DCIT 10(2), MUMBAI v. RUNWAL REALTY P.,LTD, MUMBAI

ITA 6916/MUM/2013 | 2008-2009
Pronouncement Date: 27-04-2015 | Result: Dismissed

Appeal Details

RSA Number 691619914 RSA 2013
Assessee PAN AADCR2141N
Bench Mumbai
Appeal Number ITA 6916/MUM/2013
Duration Of Justice 1 year(s) 4 month(s) 29 day(s)
Appellant DCIT 10(2), MUMBAI
Respondent RUNWAL REALTY P.,LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 27-04-2015
Assessment Year 2008-2009
Appeal Filed On 28-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R.C. SHARMA ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 6916 /M/2013 ASSESSMENT YEAR: 200 8 - 0 9 DY. COMMISSIONER OF INCOME TAX - 10(2) ROOM NO.432 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020 VS. M/S. RUNWAL REALTY PVT. LTD. (FORMERLY KNOWN AS M/S. RUNWAL CAPITALAND INDIA PVT. LTD.) 5 TH FLOOR RUNWAL & OMKAR E - SQUARE OFF. EASTERN EXPRESS HIGHWAY SION CHUNABHATTI SIGNAL SION MUMBAI 400 022 PAN: AADCR 2141N (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAKESH JOSHI A.R. REVENUE BY : SHRI LOVE KUMAR D.R. DATE OF HEARING : 2 7 .04. 201 5 DATE OF PRONOUNCEMENT : 27.0 4. 2015 O R D E R PER VIJAY PAL RAO JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30 .0 9 .201 3 OF CIT(A) ARISING FROM THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 200 8 - 0 9 . THE REVENUE H AS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY AMOUNTING TO RS.35 40 372/ - LEVIED U/S.271(1)(C) BY THE ASSESSING OFFICER. 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE PRINCIPLE RES JUDICATA IS NOT APPLICABLE TO ITA NO. 35 /M/2013 M/S. DREAM HOUSE REALTORS 2 THE INCOME TAX PROCEEDINGS. 2. THE APPELLANT CRAVES LEAVE TO ADD AMEND VARY OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL . 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD FOR ACCOUNTING PURPOSE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS UNDERTAKEN THE CONSTRUCTION OF BUILDING WHICH IS THE ONLY PROJECT WI TH THE ASSESSEE. THE ASSESSEE CLAIMED ADVERTISEMENT EXPENSES IN THE PROFIT & LOSS ACCOUNT AND REST OF THE AMOUNT WHICH WAS INVOLVED IN THE DEVELOPMENT OF THE BUILDING WAS CAPITALIZED BY THE ASSESSEE AND SHOWN AS WORK IN PROGRESS. THE ASSESSING OFFICER (A O) DISALLOWED THE ADVERTISEMENT EXPENSES ON THE GROUND THAT THE ASSESSEE SHOULD HAVE CAPITALIZED THIS AMOUNT BECAUSE IT IS DEVELOPING ONLY ONE BUILDING. 3. SUBSEQUENTLY THE AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AGAINST THE DISALL OWANCE OF THE ADVERTISEMENT EXPENSES AND LEVIED THE PENALTY OF RS.35 40 372/ - BEING 100% OF TAX TO BE EVADED VIDE ORDER DATED 06.03.12. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND CONTENDED THAT THE DISALLOWANCE OF ADVERTISEMENT EXPENSES ON THE GROUND THAT IT SHOULD HAVE BEEN CAPITALIZED DOES NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C) BECAUSE THE CLAIM OF THE ASSESSEE WAS A BONAFIDE CLAIM AND THE ADVERTISEMENT EXPENSES WERE NOT DIRECTLY RELATED TO THE CONSTRUCTION OF THE BUI LDING IN QUESTION BUT IT IS A REVENUE EXPENDITURE OF THE ASSESSEE COMPANY. THE ASSESSEE HAS ALSO POINTED OUT BEFORE THE LD. CIT(A) THAT FOR THE A.Y. 2007 - 08 THAT THE AO MADE A SIMILAR DISALLOWANCE AND ALSO INITIATED THE PENALTY ITA NO. 35 /M/2013 M/S. DREAM HOUSE REALTORS 3 PROCEEDINGS UNDER SECTION 2 71(1)(C) BUT SUBSEQUENTLY DROPPED THE PENALTY PROCEEDINGS VIDE ORDER DATED 15.03.11. 4. BEFORE THE LD. CIT(A) THE ASSESSEE ALSO RELIED UPON THE VARIOUS DECISIONS . THE LD. CIT(A) DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) BY OBSERVING THAT THE ADVERTISEMENT ADMINISTRATIVE AND OTHER EXPENSES ARE NOT DIRECTLY CONNECTED WITH THE DIRECT COST OF CONSTRUCTION THEREFORE THE EXPLANATION OF THE ASSESSEE WAS FOUND TO BE BONAFIDE. 5. BEFORE US THE LD. D.R. HAS SUBMITTED THAT THE AO HAS RECORDED THE FA CT THAT THE ASSESSEE IS ENGAGED IN THE CONSTRUCTION OF ONE BUILDING AND SINCE THE ASSESSEE IS FOLLOWING THE COMPLETION METHOD OF ACCOUNTING THEREFORE THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF ADVERTISEMENT CANNOT BE ALLOWED AS THE SAME HAS TO B E CAPITALIZED AND SHOULD BE ADDED TO THE WORK IN PROGRESS ALONG WITH THE OTHER EXPENDITURE INCURRED BY THE ASSESSEE IN CONNECTION WITH THE CONSTRUCTION OF BUILDING IN QUESTION. HE HAS STRONGLY RELIED UPON THE ORDER OF THE AO PASSED UNDER SECTION 271(1)(C) AND SUBMITTED THAT THE EXPENDITURE PERTAINING TO THE ADVERTISEMENT AND SALE PROMOTION IS CLEARLY ATTRIBUTABLE TO THE ONLY PROJECT UNDERTAKEN BY THE ASSESSEE AND THEREFORE THE SAME WAS REQUIRED TO BE ADDED IN THE WORK IN PROGRESS. THE CLAIM OF THE ASSESSE E WAS NOT PERMISSIBLE AND THEREFORE THE AO WAS JUSTIFIED IN LEVYING THE PENALTY. 6. ON THE OTHER HAND THE LD. A.R. HAS SUBMITTED THAT THE ADVERTISEMENT AND SALE PROMOTION EXPENSES ARE NOT DIRECTLY CONNECTED WITH THE COST OF THE PROJECT BUT THESE ARE GE NERAL EXPENDITURES RELATING TO THE BRAND PROMOTION OF THE ASSESSEE AND THEREFORE ARE ALLOWABLE REVENUE EXPENDITURE . T HOUGH THE AO HAS MADE A DISALLOWANCE HOWEVER THE CLAIM OF THE ASSESSEE IS A BONAFIDE CLAIM . IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS: ITA NO. 35 /M/2013 M/S. DREAM HOUSE REALTORS 4 I) H.A. SHAH & CO. VS. CIT 30 ITR 618 BOMBAY HIGH COURT II) PRAVARA SAHAKARI SAKHAR KAHKHANA LTD. VS. CIT 94 ITR 321 (SC) III) CIT VS. GIRISH MOHAN GANERIWALA 135 135 TAXMAN 233 HC (P&H) IV) DCIT VS. UNITED VANASPATI LTD. 275 ITR 124 ITAT CHANDIGARH V) CIT VS. MANGAL TIRTH ESTATES LTD. [2008] 303 ITR 366 (MAD) AND HE HAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS A BONAFIDE CLAIM AND THE DISALLOWANCE OF THE SAME IS ONLY CHANGE OF OPINION OF THE AO. HE HAS SUPPORTED THE ORDER OF THE LD. CIT(A) . 7. HAVING CONSIDERED THE RIVALS SUBMISSIONS AND RELEVANT MATERIAL ON RECORD WE FIND THAT THE AO MADE THE DISALLOWANCE OF THE EXPENDITURE ON ACCOUNT OF ADVERTISEMENT EXPENSES AS WELL AS UNDER SECTION 14A OF THE INCOME TAX ACT. THE LEVY OF PENALTY IN RESPECT OF DISALLOWANCE UNDER SECTION 14A IS NOT SUSTAINABLE IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD. 322 ITR 158 AS RELIED UPON BY THE LD. CIT(A). AS REGARDS THE ADVERTIS EMENT EXPENSES THOUGH THE ASSESSEE HAS UNDERTAKEN ONLY ONE PROJECT DURING THE YEAR UNDER CONSIDERATION HOWEVER THE ADVERTISEMENT AND SALES PROMOTION EXPENSES ARE NOT DIRECTLY RELATED TO THE PROJECT UNDER CONSTRUCTION BUT IT RELATES TO THE BRAND NAME OF T HE ASSESSEE. THERE IS NO DISPUTE REGARDING THE INCURRING OF THE EXPENDITURE ON THE ADVERTISEMENT BUT THE AO HAS DISALLOWED THE SAME HOLDING THAT THIS EXPENDITURE SHOULD HAVE BEEN CAPITALIZED AND ADDED TO THE WORK IN PROGRESS. THEREFORE IT WAS ONLY THE C HANGE OF OPINION ON THE PART OF THE AO WHICH LED TO THE DISALLOWANCE OF THE EXPENDITURE THAT THE SAME SHOULD BE CAPITALIZED AND ADDED TO THE WORK IN PROGRESS. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THOUGH THE CLAIM WAS DISALLOWED BY TH E AO HOWEVER IT CANNOT BE SAID THAT THE CLAIM OF THE ASSESSEE IS AN ABSOLUTE WRONG AND WITHOUT ANY BASIS. THE CLAIM OF THE ASSESSEE IS CERTAINLY HAVING ONE OF THE POSSIBLE VIEWS AND THE ISSUE ITSELF IS A DEBATABLE ISSUE THEREFORE IN VIEW OF THE VARIOUS JUDGMENTS ITA NO. 35 /M/2013 M/S. DREAM HOUSE REALTORS 5 RELIED UPON BY THE ASSESSEE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C). 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27. 04. 201 5 . SD/ - SD/ - ( R.C. SHARMA ) ( VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 27. 04.2015 . * KISHORE SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT ( A) CONCERNED MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.