The ITO, Ward-2,, Mehsana v. M/s. SonataDevelopers, Mehsana

ITA 2770/AHD/2012 | 2009-2010
Pronouncement Date: 29-04-2014 | Result: Dismissed

Appeal Details

RSA Number 277020514 RSA 2012
Assessee PAN ABKFS4642M
Bench Ahmedabad
Appeal Number ITA 2770/AHD/2012
Duration Of Justice 1 year(s) 4 month(s) 19 day(s)
Appellant The ITO, Ward-2,, Mehsana
Respondent M/s. SonataDevelopers, Mehsana
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-04-2014
Date Of Final Hearing 18-03-2014
Next Hearing Date 18-03-2014
Assessment Year 2009-2010
Appeal Filed On 10-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI A.M.) I.T. A. NO. 2770/AHD/2012 (ASSESSMENT YEAR: 2009-10) ITO WARD-2 MEHSANA V/S M/S. SONATA DEVELOPERS F-5 SHKRIRAM COMPLEX RADHANPUR ROAD MEHSANA- 384002 (APPELLANT) (RESPONDENT) PAN: ABKFS4642M APPELLANT BY : SHRI SHRI O.P. BATHEJA SR . D.R. RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 18-03-201 4 DATE OF PRONOUNCEMENT : 29 -04-2014 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A) AHMEDABAD DATED 17.09.2012 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER: 3. ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF LAND AND BUILDING DEVELOPMENT. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF ITA NO 2770 /AHD/2012 . A.Y. 2009- 10 2 INCOME FOR AY 2009-10 DECLARING TOTAL INCOME OF RS 10 17 577/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 23.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS 52 99 370/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) V IDE ORDER DATED 17.9.2012 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSE E. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO RS. 4 81 600/- OUT OF RS. 47 57 551/- MADE ON ACCOUNT OF DISALLOWANCE OF DEVELOPMENT EXPENSES. 4. THOUGH REVENUE HAS RAISED VARIOUS GROUNDS THE ONLY EFFECTIVE GROUND IS WITH RESPECT TO DELETION OF DISALLOWANCE OF DEVE LOPMENT EXPENSES. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT ASSESSEE HAD CLAIMED DEVELOPMENT EXPENSES OF RS 56 09 151/- WHICH WAS STATED TO HAVE BEEN SPENT ON PROVIDING VARIOUS FACILITIES AND OTHER AMENITIES LIKE COMPOUND WALL ROAD TUBE WELL CLUB HOUSE SWIMMING POOL ETC TO THE PURCHASERS OF THE PLOTS OF LAND IN THE SCHEME NAMED 'VILLA SONATA'. AO WAS OF THE VIEW THAT THE PURCHA SERS HAVE BEEN SOLD ONLY THE PIECE OF LAND AND THEY HAVE NOT BEEN GIVEN ANY OWNERSHIP RIGHTS IN RESPECT OF THE VARIOUS AMENITIES LIKE CLU B HOUSE SWIMMING POOL ETC BUT THEY HAD ONLY THE RIGHT TO ITS USE. A .O. WAS THEREFORE OF THE VIEW THAT EXPENDITURE INCURRED BY THE ASSESSEE WAS FOR CREATION OF VARIOUS FIXED ASSETS OF THE FIRM AND THE OWNERSHIP OF WHICH ALSO