DCIT CIR 3, THANE v. SHUBH BUILDERS & DEVELOPERS, MUMBAI

ITA 2380/MUM/2014 | 2010-2011
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 238019914 RSA 2014
Assessee PAN ABFFS1174D
Bench Mumbai
Appeal Number ITA 2380/MUM/2014
Duration Of Justice 2 year(s) 5 month(s) 20 day(s)
Appellant DCIT CIR 3, THANE
Respondent SHUBH BUILDERS & DEVELOPERS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 30-09-2016
Assessment Year 2010-2011
Appeal Filed On 09-04-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH MUMBAI BEFORE SHRI RAJENDRA ACCOUNTANT MEMBER AND SHRI C.N. PRASAD JUDICIAL MEMBER / I .TA NO. 2380/MUM/2014 ( / ASSESSMENT YEAR:2010-11 THE DCIT CIRCLE - 3 B-WING ASHAR IT PARK ROAD NO. 16Z WAGLE IND. ESTATE THANE(W) -400 602 / VS. M/S. SHUBH BUILDERS & DEVELOPERS OFICE NO. H. DEV PRAYAG GR FLOOR BHAKTI MANDIR ROAD PACHPAKHADI THANE(W) -400 602 ./ ./ PAN/GIR NO. ABFFS 1174D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI KAILASH GAIKWAD / RESPONDENT BY: SHRI SUBODH RATNAPARAKHI / DATE OF HEARING :12.07.2016 ! / DATE OF PRONOUNCEMENT : 30.09.2016 / O R D E R PER C.N. PRASAD JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE LD. CIT(A)-1 MUMBAI DATED 18.12.2013 PERTAINING TO ASS ESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND IN I TS APPEAL: ITA NO. 2380/M/2014 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)-1 THANE HAS ERRED IN DELETING THE ADDITION OF RS. 60 57 41/- BEING THE COST OF CONSTR UCTION OF 2251 SQ. FT. OF THE CONSTRUCTED PREMISES @ RS. 2 69 1/- PER SQ. FT. OVERLOOKING THE FACT THAT THE ASSESSEE HAS FAILED TO SUBMIT ANY EVIDENCE TO PROVE THAT THE CONSIDERATION PAID TO MR. YUSUF H. MUKADAM IN THE FORM OF 2886 SP. FT. OF CONSTRUCTED AREA FOR RS. 29 00 000/- WAS FOR ACQUIR ING DEVELOPMENT RIGHTS FROM MR. YUSUF H. MUKADAM. 3. BRIEFLY STATED THE FACTS ARE THAT APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPERS. T HE APPELLANT HAD ACQUIRED DEVELOPMENT RIGHTS IN LAND MEASURING 1239. 90 SQ. MTS. AT SURVEY NO. 64 AT VILLAGE BALKUM THANE. PRIOR TO AC QUISITION BY THE APPELLANT THE DEVELOPMENT RIGHTS IN RESPECT OF THE SAID LAND WERE HELD BY MR. YUSUF H. MUKADAM WHO HAD ACQUIRED THE SAME IN TURN FROM ANOTHER PARTY I.E. M/S. MITTAL BUILDERS & ASSO CIATES WHO HAD ACQUIRED-THE SAME FROM THE ORIGINAL LANDLORD I.E. S HRI DADU KANHA MHATRE. THE APPELLANT ENTERED INTO AN AGREEMENT WIT H MR. YUSUF H. MUKADAM ACCORDING TO WHICH MR. YUSUF H. MUKADAM HA S SURRENDERED HIS RIGHTS IN THE SAID LAND IN FAVOUR O F THE APPELLANT. FOR THIS SURRENDER OF RIGHTS THE APPELLANT AGREED TO GR ANT TO MR. YUSUF H. MUKADAM 2886 SQ. FT. OF CONSTRUCTED PREMISES FOR TH E CONCESSIONAL PRICE OF RS.29 00 000/-. THE APPELLANT HAD ALSO ENT ERED INTO AN AGREEMENT WITH THE ORIGINAL LAND OWNER FOR ACQUIRIN G THE DEVELOPMENT RIGHTS ON THE SAID LAND FOR WHICH THE A PPELLANT AGREED TO GIVE THE LAND OWNER 30% OF THE TOTAL CONSTRUCTED AR EA I.E. 5543 SQ. FT. OF THE CONSTRUCTED AREA (TOTAL CONSTRUCTED AREA BEI NG 18479 SQ. FT.). AS A RESULT OF THIS AGREEMENT THE APPELLANT GAVE T HE LAND OWNER FIVE FLATS WHOSE CONSTRUCTED AREA WAS 3293 SQ. FT. FOR T HE BALANCE CONSTRUCTED AREA REQUIRED TO BE GIVEN TO THE LAND O WNER WAS 2251 SQ. ITA NO. 2380/M/2014 3 FT. INSTEAD OF GIVING THIS CONSTRUCTED AREA TO THE LAND OWNER TO THE EXTENT OF 2251 SQ. FT. THE APPELLANT GAVE THE LAND OWNER AN AMOUNT OF RS. 72 50 000/- AS THE APPELLANT HAD SOLD THIS AREA IN THE OPEN MARKET AND OUT OF THE SALE PROCEEDS THIS AMOUNT WAS GIVEN TO THE ORIGINAL LAND OWNER. 3.1. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U/S. 143(3) OF THE ACT AND WHILE COMPLETING THE ASSESSME NT THE ASSESSING OFFICER DENIED COST OF CONSTRUCTION OF RS. 60 57 44 1/- OBSERVING THAT WHEN THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WIT H THE LAND OWNER DIRECTLY AND HAD PAID THE ORIGINAL LAND OWNER CONSIDERATION FOR ACQUISITION OF DEVELOPMENT RIGHTS THERE WAS NO NEED OR NO REASON FOR THE ASSESSEE TO PROVIDE 2886 SQ.FT TO MR. YUSUF HUSSAIN MUKADAM AT CONCESSIONAL PRICE. 4. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE AND DELETED THE ADDITION OBSERVING THAT THERE IS NO EVI DENCE TO SHOW THAT THE CONSIDERATION WAS NOT INFACT ALLOWED TO MR. YUS UF HUSSAIN MUKADAM OR ASSESSEE HAD RECEIVED ANY AMOUNT OVER AN D ABOVE THE PAYMENT OF RS. 29 00 000/- FROM MR. YUSUF HUSSAIN M UKADAM OR THE TRANSACTION BETWEEN THE ASSESSEE AND MR. YUSUF HUS SAIN MUKADAM IS NOT AN ARMS LENGTH TRANSACTION. AGAINST WHIC H ORDER THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSEE INCURRED EXPENDITURE IN KIND TO MR. YUSUF HUSSAIN MUKADAM. HE SUBMITS THAT THE EXPENDITURE IS NOT FOR THE PURPOSE OF BUSINESS. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITS THA T ASSESSEE ITA NO. 2380/M/2014 4 DIRECTLY ENTERED INTO AN AGREEMENT FOR DEVELOPMENT WITH LAND OWNER AND THERE WAS A CANCELLATION DEED DATED 26.2.208. THE EXISTING RIGHTS OF MITTAL BUILDERS AND ASSOCIATES/ MR. YUSUF HUSSAI N MUKADAM IN THE SAID LAND WERE TERMINATED IN FAVOUR OF THE ASSESSEE AND THIS WAS DONE LATER TO ENTERING INTO DEVELOPMENT AGREEMENT B Y THE ASSESSEE WITH THE LAND OWNER ON 2.5.2006. THUS THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSING OFFICER IS RIGHT IN DENYING THE COST OF CONSTRUCTION. 6. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUPP ORTS THE ORDER OF THE LD. CIT(A). HE SUBMITS THAT THE EXPEN DITURE WAS INCURRED IN THE COURSE OF DEVELOPMENT OF PROPERTY A ND IS THEREFORE REVENUE EXPENDITURE. HE ALSO SUBMITTED A BRIEF NOT E ON THE ISSUE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS A PARTNERSHI P FIRM ENGAGED IN THE BUSINESS AS BUILDERS AND DEVELOPERS. THE ID. A. O HAS MADE ADDITION OF RS. 60 57 441/- DISALLOWING THE COST OF CONSTRUCTION OF PREMISES GIVEN AT CONCESSIONAL RATE TO THE PREDECES SOR IN TITLE OF THE PROJECT LAND ONE MR. YUSUFH. MUKADAM. THE SEQUENC E OF PASSING OF TITLE OF THE PROJECT LAND TO THE RESPONDENT IS EXPL AINED BY THE ASSESSEE AS UNDER: A. ORIGINALLY UNDER AGREEMENT DT. 26.06.1987 DEVE LOPMENT RIGHTS OF LAND ADMEASURING 1239.90 SQ. MTRS AT SURV EY NO. 64 VILLAGE BALKUM THANE WERE GRANTED BY SHRI. DADU KA NHA MHATRE (LANDLORD) TO M/S. MITTAL BUILDERS AND ASSOC IATES OF MUMBAI. ITA NO. 2380/M/2014 5 THEREAFTER VIDE AGREEMENT DT.24.06.2006 THE SAID M/S. MITTAL BUILDERS AND ASSOCIATES AGREED TO ASSIGN THE DEVELO PMENT RIGHTS OF THE SAID LAND TO ONE MR.YUSUF H. MUKADAM OF THANE. AS THE ASSESSEE INTENDED TO DEVELOP THE SAID LAND HE ACQUIRED THE RIGHTS TITLE AND INTEREST IN THE SAID LAND FRO M MR. YUSUF H. MUKADAM AS WELL AS FROM THE ORIGINAL LANDLORD SHRI DADU KANHA MHATRE FAMILY. MR. YUSUF H. MUKADAM VIDE AGREEMENT DT. 26.02.2008 SURRENDERED HIS RIGHTS TITLE AND INTEREST IN THE S AID LAND TO THE RESPONDENT FOR CONSIDERATION OF 2886 SQ. FT. OF CON STRUCTED PREMISES AT THE CONCESSIONAL PRICE OF RS.29 00 000/ -. ACCORDINGLY VIDE DEED OF CANCELLATION DT. 26.02.20 08 THE EXISTING RIGHTS OF M/S.MITTAL BUILDERS AND ASSOCIAT ES/ MR.YUSUF H. MUKADAM IN THE SAID LAND WERE TERMINATED IN FAVO UR OF THE ASSESSEE . B. THE ASSESSEE HAS ALSO ACQUIRED DEVELOPMENT RIGHT S IN RESPECT OF THE PROJECT LAND UNDER REGISTERED AGREEM ENT DT. 02.05.2006 DIRECTLY FROM DADU KANU MHATRE. IT IS THUS THE CASE OF THE ASSESSEE THAT THE TITLE OF THE SAID LAND HAS MOVED AS UNDER:- DADU KANU MHATRE (LANDLORD) MITTAL BUILDERS & ASSOCIATES OF MUMBAI (AGREEMENT DT. 26.6.1987) MR. YUSUF H. MUKADAM (AGREEMENT DT. 24.6.2006) (RIGHTS CANCELLED WITH MUTUAL UNDERSTANDING BY ALL PARTIES ON 26.2.2008) DEVELOPMENT RIGHTS WITH THE RESPONDENT UNDER AGREEM ENT DT. 2.5.2006. C. IT IS THUS THE CASE OF THE ASSESSEE THAT THE CO NSIDERATION PAID TO MR. YUSUF H. MUKADAM WAS FOR PERFECTING THE TITL E OF THE PROJECT LAND AND HENCE IS REVENUE EXPENDITURE FOR T HE ASSESSEE ITA NO. 2380/M/2014 6 3. THE ONLY ARGUMENT OF THE ID AO IN TAKING ADVERSE VIEW OF THE MATTER IS THAT ACCORDING TO THE ID AO THE ASSESSEE WAS NOT REQUIRED TO PROVIDE THE CONSTRUCTED PREMISES TO MR. YUSUF H. MUKADAM AT CONCESSIONAL PRICE. IN ARRIVING AT THE ABOVE CONCLUSION THE ID AO HAS NOT APPRECIATED THAT MR.YUSUF H. MUKADAM HELD VAL UABLE DEVELOPMENT RIGHTS IN THE SAID LAND AND HAD TO BE S UITABLY COMPENSATED FOR SURRENDERING THE SAME IN FAVOUR OF THE ASSESSEE . APPROPRIATED THE DECISION MAKING POWER OF THE ASS ESSEE FIRM TO DECIDE AS TO WHAT WAS COMMERCIALLY JUSTIFIED IN ACQUIRING THE LEGAL TITLE OF THE SAID LAND. IT MAY KINDLY BE APPRECIATED THAT THE ID AO HAS NOT DISPUTED THE GENUINENESS OF THE TRANSACTION. 8. IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT ANY CLAIM FOR EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF A BUSINESSMAN. IN APPLYING THE TEST OF COMMERCIAL EXP EDIENCY FOR DETERMINING WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS THE REASONABL ENESS HAS TO BE JUDGED FROM THE POINT OF VIEW OF A BUSINESSMAN AND NOT REVENUE. THIS HAS BEEN HELD IN SEVERAL JUDICIAL PRONOUNCEMENTS AS UNDER: (I) CIT -VS - WALCHAND & CO. (P) LTD. 65ITR 381 (S C) (1967) (II) S.A. BUILDERS LTD. - VS - CIT (A) & ANR 288 I TR 1 (SC) (2007) 9. FURTHER WE ALSO FIND THAT THE ISSUE HAS BEEN CON SIDERED BY THE LD. CIT(A) WITH REFERENCE TO THE SUBMISSIONS AND EV IDENCES ON RECORD AND DELETED THE ADDITION WHICH IN OUR VIEW I S WELL REASONED. THE RELEVANT PORTION OF THE LD. CIT(A)S FINDINGS A RE AS UNDER: ITA NO. 2380/M/2014 7 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMIS SIONS THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER THE FACTS OF THE CASE AND HAVE ALSO GONE THROUGH VARIOUS DECISIONS R ELIED UPON BY THE APPELLANT. THE A.O. HAS MADE ADDITION OF RS.60 57 441/- BEING COST OF CONSTRUCTION OF 2251 SQ. FT. OF THE C ONSTRUCTED PREMISES @ RS.2 691/- PER SQ. FT. WHICH ACCORDING TO A.O. WAS GRANTED TO MR. YUSUF H. MUKADAM AS A CONCESSION WH ICH THE APPELLANT WAS NOT REQUIRED TO DO AS THE APPELLANT H AD DIRECTLY ENTERED INTO DEVELOPMENT AGREEMENT WITH THE LAND OW NER OF THE LAND. IN THIS REGARD IT IS SEEN THAT THE AO HAS NO T APPRECIATED THE FACT THAT MR. YUSUF H. MUKADAM HAD VALUABLE DEVELOP MENT RIGHTS IN THE SAID LAND WHICH HE HAD ACQUIRED FROM M/S. MI TTAL BUILDERS & ASSOCIATES THROUGH THE WRITTEN AGREEMENT DATED 24 .06.2006. M/S. MITTAL BUILDERS & ASSOCIATES IN TURN HAD ACQ UIRED THESE DEVELOPMENT RIGHTS FROM THE LAND OWNER VIDE AGREEME NT DATED 26.06.1987. WHEN THE APPELLANT APPROACHED MR. YUSUF H. MUKADAM FOR GETTING DEVELOPMENT RIGHTS IN THE LAND MR. YUSUF H. MUKADAM ENTERED