ITO, Kota v. URBAN IMPROVEMENT TRUST, Kota

ITA 198/JPR/2012 | 2003-2004
Pronouncement Date: 28-11-2014 | Result: Dismissed

Appeal Details

RSA Number 19823114 RSA 2012
Bench Jaipur
Appeal Number ITA 198/JPR/2012
Duration Of Justice 2 year(s) 8 month(s) 28 day(s)
Appellant ITO, Kota
Respondent URBAN IMPROVEMENT TRUST, Kota
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-11-2014
Assessment Year 2003-2004
Appeal Filed On 01-03-2012
Judgment Text
ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NOS. 198 & 199/JP/2012 ASSESSMENT YEARS 2003-04 & 2004-05 THE ITO VS. URBAN IMPROVEMENT TRUST WARD- 1(2) KOTA KOTA (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI A.K. KHANDELWAL ASSESSEE BY : SHRI RAGHAV BAJAJ DATE OF HEARING: 30-09-2014 DATE OF PRONOUNCEMENT: 28 -11-2014 ORDER PER R.P. TOLANI JM THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST TWO DIFFERENT ORDERS OF THE LD. CIT(A) KOTA DATED 30-12-2011 FO R THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE GROUNDS RAISED BY THE DEPA RTMENT IN RESPECTIVE ASSESSMENT YEARS ARE AS UNDER:- A.Y. 2003-04 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS:- (I) IGNORED THE FACT THAT AFTER THE AMENDMENT OF SE CTION 10(20) AND OMISSION OF SECTION 10(20A) OF THE I.T. ACT 1961 W.E.F. 1-4-2003 URBAN IMPROVEMENT TRUST IS NOT COV ERED UNDER THE DEFINITION OF LOCAL AUTHORITY. ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 2 (II) GIVEN RELIEF OF RS. 346.96 LAKHS BY TREATING T HE SAME AS REVENUE EXPENDITURE WITHOUT ANY BASIS AND HAS ALSO IGNORED THE FACT THAT THE HON'BLE ITAT JAIPUR BENCH IN THIS CASE HAS DIRECTED THAT THE STATUS OF THE ASSESSEE CANNOT BE CONSIDERED AS AUTHORITY FOR ALLOWING EXEMPTION U/S 10(20) OF THE ACT. A.Y. 2004-05 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS:- (I) ERRED IN TREATING THE INCOME OF RS. 22.96 LAKHS AS INCOME FROM BUSINESS AGAINST INCOME FROM HOUSE PROPERTY AS ASSESSED BY THE AO. (II) IGNORED THE FACT THAT AFTER THE AMENDMENT OF S ECTION 10(20) AND OMISSION OF SECTION 10(20A) OF THE I.T. ACT 1961 W.E.F. 1-4-2003 URBAN IMPROVEMENT TRUST IS NOT COV ERED UNDER THE DEFINITION OF LOCAL AUTHORITY. (III) GIVEN RELIEF OF RS. 522.94 LAKHS BY TREATING THE SAME AS REVENUE EXPENDITURE WITHOUT ANY BASIS AND HAS ALSO IGNORED THE FACT THAT THE HON'BLE ITAT JAIPUR BENCH IN THIS CASE HAS DIRECTED THAT THE STATUS OF THE ASSESSEE CANNOT BE CONSIDERED AS AUTHORITY FOR ALLOWING EXEMPTION U/S 10(20) OF THE ACT. 2.1 DURING THE COURSE OF HEARING THE LD. DR RELIED ON THE ORDER OF THE AO. 2.2 THE LD. AR POINTED OUT THAT GROUND NO. (I) FOR ASSESSMENT YEAR 2003- 04 AND GROUND NO. (II) FOR ASSESSMENT YEAR 2004-05 RAISED BY THE REVENUE ARE INFRUCTUOUS INASMUCH AS ITAT IN FIRST ROUND HAD DIRECTED THE LD. CIT(A) TO DECIDE THE ISSUE ON MERIT. THEREFORE GROUND NO. (I) AND GROUND NO. (II) DO NOT ARISE FROM THE RESPECTIVE ORDERS OF THE LD. CIT(A). ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 3 2.3 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD WE FIND MERIT IN THE CONTENTION OF THE ASSE SSEE. SINCE THIS ISSUE HAS BEEN DECIDED ON MERITS BY THE LD. CIT(A) THEREFORE THE REVENUES GROUNDS NO I & II ARE HELD TO BE INFRUCTUOUS AS THEY DO NOT ARISE FROM THE ORDERS OF THE LD. CIT(A). THUS BOTH THE GROUNDS OF THE REVENU E ARE DISMISSED. 