REMAINED WITH THE FIRM. HE THEREFORE AFTER CONSIDER ING THE EXPENSES ITA NO 2770 /AHD/2012 . A.Y. 2009- 10 3 LIKE LAND LEVELING LAND NA EXPENSES SUPERVISORY E XPENSES AND BROKERAGE EXPENSES AGGREGATING TO RS 8 51 600/- CON SIDERED THE BALANCE EXPENSES OF RS 47 57 551/- TO BE OF CAPITAL IN NATURE WHICH WERE ELIGIBLE FOR DEPRECIATION AND AFTER ALLOWING T HE DEPRECIATION DISALLOWED THE NET EXPENSES OF RS 42 81 796/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATTER BEFORE CIT(A). C IT(A) DELETED THE ADDITION BY HOLDING AS UNDER:- 7.11 HAVE GONE THROUGH THE FACTS OF THE CASE THE ASSESSMENT O RDER AND THE SUBMISSIONS FILED BY THE APPELLANT. WHILE PASSING THE ORDER THE A.O. HAS MADE DISALLOWANCE OF DEVELOPMENT EXPENSES CLAIMED IN TRADING ACCOUNT AMOUNTING TO RS. 47 57 551/ - CONSIDERING THESE AS CAPITAL IN NATURE AND PERTAINING TO ASSETS RETAINED BY THE ASSESSEE. THE AO HA S SUBSEQUENTLY WENT ON TO ALLOW DEPRECIATION @ 10% ON THESE EXPENDITURES. THE UNDISPUTED FACT IS THAT THE APPELLANT HAS BROUGHT UP A SCHEME CALLED VILLA SONATA; AND HAS DEVELOPED / WAS OBLIGED TO DEVELOP ROADS COMMON PLOTS CLUB HOUSE WITH GYMNASIUM SWIMMING POOL ETC. ON WHICH THE EXPENSES WERE CLAIMED AS DEVELOPMENT EXPEN SES AND DEBITED THEM TO THE PROJECT ACCOUNT (TRADING ACCOUNT). THE APPELLANT WAS CLAIMIN G THAT THESE EXPENSES WERE MADE FOR THE ENTIRE PROJECT AND THE UNDIVIDED RIGHTS ON THESE COMMO N FACILITIES-AND AMENITIES WERE TRANSFERRED / TRANSFERABLE TO THE PURCHASER OF PLOTS AND T HE EXPENSES WERE PERTAINING TO THE PROJECT ONLY AND WERE REVENUE EXPENSES. HOWEVER THE A.O. HELD THAT THE A RGUMENTS OF THE APPELLANT FIRM ARE NOT ACCEPTABLE ON THE BASIS OF FOLLOWING REASONS: (I) THE APPELLANT FIRM HAS ONLY SOLD PLOT OF LAND TO T HE PURCHASER. (II) IN THE SALE DEED NO WHERE IT HAS BEEN STATED THAT THE O WNERSHIP FOR CLUB HOUSE SWIMMING POOL ETC. HAS BEEN PASSED OVER TO PURCHASER. THE AO HAS RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF R.B. JODHARMAL KUTHALIA VS CIT 82 I TR 570 TO ARGUE THAT IN THE COMPLETE OWNERSHIP HAS NOT BEEN TRANSFERRED TO THE BUYERS. (III) AS REGARDS TO BORE WELL & OVER HEAD TANK IT HAS BEEN CLEARLY MENTIONED IN THE SALE DEED THAT THESE WILL REMAIN IN THE OWNERSHIP OF THE APPELLANT FIRM. (IV) ALL WERE FOR LONGER PERIOD HAVING ENDURING BENEFIT AND CANNOT BE DESTROYED IN A SHORT-SPAN OF TIME. (V) THE LEGAL OPINION SUBMITTED IS FACTUALLY INCORRECT AND CO GNIZANCE OF THIS OPINION CANNOT BE TAKEN. HOWEVER I FIND THAT THE AO HAS NOT CORRECTLY APPRECIATED T HE FACTS. THE AMENITIES INCLUDING ROADS AND PARKS ETC. WERE CLEARLY FOR ALL THE PLOT OWNERS. EXCEPT T HE BORE WELL & OVER HEAD TANK THE