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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI M. BALAGANESH, AM & MS. KAVITHA RAJAGOPAL, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI M. BALAGANESH, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No. 101/Mum/2022 (Assessment Year: 2017-18)
Dy. CIT, Central Circle 6(4), M/s. Citra Properties Ltd. M-62, 63, 1st Floor,Connought Place, Mumbai Vs. New Delhi-111 000
PAN/GIR No. AADCC 0776 B (Appellant) : (Respondent) Assessee by : Shri K. Gopal Revenue by : Shri Kishor Dhule Date of Hearing : 10.11.2022 Date of Pronouncement : 03.02.2023
O R D E R Per Kavitha Rajagopal, J M:
This is an appeal filed by the Revenue, challenging the order of the learned
Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2017-18.
The Revenue has challenged the ld. CIT(A)’s order in allowing the advertisements, sales and marketing expenses of Rs.3,13,29,373/- and also on restricting the receipts on on-money to 35% of the total receipts by relying on the order of the
Hon’ble Income Tax Settlement Commission u/s. 245D(4) of the Act.
The appeal is time barred by two days for which the learned Departmental Representative (ld. DR for short) had prayed for condoning the said delay by relying on
2 ITA No. 101/Mum/2022 (A.Y. 2017-18) Dy. CIT vs. M/s. Citra Properties Ltd. the decision of the Hon'ble Apex Court in the case of suo moto Writ Petition No. 3 of
2021, where the limitation period was extended. We hereby condone the delay of two
days as there was ‘sufficient cause’ for the delay.
The brief facts are that the assessee is engaged in the business of development of
real estate projects and other related ancillary activities. The assessee company filed its
return of income dated 14.09.2017, declaring a total loss of Rs.69,03,234/- and book loss
u/s. 115JB at Rs.67,88,843/-. The assessee revised its return dated 06.02.2018, declaring
total loss at Rs.54,35,407/- and book loss u/s. 115JB at Rs.67,88,843/-. The same was
processed u/s. 143(1) of the Act. Pursuant to a search action carried out in the case of
India Bulls dated 30.07.2016, the assessee company being a group entity was selected for
scrutiny and the assessment order dated 30.12.2018 was passed u/s. 143(3) of the Act
r.w.s. 153C of the Act where the A.O. had assessed the total income at Rs.14,15,05,090/-
and book loss u/s. 115JB of the Act u/s. 4,95,59,244/- by making various
additions/disallowances.
The assessee was in appeal before the ld. CIT(A), challenging the disallowance of
advertising, sales and marketing expenses, amounting to Rs.5,13,68,651/- and against the
addition on account of on-money amounting to Rs.2,92,36,175/- and addition on account
of extrapolation of on-money amounting to Rs.10,80,55,464/-, along with the other
grounds. The ld. CIT(A) allowed the grounds of appeal filed by the assessee on the
ground that the A.O’s disallowance on the fact that the assessee has not earned any
income during the impugned year, was not a valid ground for disallowing the business
expenditure pertaining to the advertisement, sales and marketing expenses and the
3 ITA No. 101/Mum/2022 (A.Y. 2017-18) Dy. CIT vs. M/s. Citra Properties Ltd. addition on on-money and on extrapolation of the on-money was deleted by the ld.
CIT(A) by placing reliance on the order of the Hon’ble Income Tax Settlement
Commission made with respect to other 16 entities of the India Bulls group.
Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us.
The ld. DR for the Revenue contended that the A.O. had disallowed the same due
to the fact that the assessee had not earned any revenue during the impugned year and
that the assessee has failed to submit the details or explanation for justifying the
allowability of the expenses. The ld. DR further stated that the A.O. has allowed the same
to be capitalized to work in progress (WIP) account. The ld. DR relied on the assessment
order.
The learned Authorised Representative (ld. AR for short) for the assessee, on the
other hand, controverted the same and stated that the impugned expenses are in the nature
of sales expenses and the ld. AR further stated that the A.O. has not disputed the veracity
of the expenditure incurred and had rather disallowed the same only on the ground that
the assessee has not earned any revenue during the impugned year. The ld.AR further
stated that the A.O. has not considered the sales made in subsequent years and has also
ignored the advance amount received from parties which was the result of advertisement
made by the assessee. The ld. DR further stated that the A.O. has erred in capitalizing the
selling cost with inventories and that the expenses on advertisement, marketing and sales
are mandatory for promoting the assessee’s business. The ld. CIT(A) has allowed the said
expenses by placing reliance on the various decisions of the Hon'ble High Court’s and
4 ITA No. 101/Mum/2022 (A.Y. 2017-18) Dy. CIT vs. M/s. Citra Properties Ltd. has relied on the decision of the Hon’ble Gujarat High Court in the case of Smt. Viramati
Ramkrishnav vs. CIT [1981] 131 ITR 659 (Guj) and held that the expenses pertaining to
advertisement, sales and marketing are to be allowed based on the propositions laid down
in the above said judgment and the A.O.’s action in capitalizing the same to WIP was
held to be not in accordance with the law. The ld. CIT(A) had directed the A.O. not to
add the advertisement, sales and marketing expenses to WIP.
The ld. AR relied on the decision of the co-ordinate bench in the assessee’s case
for A.Y. 2016-17 which has allowed similar expenses on advertisement, sales and
marketing.
We have heard the rival submissions and perused the material available on record.
It is evident that the co-ordinate bench has allowed the expenditure claimed on
advertisement, sales and marketing by the assessee for A.Y. 2016-17 which was
disallowed by the A.O. and allowed by the ld. CIT(A) in appeal by the assessee. The co-
ordinate bench has placed reliance on the decision of the ld. CIT(A) who has in turn
relied on the proposition laid down by the Hon’ble Gujarat High Court in the case of Smt.
Virmati Ramkrishna vs. CIT [1981] 131 ITR 659 and the Tribunal has held that the said
expenses was allowable as ‘business expenditure’ as per the provision of section 37 of the
Act in which case also the A.O. has not questioned the genuinity of the expenses. The
Hon’ble Tribunal has stated that earning of income is not a criteria for allowability of the
business expenditure when the said expenditure was incurred wholly in the course of
business activity. The co-ordinate bench has also laid its hands on the proposition laid
down by the Hon’ble Gujarat High Court in allowing the business expenditure and the
5 ITA No. 101/Mum/2022 (A.Y. 2017-18) Dy. CIT vs. M/s. Citra Properties Ltd. criteria for the eligibility of claiming of the expenditure which are expended for the
purpose of business. As this issue has been already dealt with by the co-ordinate bench
for A.Y. 2016-17, we do not find any justification in deciding otherwise. The order of the
ld. CIT(A) has no infirmity and, we therefore, dismiss ground nos. 1 & 2 raised by the
Revenue.
Ground Nos. 3, 4 & 5 pertains to the charging of 35% of the total receipts from
on-money on the basis of the order of the Hon’ble Settlement Commission passed u/s.
245D(4) of the Act. It is observed that the A.O. has made addition on account of on-
money and extrapolation of the on-money based on the documents seized during the
search action carried out in the India Bulls cases. It is observed that the impugned
unaccounted cash receipts and payments were recorded in the cash transaction record
(CTR for short) in the pen drive/laptop of Shri Ashok Sharma, the group Chief Financial
Officer (CFO) and that in case of group entities of India Bulls, the Hon’ble Settlement
Commission vide its order dated 30.04.2019 passed u/s. 245(D)(4) of the Act had
confirmed 35% of the on-money as ‘unaccounted income’, as against 10% of gross on-
money offered by the said entities. The ld. CIT(A) restricted the addition on on-money
amounting to Rs.2,92,66,175/- to 35% of the total amounting to Rs.1,02,32,661/- on the
ground that the Hon’ble Settlement Commission’s order pertaining to other entities were
on similar facts as that of the assessee and thereby deleted the balance addition
amounting to Rs.1,90,03,513/-. It is also pertinent to point out that in assessee’s case for
A.Y. 2016-17, on similar facts the Tribunal has held the addition on on-money to be
restricted to the extent of 35% of the total on-money by stating that the order of the
6 ITA No. 101/Mum/2022 (A.Y. 2017-18) Dy. CIT vs. M/s. Citra Properties Ltd. Hon’ble Settlement Commission is appealed before the Hon'ble High Court, does not bar
the ld. CIT(A) from adhering to the said order. The Tribunal also held that unless any of
the order passed by the Revenue authority is stayed, it does not prevent the lower
authorities to rely on the said decision. By holding so, the Tribunal has restricted the
addition to 35% of the total on-money. As in this appeal also, the facts are identical to
that of A.Y. 2016-17, we find no justification in interfering with the decision of the
tribunal in the previous year. From the above observation, we find no infirmity in the
order of the ld. CIT(A). Hence, the ground nos.3, 4 & 5 raised by the Revenue are
dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 03.02.2023
Sd/- Sd/-
(M. Balaganesh) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 03.02.2023 Roshani, Sr. PS
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai