DD Township Ltd., New Delhi v. DCIT, New Delhi

ITA 6311/DEL/2012 | 2009-2010
Pronouncement Date: 29-04-2015 | Result: Allowed

Appeal Details

RSA Number 631120114 RSA 2012
Assessee PAN AACCD3034G
Bench Delhi
Appeal Number ITA 6311/DEL/2012
Duration Of Justice 2 year(s) 4 month(s) 9 day(s)
Appellant DD Township Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 29-04-2015
Date Of Final Hearing 24-03-2015
Next Hearing Date 24-03-2015
Assessment Year 2009-2010
Appeal Filed On 20-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 6311/DEL/2012 A.Y. 2009-10 DD TOWNSHIP LTD. VS. DCIT CIR. 10(1) F-1/9 OKHLA INDUSTRIAL AREA NEW DELHI. PHASE-1 NEW DELHI-110020. PAN: AACCD 3034 G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI P.N. MONGA ADV. & SHRI MANU MONGA ADV. RESPONDENT BY : SMT. PARVINDER KAUR SR. DR DATE OF HEARING : 24/03-2015 DATE OF ORDER : 29-04-2015. O R D E R PER S.V. MEHROTRA A.M:- THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF LD CIT(A)-XIII NEW DELHI DATED 03-10-2012 RELATI NG TO AY 2009-10. FOLLOWING GROUNDS ARE RAISED: 1(A) THAT THE LD. CIT(A) HAS GONE WRONG IN UPHOLDI NG THE ERRONEOUS ORDER PASSED BY THE AO MAKING DISALLOWANC E OF RS. 2 97 82 854/- UNDER SECTION 36(1)(III) OF THE INCOM E TAX ACT 1961. (B) THAT IN UPHOLDING THE DISALLOWANCE OF RS. 2 97 82 854/- THE LD. CIT(A) HAS BEEN GUIDED BY IRRELEVANT AND ER RONEOUS 2 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT CONSIDERATIONS. THE JUDGMENTS RELIED UPON BOTH BY T HE AO AND THE LD. CIT(A) HAVE NO APPLICATION TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE JUDGMENTS RELIED UPO N IN SUPPORT OF THE ASSESSEES CASE WERE RELEVANT TO DEC IDE THE CONTROVERSY IN ISSUE. BOTH THE AUTHORITIES HAVE LOO KED AT THE CASE FROM WRONG ANGLE THEREBY COMING TO AN ERRONEOU S CONCLUSION. (C) THAT THE AUTHORITIES BELOW HAVE FAILED TO APPR ECIATE CORRECTLY THE FACTS OF THE CASE THEREBY COMING TO A CONCLUSION WHICH WAS UNTENABLE IN THE EYES OF LAW. NO DISALLOW ANCE OF ANY AMOUNT WAS CALLED FOR HAVING REGARD TO THE FACTS AN D CIRCUMSTANCES OF THE CASE. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE HAVING NOT BEEN PROPERLY APPRECIATED A ND ERRONEOUS CONCLUSION HAS BEEN REACHED. THE ENTIRE A DDITION OF RS. 2 97 82 854/- DESERVES TO BE DELETED. THAT THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) CO NFIRMING THE ADDITION MADE TO THE RETURNED INCOME IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE. 2. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 3 0-9-2009 DECLARING LOSS OF RS. 14 65 34 601/-. THEREAFTER THE ASSESS EE FILED A REVISED RETURN ON 1-11-2010 WHEREIN LOSS FOR THE YEAR WAS REDUCED TO RS. 4 81 03 138/-. 