APPELLANT HAD GIVEN THE RIGHTS OF THE COMMON FACILITIES TO THE PLOT HOLDERS (INCLUDING THE FUTURE PLOT OWNERS). THE COPY OF AGREEMENT UNEQUIVOCALLY STATED THAT THE LAND FOR THE COMMON PLOT 'B' IN FUTURE THEY SHALL BE CONSTRUCTED AND IN THAT CLUB HOUSE SWI MMING POOL TEMPLE ETC. SHALL BE CONSTRUCTED; CONSEQUENTLY THE ENTIRE PROPERTY WHICH IS KNOWN AS VILA SONATA WILL BE USED AND UTILIZED BY THE ENTIRE PLOT HOLDERS I. E. BOCK NO. 332 333 334 335 338 AND 339. THE BROCHURE IN FACT CLEARLY SPELLS OUT ALL THE FACILITIES THAT WOULD BE AVA ILABLE TO THE PLOT HOLDERS OF THE SCHEME. THE CLINCHING EVIDENCE THAT THE OWNERSHIP OF ROADS AND COMMON PLOTS EVEN WHOSE EXPENSES ARE REFUSED TO BE ALLOWED DOES NOT WREST WITH THE APPELLANT IS CLEAR FROM THE ORDER OF THE REVENUE DEPARTMENT OF DISTRICT PANCHAYAT MEHSANA; WHICH WHILE GRA NTING THE APPROVAL TO THE DEVELOPMENT OF THE SCHEME IN PARA 17 TO 19 OF THE ORDER APP ROVING THIS SCHEME STATED AS UNDER: '17. THE OWNERSHIP OF C.O. P./COMMON PLOT/OPEN COURT YARD AND OWNERSHIP OF THE ROADS SHALL BE COMMON. THE ROADS KEPT IN THE SAID PLOT AFTER A PERIOD OF FIVE YEARS FROM THE DATE OF THE ORDER SHALL BE ASSUMED TO BE HANDED OVER TO THE PANCHAYAT. ITA NO 2770 /AHD/2012 . A.Y. 2009- 10 4 18. THE SPACE OF C.O.P/COMMON PLOT/OPEN COURT YARD CA NNOT BE TRANSACTED IN ANY MANNER WHATSOEVER INCLUDING BY WAY OF GIFT LIEN MORTGAGE SALE TRANSFER ETC. NOR ANY CONSTRUCTION CAN BE PUT UP IN THE SAME. ' FURTHER EVEN THE SCHEDULE OF AGREEMENT BETWEEN THE BUYER AND THE APPELLANT INCLUDES THE PRO- RATA AREA OF THE COMMON FACILITIES. IT IS TRUE THAT PLOT OWNERS IN THEIR CAPACITY WHEN TAKEN INDIVIDUALLY HAVE NO ABSOLUTE RIGHTS ON THE COMMON FACILITI ES WHICH ARE BUT NATURAL IN ANY SUCH SCHEME. ALL THE PLOT HOLDERS PRESENT AND FUTURE WOULD HAVE A RIGHT TO ENJOY THESE AMENITIES ONLY AND ALL OTHER RIGHTS OF OWNERSHIP WOULD BE ENJOYED JOIN TLY BY THEM. IN FACT IF WE LOOK ON THE TRUE AND EXACT POSITION; THE APPELLANT DEVELOPER WOULD NOT RETA IN ANY RIGHTS IN THE COMMON FACILITIES (EXCEPT BOREWELL AND OVERHEAD TANK WHICH IS DISCUSSED LATER). T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF R.B. JODHARMAL KUTHALIA VS CIT 82 ITR 570 HAS BEEN RELIED ON OUT OF CONTEXT BY THE AO. IN FACT IN THE COMMON FACILITIES IT WAS THE APPELLANT WHO WOULD NOT HAVE ANY RIGHT LIKE POSSESSION TO ALIENATE TO LEASE OR EVEN USE OR EN JOY IN THE CAPACITY OF A DEVELOPER. MOST OF THE RIGHTS (WHICH CANNOT BE ABSOLUTE IN SUCH CIRCUMSTAN CES) LIKE TO USE AND ENJOY AND MANAGE ETC WOULD BE ALLOWABLE ONLY TO THE PLOT-HOLDERS COLLECTIVELY. THEREFORE IT IS HELD THAT THE APPELLANT HAS/IS BOUND TO AS A PART OF THE PROJECT AND