NAM DEVELOPERS P.LTD, MUMBAI v. ITO 9(2)(3), MUMBAI

ITA 5416/MUM/2015 | 2011-2012
Pronouncement Date: 28-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 541619914 RSA 2015
Assessee PAN AAACN9198F
Bench Mumbai
Appeal Number ITA 5416/MUM/2015
Duration Of Justice 10 month(s) 3 day(s)
Appellant NAM DEVELOPERS P.LTD, MUMBAI
Respondent ITO 9(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 28-09-2016
Date Of Final Hearing 03-02-2016
Next Hearing Date 03-02-2016
Assessment Year 2011-2012
Appeal Filed On 24-11-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI BEFORE S/SHRI SANJAY ARORA ACCOUNTANT MEMBER AND AMARJIT SINGH JUDICIAL MEMBER / I .T.A. NO.5416/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) NAM DEVELOEPRS PVT. LTD. 43 RAMDAS NAYAK MARG HILL ROAD OPP. ELCO MARKET BANDRA (WEST) MUMBAI - 400050 / VS. INCOME TAX OFFICER 9(2)(3) AAYAKAR BHAVAN. M.K.ROAD MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACN9198F ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI AJAY C. GOSALIA DEPARTMENT BY: DR. SUMAN RATNAM DARSI / DATE OF HEARING: 03.08.2016 /DATE OF PRONOUNCEMENT: 28.09.2016 ! / O R D E R PER AMARJIT SINGH JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 16.09.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-21 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RE LEVANT TO THE A.Y.2011-12. 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS:- 1. RE: GROUND 1: REDUCTION OF PROJECT IN PROGRESS RS.59 87 714/- ITA NO.5416/MUM/2015 ASSESSMENT YEAR: 2011-12 2 A) THE LD. CIT(A) ERRED IN UPHOLDING THE REDUCTION OF PROJECT IN PROGRESS OF RS.59 87 714/- U/S.40(A)(IA) ON THE GROUND OF NON DEDUCTION OF TAX AT SOURCE FROM INTEREST. B) HE ERRED IN HOLDING THAT INTEREST DEBITED TO PROJEC T IN PROGRESS A/C. IS CURRENT YEARS EXPENDITURE WHICH I S BOUND TO INCREASE WIP. C) HE FAILED TO APPRECIATE THAT AS THE APPELLANT HAD N OT STARTED CONSTRUCTION ACTIVITIES IT DID NOT PREPARE ANY PROFIT AND LOSS A/C. AND HENCE HAD NOT CLAIMED THE SAID INTEREST OF RS.59 87 714/- AS BUSINESS EXPENSE FOR THE YEAR. D) WITHOUT PREJUDICE TO THE FOREGOING HE FAILED TO AP PRECIATE THAT THE PAYEES HAD OFFERED THE INTEREST FROM THE A PPELLANT AS THEIR INCOME CHARGEABLE TO TAX IN THEIR INDIVIDU AL RETURNS OF INCOME. E) HE THEREFORE OUGHT TO HAVE HELD THAT REDUCTION OF P ROJECT IN PROGRESS BY INTEREST OF 59 87 714/- OR ANY OTHER AMOUNT WAS NOT JUSTIFIED. 2. RE: GROUND 1: CHARGING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY 29 826/- A) THE LD. CIT(A) ERRED IN HOLDING THAT RENT OF 29 826 /- WAS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERT Y ON THE GROUND THAT APPELLANT WAS NOT IN THE BUSINES S OF LETTING OF PROPERTY. B) HE FAILED TO APPRECIATE THAT THE RENTS WERE RECEIVE D BY THE APPELLANT INCIDENTALLY IN THE COURSE OF ITS CONSTRU CTION ACTIVITY. C) HE THEREFORE OUGHT TO HAVE HELD THAT THE RENT OF 29 826/- RECEIVED BY THE APPELLANT SHOULD BE REDUCED FROM TH E COST OF PROJECT IN PROGRESS. 3. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE T O ONE ANOTHER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.NIL ON 26.12.2011. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME T AX ACT 1961( IN SHORT THE ACT). THEREAFTER THE CASE WAS SELECTE D FOR SCRUTINY AND ACCORDINGLY NOTICE U/S.143(2) OF THE ACT DATED 27.0 9.2012 WAS ISSUED ITA NO.5416/MUM/2015 ASSESSMENT YEAR: 2011-12 3 AND SERVED UPON THE ASSESSEE. THEREAFTER THE NOTI CE U/S.142(1) OF THE ACT DATED 17.10.2012 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPERS AND ITS ONE CONSTRUCTION PROJECT WAS IN PROCESS. A T THE TIME OF ASSESSMENT THE ASSESSING OFFICER NOTICED THAT THE A SSESSEE WAS PAYING THE INTEREST TO THE PARTIES FROM WHOM THE LOAN HAS BEEN TAKEN BUT THE TDS WAS NOT DEDUCTED THEREFORE THE INTEREST TO TH E TUNE OF RS.59 87 714/- WAS DISALLOWED U/S.40(A)(IA) OF THE ACT AND WAS REDUCED FROM THE WIP AND ADDED TO THE INCOME OF THE ASSESSE E. THE ASSESSING OFFICER ALSO ADDED INCOME FROM HOUSE PROPERTY TO TH E TUNE OF RS.75 050/-. SINCE THE ASSESSEE WAS NOT SATISFIED THEREFORE THE ASSESSEE FILED AN APPEAL BEFORE CIT(A) WHO DISMISSED THE APP EAL OF THE ASSESSEE THEREFORE ASSESSEE HAS FILED THE PRESENT APPEAL BEF ORE US. ISSUE NO.1:- 4. UNDER THIS ISSUE THE ASSESSEE HAS RAISED THE RED UCTION OF PROJECT IN PROGRESS TO THE TUNE OF RS.59 87 714/-. THE ASSESS EE PAID THE INTEREST TO THE TUNE OF RS.59 87 714/- ON THE ACCOUNT WHICH HE HAD TAKEN THE LOAN. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE FAILE D TO DEDUCT THE TDS ON THE INTEREST TO THE TUNE OF RS.59 87 714/- U/S.1 94A OF THE ACT. THEREFORE THE SAID AMOUNT WAS REDUCED FROM WIP. T HE CONTENTION OF THE ASSESSEE IS THAT NO DOUBT THE ASSESSEE DID NOT DEDUCT THE TDS ON THE INTEREST WHICH WAS PAID TO THE CREDITORS BUT THE CR EDITORS HAVE SHOWN THESE INTEREST IN THEIR INCOME AND THEIR INCOME WAS ASSESSED IN VIEW OF THE PROVISION U/S.40(A)(IA) OF THE ACT. THEREFORE IN THE SAID CIRCUMSTANCES THE INTEREST TO THE TUNE OF RS.59 87 714/- IS NOT LIABLE TO ITA NO.5416/MUM/2015 ASSESSMENT YEAR: 2011-12 4 BE DEDUCT FROM THE WIP IN VIEW OF THE LAW SETTLED I N ITAT AGRA BENCH IN CASE OF RAJEEV KUMAR AGARWAL VS. ADDITIONAL COMM ISSIONER OF INCOME-TAX RANGE-3 MATHURA [2014] 149 ITD 363/45 TAXMANN.COM 555 (AGRA TRIB.). 5. IN VIEW OF THE SAID LAW WE DEEM IT PROPER TO REM IT THE FILE BEFORE THE ASSESSING OFFICER FOR FRESH ADJUDICATION TO CAR RY OUT THE NECESSARY VERIFICATION WHETHER THE RECIPIENTS OF THE INTEREST HAS SHOWN THE INTEREST INCOME IN THEIR I.T. RETURNS OR NOT. THE ASSESSING OFFICER IS ALSO HEREBY DIRECTED TO GIVE A REASONABLE AND FAIR OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH LAW. ACCORDINGLY WE D ECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE FOR STAT ISTICAL PURPOSE. ISSUE NO.2:- 6. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE INCOME TO THE TUNE OF RS.29 826/- UNDER THE HEAD INCOME FROM HOUS E PROPERTY. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE PUR CHASED THE DEVELOPMENT RIGHTS IN FURTHERANCE OF ITS BUILDING C ONSTRUCTION PROJECT FOR WHICH IT WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING AND THE ASSESSEE WAS RECEIVING THE RENT MERELY INCIDENTAL T O ITS SAID BUSINESS OF BUILDING CONSTRUCTION PROJECT. IT IS ALSO ARGUED T HAT IN ACCORDANCE WITH ACCOUNTING STANDARD 2 VALUATION OF INVENTORIES PR ESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA THE CO ST OF INVENTORY CAN NEVER EXCEED THE TOTAL OF COSTS INCURRED IN BRINGIN G THE INVENTORY TO ITS PRESENT LOCATION AND CONDITION AND THUS THE EXPENSE S INCURRED ON CONSTRUCTION PROJECT ARE TO BE ACCUMULATED WHEREAS RECEIPTS RECEIVED ITA NO.5416/MUM/2015 ASSESSMENT YEAR: 2011-12 5 DURING THE COURSE OF CONSTRUCTION PROJECT ARE REQUI RED TO BE REDUCED FROM PROJECT IN PROGRESS. 7. HOWEVER ON THE OTHER HAND THE LEARNED REPRESENT ATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSE D BY THE CIT(A) IN QUESTION. BEFORE DISCUSSING FURTHER IT IS NECESSAR Y TO ADVERT THE FINDING OF THE CIT(A) ON RECORD. 5. GROUND NO.2 IS IN RESPECT OF THE ASSESSING OFFI CER COMPUTING THE INCOME FROM HOUSE PROPERTY AT RS.75 0 50/-. THE APPELLANT HAS REDUCED THE AMOUNT OF RENT RECEIV ED FROM THE PROJECT WIP INSTEAD OF SHOWING THE SAME AS INCO ME FROM HOUSE PROPERTY. LEASING OUT OF THE PROPERTY I S NOT THE APPELLANTS BUSINESS. IT IS DEVELOPING THE PROJECT . THE RENT RECEIVED HAS TO BE ASSESSED AS INCOME FROM HOUSE PR OPERTY. HOWEVER THERE IS MERIT IN THE CLAIM OF THE APPELLA NT THAT THE RENT RECEIVED DURING THE YEAR IS ONLY RS.29 826 /- AND NOT RS.1 07 215/- AND TO THAT EXTENT THE AMOUNT CON SIDERED BY THE ASSESSING OFFICER IS INCORRECT. THE ASSESSI NG OFFICER IS DIRECTED TO CONSIDER RS.29 826/- AS THE ANNUAL RENT AND COMPUTE THE INCOME FROM HOUSE PROPERTY AT RS.20 878/- AFTER ALLOWING DEDUCTION U/S.24(A) OF THE ACT. AS A COROLLARY THE WIP WILL INCREASE BY THE SAME A MOUNT OF RS.29 826/- SINCE THE WIP IN THE AUDITED ACCOUNT S IS SHOWN LOWER BY THE EXTENT OF RENT RECEIVED IN THE C URRENT YEAR. THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO.5416/MUM/2015 ASSESSMENT YEAR: 2011-12 6 8. THE APPELLANT IS ENGAGED IN DEVELOPING THE PROJE CT. THE APPELLANT IS NOT IN THE BUSINESS OF LEASING THE PROPERTY. HE RECEIVED THE RENT TO THE TUNE OF RS.29 826/-. HOWEVER THE RENT TO THE TUNE OF RS.1 07 215/- WAS NOT RELEVANT FOR THE ASSESSMENT YEAR IN QUESTION. 9. IN THE SAID CIRCUMSTANCES HOW THE INCOME IS REQU IRED TO BE ASSESSED HAS BEEN HELD IN EAST INDIA HOUSING AND LA ND DEVELOPMENT TRUST LTD. VS. COMMISSIONER OF INCOME TAX WEST BEN GAL SUPREME COURT OF INDIA [1961] 42 ITR 49 SC. IN VIEW OF TH E SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH DOES NOT REQUIRED T O BE INTERFERE WITH AT THIS APPELLATE STAGE. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS HE REBY PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016 SD/- SD/- (SANJAY ARORA) (AMARJIT SINGH) / ACCOUNTANT MEMBER #$ /JUDICIAL MEMBER % & MUMBAI; ' DATED : 28 TH SEPTEMBER 2016 MP MP MP MP ITA NO.5416/MUM/2015 ASSESSMENT YEAR: 2011-12 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ( ) / THE CIT(A)- 4. ( / CIT 5. )*+ $$ - - % & / DR ITAT MUMBAI 6. +./ 0 / GUARD FILE. / BY ORDER ) $ //TRUE COPY// / ! ' (DY./ASSTT. REGISTRAR) # $ % & / ITAT MUMBAI