DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), MUMBAI vs. M/S LAKEPOINT BUILDERS PVT LTD, MUMBAI

ITA 2741/MUM/2022Status: DisposedITAT Mumbai13 March 2023AY 2015-20165 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) correctly deleted the disallowance of business expenditure. The decision followed a coordinate bench ruling in the assessee's own case, which held that a pending appeal to a higher court does not diminish the binding effect of a coordinate bench's order.

What were the facts?

The assessee, a real estate developer, declared a loss for the A.Y. 2015-16. The Assessing Officer disallowed business expenditure and added it to work-in-progress. The CIT(A) deleted these additions.

What were the issues?

Whether business expenditure incurred on construction activity without corresponding sales in the same year should be disallowed and capitalized as work-in-progress. Whether a CIT(A) order relying on a coordinate bench decision that is under appeal is valid.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI AMIT SHUKLA, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Manoj Sinha

For Appellant: Ms. Shloka Shah

For Respondent: Shri Manoj Sinha

Hearing: 29.12.2022Pronounced: 13.03.2023

O R D E R PER S. RIFAUR RAHMAN (AM)

This appeal is filed by the revenue against order of the Learned Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 29.08.2022 for the A.Y.2015-16.

Brief facts of the case are, assessee is a private limited company registered and incorporated on 7th July, 2005 engaged in the business of Construction and Development, Real Estate, more particularly integrated townships, sale of residential units, leasing, operation and sale of commercial and retail estate inter-alia entertainment facilities. During the 2 (A.Y: 2015-16) M/s. Lakepoint Builders Pvt. Ltd., current assessment year assessee filed its return of income on 30.09.2015 declaring a loss of ₹.2,43,25,648/-. Subsequently, assessee’s case was selected for limited scrutiny and accordingly, notices u/s. 143(2) and 142(1) were issued and served on the assessee.

The assessment was completed u/s. 143(3) of the Act assessing the total income at ₹.2,06,23,290/- disallowing business expenditure of ₹.7,15,89,704/- and capitalizing the expenses by adding the same to Work-in-progress. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) has deleted the additions made by the Assessing Officer.

Aggrieved revenue, is in appeal before us raising following grounds in its appeal: -, "1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of business loss of Rs. 7,15,89,704/- from the P&L Account and adding the same to Capital Work-in-progress, ignoring that the assessee had only one contract and therefore, entire expenses were liable to be capitalized as work in progress.

2. On the facts and in the circumstances of the case and in law, the CIT(A) has failed to consider that since there was no sales offered for tax during the year and only construction activity had been carried out, no corresponding expenses could be allowed to the assessee.”

3 (A.Y: 2015-16) M/s. Lakepoint Builders Pvt. Ltd., 5. At the time of hearing, Ld. AR brought to our notice that similar issue was considered by the Coordinate Bench in the assessee’s own and he brought to our notice the relevant grounds raised by the revenue and the Coordinate Bench in ITA.No. 5063/Mum/2019 dated 31.01.2022 has decided the issue in favour of the assessee by dismissing the appeal filed by the Revenue.

On the other hand, Ld. DR relied on the order of the Assessing Officer.

Considered the rival submissions and material placed on record, we observe that Assessing Officer has disallowed the business expenditure claimed by the assessee and added the above said expenditure in work- in-progress. Since the similar issue was considered and adjudicated by the Coordinate Bench in favour of the assessee in assessee’s own case for the assessment year 2014-15, for the sake of clarity, we are reproducing the ratio of the above decision: -

“4. It was noted, and pointed out to the learned Departmental Representative, that the short grievance raised by the Assessing Officer implicitly suggests that considering the fact that the decision of the Tribunal was challenged by the Income Tax Department in Hon’ble High Court, the learned Commissioner (Appeal) ought not to have followed the same. Upon pointing out this, the learned Departmental Representative simply relied upon the grounds of appeal and left the matter to us. The learned Departmental Representative also invited our attention to paragraph 5 of the 4 (A.Y: 2015-16) M/s. Lakepoint Builders Pvt. Ltd., assessment order, wherein facts of the case and the reasoning adopted by the Assessing Officer has been elaborated upon.

5. As even a casual look at the order of the learned CIT(A) shows, that the learned Commissioner (Appeal) has merely relied upon the decision of a co-ordinate bench in the case of Hiranandani Palace Garden Ltd. vs. ACIT (ITA No. 4579/Mum/2013, order dated 30.12.2015). There is no dispute that the said co-ordinate bench decision covers the issue in favour of the assessee. The grievance of the Assessing Officer is confined to the fact that because this order was challenged before the Hon’ble Jurisdictional High Court, the learned Commissioner (Appeal) ought not to have followed the same. This grievance is clearly illconceived. It is only elementary that the mere fact that a judicial decision is challenged before a higher judicial forum, it does not curtail, dilute or otherwise narrow down its binding effect in nature. A decision of the co-ordinate bench, admittedly direct on the issue in appeal, thus binds us. We see no reasons to deviate from the stand of the co-ordinate bench. We, therefore, reject the grievance of the Assessing Officer and uphold the order of the ld. CIT(A) on this point.”

8. Respectfully following the above said decision, we are inclined the dismiss the grounds raised by the revenue.

In the result, appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 13th March, 2023

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