AGREEMENT WITH THE BUYERS TRANSFER ALL THESE RIGHTS COLLECTIVELY TO THEM AND DO ES NOT RETAIN THEM AND THE EXPENSES ARE DEBITABLE TO THE TRADING ACCOUNT AS DONE BY THE APPELLAN T (EXCEPT BOREWELL AND OVERHEAD TANK WHICH IS DISCUSSED LATER). NOW THE ISSUE OF COST OF BOREWELL AND OVERHEAD TANK IS TO B E TAKEN UP. THERE IS NO DOUBT THAT THE APPELLANT RETAINS THE OWNERSHIP AND ALL RIGHTS IN THESE A S PER THE AGREEMENTS. IT MEANS THAT IT MAY USE IT FOR SUPPLYING WATER FOR PERSONAL USE AS WELL AS AN Y OTHER SCHEME COMING UP IN VICINITY ALSO. HOWEVER THE PLOT OWNERS OF THE SONATA SCHEME ALSO GET RIGHT OF USAGE OF THE FACILITIES AND SUPPLY OF WATER. THEREFORE SOME PART OF THE COST HAS TO BE ALLOWED AGAINST THIS PROJECT ALSO. AS PER THE DETAILS IN THE BOOKS OF ACCOUNT THE APPELLANT HAS SPENT RS . 5 01 960/- ON BORE WELL EXPENSES TILL THE END OF THE YEAR. NO OVER TANK HAS YET BEEN BUILT. THE LAND REQUIRED FOR THE FACILITIES IS ESTIMATED AT 200 SQ. YARDS. LOOKING TO THE COST OF LAND RS. 1 00 000/- IS TAKEN TOWARDS IT. 20% OF THE TOTAL COST IS ALLOWED TO BE TAKEN TOWARDS THE PROJECT COS T DEBITABLE FROM THE PROFITS OF THIS YEAR. THEREFORE A DISALLOWANCE OFRS. 4 81 600/- (20% OF RS. 6 01 960) IS TO BE MADE AND THIS AMOUNT IS ADDED TO THE TOTAL INCOME AS DECLARED BY THE APPELLANT. NO DEPRECIATION IS ALLOWABLE ON THE COST OF FACILITIES AS ALLOWED BY THE AO AFTER MAKING THE DISALLOWANCE. IT IS TO BE UNDERSTOOD THAT THE FACILITIES A ND AMENITIES ULTIMATELY WOULD BELONG TO THE PLOT HOLDERS AND ANY DEPRECIATION WEAR OR TEAR WOULD BE TH EIR LOSS. THE APPELLANT SUFFERS NO DEPRECIATION. THE GROUNDS OF APPEAL ARE THEREFORE DECIDED AS ABOVE. TO SUM UP THE TOTAL INCOME OF THE APPELLANT DECLARED WOUL D INCREASE BY RS. 4 81 600/- OVER AND ABOVE THE RETURNED INCOME; INSTEAD OF THE VARIATIONS MADE BY T HE A.O. 6. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US THE LD. A.R MOVED AN ADJOURNMENT APPLICA TION BUT THE SAME WAS REJECTED AND THEREAFTER THE CASE WAS TAKEN UP F OR HEARING ON MERITS. ITA NO 2770 /AHD/2012 . A.Y. 2009- 10 5 8. BEFORE US ID D.R. SUPPORTED THE ORDER OF AO. 9. WE HAVE HEARD THE LD D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE LD. CIT(A) WHILE DELETING THE ADDITIO N BY A WELL REASONED ORDER GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. B EFORE US LD D.R. COULD NOT CONTROVERT THE FINDINGS OF LD. CIT(A) NOR HAD BROUGHT ANY MATERIAL IN ITS SUPPORT. IN VIEW OF THE AFORESAID F ACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS UPHOLD HIS ORDER. THUS THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 29 - 04 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AH MEDABAD