2.1. BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE A DEVELOPER IN THE RELEVANT ASSESSMENT YEAR DEALT IN REAL ESTATE BUSINESS. THE AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAD E NTERED INTO AN AGREEMENT FOR DEVELOPMENT OF LAND WITH DD INFRASTRU CTURE AND OTHER COMPANIES OF THE GROUP FOR DEVELOPING OF REAL ESTAT E PROJECTS AT FARIDABAD. THE ASSESSEE HAD ALSO SOLD LAND RIGHTS DURING THE Y EAR AND HAD SHOWN INCOME ON ACCOUNT OF TRANSFER OF LAND RIGHTS. BESIDES THE ASSESSEE HAD EARNED 3 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT INTEREST INCOME AND ALSO RENTAL INCOME. IN THE BACK DROP OF THESE FACTS THE AO NOTICED FROM THE P&L A/C. THAT AGAINST THE INCOM E EARNED UNDER THE HEAD HOUSE PROPERTY INTEREST INCOME AND INCOME ON ACCO UNT OF TRANSFER OF LAND RIGHTS THE ASSESSEE HAD CLAIMED FINANCIAL CHARGES OF RS. 17 46 69 166/-. 2.2. THE ASSESSEE IN ITS REPLY POINTED OUT THAT ASS ESSEE ITSELF ADDED BACK INTEREST OF RS. 9 84 31 463/- WHILE FILING ITS REVI SED RETURN AND ACCORDINGLY LOSS WAS REDUCED AS AGAINST ORIGINALLY RETURNED. AS REGARDS THE BALANCE INTEREST THE ASSESSEE POINTED OUT THAT THE SAME WA S ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE FOR WHICH IT HAD GIVEN ADV ANCE TO BUY LAND RIGHTS ON WHICH IT HAD SHOWN INCOME OF RS. 5 CRORES. 2.3. THE ASSESSEE ALSO POINTED OUT THAT IT HAD SHOW N INTEREST INCOME OF RS. 20 85 562/- ON ACCOUNT OF VARIOUS LOANS AND ADV ANCES. THE ASSESSEE FURTHER SUBMITTED THAT IT HAD MADE AN INVESTMENT OF RS. 20 05 64 120/- IN GROUP COMPANIES. IN ADDITION TO THIS INVESTMENT TH E COMPANY HAD ALSO GIVEN INTEREST FREE ADVANCE TO THE GROUP COMPANIES AMOUNT ING TO RS. 168 43 58 666/-. THE ASSESSEE ALSO POINTED OUT THAT APART FROM SECURED AND UNSECURED LOANS THE COMPANY HAD ON ITS DISPOS AL A SUM OF RS. 102 16 46 857/- IN THE SHAPE OF ADVANCE RECEIVE D FROM CUSTOMERS IN THE EARLIER YEARS WHICH WERE INTEREST FREE ADVANCES AN D WERE UTILIZED FOR GIVING LOANS AND ADVANCE TO THE GROUP COMPANIES FOR PURCHA SE OF LAND AND LIKEWISE THE INVESTMENT ALSO REPRESENTED THE INVESTMENT FROM THE SAME SOURCE. THUS THE ASSESSEES PLEA WAS SUMMARIZED AS UNDER: 4 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT INVESTMENTS IN GROUP COMPANIES RS. 20 05 64 120/- INTEREST FREE LOANS AND ADVANCES RS. 168 43 58 566 /- TOTAL RS. 188 49 22 686/- LESS: INTEREST FREE LOAN AVAILABLE WITH THE ASSESSEE RS. 102 16 46 857/- BALANCE INTEREST FREE ADVANCES (INVESTMENT) RS. 86 32 75 829/- 2.4. THE AO AFTER REFERRING TO PLETHORA OF DECISIO NS CONCLUDED THAT WHERE THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCE AND HA D ALSO GIVEN INTEREST FREE LOANS TO GROUP CONCERNS FOR HELPING THEM AND SINCE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH ANY DIRECT NEXUS BETWEEN OWN FUND S VIS A VIS INTEREST FREE LOANS DISALLOWANCE U/S 36(1)(III) WAS TO BE MADE O N ACCOUNT OF UTILIZATION OF INTEREST BEARING FUNDS FOR NON BUSINESS ACTIVITIES. THE AO ACCORDINGLY WORKED OUT THE DISALLOWANCE AT RS. 2 97 82 854/- AS UNDER: 174412088 X 863275829 = RS. 12 82 14 017/- 1174331352 INTEREST NEEDS TO BE DISALLOWED 12 82 14 017/- LESS: INTEREST ALREADY ADDED BACK 9 84 31 463 BALANCE INTEREST 2 97 82 854 2.5. IN APPEAL THE LD. CIT(A) CONFIRMED THE AOS A CTION INTER ALIA OBSERVING THAT ASSESSEE COMPANY HAD MADE