The ACIT, Circle-3,, Surat v. M/s. Vastushilp Corporation, Surat

ITA 96/AHD/2009 | 2005-2006
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 9620514 RSA 2009
Assessee PAN AACFV3234F
Bench Ahmedabad
Appeal Number ITA 96/AHD/2009
Duration Of Justice 2 year(s) 10 month(s) 21 day(s)
Appellant The ACIT, Circle-3,, Surat
Respondent M/s. Vastushilp Corporation, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-11-2011
Date Of Final Hearing 24-11-2011
Next Hearing Date 24-11-2011
Assessment Year 2005-2006
Appeal Filed On 09-01-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI D.K.TYAGI JM AND A. K. GARODIA AM. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3 AAYAKAR BHAVAN MAJURA GATE SURAT. VS M/S.VASTUSHILP CORPN. F-14 JAY COMPLEX ANAND MAHAL ROAD SURAT. (APPELLANT) .. (RESPONDENT) PAN: AACFV 3234 F APPELLANT BY :- SHRI B. L.YADAV D.R. RESPONDENT BY:- NONE WRITTEN SUBMISSION. DATE OF HEARING :24 /11/2011 DATE OF PRONOUNCEMENT : 30/11/11. O R D E R PER D. K. TYAGI JUDICIAL MEMBER . THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT (A)-II SURAT IN APPEAL NO.CAS/II/308/2007-08 DATED 30-10-2008 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY GROUND TAKEN BY THE REVENUE IS AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) SURAT HAS ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.6 00 000/- HOLDING THAT CHANGES IN THE SA NCTIONED PLAN WAS SOUGHT EVEN BEFORE THE CONSTRUCTION WORK IS STA RTED AND THEREBY IT CANNOT BE SAID THAT THERE WAS UNAUTHORIZ ED CONSTRUCTION. ITA NO.96/AHD/2009 ASST. YEAR :2005-06 ITA NO. 96/AHD/2009 ASST. YEAR 2005-06 2 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THEAO NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS.6 LACS UNDER THE HEAD OF S MC FEES. THE ASSESSEE EXPLAINED THAT SUCH FEES HAD BEEN PAID AS CHARGED FOR COVERING BALCONIES. THE AO TOOK THE VIEW THAT SUCH CHARGES W ERE ESSENTIALLY IN THE NATURE OF A PENALTY AND HENCE COULD NOT BE ALLOWED AS A DEDUCTION. HE ISSUED A SHOWS CAUSE NOTICE ASKING THE ASSESSEE TO EXPLAIN WHY SUCH CLAIM SHOULD NOT BE DISALLOWED. THE ASSESSEE EXPLAI NED THAT IT WAS IN THE NATURE OF PREMIUM PAID TO THE SMC FOR SEEKING PERMI SSION TO COVER BALCONIES IN THE BUILDINGS CONSTRUCTED BY THE ASSES SEE. THE PERMISSION WAS SOUGHT PRIOR TO CARRYING OUT THE CONSTRUCTION AND HENCE WAS NOT IN THE NATURE OF PENALTY. SUCH FEES HAD BEEN PAID IN A CCORDANCE WITH A CIRCULAR ISSUED BY THE CITY DEVELOPMENT OFFICER A COPY OF WHICH WAS SUBMITTED BEFORE THE AO. IT WAS ARGUED THAT SUCH PA YMENT WAS MADE NOT FOR THE CONTRAVENTION OF ANY LAW OR ANY OFFENCE UND ER ANY STATUTE. IT WAS IN THE NATURE OF ADMINISTRATIVE FEES FOR GRANTING P ERMISSION TO CARRY OUT SOME WORK OF COMMERCIAL NATURE. THE AO REJECTED THE ASSESSEES SUBMISSIONS AND TREATING THE SAME AS BEING IN THE N ATURE OF A PENALTY AND ADDED THE SUM OF RS.6 LACS TO THE ASSESSEES TOTAL INCOME. 3. IN APPEAL BEFORE THE LD. CIT (A) THE ASSESSEE P LACED RELIANCE ON THE STATEMENT OF FACTS APPENDED TO THE APPEAL MEMO AND HAS ALSO FURNISHED THE COPY OF A LETTER ADDRESSED TO THE AO IN COURSE OF THE ASSESSMENT PROCEEDINGS. THE CIT (A) DELETED THE AD DITION MADE BY THE AO AMOUNTING TO RS.6 LACS. 4. WHILE DELETING THE ADDITION OF RS.6 LACS THE LD . CIT (A) OBSERVED AS FOLLOWS:- 5. I HAVE GONE THROUGH THE STATEMENT OF FACTS AND THE SUBMISSIONS MADE BEFORE THE AO. FROM THE FACTS OF T HE CASE IT IS ITA NO. 96/AHD/2009 ASST. YEAR 2005-06 3 3 CLEAR THAT THE BALCONY COVER CHARGES WERE PAID BY T HE ASSESSEE FOR SOMEWHAT CHANGING THE PLAN ORIGINALLY SANCTIONE D IN RESPECT OF THE PROJECT(S) DEVELOPED PROMOTED AND CONSTRUCTED BY THE ASSESSEE. IN THE CASE OF CIT VS. SYNDICATE BANK 26 1 ITR 528 THE HONBLE KARNATAKA HIGH COURT HELD THAT IF A PENALTY IS LEVIED FOR INFRACTION OF LAW THEN IT CANNOT BE ALLOWED AS DEDU CTION. HOWEVER IF IT IS IN THE NATURE OF A COMPENSATORY PAYMENT I T MAY BE ALLOWED AS DEDUCTION. ON THE BASIS OF SUCH OBSERVATION THE HONBLE HIGH COURT SUSTAINED THE PENALTY LEVIED ON THE SAID BANK BY THE RBI U/S. 24 OF THE RBI ACT FOR FAILING TO MAINTAIN A PERCEN TAGE OF THE ASSET OF THE BANK IN THE MANNER PROVIDED THEREIN. HOWEVER IN AN EARLIER CASE OF CIT DELHI-IV VS. LOKNATH AND CO. (CONSTRU CTION) THE ASSESSEE HAD VIOLATED THE SANCTION OF A PLAN FOR CO NSTRUCTION OF A BUILDING OF 13 STOREYS BY THE NMDC. ACCORDING TO T HE BY LAWS OF THE NMDC THE SECOND FLOOR OF THE BUILDING COULD CO VER ONLY 35% WHILE THE ASSESSEE HAD COVERED 50% THEREBY EXCEEDI NG PERMISSIBLE LIMIT LAID DOWN BY THE BY-LAWS. TIME FO R REVALIDATION OF THE PLAN HAVING EXPIRED THE ASSESSEE APPLIED FOR T HE SANCTION OF A REVISED PLAN OF THE BUILDING WITH ONLY 12 STOREYS ON THE GROUND THAT THERE HAD BEEN EXCESS CONSTRUCTION IN THE SECO ND FLOOR. THE REVISED PLAN WAS SANCTIONED CONDONING THE ADDITIONA L COVERAGE AND THE OTHER IRREGULARITIES ON THE CONDITION THAT THE ASSESSEE PAID AN ADHOC PENALTY OF RS.4 LAKH. THE HONBLE DELHI HI GH COURT AFFIRMING THE DECISION OF THE ITAT HELD THAT THE S AID SUM OF RS.4 LAKHS WAS AN ALLOWABLE DEDUCTION. 5.1. THE FACTS OF OUR ASSESSEES CASE ARE NOT ONLY SIMILAR TO THAT OF M/S. LOKNATH AND CO. (SUPRA) BUT IS EVEN BETTER POSITIONED FOR SUCH FEES/CHARGES TO BE ALLOWED AS DEDUCTION. THE A SSESSEES CLAIM THAT SUCH FEES WERE PAID EVEN PRIOR TO BEGINNING TH E CONSTRUCTION ACTIVITY HAS NOT BEEN CONTESTED BY THE AO. EVIDENT LY WHAT THE ASSESSEE DID WAS TO SEEK A CHANGE IN THE SANCTIONED PLAN BY PAYING THE REQUISITE CHARGES. THERE HAVE BEEN CASES WHERE BUILDERS HAVE REGULARLY VIOLATED THE SANCTIONED PLAN AND HAVE CON STRUCTED EITHER IN EXCESS OF THE SANCTIONED FSI OR HAVE COVERED BAL CONIES TO INCREASE THE FLOOR AREA OF THE FLATS. FOR SUCH VIOL ATIONS OR CONTRAVENTIONS TO BE REGULARIZED THE GOVERNMENT OF GUJARAT HAS INTRODUCED A SCHEME UNDER THE GUJARAT REGULARIZATIO N OF UNAUTHORIZED DEVELOPMENT ACT 2001 (GRUDA). UNDER T HIS SCHEME PERSONS WHO HAVE VIOLATED SANCTIONED PLANS WERE ALLOWED TO REGULARIZE THE UNAUTHORIZED CONSTRUCTION BY PAYI NG STIPULATING FEES. EVEN SUCH PAYMENTS HAVE BEEN HELD TO BE IN TH E NATURE OF THE COMPENSATORY PAYMENT AS EXPLAINED BY THE HONBLE HIGH COURT ITA NO. 96/AHD/2009 ASST. YEAR 2005-06 4 4 OF KARNATAKA IN THE CASE OF SYNDICATE BANK (SUPRA). UNDER THE SAID SCHEME A REVISED PLAN WOULD HAVE TO BE SUBMITTED SH OWING THE EXTRA COVERAGE AND EXTRA USE OF FSI. WHILE GETTING THE REVISED LAN SANCTIONED THE BUILDER IS REQUIRED TO PAY IMPACT F EES AND BALCONY COVER CHARGES AS WAS IN THE CASE OF LOKNATH & CO. ( SUPRA). BEING IN THE NATURE OF COMPENSATORY PAYMENT UNDER THE SCH EME FLOATED BY THE GUJARAT GOVERNMENT THE FEES/CHARGES PAID B Y A BUILDER FOR REGULARIZATION OF SUCH UNAUTHORIZED CONSTRUCTION H AVE BEEN HELD TO BE CLEARLY ALLOWABLE AS PERMISSIBLE DEDUCTION. I N THE CASE OF THE ASSESSEE CHANGES IN THE SANCTIONED PLAN WAS SOUGHT EVEN BEFORE THE CONSTRUCTION HAD ACTUALLY STARTED AND THEREFOR E IT COULD NOT BE THAT THERE WAS ANY UNAUTHORIZED CONSTRUCTION. FOR S EEKING SUCH CHANGE THE ASSESSEE WAS REQUIRED TO PAY THE REQUIS ITE FEES/CHARGES TO RS.6 LACS WHICH WAS FOR COVERING THE BALCONIES. UNDER NO CIRCUMSTANCES COULD SUCH FEES/CHARGES BE TREATED AS BEING IN THE NATURE OF A PENALTY. CONSEQUENTLY SUCH EXPENDITURE COULD NOT BE DISALLOWED. THE AO IS DIRECTED TO DELETE THE ADDITI ON OF THE SUM OF RS.6 LACS. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER WRITTEN SUBMISSIONS HAVE BEEN FILED. 6. AT THE TIME OF HEARING THE LD. DR RELIED ON THE CONTENTIONS OF THE A.O. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RECORD WE FIND THAT THE ADDITION OF RS.6 LACS HAS BEEN MADE B Y THE AO BY TREATING THE PAYMENT OF RS.6 LACS MADE BY THE ASSESSEE TO SU RAT MUNICIPAL CORPORATION FOR COVERING BALCONIES AS PENAL IN NATU RE. THE LD. CIT(A) AFTER ANALYZING THE FACTS IN DETAIL AND FOLLOWING T HE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF LOKNATH & CO. (SUPR A) AND HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SYNDICA TE BANK (SUPRA) ON SIMILAR FACTS HAS GIVEN RELIEF TO THE ASSESSEE BY H OLDING THAT THE PAYMENT ITA NO. 96/AHD/2009 ASST. YEAR 2005-06 5 5 OF RS.6 LACS MADE BY THE ASSESSEE TO SURAT MUNICIPA L CORPORATION WAS IN FACT COMPENSATORY IN NATURE AND THEREFORE NO DISA LLOWANCE WAS CALLED FOR IN THIS CASE. SINCE THE REVENUE HAS NEITHER DIS TINGUISHED FACTS OF THIS CASE FROM THE FACTS OF THE CASES RELIED ON BY THE L D. CIT(A) NOR ANY CONTRARY DECISION WAS RELIED UPON AT THE TIME OF HE ARING BEFORE US WE ARE LEFT WITH NO OPTION BUT TO CONFIRM THE ORDER PASSED BY THE LD. CIT(A). THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30/11/11. SD/- SD/- (A.K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- II SURAT. 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 24/11/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 28/11/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..