THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), VADODARA vs. M/S. OCEANIC BUILDCON PVT. LTD., BARODA

The solitary ground of appeal of the revenue is against the decision of ld. CIT(A) in deleting the penalty levied u/s. 271(1)(c) of the act.

At the time of hearing, ld. counsel has brought to our notice that quantum addition on the basis of which instant penalty was levied has been deleted by the Co-ordinate Bench of the ITAT vide ITA 3034/Ahd/2014, 1865, 1866 & 3487/Ahd/2016 dated 15-10-2018 M/s. Oceanic Build com Pvt. Ltd. Vs. ACIT. With the assistance of ld. representatives, we have gone through the aforesaid decision of Co-ordinate Bench of the ITAT and noticed that the quantum appeal has been decided in favour of the assessee. The relevant part of the decision of Co-ordinate Bench of the ITAT is reproduced as under:- 19. We have gone through the relevant record and impugned order. The construction of the building is commenced in the Financial Year 2007-08 and is completed in the Financial Year 2009-10. The source of funds for the construction of Mall being own funds, unsecured loans from promoters as also borrowing to the extent of Rs. 8.65 crores from Financial Institutions. The company had started marketing the availability of premises in the Mall and entered into a MoU dated 19.02.2007 with Cinemax proposing the broad terms on which the property would be licensed/leased. In the accounts prepared for the Financial Year 2008-09, the business of the construction of Mall had already commenced and the appellant derived some income from renting of hoarding signs etc. and mainly company is engaged in renting of premises and in the Assessment Year 2010-11, ld. A.O. denied the claim of loss of Rs.2,46,03,893/- as claimed in the return of income holding that assessee’s project was still under construction and that the loss could not be allowed. 20. In appeal before ld. CIT(A), appellant contended that it had set up its business during the year and Mall under construction was capitalized and contended that loss was required to be allowed. But ld. CIT(A) held that income of the appellant to be taxed under the head income from house property. 21. As we can see, that in similar circumstances, Hon’ble Supreme Court in the matter of Chennai Properties & Investments Ltd. (supra) decided matter in favour of the assessee holding that income from renting a property of Mall to be treated as business income and in those circumstances, appellant case is fully covered by the aforesaid judgment. ITAT Bench of Mumbai in the matter of Hagwood Commercial Developers Pvt. Ltd. (supra) has also given finding in favour of assessee. To the effect that even if Mall had not commenced business till end of relevant year, assessee had rightly debited general overhead expenses being indirect expenses incurred, in profit and loss account. Thus, we are considered opinion, that in assessee’s case, the income from renting a properties in Mall to be taxed as business income and not income from house property as well as business loss also to be allowed. 22. So far initiating of penalty proceeding u/s. 271(1)(a) is concerned, same are premature. Thus, we do not want to comment on that. 23. In the result, appeal filed by the Appellant is allowed.”

In view of the above facts and circumstances, we consider that the penalty levied u/s. 271(1)(c) in the case of assessee has become infructuous

In the result, the appeal of the revenue is dismissed.