONDENT BY : MR. P.RADHAKRISHNAN, JCIT / DATE OF HEARING : 31 ST JULY, 2015 / DATE OF PRONOUNCEMENT : 16 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS MISCELLANEOUS PETITION IS FILED BY THE ASSESSE E SEEKING THE INDULGENCE OF THE TRIBUNAL TO CONSIDER APPLICABILITY OF THE DECISION OF SUPREME COURT IN T HE CASE OF TAPARIA TOOLS LTD. VS. JCIT (372 ITR 605) AND TO GI VE SUITABLE DIRECTION TO THE LOWER AUTHORITIES TO ALLOW THE CLA IM OF THE ASSESSEE FOR DEDUCTION OF INTEREST EXPENDITURE. 2. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THERE IS NO MISTAKE APPARENT ON RECORD CREPT IN THE ORDER OF TH E TRIBUNAL M.P.NO.63/MDS/2015 2 IN DECIDING THE ISSUE OF ALLOWABILITY OF INTEREST AS EXPENDITURE FOR THE ASSESSMENT YEAR IN QUESTION. HE ALSO SUBMIT S THAT THE DECISION RELIED ON IN THE MISCELLANEOUS PETITION HA S NO APPLICATION TO THE FACTS OF THE ASSESSEES CASE. 3. WE HAVE HEARD BOTH THE SIDES. THE ASSESSEE COULD NOT EXPLAIN AS TO WHAT IS THE RATIO IN THE CASE OF TAPA RIA TOOLS LTD. (SUPRA) WHICH WAS RELIED UPON AND HOW THE SAID DE CISION OF HONBLE SUPREME COURT IS APPLICABLE TO THE FACTS O F ASSESSEES CASE. THE FACTS IN THE CASE OF TAPARIA T OOLS LTD WAS THAT THE ASSESSEE ISSUED NON-CONVERTIBLE DEBEN TURES AND AS PER THE TERMS AND CONDITIONS OF THE ISSUE O PTION WAS GIVEN TO SUBSCRIBER TO RECEIVE INTEREST PERIODICALL Y OVER THE PERIOD OF DEBENTURES OR ONETIME PAYMENT OF LOWER S UM PAYABLE IMMEDIATELY. IN THE CASE ON HAND, THE ISSU E BEFORE THE TRIBUNAL WAS NOT WITH RESPECT TO ISSUE OF DEBE NTURES AND CLAIM OF INTEREST ON SUCH NON-CONVERTIBLE DEBENTURE S. THE ISSUE BEFORE THE TRIBUNAL WAS AS TO WHETHER THE ASS ESSING AUTHORITY SHOULD HAVE ACCEPTED THE BONAFIDE METHOD OF CHANGE IN ACCOUNTING BROUGHT IN BY THE ASSESSEE OR NOT AND M.P.NO.63/MDS/2015 3 ALLOWABILITY OF INTEREST AS PERIOD COST. THE TRIBUN AL IN ITS ORDER CONSIDERED THE ISSUE AND SUSTAINED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WHO REJECTED THE CONTENTIONS OF THE ASSESSEE, IN PARAS 6 TO 9 AS UND ER:- 6. THE NEXT ISSUE RAISED BY THE ASSESSEE IS THAT THE ASSESSING AUTHORITY SHOULD HAVE ACCEPTED THE BONA F IDE CHANGE IN THE METHOD OF ACCOUNTING BROUGHT IN BY T HE ASSESSEE SINCE THE IMPUGNED ASSESSMENT YEAR AND AS SUCH, HE SHOULD HAVE ALLOWED AS A DEDUCTION THE AMO UNT OF INTEREST OF ` 89,72,461/- AS A PERIOD COST. 7. THIS ISSUE HAS BEEN CONSIDERED BY THE COMMISSI ONER OF INCOME-TAX(APPEALS) IN A DETAILED MANNER IN PAGES 8 TO 35 OF HER ORDER. THE COMMISSIONER OF INCOME-TAX(APPEA LS) HAS EXAMINED THE WORKING RESULTS OF THE ASSESSEE- COMPANY FOR EARLIER ASSESSMENT YEARS IN THE BACKDR OP OF THE OPERATIONAL ACTIVITIES CARRIED OUT BY THE ASSE SSEE WITH REFERENCE TO THE DIFFERENT PROJECTS. AFTER A THOROU GH ANALYSIS OF THE ACTIVITIES, REPORTING STANDARDS AND ACCOUNTI NG POLICIES FOLLOWED BY THE ASSESSEE AND ALSO THE METHOD OF REV ENUE RECOGNITION STATED TO HAVE BEEN FOLLOWED BY THE ASS ESSEE, THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS COME T O A CLEAR-CUT FINDING THAT THE METHOD OF ACCOUNTING WHI CH WAS HITHERTO FOLLOWED BY THE ASSESSEE-COMPANY DID NOT R EFLECT THE TRUE PICTURE OF THE OPERATIONAL ACTIVITIES AND FUNDING AND RESULTS OF THE ASSESEEE AS A CONSEQUENTIAL. SHE HA S FURTHER CONCLUDED THAT EVEN THE SO CALLED CHANGE IN THE ME THOD OF ACCOUNTING BROUGHT IN BY THE ASSESSEE, IS NOT SUCC ESSFULLY CONVINCING AS TO HOW THE CHANGE ENABLED THE COMPAN Y TO GIVE A TRUE AND REAL PICTURE OF ITS BUSINESS AFFAIR S. SHE OBSERVED THAT WHATEVER METHOD THAT HAD BEEN FOLLOWE D BY THE ASSESSEE FOR THE EARLIER ACCOUNTING PERIODS AS WELL AS FOR THE IMPUGNED