INTO AN AGREEMENT WITH THE APPEL LANT FOR SURRENDERING HIS VALUABLE DEVELOPMENT RIGHTS IN THE SAID LAND FOR A CONSIDERATION OF GETTING THE CONSTRUCTED PREMISES TO THE EXTENT OF 2886 SQ. FT. FOR A CONCESSIONAL PRICE OF RS. 29 00 000/-. A WRITTEN AGREEMENT TO THIS EFFECT HAS BEEN ENTERED I NTO BY THE APPELLANT WITH MR. YUSUF H. MUKADAM DATED 26.02.200 8. THEREFORE THE CONSIDERATION PAID BY THE APPELLANT TO MR. YUSUF H. MUKADAM WAS ON ACCOUNT OF VALUABLE DEVELOPMENT RIGH TS HELD BY MR. YUSUF H. MUKADAM IN THE LAND WHICH HE AGREED T O SURRENDER IN FAVOUR OF THE APPELLANT. THEREFORE THE EXPENDIT URE INCURRED BY THE APPELLANT FOR SECURING THE DEVELOPMENT RIGHTS I N THE LAND WAS AN ALLOWABLE BUSINESS EXPENDITURE. THE OBSERVATION OF THE AO THAT THE APPELLANT WAS NOT REQUIRED TO PAY ANY CONS IDERATION TO MR. YUSUF H. MUKADAM DOES NOT TAKE INTO ACCOUNT THE FACT THAT MR. YUSUF H. MUKADAM HAD VALID DEVELOPMENT RIGHTS I N THE SAID LAND WHICH HE SURRENDERED IN FAVOUR OF THE APPELLA NT. THE FACT THAT THE APPELLANT PAID SEPARATE CONSIDERATION TO T HE ORIGINAL LAND OWNER HAS NO BEARING ON THE CONSIDERATION ALLO WED TO MR. YUSUF H. MUKADAM IN RESPECT OF SURRENDER OF HIS DEV ELOPMENT RIGHTS. 10. IN VIEW OF THE VARIOUS JUDGEMENTS RELIED UPON B Y THE APPELLANT AS REPRODUCED ABOVE IT IS FURTHER HELD THAT IT IS THE PREROGATIVE OF THE ASSESSEE TO CONDUCT HIS BUSINESS BASED ON THE PRINCIPLES OF COMMERCIAL EXPEDIENCY. THE A.O. THERE FORE WAS NOT ITA NO. 2380/M/2014 8 JUSTIFIED IN OBSERVING THAT THE APPELLANT WAS NOT R EQUIRED TO MAKE ANY PAYMENT TO MR. YUSUF H. MUKADAM. FURHER I N THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE CONSIDERAT ION WAS NOT IN FACT ALLOWED TO MR. YUSUF H. MUKADAM OR THAT THE APPELLANT HAD RECEIVED ANY AMOUNT OVER AND ABOVE THE PAYMENT OF RS. 29 00 000/- FROM MR. YUSUF H. MUKADAM OR THAT THE T RANSACTION BETWEEN THE APPELLANT AND MR. YUSUF H. MUKADAM WAS NOT AN ARM'S LENGTH TRANSACTION THE AO WAS NOT JUSTIFIED IN MAKING THIS ADDITION . THEREFORE THE ADDITION OF RS . 60 57 44 1/- MADE BY THE AO ON THIS ACCOUNT IS DELETED. 10. ON GOING THROUGH THE ORDER OF THE LD. CIT(A) W E DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(A) I N DELETING THE ADDITION BEING THE COST OF CONSTRUCTION CLAIMED BY THE ASSESSEE. THUS WE SUSTAIN THE ORDER OF THE LD. CIT(A). 11. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED 30 TH SEPTEMBER 2016 . % . ./ RJ SR. PS ITA NO. 2380/M/2014 9 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ %%-. -.! / DR ITAT MUMBAI 6. /01 / GUARD FILE. / BY ORDER *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI