DCIT CC 8(3), MUMBAI, MUMBAI vs. S D CORPORATION PVT. LTD., MUMBAI

The effective grounds raised by the Revenue in A.Y. 2015-16 read as under:-

The effective grievance of the Revenue is that the learned CIT(A) erred in deleting the addition made by the Assessing Officer by reducing the Work-in-Progress (WIP)/inventory on account of payments made to M/s. PRS Developers and the consequential finance cost attributable thereto, deleting the disallowance made under section 14A of the Act and, for A.Y.2015-16, deleting the addition made on account of notional income from house property.

Briefly stated, the assessee is engaged in the business of builders and developers. For the assessment year under consideration, assessment was completed under section 143(3) read with section 147 of the Act. During the reassessment proceedings, the Assessing Officer observed that in the earlier years payments had been made to M/s. PRS Developers, proprietary concern of Shri Nilesh J. Thakur, and relying upon the findings recorded in the assessment order for A.Y 2014-15, held that interest attributable to such non genuine consultancy services should be reduced from work in progress. Consequently, the Assessing Officer reduced the work-in-progress of the Samata Nagar Project by the finance cost attributable to such payments. He also made disallowance under section 14A of the Act and, in A.Y.2015-16, brought to tax notional annual value of an unsold flat under the head "Income from House Property". Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A), who deleted the additions primarily by following the decision of the Coordinate Bench of the Tribunal in the assessee's own case for Assessment Years 2008-09, 2009-10 and 2011-12 to 2014-15 in ITA Nos.6191 to 6194, 6204 & 6033/Mum/2019 dated 30.08.2023, holding that the issues stood squarely covered in favour of the assessee. Aggrieved by the relief granted by the learned CIT(A), the Revenue is in appeal before us.

The learned Departmental Representative strongly relied upon the assessment order. It was submitted that the learned CIT(A) was not justified in deleting the reduction of WIP by merely relying upon the earlier order of the Tribunal. According to the Revenue, the assessee had failed to establish the genuineness of the consultancy services allegedly rendered by M/s. PRS Developers and, therefore, the Assessing Officer had rightly reduced the WIP and made consequential adjustment in respect of finance cost. It was further submitted that the learned CIT(A) erred in deleting the disallowance under section 14A despite the specific findings recorded by the Assessing Officer. In respect of A.Y.2015-16, it was also contended that the learned CIT(A) erred in deleting the addition made on account of notional annual value of the unsold flat.

Per contra, the learned Authorised Representative submitted that all the issues raised by the Revenue are no longer res integra and stand concluded by the order of the Coordinate Bench of the Tribunal in the assessee's own case dated 30.08.2023. It was submitted that the Tribunal, after an elaborate consideration of the entire material, including the appointment letter, consultancy agreement, nature of services rendered by Shri Nilesh J. Thakur, deduction of tax at source, documentary evidences and the order passed in the case of Shri Nilesh J. Thakur, had categorically held that the payments made to M/s. PRS Developers were genuine business payments and the Assessing Officer was not justified in reducing the work-in-progress or in making consequential disallowance of finance cost. It was further submitted that the issue relating to disallowance under section 14A and the issue of notional annual value are also covered by the same order of the Tribunal in favour of the assessee. Therefore, according to the learned Authorised Representative, the learned CIT(A) has merely followed the binding decision of the Coordinate Bench and no interference is called for.

We have considered the rival submissions and perused the material available on record. We find that the controversy regarding allowability of capitalization of payments made to M/s. PRS Developers and the consequential finance cost is no longer res integra. An identical issue had come up before the Coordinate Bench of the Tribunal in the assessee's own case for Assessment Years 2008-09, 2009-10 and 2011-12 to 2014- 15 in ITA Nos.6191 to 6194, 6204 & 6033/Mum/2019 vide order dated 30.08.2023.

The Coordinate Bench examined the appointment letter issued to Shri Nilesh J. Thakur, the consultancy agreement, the nature of consultancy services, the evidence furnished by the assessee as well as the findings recorded in the case of Shri Nilesh J. Thakur. After an elaborate discussion, the Tribunal observed that the Assessing Officer had proceeded merely on presumptions without bringing any material to dislodge the documentary evidence produced by the assessee. The Tribunal noticed that in the case of Shri Nilesh J. Thakur itself, it had already been held that the receipts from the assessee represented genuine consultancy receipts and that the consultancy agreement and appointment letter clearly established the relationship between the parties. The Tribunal further observed that the assessee had deducted tax at source on the consultancy payments and had produced all supporting evidences during the assessment proceedings.

The Coordinate Bench ultimately approved the findings of the CIT(A) by observing as under:

The Tribunal thereafter dismissed the Revenue's grounds on merits and upheld the order of the CIT(A).

Before us, the learned Departmental Representative could not point out any distinguishing feature in the facts of the present assessment year vis-à-vis the assessment years decided by the Coordinate Bench. No material has been brought on record to show that the aforesaid decision has either been reversed or stayed by any higher judicial forum. The controversy involved in the present appeal is thus identical to the controversy adjudicated by the Coordinate Bench. Respectfully following the earlier decision in the assessee's own case, we uphold the order of the learned CIT(A) deleting the reduction of work-in- progress and the consequential adjustment of finance cost. Accordingly, Grounds No.1 and 2 raised by the Revenue are dismissed.

Grounds No.3 to 6 relate to the deletion of disallowance made under section 14A of the Act.

We find that this issue is also squarely covered by the order of the Coordinate Bench in the assessee's own case dated 30.08.2023. While adjudicating the Revenue's appeal, the Tribunal examined the applicability of section 14A in the facts of the assessee's case and upheld the deletion made by the CIT(A). The Tribunal held that, in the absence of exempt income during the relevant year, no disallowance under section 14A could be sustained and consequently rejected the Revenue's contention founded on CBDT Circular No.5/2014. The relevant discussion is contained in paragraphs 26 to 28 of the said order, wherein the Coordinate Bench dismissed the Revenue's grounds on this issue.

Since the learned CIT(A) has merely followed the binding decision of the Coordinate Bench and the Revenue has failed to point out any distinguishing feature or any subsequent contrary decision, we respectfully follow the earlier order and uphold the deletion of the disallowance under section 14A. Grounds No.3 to 6 raised by the Revenue are accordingly dismissed.

Grounds No.7 & 8 relate to addition of notional income of Rs.9,76,335/- on unsold flat.

The Assessing Officer had also brought to tax notional annual value in respect of an unsold flat under the head "Income from House Property". The learned CIT(A) deleted the addition by following the decision of the Tribunal in the assessee's own case.

We find that this issue also stands concluded by the decision of the Coordinate Bench in the assessee's own case, wherein, after considering identical facts, the Tribunal upheld the order of the CIT(A) deleting the addition made on account of notional annual letting value of unsold flats. The relevant findings are contained in paragraphs 30 to 32 of the Tribunal's order. The Revenue has not demonstrated any distinguishing feature in the facts of the present year. Respectfully following the earlier order of the Coordinate Bench, we uphold the order of the learned CIT(A) on this issue also.

The facts and issues involved in A.Ys. 2016-17, 2017-18 and 2018- 19 are identical except for variation in the quantum of additions. The learned representatives of both the parties fairly agreed that the decision rendered in the lead year would govern the remaining assessment years also. Accordingly, our findings recorded hereinabove shall apply mutatis mutandis to ITA Nos.1111/Mum/2026, 1112/Mum/2026 and 1113/Mum/2026. Consequently, all the grounds raised by the Revenue in the said appeals are also dismissed.

In the result, all the four appeals filed by the Revenue are dismissed.