INVESTMENT IN GROUP COMPANIES OF RS. 20 05 64 120/- TO HAVE A CONTROLLING STAKE O N SUCH COMPANIES. BESIDES THE ASSESSEE HAD GIVEN INTEREST FREE ADVAN CE TO THE GROUP COMPANIES OF RS. 168 43 58 566/-. HE FURTHER POINTED OUT THA T NO BENEFIT WAS SHOWN TO HAVE BEEN DERIVED BY THE ASSESSEE FROM THESE INVES TMENTS AND INTEREST FREE LOANS. THERE WAS NO COMMERCIAL EXPEDIENCY FOUND IN ADVANCING INTEREST FREE LOANS AND INVESTMENTS. THEREFORE THE INTEREST FREE LOANS AND INVESTMENTS 5 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT WERE WITHOUT ANY JUSTIFICATION AND THEY WERE WITHOU T ANY BUSINESS PURPOSE. HENCE SUCH INTEREST PAYMENTS EXPENDITURES COULD NO T BE HELD AS INCURRED FOR BUSINESS PURPOSES. HE ALSO RELIED ON VARIOUS CASE LAWS AS MENTIONED IN HIS ORDER. 2.6. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US . 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS A DEVELOPER AND DEALT IN REAL ESTATE BUSINESS. HE REF ERRED TO PAGE 39 OF THE PB TO DEMONSTRATE THAT AO HAD WRONGLY COMPUTED THE INT EREST BEARING FUNDS ADVANCED WHICH WAS ACTUALLY AS UNDER: INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE RS. 1 02 16 46 857 UNSECURED LOANS (INTEREST FREE) AVAILABLE WITH THE ASSESSEE RS. 20 46 65 623 1 22 63 12 680 LESS: INVESTMENTS IN GROUP COMPANIES. 20 05 64 120 TOTAL: 1 02 57 48 360 INTEREST FREE LOANS & ADVANCES PROVIDED TO CONCERNS 1 68 43 58 567 LESS: INTEREST BEARING ADVANCES- INTEREST RECD. SHOWN IN PROFIT & LOSS A/C ASSESSMENT ORDER- PAGE NO. 3 2 26 50 000 1 766 17 08 567 INTEREST BEARING FUNDS ADVANCED 63 59 60 207 3.1. LD. COUNSEL SUBMITTED THAT THE ASSESSE IS A DE VELOPER AND DEALS IN REAL ESTATE BUSINESS. DURING THE YEAR COMPANY HAD ENTERE D INTO AN AGREEMENT FOR DEVELOPMENT OF LAND WITH DD INFRASTRUCTURE AND OTHE R COMPANIES OF THE GROUP FOR DEVELOPING REAL ESTATE PROJECT AT FARIDAB AD. HE FURTHER SUBMITTED 6 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT THAT UNDER THE LAND ACQUISITION ACT SINGLE ENTITY IS RESTRICTED TO PURCHASE OVER CERTAIN RESTRICTED LIMIT OF LAND. IN VIEW OF T HIS RESTRICTION ASSESSEE ADVANCED/ BORROWED MONEY FOR BUSINESS PURPOSES TO I TS GROUP CONCERNS FOR PURCHASING THE PLOT OF LAND AND THUS THE AMOUNT WAS ADVANCED TO GROUP CONCERNS NOT FOR CONTROLLING INTEREST IN THE COMPAN Y BUT FOR COMMERCIAL EXPEDIENCY. HE SUBMITTED THAT THE FINDINGS OF LD. C IT(A) THAT THE AMOUNT WAS ADVANCED FOR ACQUIRING CONTROLLING INTEREST IS NOT CORRECT. LD. COUNSEL FURTHER REFERRED TO PAGE 16 OF THE PBH WHEREIN THE BALANCE SHEET OF ASSESSEE IS CONTAINED WHEREIN INVESTMENT IN GROUP COMPANIES HAS BEEN SHOWN AT RS. 20 05 64 120/-. 