3.1 THE SOLE GROUND OF THE REVENUE WHICH REMAINS FO R ADJUDICATION ON MERITS IN BOTH THE YEARS IS AS UNDER:- THE LD. CIT(A) HAS ERRED IN GIVING RELIEF OF RS. 346.95 FOR ASSESSMENT YEAR 2003-04 AND RS. 522.94 FOR ASSE SSMENT YEAR 2004-05 BY TREATING THE SAME AS REVENUE EXPEND ITURE WITHOUT ANY BASIS AND HAS ALSO IGNORED THE FACT THA T THE HON'BLE ITAT JAIPUR BENCH IN THIS CASE HAS DIRECTED THAT THE STATUS OF THE ASSESSEE CANNOT BE CONSIDERED AS AUTHORITY FOR ALLOWING EXEMPTION U/S 10(20) OF THE ACT. 3.2 THE LD. DR CONTENDS THAT REVENUE HAS ASSAILED T HE DECISION OF LD. CIT(A) ON THE GROUND THAT ISSUE HAS BEEN DECIDED IN ASSESSEES FAVOR WITHOUT CITING PROPER REASONING. THEREFORE IT MUST BE RESTORED BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE SAME AFRESH AF TER CONSIDERING THE MATERIAL AVAILABLE ON THE RECORD. 3.3 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT REVENUE HAS RAISED THIS GROUND AGAIN IN MISCONCEPTION INASMUCH AS THE LD. C IT(A) ADJUDICATED THE ISSUE IN AY 2003-04 BASED ON HIS REASONINGS FOR A Y 2004-05 BY FOLLOWING OBSERVATIONS. ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 4 4.62 DISCUSSION AND THE APPELLATE DECISIONS THE FACTS OF THE CASE ARE SIMILAR TO THE ASSESSEE'S CASE FOR ASSESSMENT YEAR 2004-05 (APPEAL NO. 300/11-12). IN MY FINDING IN RESPECT OF GROUND NO. 6 AND 7 I HAVE HELD THAT INCOME AND EXPENDITURE OF THE ASSESSEE ARE TO BE RECOGNIZED IN THE YEAR OF THEIR INCURRING / RECEIVING. FOLL0WING MY FINDINGS IN THE ASSESSMENT YEAR 2004-05 IT IS HELD THAT DEVELOPMENT OF LOW COST HOUSING PROJECT WAS BUSINESS ACTIVITIES OF THE ASSESSEE AND INCOME AS WELL AS EXPENDITURE RELATED TO THE SAME HAS TO BE RECOGNIZED IN THE CURRENT YEA R ON CASH BASIS. THE AO IS THEREFORE DIRECTED TO DELETE ADDITION OF RS. 346.95 LACS. 3.4 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE LD. DR HAS THUS FAILED TO APPRECIATE THAT IN THE OPENING LINE ITSEL F THE LD. CIT(A) HAS FOLLOWED THE FINDING AS GIVEN IN THE ASSESSMENT YEAR 2004-05 WHICH ARE AS UNDER:- 4.72 DISCUSSION AND THE APPELLATE DECISIONS ON GROU ND NO. 6 AND 7 THE ASSESSEE HAS CLAIMED DEVELOPMENT EXPENSES OF RS. 522.19 LACS RS. 522.94 LACS UNDER THE HEAD NON- PLAN EXPENDITURE. THE AO DISALLOWED THE SAME TREATING T HE SAME AS CAPITAL IN NATURE. ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 5 THE ASSESSEE CLAIMED THAT THE DEVELOPMENT OF VARIOUS HOUSING PROJECTS WAS AS PER OBJECTIVES OF T HE ASSESSEE AND EXPENSES INCURRED ON DEVELOPMENT WERE WHOLLY AND EXCLUSIVELY FOR THESE OBJECTIVES. FOR D ECIDING THE ISSUE THE FOLLOWING FACTS ARE WORTH MENTIONING: (I) THE ASSESSEE WAS ENGAGED IN DEVELOPMENT OF AREA ASSIGNED TO IT BY THE STATE GOVT. (II) THE ACTIVITIES OF THE ASSESSEE INCLUDED CONSTRUCTION OF LOW COST HOUSING DEVELOPMENT AND MAINTENANCE OF AREA ASSIGNED TO IT. (III) THE ASSESSEE WAS FOLLOWING SINGLE ENTRY OF ACCOUNTING. (IV) INCOME AND EXPENDITURE WERE RECOGNIZED BY THE ASSESSEE ON CASH BASIS. (V) THIS METHOD WAS CONTINUOUSLY FOLLOWED BY THE ASSESSEE SINCE INCEPTION. (VI) IN