ACCOUNTING PERIOD, RECOGNITION OF INCOME VIS--VIS BOOKING OF EXPENDITURE ARE NOT IN CONFORM ITY WITH THE RECOGNIZED PRINCIPLES OF ACCOUNTING AND, THEREF ORE, CANNOT BE UPHELD IN LAW. WITH REGARD TO THE CONTENT ION OF THE ASSESSEE THAT IT HAD OFFERED INCOME FOR THE EAR LIER ASSESSMENT YEARS, MORE PARTICULARLY WITH REFERENCE TO PARK DUGAR PROJECT, THE COMMISSIONER OF INCOME-TAX(APPEA LS) M.P.NO.63/MDS/2015 4 FOUND THAT WHAT WAS OFFERED AS INCOME WAS ONLY PROJ ECT PROMOTION FEES AND NOTHING ELSE. RELYING ON THE DEC ISION OF THE BOMBAY TRIBUNAL IN THE CASE OF JCIT V. K. RAHEJ A (P) LTD. THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD T HAT INTEREST CLAIM AS A PERIOD COST MAY BE ALLOWED IN A CASE WHERE THE ASSESSEE IS FOLLOWING DEFINITE AND RECOGN IZED METHOD OF ACCOUNTING COMPLETED CONTRACT FOR REC OGNIZING ITS INCOME OR LOSS. BUT SUCH A VIEW CANNOT BE TAKEN IN THE CASE OF THE ASSESSEE, AS THE ASSESSEE IS DOING REAL ESTATE BUSINESS AS WELL AS BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF PROPERTIES AND IN RESPECT OF LATTER ONE, THE ASSESSEE WAS FOLLOWING COMPLETED CONTRACT METHOD WH EREIN THE ASSESSEE HAD ALREADY DEBITED THE ENTIRE INTERES T EXPENDITURE AS DEDUCTION FROM ITS COST. 8. IT IS AFTER EXAMINING ALL THESE ASPECTS OF T HE CLAIM THAT THE COMMISSIONER OF INCOME-TAX(APPEALS)HAS COME TO THE CONCLUSION THAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR DOES NOT PORTRAIT AND DE FACTO CHANGE IN THE METHOD OF ACCO UNTING OR RECOGNITION OF INCOME AND IT DOES NOT GIVE ANY CLEA R PICTURE OF ITS CONSTRUCTION ACTIVITIES. IT IS ON THE BASIS OF THE ABOVE FINDING THAT THE COMMISSIONER OF INCOME-TAX(APPEALS ) HAS CONFIRMED THE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING AUTHORITY. 9. ON GOING THROUGH THE DETAILED DISCUSSION MADE BY THE COMMISSIONER OF INCOME-TAX(APPEALS), WE ARE ALSO IN CLINED TO AGREE WITH HER. THE METHOD EMPLOYED BY THE ASSES SEE WAS INCONSISTENT WITH PAST ASSESSMENT YEAR-WISE OR PROJECT- WISE. WHEN SUCH A SET OF PATTERN IS NOT VISIBLE FOR THE EARLIER ASSESSMENT YEARS, IT IS NOT POSSIBLE TO HOLD THAT T HERE WAS SUCH FOLLOWING OF ACCEPTED METHOD OF ACCOUNTING BY THE ASSESSEE. SUCH A METHOD IS NOT AT ALL AVAILABLE. TH ERE IS NO FORCE IN THE ARGUMENT OF THE ASSESSEE REGARDING CHA NGE IN ITS METHOD OF ACCOUNTING SINCE IMPUGNED ASSESSMENT YEAR, AND, THEREFORE, THE INTEREST EXPENDITURE SHOULD BE ALLOWED AS A PERIOD COST. IN THE ASSESSEES CASE IN RESPECT OF CERTAIN PROJECTS IT IS FOLLOWING PROJECT COMPLETION METHOD AND WHILE DOING SO, HAS CLAIMED THE ENTIRE FINANCE AND INTEREST COST OF THE PROJECT AS A WHOLE AS DEDUCTIO N IN COMPUTING ITS PROFITS. IN THESE FACTS AND CIRCUMSTA NCES OF THE CASE, WE FIND THAT ALL OF A SUDDEN THE CLAIM MA DE BY THE ASSESSEE TO TREAT THE INTEREST EXPENDITURE AS A PER IOD COST IS NOT LEGALLY SUSTAINABLE. THEREFORE, WE CONFIRM T HE ORDERS M.P.NO.63/MDS/2015 5 OF THE LOWER AUTHORITIES ON THIS POINT AND REJECT T HE CONTENTION S OF THE ASSESSEE. 4. THE ASSESSEE COULD NOT POINT OUT ANY MISTAKE APP ARENT ON RECORD IN THE IMPUGNED ORDER IN COMING TO SUCH CONCLUSION BY THE TRIBUNAL. THUS, THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE IS LIABLE TO BE DISMISSED. 5. IN THE RESULT, MISCELLANEOUS PETITION FILED BY ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2015.. SD/- SD/- ( . ) ( # &' ( ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEND RA PRASAD ) * / ACCOUNTANT MEMBER &, * / JUDICIAL MEMBER & /CHENNAI, . /DATED, 16 TH SEPTEMBER, 2015 SOMU (,12 42 /COPY TO: 1. APPLICANT 2. (57 /RESPONDENT 3. 8 () /CIT(A) 4. 8 /CIT 5. 2 (,,; /DR 6. > /GF