BOMBAY ISLE DEVELOPERS P. LTD, MUMBAI v. ITO WD 9(1)(2), MUMBAI

ITA 7345/MUM/2011 | 2006-2007
Pronouncement Date: 28-09-2016 | Result: Allowed

Appeal Details

RSA Number 734519914 RSA 2011
Assessee PAN AABCB5317P
Bench Mumbai
Appeal Number ITA 7345/MUM/2011
Duration Of Justice 4 year(s) 10 month(s) 25 day(s)
Appellant BOMBAY ISLE DEVELOPERS P. LTD, MUMBAI
Respondent ITO WD 9(1)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-09-2016
Date Of Final Hearing 23-06-2015
Next Hearing Date 23-06-2015
Assessment Year 2006-2007
Appeal Filed On 02-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUM BAI BEFORE SHRI R.C. SHARMA AM AND SHRI SANDEEP GOSAIN JM ./ I.T.A. NO. 7345/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) M/S. BOMBAY ISLE DEVELOPERS PVT. LTD. NARANG MANOR GROUND FLOOR PLOT NO 96-B 15 TH ROAD BANDRA (WEST) MUMBAI-400 050. / VS. INCOME TAX OFFICER 9(1)(2) 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AABCB 5317P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI K. GOPAL / RESPONDENT BY : SHRI RANDHIR GUPTA / DATE OF HEARING : 25/07/2016 !'# / DATE OF PRONOUNCEMENT : 28/09/2016 $% / O R D E R PER SANDEEP GOSAIN JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- 19 DATED 11 .08. 2011 ON THE GROUNDS OF APPEAL MENTIONED HEREIN BELOW. 2 ITA NO. 7345/MUM/2011(A.Y. 2006-07) BOMBAY ISLE DEVELOPERS P. LTD. VS. ITO 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN CONFIMING THE ADDITION OF RS.15 45 880/- BEING INTEREST COST BY N OT APPRECIATING THE FACT THAT THE MATTER IS DEBATABLE AND CANNOT BECOME SUBJ ECT MATTER OF RECTIFICATION UNDER SECTION 154 OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FU RTHER ERRED IN UPHOLDING THE VIEW OF THE ASSESSING OFFICER THAT TH E VALUE OF CLOSING WORK IN PROGRESS BE ENHANCED BY THE AMOUNT OF INTEREST COST OF RS.15 45 880/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE I.T. ACT 1961 ON 29.12.2008 THEREBY ASSESSING TOTAL INCOME AT RS.19 58 40/-. HOWEVER IT WAS NOTICED THAT DISALLOW ANCE OF NET INTEREST ON ACCOUNT OF ENHANCED WIP AMOUNTING TO RS.15 45 880/- WAS NOT ADDED TO THE BUSINESS INCOME. THEREFORE AFTER SERVING NOTICES THE ITO PA SSED ORDER U/S 154 OF THE ACT THEREBY REVISED THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE ITO ASSESSEE FILE D THE APPEAL BEFORE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF THE AS SESSEE DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 29.12.2008 THEREBY UP HOLDING THE ORDER OF ITO PASSED U/S 154 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE F ILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. 5. BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE INTE R-CONNECTED AND INTER-RELATED THEREFORE WE THOUGHT IT FIT TO DISPOSE OFF THE SAME THROUGH THE PRESENT COMMON ORDER. AT THE VERY OUTSET LD. AR APPEARING ON BEHA LF OF ASSESSEE SUBMITTED THAT THE 3 ITA NO. 7345/MUM/2011(A.Y. 2006-07) BOMBAY ISLE DEVELOPERS P. LTD. VS. ITO CIT(A) ERRED IN CONFIRMING ADDITION OF RS.15 45 880 /- BEING INTEREST COST BY NOT APPRECIATING THE FACT THAT THE MATTER IS DEBATABLE AND CANNOT BECOME SUBSEQUENT MATTER OF RECTIFICATION U/S 154 OF THE ACT. LD. AR FURTHER SUBMITTED THAT THE ASSESSEE IS A BUILDER AND DEVELOPER AND HAD TWO PRO JECT UNDER CONSTRUCTION