LIEU OF MAINTENANCE AND DEVELOPMENT ACTIVITIES THE ASSESSEE RECEIVED A SHARE IN URBAN T AX AND A SHARE IN LAND CONVERSION CHARGES. IN VIEW OF ABOVE IT IS HELD THAT CONSTRUCTION OF HOUSE AND DEVELOPMENT AND MAINTENANCE OF AREAS ASSIGNED TO ASSESSEE WAS THE CORE ACTIVITIES OF THE ASSESSEE. IT IS ALSO HELD THAT THESE ACTIVITIES WERE IN THE NATURE OF BUSINESS. IT IS ALSO HELD THAT IN VIEW OF METHOD OF ACCOUNTIN G FOLLOWED BY ASSESSEE THE INCOME AND EXPENDITURE FR OM THESE ACTIVITIES HAS TO BE RECOGNIZED IN THE YEAR O F INCURRING / RECEIVING THE EXPENDITURE / RECEIPTS. THE AO IS THEREFORE DIRECTED TO ALLOW THE EXPENDITURE INCURRED DURING THE YEAR. ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 6 IT IS CLARIFIED THAT WHILE ALLOWING THESE EXPENSES THE AO WILL TAKE INTO ACCOUNT CORRESPONDING RECEIPT S ALSO (WHICH WERE EXCLUDED BY HIM IN ASSESSMENT ORDER.) 3.5 THE LD. COUNSEL FOR THE ASSESSEE PLEADS THAT EA RLIER THE INCOME OF THE ASSESSEE WAS EXEMPT U/S 10(20) AS A NOTIFIED LOCAL AUTHORITY SUBSEQUENTLY DUE TO AMENDMENT IN THE PROVISIONS THE INCOME OF TH E ASSESSEE BECAME TAXABLE AS BUSINESS INCOME. LD. CIT(A) HAS APPRECIA TED THE RELEVANT ISSUES FROM EVERY ANGLE AND HELD THAT THE ASSESSEE WAS FOL LOWING SINGLE ENTRY SYSTEM OF ACCOUNTING WHICH IS ONE OF THE RECOGNIZED METHOD OF ACCOUNTING. BESIDES IT IS REGULARLY FOLLOWED BY THE ASSESSEE IN PAST YEARS AND HAS BEEN ACCEPTED BY THE DEPARTMENT. ONCE THE HOUSE BUILDING ACTIVITY CARRIED OUT BY ASSESSEE IS HELD AS BUSINESS ACTIVITIES THEN AS A N ATURAL CONSEQUENCE CORRESPONDING EXPENSES LIKE DEVELOPMENT EXPENDITURE AND CONSTRUCTION EXPENSES ARE TO BE ALLOWED AS BUSINESS EXPENDITURE. IT IS EXPLAINED THAT ALL THESE ASPECTS HAVE BEEN CONSIDERED BY THE LD. CIT(A ) AFTER CAREFUL CONSIDERATION THEREOF. THE LD. AR SUBMITTED THAT TH IS CONTENTION OF THE REVENUE THAT NO REASONS HAVE BEEN GIVEN BY THE LD. CIT(A) HAS NO LEGS TO STAND UPON. THE ORDERS OF LD. CIT(A)S BEING BASED ON JUST AND PROPER REASONING DO NOT CALL FOR ANY INTERFERENCE. 3.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. AR THAT THE LD. ITA NO. 198/JP/2012 ITO VS. URBAN IMPROVEMENT TRUST KOTA 7 CIT(A) HAS GIVEN DETAILED REASONS IN HIS ORDER FOR ASSESSMENT YEAR 2004-05. THE BUSINESS ACTIVITIES OF THE ASSESSEE TO DEVELOP LAND AND CONSTRUCT HOUSES FOR GENERAL PUBLIC ARE WELL RECOGNIZED AND REGULATE D BY STATUTORY RULES. ONCE THE ACTIVITIES UNDERTAKEN BY ASSESSEE ARE HELD AS B USINESS ACTIVITY THEN CORRESPONDING EXPENDITURE HAS TO BE ALLOWED AS BUSI NESS EXPENDITURE AS A NATURAL CONSEQUENCE. IT IS NOT DISPUTED THAT ASSESS EE HAS BEEN FOLLOWING SAME METHOD OF ACCOUNTING WHICH HAS BEEN ACCEPTED B Y THE DEPARTMENT. IN VIEW THEREOF WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A) WHICH ARE UPHELD. 4.0 IN THE RESULT THE APPEALS OF THE REVENUE ARE D ISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 -11-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 28 TH NOV. 2014 *MISHRA COPY FORWARDED TO:- 1. THE ITO WARD- 1(2) KOTA 2. URBAN IMPROVEMENT TRUST KOTA 3. THE LD. CIT(A) 4. THE LD. CIT BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 198/JP/2012) AR ITAT JAIPUR