GAWDE CONSTRUCTIONS P. LTD, MUMBAI v. ITO 6(3)(1), MUMBAI

ITA 7251/MUM/2008 | 2005-2006
Pronouncement Date: 30-07-2010 | Result: Allowed

Appeal Details

RSA Number 725119914 RSA 2008
Assessee PAN AABCG3494J
Bench Mumbai
Appeal Number ITA 7251/MUM/2008
Duration Of Justice 1 year(s) 7 month(s) 7 day(s)
Appellant GAWDE CONSTRUCTIONS P. LTD, MUMBAI
Respondent ITO 6(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 30-07-2010
Date Of Final Hearing 26-07-2010
Next Hearing Date 26-07-2010
Assessment Year 2005-2006
Appeal Filed On 23-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.7251/MUM/2008 ASSESSMENT YEAR- 2005-06 M/S. GAWDE CONSTRUCTIONS PVT. LTD. 40/1106 ADARSH NAGAR PRABHADEVI MUMBAI-400 030 PAN - AABCG3494J VS. THE ITO 6(3)(1) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIJAY KOTHARI RESPONDENT BY: DR. A.K. NAYAK O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 25.9.2008 PASSED BY THE LD. CIT(A)-VI F OR THE ASSESSMENT YEAR 2005-06. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DEVELOPED A BUILDING AT MAHIM MUMBAI. THE PROJECT WAS STARTED DURING FINANCIAL YEAR 2001-02 AND ACCORDING TO THE ASSESSEE TILL 31. 3.2005 THE PROJECT WAS NOT COMPLETED. NO ONE WAS GIVEN TO THE POSSESS ION OF THE FLAT UPTO 31.3.2005. 3. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE I S FOLLOWING PROJECT COMPLETION METHOD OF REVENUE RECOGNITION. HE FURTHER NOTED THAT THE ASSESSEE HAD REDEVELOPED TOTAL 18 FLATES O UT OF WHICH 11 WERE GIVEN TO EXISTING OWNER AND THE TENANTS AND THE BALANCE 7 WERE ITA NO. 7251/M/08 2 SOLD. THE AO FURTHER NOTED THAT THE ASSESSEE HAD R ECEIVED OCCUPATION CERTIFICATE OF THE SAID BUILDING FROM MUNICIPAL CO RPORATION WHICH HAD CERTIFIED THAT THE BUILDING IS COMPLETE UPTO 5 TH FLOOR. THE AO DID NOT AGREE WITH THE CONTENTION OF THE AR THAT MOST OF TH E FLATS WERE HANDED OVER TO THE EXISTING TENANTS/OWNERS OF THE BUILDING ON ACCOUNT OF REDEVELOPMENT AND THE ASSESSEE HAD SOLD ONLY ONE FL AT IN THIS YEAR AND THE REST OF THE FLATS WERE SOLD IN THE NEXT YEAR IN WHICH THE PROFITS WERE DISCLOSED IN THE RETURN OF INCOME. THE AO HOW EVER HELD THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD SO REVENUE IS TO BE RECOGNIZED IN THIS YEAR ITSELF AS 87% OF THE WORK H AS BEEN COMPLETED AS PER THE OCCUPATION CERTIFICATE DT. 31.8.2004 FRO M THE MUNICIPAL CORPORATION OF GREATER MUMBAI. ACCORDINGLY HE ADD ED AN AMOUNT OF RS. 28 50 303/-. FURTHER THE AR PLEADED THAT THE A O WAS WRONG IN RECOGNIZING FLAT NO. 602 AS COMPLETED FLAT SINCE TH E MUNICIPAL CORPORATION HAS GIVEN CERTIFICATE UPTO 5 TH FLOOR AND THE 6 TH FLOOR HAS NOT COMPLETED THIS YEAR. 4. ON FURTHER APPEAL THE LD. CIT(A) HELD AS FOLLO WS: I HAVE DULY CONSIDERED THE SUBMISSION OF THE AR AN D I FIND THAT IN THIS YEAR THE ASSESSEE HAS SOLD ONLY O NE FLAT BUT THE ASSESSEE HAS DISCLOSED THE PROFIT IN THE NE XT YEAR I.E. A.Y. 2006-07 WHEN THE PROJECT WAS COMPLETED AN D THE PROFIT WAS EARNED BY THE ASSESSEE. SINCE THE PROJE CT HAS NOT BEEN COMPLETED AND THE ASSESSEE IS FOLLOWING PR OJECT COMPLETION METHOD NO PROFIT CAN BE ASSESSED IN THI S YEAR. THE MUNICIPAL CERTIFICATE OF COMPLETION OF PROJECT UPTO PART 5 TH FLOOR IS ONLY FOR THE TENANTS AND OWNERS WHO WERE GIVEN FLATS FREE OF COST. THE ASSESSEE SOLD REST OF THE FLATS WHICH ARE SITUATED ON 6 TH FLOOR WHICH WAS COMPLETED IN A.Y. 2006- 07 AND THE PROFIT WAS DULY DISCLOSED IN THE RETURN OF INCOME. THE AO IS NOT JUSTIFIED IN PROPORTIONATELY TAXING THE INCOME OF THE ASSESSEE. IN THE CASE OF CIT VS NAHALCHAND LALOOCHAND PVT. LTD. THE ITAT MUMBAI BE NCH ITA NO. 7251/M/08 3 D HELD THAT THERE IS NO QUESTION OF LAW IN FINDIN G OF THE FACT THAT REVENUE IS REQUIRED TO BE RECOGNIZED ON COMPLETION OF THE PROJECT AND NOT ON PART COMPLETIO N OF THE PROJECT. IN THE CASE OF MALAD SHOPPING CENTRE PVT. LTD. VS ITO THE ITAT MUMBAI BENCH C HELD THAT THE ENTI RE PROJECT IS TO BE TREATED AS SINGLE VENTURE BY THE A SSESSEE AND DEPARTMENT PROJECT CANNOT BE TAXED IN THE 3 RD YEAR. THE AO IS DIRECTED TO DELETE THIS ADDITION. THIS G ROUND OF APPEAL IS ALLOWED. 5. FURTHER THE AO ALSO WHILE DETERMINING THE TOTAL SALE CONSIDERATION FOR THE ENTIRE BUILDING HAS HELD AS F OLLOWS: IN WORKING OUT THE SALE CONSIDERATION OF THE FLATS SOLD IN RESPECT OF FLAT NO. 502 THE CONSIDERATION HAS BEEN ADOPTED AT RS. 23 00 000/- WHICH IS THE AGREEMENT VALUE OF THE SAID FLAT AS AGAINST RS. 3 00 000/- WHICH IS THE AM OUNT RECEIVED TILL DATE. 6. THE ASSESSEE WAS AGGRIEVED BY THE ACTION OF THE AO IN CONSIDERING THE TOTAL AGREEMENT VALUE AT RS. 23 00 000/- FOR THE FLAT NO. 501 WHEREAS ACTUALLY THE ASSESSEE HAS RECEIVED ONLY RS. 3 00 000/- DUE TO LITIGATION PERTAINING TO THE FLAT PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 7. BEFORE THE LD. CIT(A) THE AR SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANYTHING BEYOND RS. 3 00 000/- AND HEN CE THE AO IS NOT JUSTIFIED IN INCLUDING THE TOTAL AMOUNT OF RS. 23 00 000/- AS THE CONSIDERATION OF THE FLAT. THE LD. CIT(A) HELD AS FOLLOWS: SINCE I HAVE ALREADY GIVEN THE DECISION THAT THE P ROFIT OF THE ASSESSEE IS TO BE TAXED IN THE NEXT YEAR ON TOT AL CONSIDERATION RECEIVED THIS AMOUNT OF RS. 23 LAKHS IS ALSO REQUIRED TO BE CONSIDERED IN THE YEAR OF COMPLETION OF THE PROJECT AS THE ASSESSEE IS ENTITLED TO RECEIVE THE ENTIRE ITA NO. 7251/M/08 4 AMOUNT OF RS. 23 LAKHS. THIS GROUND OF APPEAL IS DISMISSED. 8. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSESS EE PREFERRED AN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN DIRECTING THAT AN AMOUN T OF RS. 23 00 000/- IS ALSO REQUIRED TO BE CONSIDERED I N THE YEAR OF COMPLETION OF THE PROJECT AS THE ASSESSEE IS ENTITLED TO RECEIVE THIS AMOUNT OF RS. 23 LAKHS AND WHILE DOING SO THE CIT(A) FAILED TO APPRECIATE A) THERE WAS NO SALE OF FLAT NO. 501 SINCE THE AGREEMENT WAS CANCELLED AND TERMINATED BY THE APPEL LANT. B) THAT THE APPELLANT WAS NOT ENTITLED TO ANY CONSIDERATION ON ACCOUNT OF FLAT NO. 501. C) THAT THE APPELLANT HAD REFLECTED FLAT NO. 501 IN THE VALUE OF CLOSING STOCK AS ON 31.3.2006. 9. WE FIND THAT THE LD. CIT(A) HAS ERRED IN DIRECTI NG THAT THE AMOUNT OF RS. 23 00 000/- IS TO BE CONSIDERED IN T HE YEAR OF COMPLETION OF THE PROJECT AS THE ASSESSEE IS NOT EN TITLED TO RECEIVE THE AMOUNT OF RS. 23 00 000/- SINCE THE AGREEMENT WAS C ANCELLED AND TERMINATED BY THE ASSESSEE WITH RESPECT TO FLAT NO. 501 AND THE ASSESSEE HAS RECEIVED ONLY RS. 3 00 000/-. THE LD. CIT(A) HAS FAILED TO DECIDE THE ISSUE ON MERITS. THEREFORE WE DEEM I T FIT TO RESTORE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE ISSUE ON MERITS IN THE YEAR 2006-07 AS THE ASSESSEE HAS REFLECTED FLAT NO. 501 IN THE VALUE OF CLOSING STOCK AS ON 31.3.2006. THE LD. AO SHALL EX AMINE IN DETAIL THE ACTUAL RECEIPT BY THE ASSESSEE AND DECIDE IN ACCORD ANCE WITH LAW. ITA NO. 7251/M/08 5 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF JULY 2010 SD/- SD/- (PRAMOD KUMAR ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 30 TH JULY 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 7251/M/08 6 ` DATE INITIALS 1 DRAFT DICTATED ON: 27.7.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 2 7 . 7 .2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______