3.2. LD. COUNSEL FURTHER REFERRED TO PAGE 19 OF THE PB WHEREIN DETAILS OF LOANS AND ADVANCES AGGREGATING TO RS. 168 43 58 566 /- ARE CONTAINED TO DEMONSTRATE THAT ADVANCES WERE GIVEN IN VARIOUS PRO JECTS WHICH WAS MENTIONED IN SCHEDULE 8 TO THE BALANCE-SHEET AS UND ER:-. ADVANCE IN VARIOUS PROJECTS - PROJECT FARIDABAD (SECTOR-70) 107 774 988.00 - PROJECT FARIDABAD (SECTOR-77) 491 341 398.00 - PROJECT MOHALI 68 352 975.00 - PROJECT ZIRAKPUR 246 726 424.73 - PROJECT SONEPAT 2 690 549.00 - PROJECT AMRITSAR 67 206 222.00 - PROJECT FARIDABAD (FARM HOUSE) 10 000 000.00 - PROJECT GURGAON 7 624 370.00 - OTHER MISC. ADVANCE FOR LAND 128 538 566.73 1 684 358 566.73 3.3. LD. COUNSEL POINTED OUT THAT THE AFOREMENTIONE D BALANCES WERE WITH RESPECT TO COLLABORATION AGREEMENT. 7 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT 3.4. IN THE BACKDROP OF THESE FACTS LD. COUNSEL SU BMITTED THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS 288 ITR 1 IS SQUARELY APPLICABLE BECAUSE ALL THE ADVANCES WERE FOR COMMER CIAL EXPEDIENCY. 4. LD. DR SUBMITTED THAT INVESTMENT IN GROUP COMPAN IES WAS FOR ACQUIRING CONTROLLING INTEREST. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE RECORD OF THE CASE. BOTH THE LOWER REVENUE AUTHORIT IES HAVE PROCEEDED WITH A PREMISE THAT INVESTMENTS IN GROUP COMPANIES WERE M ADE TO HAVE CONTROLLING INTEREST IN SUCH COMPANIES AND INTEREST FREE ADVANCES WERE GIVEN TO GROUP COMPANIES WHICH WERE NOT FOR BUSINESS PURP OSE. WE FIND THAT THE ENTIRE THRUST OF ASSESSEES SUBMISSIONS FROM THE VE RY BEGINNING WAS THAT THE AMOUNTS WERE ADVANCED TO GROUP CONCERNS KEEPING IN VIEW THE RESTRICTIONS IMPOSED BY LAND ACQUISITION ACT AND THIS ASPECT WE FIND HAS NOT AT ALL BEEN ADDRESSED BY LOWER REVENUE AUTHORITIES. IF THE ADVA NCES WERE GIVEN OUT OF COMMERCIAL EXPEDIENCY THEN IT IS SETTLED LAW THAT N O DISALLOWANCE IS CALLED FOR. 5.1. FROM THE DETAILS REPRODUCED FROM BALANCE-SHEET AS ABOVE IT APPEARS THAT THE AMOUNTS WERE ADVANCED FOR VARIOUS PURCHASE S AND THEREFORE IT COULD NOT BE CONCLUDED THAT THE INTEREST FREE ADVAN CES GIVEN TO GROUP CONCERNS WERE NOT FOR BUSINESS PURPOSES. WE FIND T HAT THESE ASPECTS HAVE NOT AT ALL BEEN EXAMINED BY LOWER REVENUE AUTHORITI ES AND NO FINDINGS HAVE BEEN RECORDED AS TO THE PURPOSE FOR WHICH INTEREST FREE ADVANCES WERE GIVEN TO GROUP COMPANIES. THE ASSESSEES SUBMISSIONS ARE QUITE CONVINCING THAT 8 ITA NO. 6311/DEL/2012 DD TOWNSHIP LTD. VS. DCIT CONSIDERING THE RESTRICTIONS IMPOSED BY LAND ACQUIS ITION ACT IT HAD ENTERED INTO VARIOUS COLLABORATION AGREEMENTS. THE AO IS RE QUIRED TO RECORD SPECIFIC FINDING ON THESE ASPECTS BEFORE COMING TO THE CONC LUSION THAT THE ENTIRE INTEREST FREE ADVANCE GIVEN TO GROUP CONCERNS WERE NOT FOR BUSINESS PURPOSES. WE THEREFORE SET ASIDE THE ORDER OF LOW ER REVENUE AUTHORITIES AND RESTORE THE MATTER BACK TO THE FILE OF AO TO EXAMIN E THE ISSUE DE NOVO PARTICULARLY HAVING REGARD TO THE AVAILABILITY OF O WN FUNDS AND COLLABORATION AGREEMENT ENTERED INTO BY ASSESSEE WITH ITS GROUP C ONCERNS AND IF THE AMOUNTS HAD BEEN ADVANCED TO GROUP CONCERNS FOR BUS INESS EXPEDIENCY THEN NO DISALLOWANCE IS CALLED FOR. 6. IN THE RESULT ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 29-04-2015. SD/- SD/- (C.M. GARG ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29-04-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR