DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, JODHPUR vs. M/S. MARUDHAR HOTELS PVT. LTD. , JODHPUR

आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member): - 1.1 Aforesaid appeals by revenue for Assessment Years [in short referred to as ‘AY’] 2013-14 and 2014-15 contest separate orders of first appellate authority. The assessee has filed cross-objections against the same. Facts as well as issues are identical in both the years and therefore, the appeals are being disposed-off by way of this common order for the sake of convenience & brevity. First, we take up appeal as well as cross-objection of the assessee for AY 2013-14 which is against the order dated 16/02/2018 passed by Ld. Commissioner of Income-Tax(Appeals)-1, Jodhpur, [in short referred to as ‘CIT(A)’], Appeal No.277E/2016-17. 1.2 The grounds raised by the revenue read as under:- 1. Whether under the facts and circumstances of the case the CIT(A) is right in law in holding that surplus on sale of plot of Rs.7,03,86,970/- is assessable as capital gain, ignoring the various patent facts of the case emerging out of various clauses of the development agreement entered into with M/s Ess Gee Real Estate Developers Pvt. Ltd. 2. Whether on the facts and circumstances of the case the CIT(A) is correct in facts and law in deleting the disallowances out of interest expenses of Rs.4,29,07,571/- on account of interest free loans/advances given to associates entities and close relative of the director of the company. 3. Whether on the facts and circumstances of the CIT(A) is correct in facts and law in directing to adopt fair market value of Rs.250/- sq yd as determined by the registered valuer instead of Rs.4/- sq yd taken by the Assessing Officer without appreciating the fact that registered valuer has taken fair market value as on 01.04.1981 on estimate basis without quoting an actual instance of selling price of similar land in nearby areas. 1.3 The assessee’s cross-objections are primarily in support of the impugned order. The grounds read as under: -

Marudhar Hotels Private Limited Assessment Years: 2013-14 & 2014-15 The Respondent submits that the deletion by Id. CIT(A) are correct and as per law namely - i) Following the finding given by Hon'ble ITAT, Jodhpur Bench, Jodhpur in assessee's own case by order dt. 15.2.2013 and 24.6.2013 for AYrs. 2006-07 to 2008-09 and 2009-10 and subsequently in AYs. 2010-11 and 2011-12. ii) In confirming that income arising from sale of plots is Long Term Capital Gains and not Business Income and further upholding the working of Capital Gains declared by the assessee and deleting addition of Rs.7,03,86,9707- and accepting the Capital Gain declared by the assessee Company. iii) in confirming the issue of adoption of cost of acquisition of land @ Rs.250/- per qq. Yd. instead of Rs.8/- adopted by Id. AO. iv) Ld. CIT(A) erred in not giving finding relating to leaving out of utility area for park, drainage, culvert, pathways etc. which are regulatory requirement and not including the same in development expenses. v) in deleting the addition made on account of interest amounting to Rs.4,29,07,571/-. As evident from cross-objections, the Ld. CIT(A) has substantially followed the Tribunal orders in assessee’s own case in earlier AYs. 2. We have carefully heard the rival submissions and perused relevant material on record including written submissions and documents placed in the paper book. The judicial precedents as relied upon during the course of hearing have duly been deliberated upon. Our adjudication to the subject matter would be as given in succeeding paragraphs. 3.1 The assessee being resident corporate assessee stated to be engaged in hotel business was assessed for the year under consideration u/s 143(3) vide order dated 30/03/2016 wherein the income was determined at Rs.10.54 Crores after certain additions /adjustment. 3.2 It transpired that the assessee as vendor entered into joint venture development agreement with an entity namely M/s Ess Gee Real Estate Developer Private Ltd. as builder to develop a scheme of bungalows named Umaid Heritage at the foothills of Chittar Hills.

4 Marudhar Hotels Private Limited Assessment Years: 2013-14 & 2014-15 According to the terms of the agreement, the assessee was entitled to receive certain percentage of sale consideration of every plot based on rate at which the plot was sold. During the year, the assessee reflected sale of 2905 Square ft. of plot at sale consideration of Rs.7.62 Crores. The same was offered to tax under the head Long-Term Capital Gains (LTCG). However, as held in assessment order for AY 2012-13, Ld. AO chose to treat the sale consideration as Business Income and accordingly, worked out business income of Rs.7.03 Crores. The plea that the Tribunal already accepted the same as Capital Gains was rejected since the department was in further appeal before Hon’ble High Court. 3.3 Alternatively, even if the gains were to be treated as Capital Gains, the cost of acquisition as on 01/04/1981 as taken by the assessee @Rs.250/- per square yards was highly excessive. Following AYs 2011-12 & 2012-13, the cost was to be taken as Rs.8/- per square yards which would yield LTCG of Rs.5.82 Crores in the hands of the assessee. 3.4 Another addition was interest disallowance u/s 36(1)(iii) for Rs.4.29 Crores since the assessee had advanced interest free loans for Rs.60.47 Crores. The disallowance so made was in accordance with assessment order for AY 2012-13. 3.5 Upon further appeal, Ld. CIT(A), following Tribunal’s common order dated 15/02/2013 for AYs 2006-07 to 2008-09 held that the gains were to be computed under the head Capital Gains. It was noted that this order of Tribunal was subsequently followed by the

5 Marudhar Hotels Private Limited Assessment Years: 2013-14 & 2014-15 coordinate benches in AYs 2009-10 to 2011-12. Similarly, following the order of the Tribunal for AY 2009-10, ITA No.34/Jodh/2013 dated 24/06/2013, the cost of acquisition was directed to be taken as Rs.250/- per square yards as adopted by the assessee. 3.6 Regarding interest disallowance, it was submitted that loans were not given out of borrowed funds. The Ld.CIT(A), following the findings given by Tribunal for AYs 2006-07 to 2008-09 as well as for AYs 2009-10 to 2011-12 and following the binding decision of Hon’ble Rajasthan High Court in CIT V/s Vijay Solvex Ltd. 113 DTR 382 dated 10/12/2014, observed that interest free funds of Rs.6047 Lacs were substantially higher than the interest free advances made to related parties and therefore, the disallowance was to be deleted. Aggrieved as aforesaid, the revenue is in further appeal before us. 4. We have duly considered the factual matrix as enumerated in the preceding paragraphs. It is quite evident that the issue of head under which the sale of plots would be assessable as well as the issue of cost of acquisition as on 01/04/1981 stood squarely covered in assessee’s favor by the earlier decisions of this Tribunal. The Ld. CIT(A) has merely followed the same which is the correct approach. There is nothing on record which would show that the aforesaid decisions have subsequently been reversed, in any manner. No change in facts has been demonstrated before us. Therefore, we find no fault in the approach of Ld.CIT(A) in providing relief to the assessee, on this account.

6 Marudhar Hotels Private Limited Assessment Years: 2013-14 & 2014-15 5. So far as interest disallowance is concerned, it is admitted fact that the assessee’s own funds far exceeded the interest free advances given by the assessee. Therefore, the decision of Tribunal in earlier years as well as the ratio of cited decision of Hon’ble High Court was clearly applicable to the facts of this year. This being the case, no interference is called for in the impugned order, on this issue also. We order so. 6. In the result, revenue’s appeal stand dismissed. The cross- objections are substantially in support of impugned order. Our aforesaid adjudication has rendered ground no. (iv) of the cross- objections merely academic in nature and hence, not specifically dealt with. The cross-objection also stand dismissed. Assessment Year 2014-15 7. In this year, an assessment has been framed against the assessee on 29/12/2016 on more or less similar lines as in AY 2013-14. The income earned on sale of plots has been assessed as Business Income. The assessee has been saddled with interest disallowance u/s 36(1)(iii) on similar logic and reasoning. The Ld. first appellate authority, following earlier orders of Tribunal, has provided relief to the assessee. Aggrieved, the revenue is in further appeal before us with identical grounds of appeal. The assessee’s cross-objections are merely in support of impugned order. Facts and issues being identical, our adjudication as for AY 2013- 14 shall mutatis mutandis apply to this year also. The revenue’s appeal as well as cross-objections stands dismissed.

7 Marudhar Hotels Private Limited Assessment Years: 2013-14 & 2014-15 Conclusion Both appeals as well as cross-objections stand dismissed. 8. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (Sandeep Gosain) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member

मुंबई Mumbai; िदनांकDated : 21/12/2020 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, जोधपुर / DR, ITAT, Jodhpur 5. गाड�फाईल / Guard File 6.

आदेशानुसार/ BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, जोधपुर / ITAT, Jodhpur.