DURING THE YEAR CALLED LATA SONI C.H.S. AND KAMAL VISHR ANTI KUTIR AT BANDRA AND DURING THE YEAR UNDER CONSIDERATION BOTH THE PROJEC TS WERE UNDER CONSTRUCTION AND THE ASSESSEE HAD RECEIVED INTEREST INCOME OF RS.15 45 880/-. THE ASSESSEE HAS DEBITED UNDER THE HEAD FINANCIAL EXPENSES AN AMO UNT OF RS.31 13 778/- ON ACCOUNT OF INTEREST AND FIANC BROKERAGE. IT WAS F URTHER SUBMITTED THAT CLOSING STOCK OF W.I.P. IS VALUED AT COST AND COST INCLUDES ALL EXPENSES INCLUDING ADMINISTRATIVE AND NET INTEREST COST INCURRED TO FI NANCE THE PROJECT AS PER CLAUSE 12(A) REGARDING METHOD OF VALUATION OF CLOSING STOC K OF TAX AUDIT REPORT. THIS IS JUST MATTER OF ACCOUNTING POLICY WHICH IS CONSISTEN TLY FOLLOWED BY COMPANY. SO THE ASSESSEE HAS CORRECTLY CHARGED NET INTEREST COST TO CLOSING W.I.P. IT WAS FURTHER SUBMITTED THAT DURING NORMAL COURSE OF BUSINESS ANY SURPLUS FUND UTILIZED BY THE COMPANY AS ADVANCES TO DIRECTOR AND INTEREST EARNED ON THAT ADVANCES IS LIABLE TO SET OFF AGAINST INTEREST COST INCURRED BY THE COMPA NY TO THE EXTENT INTEREST EARNED BY THE COMPANY AND THAT IS WHAT ASSESSEE HAS DONE B Y CAPITALIZING NET INTEREST COST TO THE PROJECT BY REDUCING INTEREST COST TO THE EXT ENT INTEREST RECEIVED BY THE COMPANY ON ADVANCES MADE OUT OF SURPLUS FUND. 4 ITA NO. 7345/MUM/2011(A.Y. 2006-07) BOMBAY ISLE DEVELOPERS P. LTD. VS. ITO 6. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 7. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS GROUND AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. AFTER CONSIDERING THE ENTIRE FACTS AS WELL AS CIRCUMSTANCES OF THE PRESENT CASE WE ARE OF THE CONSIDERED VIEW THA T THE ISSUE OF TAXABILITY OF A RECEIPT UNDER THE HEAD BUSINESS INCOME OR INCOME FR OM OTHER SOURCES IS A DEBATABLE ISSUE AND HENCE THE SAME IS NOT A MISTAKE APPARENT TO BE RECTIFIED U/S 154. EVEN THE REVENUE AUTHORITIES HAVE FAILED TO APPRECIATE THAT THE INTEREST RECEIPT ARE BUSINESS RECEIPT OF THE ASSESSEE AND BECAUSE OF THAT WIP IS REDUCED AS PER THE CONSISTENT METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE. THEREFOR E ON THAT ACCOUNT ADDITIONS OF RS.15 45 880/- HAD NOT AT ALL JUSTIFIED TO BE ADDE D BY VIRTUE OF AN ORDER PASSED U/S 154 OF THE ACT AS THE SAME CANNOT BE HELD AS A MIS TAKE APPARENT TO BE RECTIFIED U/S 154 OF THE ACT MORE PARTICULARLY WHEN THE ASSES SMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 29.12.08. LD. AR ALSO DRAW N OUT ATTENTION TO PAGE NO. 1 TO 39 OF THE PAPER BOOK WHICH CONSIST OF AUDITED FI NANCIAL STATEMENTS FOR THE FINANCIAL YEAR 2005-06 REPORT OF THE AUDITOR IN FO RM 3CA CONTAINING PARTICULARS IN FORM 3CD WITH ANNEXURE FOR AY 2006-07. 5 ITA NO. 7345/MUM/2011(A.Y. 2006-07) BOMBAY ISLE DEVELOPERS P. LTD. VS. ITO 8. THEREFORE UNDER THESE CIRCUMSTANCES WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITIONS OF RS.15 45 880/- MADE BY AO WHILE PASSING THE ORDER U/S 154 OF THE IT ACT. HENCE THESE GROUNDS OF APPEAL FILED BY ASSESSEE ARE ALLOWED. 9. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016 SD/- SD/- (R.C. SHARMA) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :28.09.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 12# ( ) / DR ITAT MUMBAI 6. 045 6 / GUARD FILE / BY ORDER / !'# (DY./ASSTT. REGISTRAR) #$ % ( ) / ITAT MUMBAI