JUPITER CONSTRUCTION, MUMBAI v. DCIT 19(3), MUMBAI

ITA 5829/MUM/2014 | 2010-2011
Pronouncement Date: 28-09-2016

Appeal Details

RSA Number 582919914 RSA 2014
Assessee PAN AAAFJ1783H
Bench Mumbai
Appeal Number ITA 5829/MUM/2014
Duration Of Justice 2 year(s) 11 day(s)
Appellant JUPITER CONSTRUCTION, MUMBAI
Respondent DCIT 19(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Bench Allotted J
Tribunal Order Date 28-09-2016
Assessment Year 2010-2011
Appeal Filed On 17-09-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH MUMBAI BEFORE SHRI R. C. SHARMA ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN JUDICIAL MEMBER ./ I.T.A. NO. 582 9 /MUM/2014 ( / ASSE SSMENT YEAR: 2010 - 11 ) JUPITER CONSTRUCTION GROUND FLOOR NARANG MANOR 15 TH ROAD PLOT NO. 96 - B BANDRA (W) MUMBAI - 400 050 / VS. DY. CIT - 19(3) ROOM NO. 305 3 RD FLOOR PIRAMAL CHAMBERS LALBAUGH MUMBAI - 400 012 ./ ./ PAN/GIR NO . AAAFJ 1783 H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI K. GOPAL & MS. NEHA PARANJPE / RESPONDENT BY : SHRI K. RAVI KIRAN / DATE OF HEARING : 14.7.2016 / DATE OF PRONOUNCEMENT : 28.09 .2016 / O R D E R PER R. C. SHARMA A. M.: THIS IS AN A PPEAL FILED BY THE ASSESSEE AGAINST THE O RDER BY THE LD. CIT(A) - 30 MUMBAI DATED 17.6.2014 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11. 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF BUSINESS EXPENSES OF RS.5 19 743/ - . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND IT DID CARRY OUT BUSINESS 2 ITA NO. 582 9 /MUM/2014 (A.Y. 2010 - 11) JUPITER CONSTRUCTION VS. DY. CIT ACTIVITIES DURING THE YEAR UNDER CONSIDERATION. THE FIRM HAD COMPLETED ITS PROJECT AT LINKING ROAD BANDRA MUMBAI. IT WAS LOOK ING OUT FOR OTHER DEVELOPMENT PROJECTS AND NEGOTIATI ONS WERE HELD WITH INTEREST ED PARTIES BUT DUE TO GENERAL LULL IN THE REAL ESTATE MARKET NO DEAL WAS STRUCK. D URING THE YEAR NO SALE OF COMPLETED UNITS IS REALIZED DUE TO ADVERSE MARKET CONDITIONS AND GENERAL RECESSION IN THE REAL ESTATE MARKET ALL OVER M UMBAI. AS THE FIRM WAS NOT GETTING BUYER UNSOLD STOCK HAS BEEN PUT TO USE IN THE BUSINESS BY WAY OR RENTING THE SAME. THUS THE UNSOLD STOCKS HAVE BEEN EXPLOITED COMMERCIALLY IN VIEW OF THE CHANGED BUSINESS SCENARIO AND IT CANNOT SAID THAT NO BUSINESS ACT IVITY IS CARRIED OUT BY THE ASSESSEE . THUS THE BUSINESS OF THE ASSESSEE WAS VERY MUCH IN EXISTENCE AND IT CANNOT BE SAID THAT THERE WAS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE . WE FOUND T HAT THE BUSINESS OF THE ASSESSEE FIRM WAS IN TEMPORARY LULL DURING WHICH PERIOD THE ASSESSEE EXPLOITED ITS COMMERCIAL ASSETS FOR EARNING INCOME. IN ORDER TO BE A BUSINESS INCOME WITHIN THE MEANING OF SEC.28 THERE MUST BE EVIDENCE OF EXPLOITATION OF COMMERCIAL ASSET. IN THIS CASE THE ABOVE CRITERIA EXIST BECAUSE THE ASSESSEE HAS AN ESTABLISHMENT INCURRED EXPENSES ON RETAINING ITS REGISTERED OFFICE AND TO SURVIVE EXPLOITED ITS COMMERCIAL ASSETS DURING THE LULL IN THE BUSINESS. MOREOVER THE AO DID NOT BRING ON RECORD ANY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD INTENTION TO CLOSE DOWN THE BUSINESS OR IT HAS ALREADY CLOSED DOWN ITS BUSINESS ACTIVITIES. THEREFORE SIMPLY ON THE REASON THAT THERE WAS NO BUSINESS RECEIPT DURING THE YEAR THE AO WAS NOT JUSTIFIED IN DISALLOWING THE LOSS INCURRED BY THE ASSESSEE . RELI ANCE CAN BE PLACED ON THE DECISION OF DELHI BENCH IN THE CASE OF ITO VS. MOKUL FINANCE ( P ) LTD. [2007] 110 TTJ 445 (DEL) AND HONBLE CALCUTTA HIGH COURT DECISION IN TH E CASE OF CIT VS. GANGA PROPERTIES LTD. [1993] 199 ITR 94 (CAL). 4. IN VIEW OF THE ABOVE WE DO NOT FIND ANY JUSTIFICATION FOR DISALLOWANCE OF THE EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT MERELY BECAUSE THERE WAS LULL IN THE MARKET AND THE ASSESSEE HAS NOT EARNED ANY BUSINESS INCOME DURING THE YEAR. 5. GROUND NO S . 2 AND 3 WAS NOT PRESSED BY THE LD. AR THE SAME IS THEREFORE DISMISSED IN LIMINE AS NOT PRESSED. 3 ITA NO. 582 9 /MUM/2014 (A.Y. 2010 - 11) JUPITER CONSTRUCTION VS. DY. CIT 6. GROUND NO. 4 RELATE TO DISALLOWING THE COST OF IMPROVEMENT OF PROPERTY FROM SHORT TERM CAPITAL GAIN (STCG). 7. RIVAL CONTENTION HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FOUND THAT ASSESSEE FIRM HAD CLAIMED COST OF IMPROVEMENT BEING COMPENSATION PAID . IT WAS EXPLAINED T O THE AO THAT THE SAID AMOUNT WAS PAID TO THE LICENSEE WITH A COMMITMENT THAT IT STAY IN THE LICENSED PREMISES FOR MINIMUM LOCK IN PERIOD AND WILL NOT TERMINATE THE LEAVE AND LICENSE AGREEMENT BEFORE THAT DATE . DUE TO ADVERSE MARKET CONDITIONS ASSESSEE WAS FINDING IT DIFFICULT TO GET BUYERS FOR THIS PROPERTY. THEREFORE AS INCENTIVE TO THE PROSPECTIVE BUYER ASSESSEE HAD TO ENTER INTO THIS ARRA NGEMENT WITH LICENSEE. WITH THIS KIND OF ARRANGEMENT THE PROSPECTIVE BUYERS WERE ASSURED RENTAL INCOME WHICH RESULTS IN HIGHER PROBABILITY OF SALE OF UNITS IN THE DEPRESSED MARKET. IN FACT SAID UNIT WAS UL TIMATELY SOLD TO ONE MR. MANOJ//GWALANI. THUS CO MPENSATION PAID BY THE ASSESSEE FI RM WAS WHOLL Y AND EXCLUSIVELY IN CONNECTION WITH THE SALE OF PROPERTY AND HENCE VERY MUCH ALLOWABLE WHILE COMPUTING THE CAPITAL GA IN. ACCORDINGLY THE A.O. IS DIRECTED TO ALLOW THE COMPENSATION SO PAID WHILE COMPUTING STCG. 8. GROUND NO. 5 PERTAINS TO DISALLOWANCE OF BROKERAGE PAID TOWARDS SALE OF PROPERTY AGAINST THE STCGS. FACTS IN BRIEF ARE THAT THE ASSESSEE HAS PAID BROKERAGE OF RS.7 70 000/ - TO M/S. WESTERN INDIA DEVELOPERS TOWARDS SALE OF OFFICE PREMISES NO. 101 102 AND 202 ON 1 ST AND SECOND FLOOR. THE ASSESSEE HAS FURNISHED THE DEBIT NOTE AND TDS CERTIFICATE BEFORE THE A.O. AND LD. CIT(A). HOWEVER THE SAME WAS DISALLOWED WHILE COMPUTING THE SHORT TERM CAPITAL GAINS. WE FOUND THAT THE ASSESSEE HAS PAID THE BROKERAGE IN CONNECTION WITH THE SALE OF OFFICE PREMISES T HE INCOME FROM WHICH HAS BEEN OFFERED FOR SHORT TERM CAPITAL GAINS. HENCE THE SAME IS ALLOWABLE WHILE COMPUTING THE SHORT TERM CAPITAL GAIN. THUS THE DISALLOWANCE OF BROKERAGE PAID WAS UNJUSTIFIED. ACCORD INGLY THE A.O. IS DIRECTED TO ALLOW THE SAME. 9. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED IN PART. 4 ITA NO. 582 9 /MUM/2014 (A.Y. 2010 - 11) JUPITER CONSTRUCTION VS. DY. CIT ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 201 6 SD/ - SD/ - ( SANDEEP GOSAIN ) ( R. C. SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI ; / DATED : 28. 0 9 .201 6 . . ./ ROSHANI SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. / DR ITAT MUMBAI 6. / GUARD F ILE / BY ORDER / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI